Independent Grocers Alliance Distributing Company

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IN THE l\L-\.TTER OF INDEPENDENT GROCERS ALLIANCE DISTRIBUTING COl\IPANY ET AL.

COMPLAINT, FINDINGS, AND ORDER IN REGARD '1'0 THE ALLEGED VIOLATION OF SUBSEC. (c) OF SEC. 2 OF AN ACT OF CONGRESS APFROVED OCT. 15, 19i4, AS AMENDED BY AN ACT APPROVED JUNE 19, 1936 Docket 5433. Cmnplalnt, Apr. 1946-Decision, Mar. , 195B Where four corporations, which were fairly typical members of a large class of manufacturers, processors and producers who sold a substantial amount of foodstuffs, groceries and allied products to wholesale grocery buyers who also purchased through the corporate agency below,"v described- (a) Paid to said corporate service and purchasing agency brokerage or allowances upon purchases in connection with which said agency 01' intermediary acted in fact for its wholesale grocer stockholders and other wholesale grocer buyers; and Where said agency, which ,,-as o,,'ned and controlled, directly and through two holding corporations, by wholesale grocery firms who bought through it and recei,ed the benefit of brokerage or commissions paid by sellers to it on their purchases; and which- 1. Through the operation of franchise agreements between it and its numerous affiliated wholesale grocers, received from them monthly fees compensa tion for purchasing and other services rendered to them in connection with its purchase and sale of merchandise under its 1. G. A. label, and in connection with merchandise packed for sale thereunder, through the thousands of retail grocers affiliated with the 1. G. A. movement, allotted and restricted the territory and channels through which said merchandise might be sold; and 2. Through contracts executed between it and aforesaid and other selected sellers, packers, manufacturer's and producers, specified and controlled the quality of merchandise which they might pack and sell under said brands; controlled, restricted and designated the number and t~7pes of buyers to whom said merchandise might be sold; and through negotiation with said sellers, controlled the price at which it might be sold to said buyers;

(b) Acting in its. mn1 behalf and in behalf of its wholesale grocer affiliates received commissions or other compensation from sellers upon purchases made by its said affiliated wholesale grocers, which it passed on to said buyer wholesalers in the form of ser,ices, including advertising allowances restricted to the promotion of said branded merchandise, known as "territorial aclyertising, and measured by the amount of brokerage it collected on the wholesaler s purchases of I. G. A. branded products, and in the form of stock diyidends to one of aforesaid holding companies, the majority of the stock of which was owned by wholesale grocers concerned; and Where one of said two holding companies, which owned and controlled the stock of said corporate agency, and the controlling stock of both of which was &; &; &;

INDEPENDENT GROCERS ALLIANCE DISTRIB. CO., ET AL. 895 894 Syllabus owned by wholesale grocery firms buying through said agency;y, which received the benefit of brokerage paid by sellers to said agency on said buyers purchases- (c) Received as dividends on its stock in said corporate agency, benefits from allowances 01' discounts paid said agency on purchases as to which it acted in fact for wholesale grocer buJ- er stockholders and affiliates concerned, and parties to the transaction other than the seller; and 'Vhere a large number of wholesale grocel's, associated with said corporate agency as stockholder's and by virtue of their aforesaid contracts with it- (d) Received from it or from said holding company also by virtue of their stock interest in the fol'm of services or dividends, the benefit of brokerage or other compensation paid by sellers upon their purchases, in transactions in which said corporate agency acted in theil' interests, and in connection with which it l'endel'ed no Ben-ice to the sellers except for such incidental services as were involved in their not having to seek other outlets for merchandise sold through saiel corporate agellc~- :

H e7d That the payment by such sellers of brokerage fees or commissions to said corporate agency on the purchases of the aforesaid Yll10lesale grocer buyers, and the receipt and acceptance thereof by said corpora te agency, holding company and buyers, under the circumstances set forth, constituted violations of the provisions of subsec. (c) of Sec. 2 of the Clayton Act, as amended.

Before jJl7'. E' veI'ett F. Haycraft hearing examiner. lii'/'. Eldon P. 8chrl', uJJ for the Commission. Ungaro cD Shel' wood of Chicago, Ill., for Independent Grocers Alliance Distributing Co., J. Frank Grimes, L. G. Groebe and vVilliam 'V. Thompson.

Shea Hoyt of ~::Iilwal1kee, 'Vis., for James D. Godfrey, Ned N. Fleming, Robert H. Perlitz, The Grocers Co., T. G. Harrison, Robert ~lcLain, E. F. Bre,yster, Joseph Parker, N onnal Younglove andi-Iarry K. Grainger. Boyd of Indianapolis, Ind., and Barnes, Hickam. , Pantzer Oovingto. , Bu1'ling, R'ublee, O'Bria' Shorb of 'Vashington, D. C. for Stokely-Van Camp, Inc.

S onn.en8eheiTL., B el'kson, Lautm,ann, Levinson M one of Chicago Ill., for Franklin l\lac V eagh & Co.

B ended1', T1"ll/7np, lIlelntY1' , T1'im, bo1"n Godlrey, of l\Elwaukee 'Vis. , for E. R.. Godfrey & Sons Co. and 'Vetter au Grocer Co. , Inc. Dot' Bey, Colman, Barker, Seott ill Barber, of ~lilllleapolis, :Minn. for 'Vinston &. Newell Co.

T-ilUnghast, Oollin8 Tan1w1' of Providence, R. 1., for Brownell & Field Co.

Thomas, Beedy, Nelson l(ing, of San Francisco, Calif., for Haas . Brothers.

213840-54-- Complaint 48 F. T. C.

COMPLAINT The Federal Trade Commission, having reason to believe that the parties respondent named in the caption hereof and hereinafter more particularly designated and described, since June 19, 1936, have violated and are now violating the provisions of Subsection (c), Section 2 of the Clayton Act, as amended by the Robinson-Patman Act, approved June 19, 1936 (U. S. C., Title 15, Section 13), hereby issues its complaint stating its charges with respect thereto as follows: PARAGRAPH 1. Respondent, Independent Grocers Alliance Distributing Company (hereinafter for convenience referred to as "respondent 1. G. is a corporation organized and existing under and by virtue of the laws of the State of Illinois with its principal office and place of business located at 309 ,Yest Jackson Boulevard, Chicago, Illinois, and with branch offices located in San Francisco, California; Seattle ,Vashington; and New Yor1\:, New York.

The respondent directors of respondent 1. G. A. are: J. Frank James D. Godfrey, Chairman Grimes Ned N. Fleming L. G. Groebc vVilliam ,V. Thompson Robert H. Perlitz.

Respondent Grocers Company is a corporation organized and existing under and by virtue of the laws of the State of Delaware with its principal office located at 3900 Board of Trade Building, Chicago Illinois.

The respondent directors of respondent Grocers Company are: James D. Godfrey, c/o E. R. Godfrey & Sons Co., ~.filwaukee ,Yisconsin;

Ned N. Fleming, c/o Fleming-,Vilson ~lercantile Co., Topeka Kansas;

Robert H. Perlitz, c/o The Schu)- aacher Company, Houston Texa s ;

T. G. Harrison, c/o ',,"inston & Newell Co. , :Minneapolis, ~linnesot a ;

Robert l\1chain, c/o lfcLai~ Grocery Company, JHassillon, Ohio; E. F. Brewster, c/o Brewster, Gordon & Company, Rochester Joseph Parker, c/o ~lillikin, Tomlinson Company, Portland l\faine ~ Normal Younglove, c/o Younglove Grocery Company, Tacoma vVashington ;

and Harry K. Grainger, c/o Grainger Brothers Company, Lincoln N ebraslm.

INDEPENDENT GROCERS ALLIANCE DISTRIB. CO., ET AL. 897 894 Complaint PAR. 2. Respondent Jersey Cereal Company is a corporation organized and existing under and by virtue of the laws of the State of Pennplace of business located at 10 S. sylvania with its principal offi:ce and Lasalle Street, Chicago, Illinois.

Respondent Stokely Brothers & Company, Inc., is a corporation organized and existing under and by virtue of the laws of the State of Indiana with its principal otnce and place of business located at 940 North :Meric1ian Street, Indianapolis, Indiana. Respondent Dean ~iilk Company is a corporation organized and existing under and by virtue of the la"s of the State of Illinois with its principal ofilc.e. and place of business located at 20 North ,Yackel' Drive, Chicago, Illinois.

Respondent Cupples Company is a corporation organized and existing under and by virtue of the laws of the State of :Missouri with its princi pal office and place of business located at 401 South Seventh Street, St. Louis, ~iissouri.

The respondents in this paragraph named are hereinafter designated and referred to as "seller respondents. Said seller respondents, and each of them, are, and since June 19, 1936, have been, engaged in the business of selling commodities particularly foodstuffs, groceries and allied products to numerous buyers, including the buyer respondents hereinafter set out. Said seller respondents are fairly typical and representative members of a large group or class of manufacturers processors and producers engaged in the common practice of selling a substantial portion of their commodities to buyers who purchase through respondent 1. G. A. as intermediary for buyers. Said group or class of sellers is composed of a large number, to-wit: approximately 300, of such manufacturers, processors and producers too numerous to be individually named herein as respondents without manifest inconvenience and delay.

PAR. 3. Respondent Franklin ~lac Veagh & Company is a corporation organized and existing under and by virtue of the laws of the State of Illinois with its principal office and place of business located at 1347 South Clinton Street, Chicago, Illinois.

Respondent E. R. Godfrey & Sons Company is a corporation organized and existing under and by virtue of the laws of the State Wisconsin with its principal office and place of business located at . 402 N. Broadway, ~lilwaukee, ,Visconsin.

Respondent V\Tinston & Newell Company is a corporation organized and existing under and by virtue of the laws of the State of Delaware with its principal office and place of business located at 300 Sixth Avenue Minneapolis, ~iinnesota.

898 FEDERAL TRADE COJ\ll\1:ISSION DECISIONS Complaint 48 F. T. C.

Respondent V,T etterau Grocer Company, Inc., is a corporation, the place of whose incorporation is not known to the Commission with its principal office and place of business located at 112 ~lonroe Street, St.. Louis, ~iissouri.

The respondents in this paragraph named are hereinafter designated and referred to as "buyer respondents. Each of the said buyer respondents is engaged in the wholesale grocery business and is affiliated and under contract with respondent I. G. A. and is a stockholder of the respondent Grocers Company. Said buyer respondents are named as parties respondent, both individually and as representative of a group or class of a large number of wholesale grocery concerns, each of WhOlll is likewise affiliated and under contract with respondent 1. G. A. and is a stockholder of respondent Grocers Company. PAR. 4. Respondent I. G. since its organization in 1927, has sponsored and is now sponsoring the so-called "1. G. A. movement" in pursuance to which respondent 1. G. A. has entered into, is now entering into, and acting in accordance with franchise agreelllents with wholesale grocers, located throughout the United States, whereby said wholesalers are granted "exclusive rights to all the merchandising, publicity, sales and promotion service" of respondent 1. G. A., in certain specjfiec1 territories, in connectjon with I. G. A. merchandise which consists of foodstuffs and other articles to which has been applied trade names, trade-marks or insignias owned by respondent 1. G. A. ; said affiliated wholesalers agree to cooperate and do cooperate with respondent I. G. A. in the furtherance of the said T. G. A. movement, in enrolling and maintaining qualified retail grocers known as "1. G. A. Stores" ,yjthjn specified territories; purchasing all 1. G. A. merchandise through I. G. A. or through mutually agreed sources, and selling or distributing such merchandise for resale only to duly qualified 1. G. A. stores within the specified territory, paying to T. G. A. $4.75 per month for each I. G. A. store in such specified territory, plus a monthly fee of $40. , plus an additional sum equal to one-fourteenth of one percent of the average monthly sales of the wholesaler during the preceding calendar year. Respondent I. G. A., in accordance with such agreements, agrees to instruct and does instruct the personnel of the wholesalers in the effective administration of the T. G. A. plan; cooperating with such personnel in supervising 1. G. A. stores; making available without cost, a consultation, advisory and follow-up service; furnishing merchandising service and achrertising materials to and for the wholesalers and for the 1. G. A. Stores; continuing to maintain a complete brokerage department through which the wholesalers agree to purchase and do purchase the fullest extent of their requirements; fur- INDEPENDENT GROCERS ALLIANCE DISTRIB. CO., ET AL. 899 894 Complaint nishing to wholesalers full and complete market information relative to commodities handled by the wholesalers. The affiliated wholesalers have the privilege of renewing such agreements from year to year provided that they have actively and fully cooperated with I. G. A. As of January 1, 1939, there were affiliated and under contract with respondent I. G. A. approximately 97 wholesale grocers who in turn sponsored npproximately 4 836 I. G. A~ retail stores. Three of the six directors of respondent 1. G. A. are representatives of affiliated wholesalers.

PAR. 5. All the capital stock of respondent 1. G. A. was formerly owned by the ~farket Specialty Company, an Illinois corporation; the said corporation was organized merely for the purpose of holding said stock; all the capital stock of the ~farket Specialty Company is held by four individuals who were the original promoters of the 1. G. A. movement, three of whom are directors of respondent I. G. and are also the officers and directors of Market Specialty Company. In 1933 as a result of the efforts of affiliated wholesalers to protect their interest in and expected benefits from respondent I. G. A., respondent Grocers Company was organized as a holding company and purchased 50% of the capitalization of respondent I. G. A. or 100 000 shares from the ~iarket Specialty Company for $500 000. The greater portion of this purchase nloney came from the earnings of respondent 1. G. A. All the capital stock of respondent Grocery Company is held by wholesalers affiliated and under contract with respondent 1. G. A. PAR. 6. Respondent I. G. A. is now and since June 19 1936, has been engaged in the business of providing, purchasing and other services for its affiliated wholesalers who are referred to as buyer respondents in Paragraph Three hereof.

In the course and conduct of its business, respondent 1. G. A. receives orders from the buyer respondents to purchase commodities for them and transmits such orders as agent for said buyer respondents to the seller respondents and other sellers, as a result of the transmission of said orders, by said buyers to respondent I. G. A., the execution of same by said respondent I. G. A., for and in behalf of said buyers, and the acceptance of said orders by said seller respondents and other sellers, commodities, particularly foodstuffs, are by each of the said seller respondents and other sellers shipped from the State in which such commodities are located at the time of sale into and through the various other States of the United States directly to each of said buyer respondents.

In the course of the buying and selling transactions hereinabove referred to resulting in the delivery of commodities from seller respondents to the buyer respondents, said seller respondents, since June 900 FEDERAL TRADE CO:L\:LMIS8ION DECISIONS Complaint 48 F. T. C.

, 1936, have transmitted, paid and delivered n,nd do transmit, pay and deliver to the respondent 1. G. A. so-called brokerage fees or commissions, the same being percentages of the total sales prices agreed upon by the said seller respondents and the respondent I. G. A. Respondent I. G. A., since June 19, 1936, has received and accepted and is receiving and accepting such so-called brokerage fees or commissions upon the purchases of the buyer respondents. In 1937, respondent I. G. A. received such brokerage fees and commissions amounting to approximately $557 026.88; in 1944, such brokera,ge amounted to $346.667.39.

PAR. 7. In all of the buying and selling transactions hereinabove referred to, the so-called brokerage fees or commissions are paid and transmitted by the seller respondents and other sellers to and received and accepted by the respondent I. G. A., upon the purchases of the buyer respondents, while the said respondent 1. G. A. is acting in fact in its own behalf and for and in behalf of buyer respondents and for said so-called brokerage fees or commissions no services whatsoever have been rendered or are being rendered in connection with such purchases for or to said seller respondents and other sellers by respondent I. G. A.

Prior to the enactment of the Robinson-Patman Act in June, 1936 80% of the so-called brokerage fees and commissions paid by the seller respondents and other sellers to respondent I. G. A., as intermediary upon the purchases of the buyer respondents .were transmitted to and received and accepted by the buyer respondents. After the enactment of said Act, respondent I. G. A. discontinued the practice of remitting such brokerage and commissions, directly as snell, to the buyer respondents; respondent 1. G. A. in lieu thereof passed on, and now passes on, such brokerage and commissions to respondent buyers in the form of services, inducting advertising allmvances by the way terdtorial advertising contracts" which, in 1944, amounted to over $250 000 and in the form of dividends on 50% of the stock of respondent I. G. A. paid to its stockholder, respondent Grocers Company, for the benefit of the affiliated ,Wholesalers ,-dl0 D'Y11 the. entire capital stock of said respondent Groeers Company.

PAR. 8. The payment, by seller respondents and others, of brokerage fees or commissions to the respondent 1. G. A. upon the purehases of buyer respondents and the receipt and aceeptance thereof by the l respondent 1. G. A. and its directors; Grocers Company and its directors; and the buyer respondents, in the manner and form bereinabove set forth, are in violation of the provisions of Seetion ~ subsection (c) of the Clayton Act as amended by the. R.obinson- Patman Act, approved June 19 , 1936.

&:

INDEPENDENT GROCERS ALLIANCE DISTRIB. CO., ET AL. 901 894 Findings REPORT, FINDINGS AS TO THE FACTS, AND ORDER Pursuant to the provisions of an Act of Congress entitled "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes," approved October 15, 1914 (the Clayton Act), as amended by an Act of Congress approved June 19 , 1936 (Robinson-Patman Act) (D. S. C. Title 15, See. 13), the Federal Trade Commission on April 18, 1946, issued and subsequently served its COlllplaint in this proceeding upon the respondents named in the caption hereof, charging said respondents with having violated the provisions of subsection (c) of section 2 of the Clayton Act as amended. Answers were filed separately by respondent Stokely-Van Camp, Inc. (designated in the complaint as Stokely Brothers & Company, Inc. ), on May 7, 1946; separately by respondent Franklin ~lac Veagh & Comrally and separately by respondent The Grocers Company (designated in the complaint as Grocers Company), a corporation, and its directors, James D. Godfrey: Ned N. Fleming, Robert H. Peretz, T. G. Harrison Hobert :McLain, E. F. Brewster, Joseph Parker, Normal Yonnglove and Harry K. Grainger, on June 11, 1946; separately by respondents Independent Grocers Alliance Distributing Company, a corporation and its directors, J. Frank Grimes, L. G. Groebe, vVilliam 'V. Thompson, James D. Godfrey, Ned N. Fleming, and Robert I-I. Perlitz, on June 12, 1946; jointly by respondents E. R. Godfrey & Sons Company and vVetterau Grocer Company, Inc., on June 24 1946; and separately by respondent vVinston Newell Company on September 3, 1947. All other respondents failed to file answers. On January 7, 1947 a trial examiner of the Commission was duly designated and appointed to take testimony and receive evidence in this proceeding. Thereafter, respondents James D. Godfrey, Ned N. Fleming, and Robert H. Peretz, in their capacities as directors of respondent Independent Grocers Allianee Distributing Company, a corporation respondents The Grocers Company and its above-named directors, and respondents E. R. Godfrey & Sons Company, R corporation, and V\Tetterau Grocer Company, Inc., a corporation, by their attorneys, filed motions requesting permission to withdraw their aforesaid answers and, in lieu thereof, to substitute answers annexed to, and made a part said motions. On September 16, 1947, the Commission granted said motions, and the substitute Rnswers annexed to, and made R part thereof, have been duly received and filed. All of said sub3titute ~ns,vers, together with the answer of 'Yinston & Newell Company, admit in part and deny in part the allegations of the complaint and provide that the Commission may: without the holding of hearings the taking of testimony, the adduction of other evidence, and without 902 FEDERAL TRADE COML\IISSION DECISIONS Findings 48 F. T. C.

intervening procedure, hear this matter upon the complaint, the aforesaid answers, and briefs and oral argument of opposing counsel as to whether or not the allegations of the complaint as therein stated and admitted constitute a showing of a violation of law by these respondents and may then proceed to make nnd enter its findings of fact, including inferences and conclusions based thereon, and enter its order disposing of this proceeding.

On l\iarch 31, 1947, separate stipulations were entered into by and between counsel in support of the complaint and the respondent 1Vinston & Newell Company, and by and between said counsel and re- . spondents Independent Grocers Alliance Distributing Company and its directors, J. Frank Grimes, L. G. Groebe, 1Villiam vV. Thompson James D. Godfrey, Ned N. Fleming, and Robert H. Perlitz. Counsel for respondent Franklin l\lac V eagh &; Company signed the latter btipulation and agreed that said respondent would be bound by its terms. At a hearing before the trial examiner on the same date, said stipulations, including statements of fact and exhibits therein set forth, were introduced and admitted in evidence in lieu of other tes- 6mony. They provide that the Commission may, without the holding of hearings, the taking of testimony, the adduction of other evidence and without intervening procedure, hear this matter on the complaint, the answers of these respondents, the stipulations as to the facts, including the incorporated exhibits, and briefs and oral argument of opposing counsel, and proceed to make and enter its findings of fact, including inferences and conclusions based thereon, and enter its order disposing of this proceeding. At a hearing held before the trial examiner on April 15, 1947, the exhibits attached to and made a part of the stipulation between counsel supporting the complaint and the respondent Independent Grocers Alliance Distributing Company nnd its aforesaid directors were admitted in evidence as to all respondents named in the complaint.

Thereafter, this proceeding regularly came on for final hearing before the Commission upon the complaint, answers, substitute answers the aforesaid stipulations of fact, recommended decision of the trial examiner and exceptions thereto (which exceptions have been separately disposed of), briefs, oral argument and reargument of counsel, and the Commission having duly considered the matter and being now fully advised in the premises, makes this its findings as to the facts and its conclusion drawn therefrom:

FINDINGS AS TO THE FACT PARAGRAPH 1. (a) Respondent Independent Grocers Alliance Distributing Company (hereinafter referred to as "respondent 1. G. A. INDEPENDENT GROCERS ALLIANCE DISTRIB. CO. , ET AL. 903 894 Findings 1S a corporation organized and existing under and by virtue of the laws of the State of Illinois, with its office and principal place of business located at 309 ,Vest Jackson Boulevard, Chicago, Illinois. Said respondent owns substantially all of the stock of corporations of the same or similar name located in San Francisco, California Seattle, Washington, and New York, New York. Said respondent was orgfll1ized April 25 , 1928 to buy, see and generally deal in and trade with, either as principal or agent., all grocery and food products, wearing apparel, hardware machinery, implements, building material, furniture, manufacturers raw materials and supplies, pharmaceutical preparations, wood and fiber material and products, leather products, aluminum utensils, glass and earthenware, chemicals, florist supplies, paints and varnishes store fixtures, bakery products and other commodities used or marketed, and to sell service in connection Ivith all production, distribution and utilization of such commodities; to contract for and deal in the advertising of such eommodities; to install efficiency and other service systems, both personal and general, in plants producing or distributing such commodities; to organize, foster and promote trade and other associations and organizations, and to make business and market analyses for such organizations; to assist in financing manufacturers and distributors of such commodities; to publish bulletins and newspapers for the industries and members of the industries dealing with such commodities; to acquire and disseminate information regard1jng the production, preparation, distribution and consumption of said articles or commodities; and to generally aid and assist wholesale and retail merchants, and to do any and all things incident to the same or any of them.

(b) The officers and directors of respondent I. G. A. are as follows: J. Frank Grimes ----------------- President and Director Gerardl\l. Ungaro --------- ------- Vice President, Howal'd Gerhard -- --------------- Vice President Louis G. Groebe ------------------ Secretary, Treasurer, and Director James D. Godfrey --- ----- Chairman, Board of Directors Ned N. Fleming ------------ --- Director Robert H. Perlitz -- -------------- Director, and William W. Thompson ------ -----. Director. (c) Respondent T. G. A. had an original authorjzed eapitalization or 100 shares of no-par-yalne common stock, representing a subscribed, paid-in amount of $1 000. djvided as follows: J. Frank Grimes subscribing $300 and receiving 30 shares; L. G. Groebe subscribing ~300 and receiving 30 shares; ,Yilliam ,V. Thompson subscribing $300 find receiving 30 shares; 'V. Ie. 1-1 unter subscribing $100 and receiving , li"'indingr-; 48 F. T. C. 10 shares. The capital stock of re:-;pondent 1. G. A. was increased from 100 shares no-par-value to 200 000 shares no-pnr-yalue on April , 1933, at which time the nl1lnber of directors was increased from three to six. This capitalization increase ,,' as ael'omplished by transfer of all the original shares of stock, valued at $1 000 000, on the. basis (If exchanging: 2 000 shares of new stock for each share of the old stock. The corporate stock of respondent 1. G. A. is now owned and ontrolled as follo,, (1) l\larket. Specialty Company~ an Illinois corporation, owning :mcl controlling' 100.000 shares:

(2) The Grocers Company~ respondent. herein, a Delaware corporation, owning and colltrolling loo,OOO shares. PAR. 2. :Market Specialty Company is an Illinois corporation organized by respondents fT. Frank Grimes, L. G. Groebe, and \Villiam \V. Thompson, with its office and principal place of business located at 309 'Yest . r acksnn Boulevanl, Chicago. Illinois. Said corporation ,,' chartered April 24, 19:33 to acquire, own, sell and otherwise dispose of and deal in and ,,- ith stocks, bonds, mortgages, securities, and notes of corporations and individuals." The authorized capitalization of Market Specialty Company is 100 shares of no-par-value common stock.k, representing the subscribed, paid-in amount of $1 000, divided as follows: ~T. Frank Grimes, 33~/~1 shares; L. G. Groebe, 331j3 shares; ftnd 'Villiam 'V. ThompsOJL 33~~3 shares:. Said eapitnl stock of :Market Specialty Company \-ras paid for by 50 shares of the capital stock of respondent 1. G. A. The. present o\nwrs of its c.apital stock, together with its officers and directors, are as follows: J. Frank Grimes, President and Director ------------------ 30% 'Villi am 'V. ThomJ!son, Secretary and Director 300/0 L. G. Gl'oebe, Treasurer and Director ------------------------ 300/0 Fay H. Hunter -------------------- 31h % Jane Hunter Wiscomb ---- 6%% PAR. 3. (a) Respondent The Grocers Company is a Delaware corporation organized, existing, and doing business under and by virtue of the laws of the State of Delaware, with its principal office located at 100 'Vest Sec.ond Street, 'Yilmington, Delaware. It was organized April 3, 1933, for the purpose of acquiring, holding, and exehanging the capital stock of other corporations, and specifically to hold the capital stock of respondent 1. G. A., by certain wholesale grocers holding respondent 1. G. A. franchises, who were interested in protecting their rights in the 1. G. A. label, and in the efficient management of respondent 1. G. A. s national headquarters, as hereinafter _____ _ INDEPE:NDENT GROc.ERS ALLIANCE DISTRIB. CO., ET AL. 905 0894 Findings more particularly set forth. The present officers and directors of respondent The Grocers Company~7 are as follo"\vs: J. D. Godfrey_____------- President, Joseph Parker___n__------ Vice-President Directors:Harry K. Grainger______---- Secretary-Treasurer. J. D. Godfrey_____--------- % E. R. Godfrey & Sons Co., l\lilwaukee, .Wisconsin;

T. G. Harri~()n____--_------- % Winston & Newell Company, Minneapolis, Minnesota;

Ned N. T:llel11ing____---------- % Fleming-Wilson Mercantile Company, Topeka, Kansas;

E. It. Bre"'Rter__ % Brewster, Gordon & Company, Rochester, New York;

Robert McLftin- % McLain Grocery Co., l\1assilJon, Ohio;

Normal Younglove______---- % Younglove Grocery Co. Tacoma, IV ashington ;

Harry K. Grainger______---- % Grainger Bros. Co., Lincoln, Nebraska;

Hobert H. Perlitz____---_n- % The Schumacher Co. Houston, Texas;

Joseph Parker -------------- % Millikin Tomlinson Co. Portlaml, l\Jaine.

(b) Respondent 1. G. A., the ~farket Specialty Company, and respondent The Grocers Company entered into a subscription agreement with T. G. A. s affiliated wholesale grocers with respect to the purchase of stock of respondent I. G. A. then held by the J\farket Specialty Company, wherein it -was provided that the :Market Specialty Company would cause respondent I. G. A. to increase its capitalization so as to provide for 200 000 shares of llo-par-vnJne stock, and that :Market Specialty Company would sell one-half of the capital stock (100 000 shares) of respondent I. G. A. to wholesalers affiliated with the I. G. A. movement, and that as a part of said agreement, respondent I. G. A. would pay to Market Specialty Company, out of a so-ealled advertising account held by it, the sum of $61 370. In consideration of such payment, :Market Speeialty Company transferred and delivered, pursuant to agreement, 12 274 shares of the capital stock of respondent I. G. A. to respondent The Grocers Company, which would in turn transfer and deliver an eqnalnumber of shares of its capital stock to the wholesalers affiliated with the I. G. A. movement, without cost to them; and further, that the :Market Specialty Company would sell to these said \vholesalers the remainder of the 100 000 shares of stock. that is, 87 726 shares, at the rate of $5 per share, payment for same being spread over a period of 56 months, commencing May 1 , 1933. Findings 48 F. T. C.

It was also agreed that "all profits or dividends which during the time of this agreement are paid on account of the shares of stock being purchased hereunder shall be applied towards the purchase price of the said stock.:~ This agreeme.nt also provided that the wholesaler who purchased this stock from the :Market Specialty Company agreed with respondent The Grocers Company to transfer and deliver to the latter company all such capital stock being purchased pursuant to the agreement, and to accept from respondent The Grocers Company shares of the capital stock of The Grocers Company for each share of the capital stock of respondent 1. G. A.

(c) In another agreement between :Market Specitllty Company and respondent The Gl'oeers Company, dated April 29, 1933, :Market Specialty Company agreed to sell to respondent The Grocers Company all shares that it owned (87 726) of the capital stock of respondent 1. G. A. not purchased by the said 'wholesalers, it being intended that respondent The Grocers Company should, upon the completion of all of this and the other said contracts, hold either as principal or other"wise 100 000 shares of the capital stock of respondent I. G. A., that being one-half the lawfully authorized outstanding capital stock of that corporation. This purchase agreement contained the following cla use: :Market Specialty does hereby agree to sell, and Grocers Company does hereby agree to purchase, for $5.00 per share, 87 726 shares of the capital stock of headquarters, payable at the rate of 000. 00 per month for 56 months, commencing ~lay 1st~ A. D. 1933, which said monthly payment shall include interest on the deferred payment at the rate of 6% per annum; Provided, however, that the obligation of the parties hereunder shall be reduced by such payments as may from time to time be made by the ,Vholesale Grocers affiliated with headquarters "ho have signed purchase agreements for the said stock as hereinabove mentioned, it being the intent hereof that Grocers Company shall be bound to purchase, and :Market Specialty Company shall be bound to sell, only such stock as is not purchased by the said affiliated wholesale grocers.

It also contained a provision that all the stock should be placed in escrow and be delivered to The Grocers Company upon completion of all the payments therein mentioned. It further provided that the Market Specialty Company would, in consideration of the agreement and of services rendered by respondent The Grocers Company and its officers, pay to respondent The Grocers Company a sum equal to 10~: of all moneys which it might from time to time receive in payment of the 87 726 shares of stock, whether the same be received from the wholesale grocers or from other sources.

;: ___ INDEPENDENT GROCERS ALLIANCE DISTRIB. CO. , ET AL. 907 894 Findings (d) Pursuant to the foregoing agreements, respondent The Grocers Company was organized April 3, 1933, by wholesale grocers affiliated with the 1. G. A. movement, and since that date has been conducted as a c.orporation, having as its officers and directors wholesalers who were then and who are now affiliated with the 1. G. A. movement, including respondents James D. Godfrey, Ned N. Fleming, Robert H. Perlitz T. G. Harrison, and E. F. Bre'\Yster. Three of these officers and directors have also continuously seryecl as officers and directors of respondent I. G. A. since 1933.

(e) Beginning 1\Iay 1 , 1933, respondent 1. G. A. allocated $4 500 out of the respective brokerage accounts toward the installment payments due on the said contracts as of :May 1, 1933." As of October 1934 there was received by respondent The Grocers Company from respondent I. G. , , on said dividend allocations, a total of $76 500 to apply to"\yards the purchase price of the 87 726 shares of stock. addition respondent The Groeers Company was given credit for service allowance. deductions for 18 months at $4 500 per month, or a total of $81 000. The said stock-purchase plan entered into on April 29 1933, between respondent The Groeers Company and J\larket Specialty Company\\as completed on December 1, 1937, as follows: The initial down-payment of $61 370, which was obtained from the former national advertising fund held by the Independent Grocers Allianee Distributing Company;

Dividends received on stock of Independent Grocers Alliance Distributing Company o\vned by The Grocers Company as declared and paid in the period from ~Iay 1933 to December 1937, inclusive $189 000 ;

Amounts paid by individual wholesalers through charges to their accounts with the Independent Grocers Alliance Distributing Company in the total amount of $315000. (f) These payments resulted in the payment to the J\larket Specialty Company over the 56-month period from l\lay 1, 1933, to December 31, 1937, of the purchase price of $500 000 plus 6% interest as a result of which, the stock held in escrow at the Northern Trust Company, Chicago, was released to respondent The Grocers Company on December 2, 1937, in stock certificates as follows: The Grocers Company, dated April 29, 1933_----------- 99 097 shares. For qualifying directors James D. Godfrey, T. G. Harrison, and Ned N. Fleming__ ---- 1 shm'e each. At that time all the outstanding capital stock of respondent The Grocers Company \vas held by wholesale grocers and individuals engaged in the wholesale grocery business and affiliated with respondent &:. _________ __ 908 Fl'-:DERAL TRADE COMMISSION DECISIONS li--indings 48 F. T. C. I. G. A. On December 13, 1937, proxies were appointed to vote the stock of respondent T. G. A. during the year 1938. The stockholders as of April 20, 1946, were as follows:

Number of sharesVirginia 1\1. Beattie (Mrs. ), 690 BellaireNameSt. , Denver', C010--_--__-------- F. J. Bedessem, 231 South 15th St., LaCrosse, 'Vis-____----------------- Blake.Curtiss Company, Haverhill, 1\1a8s---__------_ ":'_---------------- 1, 136 E. Franklin Brewstel' , 2080 East Ave., Rochester 10, N. Y_--------------- 2, 816 Carroll T. Brown, 657 Lafayette St., Denver, Colo___ 109- E. N. Brown, Jr., 1324 "\Villiams St., Denver, Colo_____----------------- J. S. Bro,,- , Jr., 745 Columbine St., Denver, Colo-__-_----------------- Lu Gray D. Brown (M1'8. ) , 6G7 Lafayette St., Denver, Colo_____--------- 301 'V. K. Brown, (;51 Emerson St., Denver, Colo-____--------------------- 421 W. K. Brown, Jl'. , 10:38 U. S. National Bank Bldg., Denver, Colo--_--__-- William K. Brown, Jr., 1036 U. S. National Bank Bldg., Denver, Colo____- 110 Brownell So:,Field CompallY-, Providence, H. L-_____-------------------- 1 300 Burlington Grocery Compfm~', Burlington, VL_--------------- -------- 1 501 Cal'l'oll, Brough &. Hobinson, Inc., Oklahoma City, OkhL___--_--------- Central Grocery COmlk'1ny, Yakima, 'VasIL__-__ Champa & Co., % Colorado National Bank, Denvel' , Colo--_--__--------- The F. H. Cobb Company, Cortland, N. Y_----- ------------------------ 1, 850 Bef':sie S. Cosgriff (l\Irs. ), Trustee; 1064 Gaylord St., Denver Colo_____-- 175 11. 1\1. Davidson, 1104 Warm Springs Axe., Boise, Idal1o____- ----------- 1, 000 C. H. Deutsch, 1935 ,Tmwtte A \"e. , Cleveland Heigh1"s, Ohio-__ :Marcel L. Deut:;:c:h, 1fl24 East 105th St. , Cle\~elnnd, Ohio..___------------ De Voe Grocery Corporation, 'Varren, Ohio_____- --------------------- 1 300 Dayjd Childs Dodge, 3901 South "University BIYCl., Denver, Colo--____---- D. C. Dodge, 1330 Broach-my, DenVl' , Colo-- 105 Margaret Niles Dodg:e (Mrs. ), 3901 South PnivenMy B1YC1., Denver, Colo- Pearce K. Drake C~\lr~. Fred R). 30:1 Lexington /I..ve. , XP.\V York City___- 2 260 The Eavey Company, Xenia, Ohio_____- ------------- 4, 640 Mrs. Mary Egstad, 241 South 23d St., La Crosse, Wis_____-------------- Lois P. English Clarenee H. English as Joint 'Tenants with right of Survivorship, 2919 Dale St., San Diego 4, Calif__--__------------------- Dr. William C. Finch, % Robert A. Levi, E~q., Attorney at La\v, 4413 S. Broadway, Los Angeles 37, Calif__--___---------------- Virginia l\1iller Fleming, % 'nw Fleming Company, Topeka, Kans__--__- 352 The Fleming 'Vilson Mercantile Company, Tollelw, Kans__-__---------- 500 Franklin MacVeag-h So:, Co., 1347 South Clinton St. , Chicago, Ill____-_---- 750 C. P. Galligan, 308 Nortl1 22d Street, La Cros~e, Wis-____--------------- Cannon Grocery Coml1any. Marquette, l\lids- 050 Eleanol' P. Garnett &:. Hal'1'~' H. Garnett as Joint Tenants, with Riglrt Survivol'ship, 124 East Fontanei'o Sf., Colorado Springs, C010--____-- Gary Wholesale Grocery Company, Gary, Ind_-____----------- 170 General Grocery Company, Inc. , Portland, Oleg_--__ 500 !lir~. .Tean Gillette, 1004 Cnss Street, La Crosse, Wis__ E. R Godfrey &. Soi1sCompany, l\lil,,-aul;;:ee, Wis--____---------------- 440 Philip S. Goldberg, Guardian of the Estate of Edna Goldsmith, Ineompetent, % Bloolllbprg" &. Wolf, Attorneys at Law, 1910 Union Commerce Bldg., Cleveland, Ohio___n_--___ n______---- :_ _ ,__ __: __ _ :.. _ INDEPENDENT GROCERS ALLIANCE DISTRIB. CO., ET AL. 909 894 Findings Nu.?nber Na.lil. of shares Graingel'Hl'os. COmpany, Lincoln, Nebr_ --_-_----------------------- 2 860 909H. K. Grainger, % Grainger Brothers Co., Lincoln, Nebr__---_---------- J. J. Grainger, % Graillgel' Broth6lrs Co. , Lincoln, Nebr------------------ 594 483Haas Brothers, 3d and Channel Sts., San Francisco, Calif-__-__------- J. W. Hawkins, Trustee, Granel Junction, Colo_____------------------- The Holbrook Grocery Co., Keene, N. H__ ------------- 2 387 Holmstrom-Pilcher Company, Joliet, Ill______----------------------- 117 Mrs. Mariam Hurtgen, 2404 Vine St., La Crosse, \Vis------------------ 51 Independent Grocel's' Alliance Distributing Co. , 309 West Jackson Blvd. Chicago, 111_- -- 164 International Trust Company, Guardian for Lu Gray Miles Dodge, 17th and California Sts., Denver, Colo____---- The Inter-State Grocer Co., Joplin, 1\10-_-__--------------------------- 700 The F. N. Johnson Co., Bellefontaine, Ohio____------------------------ 000 S. M. Kennedy, % C. D. Kenny DIYision, Sprague 'Warner-Kenny Corp., Bal ti ill 0 re, M (L -- - - - - - - - - - - - - - - - - - - - - - - 220 La Crosse Trust Company, Trustee for L. H. Martin, Jr., La Crosse \Vls_- Lee Grocery Company, Everett, Wasb Francis H. Leggett & Company;y, 27th St. and 12th Ave., New York City__- 280 Lewis-Hubbard Corporation, P. O. Box 223a, Charleston 28, 'V. V3.-_----- 660 The McLain GrocerJ' Co. , j\lt1:ssillon, Obio-____ 910 Thos G. McMahon, Utica, New YorIL- 880 Jane l\letzler, Mrs., 913-A Euclid St., Santa 1\1onica, Calif---- Milliken Tomlinson Co., Portland, Maine______------ 430 Hm:l'iett 1\1. :\asl1, Mrs., 345 S. Williams St., Denver, Colo_____------- The Kew London City' National Bank, Nominee, New London, Conn_____- 900 Katherine J. Nordstrom, Mrs., 91111th Ave. No, Seattle, 'Yash__-___----- 126 Forrest C. Northcutt, First National Bank Bldg., Denver, Colo_____----- Nowell Wholesale Grocery Co., Columbia, 1\10_--___------------------- 320 Oliver-Finnie Company, 1\1emphis, TemL-____------- 560 The Ottaym Wholesale Grocery Co., Ottawa, Kans__ Palmer-Simpson Company, Laconia, N. H-- 812 A. H. Perfect & Company, Fort Wayne, Ind___--_---- 220 Jacob A. O. Pl'ens, % 'Vo A. Alexander & Co., 135 S. Lasalle St. Chi cago, 111- 493 Price & l\lcGillic, Malone, N. Y ------ 300 Progressive Wholesale Grocery Co., Bad Axe, l\liclL______----------- 920 L. B. Raymond, 20;-; North IGth St., La Crosse, Wis-___----------------- 322 he A. Reiter Company, Baltimore, 1\1(L______-- 167 Roundup Grocery Company, Spolwnp, 'VasIL__-___--- F. E. Royston & Company, Aurora, 11L--_-_----- 970 The Schuhmachel' COll1 111111y, Houston, Tex_---_----------------------- 890 V. V. Sharpe, P. O. Box 1381, Tampa, Fla----------------------------- 805 O. E. Sisson, 34f) Milford St., Glendale, Calif----__------------------- F. \V. Sisson, 330 North 23d S1., La Crosse, Wis___-_---------------- 747 W. To Sistrunk & Co. , Lexington, Ky --------- 530 Mrs. Anna Stall, 1601 Pearl St., Temple Apartments, Apartment 29, Denver 5, Colo-- - -- - Standard Grocery & Milling Co., Inc., Holland, l\liclL____--_------- 670 (ii Helen M. Still, Mrs., 730 Dean St., Woodstock, Ill_- ___ , Findings 48 F. T. C. N1l1nber Name ot shal' .I!'rances B. Strecker, 338 North Linden Ave., Highland Park, Ill______-- Edwin B. Suydam, 30 E. 42d St., New York, New York______------------ 31 Katherine Suydam, Mrs., Archer Road, Harrison, New York______------ 588 he Exchange National Bank of Tampa, Florida, as Trustee Under the "\Vill of Alfred "\Villiam Perkins, Dec, Tampa, Fla______-- 805 Utah Wholesale Grocery Co., Salt Lake City, Utah______--------------- 550 A. W. Walsh Company, Kalamazoo, l\IiclL__--___---------------------- 1 450 B. Ward, 1\1. Ziegler and \Villiam C. Finch, an undivided .2 interest each; Charles Wilson, Flora Wall, Mayme Heller and Dora Wilson, an undivided .1 interest each___ -------------------------------------- 1 The W. A. Weaver Company, East Liverpool, Ohio_____----------------- 650 Wetterau Grocer Company, Inc., 2d andl\1onroe Sts., St. Louis, Mo_____- 2 130 The \Vhite & Bender Company, Wallace, Idaho_____--------- S. A. Wilson, c/o Grainger Brothers Co., Lincoln, Nebr______---------- 594 Winston & Newell Company, Minneapolis, l\linn__-___------------------ 10, 590 Younglove Grocery Company, Tacoma Wash______-------------------- 50 Zarnitz Bros. Grocery Co., Wheeling, W. Va______-------------------- 2, 070 98, 978 PAR. 4. ~iarketing Specialist, Inc., is an Illinois corporation organized in June 1926 by J. Frank Grimes, ",Villiam vV. Thompson, and L. G. Groebe, hereinbefore mentioned as organizers of respondent 1. G. A. and :Market Specialty Company. A fourth individual, John J. ~iiller, also acted as an organize-r of ~farketing Specialist, Inc. which was the original sponsor of the predecessor of respondent I. G. A., namely, Independent Grocers Alliance of America. ~iarketing Specialist, Inc., transferred to respondent I. G. A. shortly after its organization all its right, title, and interest in and to the "1. G. brand, trademark, trade name, insignia, etc., upon the payment of the nominal sum of $10 and the assumption by respondent I. G. A. of certain obligations then existing on contracts previously entered into between said ~farketing Specialist, Inc., and various and sundry jobbers. On ~iarch 10, 1931 , said ~Iarketing Specialist, Inc., sold the capital stock of resi)onc1ent I. G. A. to the said J. Frank Grimes, L. G. Groebe and 'VVilliam "V. Thompson, and ",V. K. Hunter, which stock was originally issued to said individuals and sold by them to ~iarketing Specialist, Inc.

PAR. 5. (a) Food Products Co. of America is an Illinois corporation organized by the said 1ViJIia11l ",V. Thompson and L. G. Groebe and John J. l\i1illel', under the laws of the State of Illinois, in N ovembel' 1926 , under the name of Neighbor Products Co., to manufacture. produce, buy, and sell, as principal or agent, grocery and food products and other merchandise, and to own, make, establish, procure, buy, and sell, as principal or age.rt" trade names, trademarks, copyrights __ INDEPENDEN'l (i;:WCEHS ALLIANCE DISTRIB. CO., ET AL. 911 894 Findings patents, secret formulas and processes, etc. The corporate name N eighbor Products Co.'~ was chfmged to "Food Products Co. of America." on April 26, 1932 ~ at which time all the stock of said corporation was mined and controlled by respondent 1. G. A. On April :30, 1928, the said Neighbor Products Co. transferred aU of its right. title, and interest in and to the "1. G. A. " brand, trademark, trade name, ete., to respondent 1. G. A., retaining, ho"ever, at that time, its control of another brand knmvn as "Neighbor Brand. Said Food Products Co. of America now has - as its officers, and members of its Board of Directors, individuals ,yho occupied similar positions in respondent 1. G. A.

(b) On June, 1Da8 respondent I. G. A. caused to be organized under the hnys of the State of Illinois another corporation kno\\11 as Neighbor Products Co. to nct (IS brokers or agents for others, and to engage in the general advertising and merchandising business for others who engage in the general manufacturing and mercantile busi,. ness. The present officers and directors of said Neighbor Products Co. are the same persons as those "who are ofllcers and directors of ~aicl Food Products Co. of ..:-\.america.

PAR G. Progressiye ,Yholesa Ie Orae'ery Company (one of 1. G. A. ~uppIy depots) is a l\fi.chignn corporation organized, existing, and doing business under and by virtue of the Jaws of the State of l\lichigan "jth jts principal office and place of business located at Bad Axe :Michigan. Said corporation owns and controls all the outstanding capital stock of the Northern New York Grocery Company, Inc. , a wholesale grocer corporation organized, existing, and doing business under and by virtue of the la 'ys of the State of New York, with itsprincipal office and place of business located at :Malone, New York. Said Progressive ,Vholesale Grocery Company also O\yns and controls all the outstanding capital stock of Redman 'Yholesale Company, a corporation organized, existing, and doing business under and by virtue of the laws of the State of l\iichigan, with its principal office and place of business located at Alma, :Michigan. The voting capital stock of Progressive 'Yholesale Grocery Company is owned and controlled as follows:

J. Fl'allk Grill1es__ - 6,600 shares, L. G. Gl'oebe-_---- ------ 2 200 shares, or 8 800 shares out of a total outstanding issue of 10 3411/2 shares. These two persons also own 60% of the stock and act as officers and directors of :Market Specialty Company, which O\yns 50% of the stock of respondent I. G. A., of which they are also officers and directors. All the above-described wholesale grocer concerns are affiliated 213840-54- 912 FEDERAL TRADE COMMISSION DECl810NS Findings 48 F. T. C.

and under contract with respondent I. G. A., and said Progressive. Wholesale Grocery Company is a stockholder of respondent The Grocers Company.

PAR. 7. (a) Respondent Franklin l\lacVeagh & Company is a corporation organized and existing under and by virtue of the laws of the State of Illinois, with its principal office and place of business located at 1347 South Clinton Street, Chicago, Illinois. (b) Respondent E. R. Godfrey &, Sons Company is a corporation organized and existing under and by virtue of the laws of the State of 'Viseonsin, with its principal office and place of business located at 402 North Broadway, l\tljlwaukee, 'Visconsin. Respondent James D. Godfrey is president and director of this corporation. (c) Respondent vVinston &, Newell Company is a corporation organized and existing under and by virtue of the laws of the State of Delaware, with its principal office and place of business located at 300 Sixth Avenue North, j\Iinneapolis, l\linnesota. Respondent T. G. Harrison is president and director of this corporation. (d) Respondent V\Tetterau Grocery Company, Inc., is a corporation organized, existing, and doing business under and by virtue of the laws of the State of l\lissouri, with its principal office and place of business located at 112 l\fonroe Street, St. Louis, :Missouri. (e) Each of the corporations previously named in this paragraph is eng~tged in the wholesale grocery business, and (excepting vVinston & Newell Company, since August 31, 1942) is affiliated and under contract with respondent 1. G. A., and is a stockholder of respondent The Grocers Company. Said corporations are herein referred to as buyer-respondents and are named in this proceeding as representative of all the wholesale grocers listed below, who, on April 18, 1946 had franchise agreements with respondent 1. G. A., the first thirtyone of which, on April 20, 1946, also held stock in respondent 1. G. A. E. R. Godfrey & Sons Co., l\lilwaukee, ,Yisconsin Ganno Grocery Company, 1tIarquette, l\lichigan DeVoe Grocery Co., 'Varren, Ohio The Fleming Company, Inc.~ Topeka, Kansas Holmstrom-Pilcher Co., Joliet, Illinois A. H. Perfect &. Co., Fort 'Vayne, Indiana Lewis, Hubbard & Co., Charleston, 'V. Va.

Grainger Bros. Co., Lincoln, Nebraska The F. N. Johnson Co., Bellefontaine, Ohio Zarnitz Brothers Grocery Company, ,iVheeling, ,V. Va. The Schumacher Company, Houston, Texas Gary Wholesale Grocery Co., Gary, Indiana Standard Grocer Co., Holland, Michigan , .

INDEPENDENT GROCERS ALLIANCE DISTRIB. CO. ' ET AL. 913 894 Findings The Inter-state Grocer Co. oplin, Missouri lVIilliken Tomlinson Co., Portland, :Maine Burlington Grocery Co., Burlington, Vermont The Holbrook Grocery Co., Keene, N e,v Hampshire The 1\1chain Grocery Co., 1fassillon, Ohio Blake Curtiss Co., Haverhill, :Massachusetts Nowell \Vholesale Grocery Co., Columbia, 1\1missouri tV. T. Sistrunk & Co., Lexington, Kentucky, Franklin l\1ac Veagh & Co., Chicago, Illinois vVetterau Grocery Co., Inc., St. Louis, 1\1missouri The F. H. Cobb Company, Cortland, New York Progressive wholesale Grocery Co., Bad Axe, J\;lichigan Thomas G. :Mc1\:Iahon & Co., Utica, New York Brownell & Field Co., Providence, Rhode Island Haas Brothers, San Francisco, California Utah 'Yholesale Grocery Co., Salt LakeCity, Utah Roundup Grocery Co., Spokane, \Vashington Lee Grocery Co., Everett, vVashington (resigned January 1, 1947) , De V oe Grocery Co., 'Varren, Ohio, and its successor \Villiam Edwards Co., 'Varren, Ohio The Sisson Co., La Crosse, \Viscollsin Gateway Grocery Co., La Crosse, \Visconsin Brewster, Gordon & Co., Rochester, New York House of Pilcher, Inc., Joliet, Illinois, and its successor Holmstrom-Pilcher Co., Joliet, Illinois Becker Prentiss, Inc., Buffalo, New York Perkins & Sharpe, Inc., Tampa, Florida, and its successor Gulf Grocery Co., Tampa, Florida The Holbrook Grocery Co. , Keene, New Hampshire, and its predecessor Homer Simpson Co., Laconia, N. H.

Northern New York Grocery Co., 1\1alone, New York Roger vVilliams 'Yholesale Grocery Co. , Providence, R. 1. American 'Yholesale Grocery Co. , Seattle, Washington The D. G. Penfield Co., Danbury, Connecticut C. D. Kenny Company, Jason, Ohio vVilliamette Grocery Company, Salem, Oregon Bryan Keefe & Company, Tampa, Florida Bird- Shankle Corporation, San Antonio, Texas Lakewood Grocery Co., La Crosse, \Visconsin The Copps Company, Stevens Point, Wisconsin F. G. Foster Company, Iloquiam, 'Vashington .

914 FEDERAL TRADE COMjVIISSION DECISIONS Findings 48 F. T. C.

Davidson "\Vholesale Company, Twin Falls, Idaho (subsequently taken over by Utah "\Vholesale Grocer Co. February 15 ID4i), Alpena vvl1O1resale Grocer Co., Alpena, ~Iichigan Redman "\Vholesale Company, Alma, :Michigan (subsidiary of Progressive 'Yholesale C;;rocery Co.

J. ~L Jones Distributing Co. Champaign, Illinois. (f) The aforesaid corporations are the present holders of franchises obtained during the period of time from August. 1926 until April IS. 19:16. ~Iany other wholesale grocers \were franchise holders during this period, but in the interim have either canceled their franchises or were absorbed by other corporations. Respondent 'Yinston & Ne,yell Company, for instance, canceled its franchise ,,-ith respondent 1. G. A. on August 31, 1942, although the president of this respond- , :Mr. T. G. Harrison, continues as a member of the Board of Directors of respondent The Grocers Company, and respondent ,Yin:;;ton &; N e,,-ell Company continues to be a stockholder of respondent The Grocers Company, owning 10 590 shares in that corporation. On the other hand, respondent 'Vinston & Newell Company does not handle merchandise \with the 1. G. A. label. and has not done :;;0 sillce August 1942.

m. 8. (a) Respondent 1. G. A., when entering a new territory. makes a contract \with a wholesale grocer concern in such territory. This contract usually covers the normal trading' area of the wholesale grocer, and outlines the ,rholesaler s respon~ibilities in dealing: not only with respondent 1. G. A., but also 'with retail dealers in the territory. Respondent 1. G. A. supplies its afliliated \"\wholesale1'8 wjth trade information and market trends; investigates new products before attempting to sell them in order to be assured that the products hte worthy, will fill the demand of buyers. and \vin meet consumer acceptance; investigates the responsibility of new or unknown manufacturers entering the field; arranges in some instances for cooperative advertising between the seHer and the buyer 01' the buyer s affiliated retail stores; cheeks performance of any such cooperative advertisil~ arrangement; and supplies said retail grocers with retail merchandising services. In the latter connection, assistance to the retailer grocer has been in the form of store layouts which have been furnished, departmental plans, merchandising aid for day-to- clay selling and for special sales, assistance on low-price selling, advertising materials and posters, weekly bulletins and monthly house-organs, advice as to trends or changes in the retail store operation and management, advice as to market conditions and proper inventories, advice and forms as to bookkeeping methods, etc.

, :;:

INDEPENDENT GROCERS ALLIANCB DISTRIB. CO., ET AL. 915 894 Findings (b) As of January 1 ~ 1937, there "ere approximately 4,994 retail grocers affiliated 'with the I. G. A. movement as 1. G. A. stores, and as of December :31 , 19-t6 ~ there were 4 294 retail grocers so affiliated. The character of the stores has changed in the interim, so that the lesser number of retail grocers now affi.liated with the 1. G. A. mO,6l11ent represents a larger proportion of the retail food business than did the greater number of stores in 1937. All of the retail grocers affiliated with the 1. G. A. movement are designated as "I. G. A. Stores.~' Each is independently owned, and none is owned either by respondent 1. G. A. or respondent The Grocers Company. PAn. 9. (a) l\Iost of the "holesnle grocers ,,-ho are affiliated "it h respondent 1. G. A. are operating under a printed ""\Wholesalers Agreemenf~ or frallchise~ "which "-as inaugurated by respondent I. G. A. in 199j. In this agreement respondent 1. G. A. is referred to as "I-Ieadquarters" and the ,,-holesa16 grocer as "",Vholesaler. " This agreement provides, among other things, as follmys: "\YHERE.-\S Heatl(juarterf' is sponsoring and fostering a national mo,-ement, including an allianee of retail grocers, the same being sometimes lmown or designated as the IxDEPEKnExT GROCERS .\.LLU.NCE OF A?lIERICA (I. G. A. ) for the purpose of improving the grocen- trade, aiding retail merchants anll plodudn? economies and service efficiencies tol' the retailer and the ultima te consumer, and the shill retail groeers han' a common designation and are sometimes known as 1. G. A. stores or 1. G. A. retailers; and "\VHEREAS I-Ieadquartel's is the owner of Y:1riol1s and SUJl(b'~- trallemarks, trr.de J:ames and insignias which have been applipd by it to and are now in use on and in connection with yariOl1S and s11l1dn- :tl'tieles, merchandise and food products (herein sometimes refprred to as 1. G. A. merchandise), used, sold and distributed principally hy wholesale grocers and sold to the consumer only through 1. G. A. stores; and "\VHEREA. S the 1. G. ~-\. l1WH'ment wolk~ through exl'lm~i\"e wholesale grocers :UHl the ~ahl "\Vholesaler has heretofore €nten.'d into a certain franchise agreement with Headquarters find is (lesirou~ of extending- the "aid agreement as hereinafter set furth, and does here.l)~- promise aJHl fl;,!Lfe tila t it \yin cooperate fully in all the )llay'! l1l'('sented by I-Ieadquarte1'8 for the 1. G. A. movement so that the 1. G. A. Stores in the said territory will reeeiye needed benefits and more sa tisfactorily "er~'e their customers (b) Following thjs preliminary statement, respondent 1. G. A., in this agreement, grants to the wholesaler exclnsiye rights to all the merchandising, pnulicity, sales~ and promotion services of respondent I. G. A. in the grocery field, including participation in the 1. G. A. mow'ment in certain described territory. This agreement also provides that the ,,'holesnler will cooperate with respondent I. G. A. in its plans and programs adopted for the furtherance of the I. G. A. movement; will enroll and maintain retail grocers as 1. G. A. stores in the tel'l'itory described; and respondent 1. G. A. will make available Findings 48 F. T. C.

for the wholesale grocers, without cost, a consultation, advisory, and follow-up service; will furnish the wholesaler a merchandising service, advertising materials, etc., for which the wholesaler agrees to pay respondent 1. G. A. a membership and advertising fee of $4. per month for each retail grocer enrolled. The wholesaler further agrees that it will pay respondent 1. G. A., in addition to the sum just mentioned for services to be rendered, a monthly fee of $40, plus an additional sum monthly equal to 1/14th of 1 % of the average monthly sales of the wholesaler during the preceding calendar year and to furnish the respondent 1. G. A. with a statement, 30 days after execution of this agreement, and annually thereafter, showing sales during the preceding calendar year.

(c) Respondent 1.G. A., in this agreement also agrees to furnbh and make available for the use of the wholesaler, during the life of the agreement, products, merchandise, supplies, labels, and cartons bearing thereon the 1. G. A. trademark and insignia, and agrees to permit the use and distribution of same by the wholesaler in the territory described. The wholesaler, on his part, agrees that all 1. G. A. merchandise shall be purchased exclusively through respondent I. G. A. or through such other sources as may be mutually agreed upon, and that all 1. G. A. merchandise used, handled, or purchased by the wholesaler shall be sold or distributed only to duly qualified I. G. A. Etores within the territory described, or to schools, hospitals, and institutions purchasing for their own use and not for resale. Respondent I. G. A. also agrees that it will maintain and continue to maintain a complete brokerage department, and that it will furnish from time to time to the wholesaler full and complete information relative to commodities handled by the wholesaler; furnish market postings, analyses of conditions and other pertinent informationrelative to such commodities. The wholesaler agrees on its part that it will purchase through the said brokerage department the fullest extent of its requirements, provided, ho\vever, that the wholesaler shall not be obligated to use such department unless headquarters (respondent I. G. A. ) or the vendor represented by it is in a position to serve the said wholesaler equally as well as other brokers handling the particular commodities. The wholesaler further agrees, on its part, that it will furnish to headquarters (respondent 1. G. A. ) at its request .a report of all purchases made or contracts entered into by it of such n1erc.handise or commodities as may be specified by headquarters (re- INDEPENDENT GROCERS ALLIANCE DISTRIB. CO., ET AL. 917 894 Findings spondent I. G. A.) in such request. This agreement further provides as follows:

The parties hereto agree that in all transactions involving any purchase by the Wholesalel' , Headquarters shall act as the representative and broker of the vendor and shall not be deemed to be the agent or representative of the Wholesaler. Headquarters further agrees that brol~erages received by it and designated as sales service allowances, shall, in so far as the same is not prohibited by codes* of fair competition, be distributed to the wholesalers by Headquarters, provided, however, that Headquarters may retain therefrom a sum equal to its cost of general operations as determined by its Board of Directors. Headquarters further agrees that all sales service allowance, if any, which cannot be so distributed because of the provisions of codes, shall be retained by Headquarters and expended for special advertising, as may from time to time be determined by its Board of Directors.

(cl) This agreement further provides that headquarters will use its best efforts to obtain from producers, manufacturers, and suppliers of groceries and other products distributed by the wholesalers contracts for advertising and merchandising services to be rendered on behalf of the products and merchandise of the respective manufacturers, producers, and suppliers, and will advise the wholesaler of all such contracts within due time, permitting the wholesaler to render and perform in the territory specified the services provided for in the respective agreements made by headquarters with such manufacturers producers, and suppliers.

If the W11Olesaler elects to lender such services, Headquarters agrees that will compensate the Wholesaler as may be mutually agreed upon for such services. * * * The Wholesaler agrees that payments received by it hereunder shall not be used to reduce a sales price, and that it will faithfully render the services bargained for, and perform the terms and conditions of all such agreements.

PAR. 10. (a) In the wholesalers' agreements entered into between respondent 1. G. A. and its wholesaler affiliates in years subsequent to 1935, the same general language is used with respect to the maintenance of a complete brokerage department by respondent I. G. A. For instance, although the language with respect to the payment of brokerage is somewhat different, the 1938 agreement contains the following provision:

The Parties hereto agree that in all transactions involving any purchase by the Wholesaler, Heaclqnal'ters shall act as the representative and broker of the *Reference is to codes under the National Industrial Recovery Act (NRA). Findings 48 F. T. C.

vendor and shall not be deemed to be the agent 01' representative of the Wholesaler.

(b) In 1946 the franchise agreement entered into between respondent T. G. A. and its affiliated wholesale grocers (Par. Eighth) contabled the following provisions:

. Headquarters agree:,; to use its best efforts to have made anlilable for the use of the lVholesaler, during the life of this agreement, products, merchandise, supplies, labels, carton and containers bearing- thereon trademarks and insignias owned by Headquarters, and agrees that the 'Yholesaler may" use or distribute the same in the territory l1erein described. The Wholesaler understands that Headquarters acts as the exelusiye broker 01' selling agent in connection with 1. G. A. merchandise of all mflnufaeturers packing 01' lweparing 1. G. A. merchandise, and the Wholesalel' a ~Tees that all 1. G. A. merchandise. if any, purchased by it, shall be obtained onl~' from manufacturers, IHlckers, producers and suppli!:'rs which have been duly authorized to pack or prepare :,;uch lDel'cl1andise. it being understood and agreed that in all transactions inyolYing any purchase by the Wholesaler, Headquarters shall act as the representative and broker of the vendor, and shall not be deemed to be in any mnI1l1er ,y11a tsoeyer the agent or representative of the Wholesaler.

PAR. 11. (a) Respondent 1. G.. A., in addition to the foregoing franchise agreement, has, since June 19, 1936, the date of passage of the Robinson-Patman Act, entered into what are known as "Advertising nnel J\Ierchnnc1ising Agreements'~ with wholesalers affiliated ,with it. Pursuant to the terms of these agreements, the ,yholesaler agrees to furnish certain advertising and merchandising services over certain periods of time, such as newspnper advertisements, store display, window display, handbills, etc., featuring the products in the I. G. A. :Merchandiser, a trade publication sent to retailers, and to furnish the respondent I. G. A. with evidence of performance, consisting of copies of newspaper advertising or dodgers \"\ith certification showing the number used, etc., and in consideration thereof respondnt I. G. A. agrees to pay the wholesaler certain sums of money after evidence of performance, as mentioned, has been furnished it. (b) During 1943 respondent 1. G. A. entered into 2 289 such contracts, and paid out $278 090.46 to wholesale grocers, and during 1944 entered into 1 787 such contracts, and paid out $253 276.13 to wholesale grocers. The following is a list of such advertising and merchandising agreements in force during the years 1943 and 1944 between respondent 1. G. A. and its affiliated wholesalers or supply depots: ____ INDEPENDENT GROCERS ALLIANCE DISTRIB. CO, ) ET AL. 919 894 Finc1ings Contracts Issued Number of Con- tracts 1943 1944 1943 1944 American \"wholesale Grocery Co_----------------_ -__n-------- $3, 231.87 , 1'.08. 0.3 101 141 Becker-Prentiss Ine . ----0000- __00 ------- 3 425. 818. 31) Bird-Shankle Corpn__- - --- ----- --- _n--n_n -- 4 481. 28 057. Blake-Curtis Company - - - -- -- - -- - - -- - -- - 00- - ---- - -n -- - - - --- - - 2 109. 953. Bre~' ster, Gordon &- CO____n______-----------n____n_n------ 8, 199. Or-5. Brownell.'\l: Field Con__n__n_------ --------_nn___--n_----- 932. 112 440. Bryan Keefe & Co__n__n_n_____n--------------------------- 137. 685. Burlington Grocery Co_---__----_n_____-------n-------__-n- 424. , 443. F. H. Cobb Company ----______n_n_-_-n___--_ _------------- 4, 219. , 823. 55 The Copps Company ___00--__--_-------------------------- --- --_---_-h_- , 48~. Wm. Edwards Company ----------------------------__00___--- 2 576. 2a 612. The Fleming Co., Oklahoma City-_-- _----____--_n_--____---- 5 842. , 635. The Fleming Co., Topek~L___-------------------------------- 21 140. 15. ~55. 36 Gannon Grocery Company-n_-------n_----_u-------_n_---- 3 275. 040. Gary Wh01resale Grocery Co_-______n__----n_----------------- 5, 849. , 86J. .':0 Gatcway Grocery Company- _--00_00--_____-_-__00___-__00___- , 670. E. R. Godfrey & Sons COn__--n___--_n_n_--___n_---------- 15, 584. , 972. . Grainger Brothers Company-___n_------_n_ 13, Ogo. 70 912. Haas Brothers---__- --------------------------n_----_n--nn_- 2, 222. 976. Hannaher & O' Neil - 00- -- - - n - n - -- - - - - - - 00 -- -- - - - - - -- - - - - 114. ___-n___n- _00____- Holbrook Grocpry Company-------n_n_---- ------------------ 9, OJ5. 598. Holmstrom- :Pilcher Company -00 n -- 00 -- - - --- 00 -- -- -- n - 2 865. 051. 61 Inte.r-State Grecer Company ___n___-__n--_n--__------------ 5, 303. , 276. 47 Inter-Mountain Grocery Co. (Baker)___-------_n_------------- 76(1. ______00_00- F. N. J~hl1son ~o panYn_-_n_n__u_-----------------_n__n 2 770. 40 , 921. 68 101 135 C. D. I\.enny DlVJslOn-Dayton ------_n_n_---- -------------- 3, 998. 5, 465. g5 C. D. Kenny Division-Indianapolis___--_n_------------------ ----------..1 518. C. D. Kenny Division-Ne,,' Castle_-- -----------------------n 3 400. 39 I 705. C. D. Kenny Division- Richmond_____n_-------------_n_--- 00__ b33. 38 Lee Grocery Company-Bellingham_--__-_n_--_n_----------- 231. 856. 00 141 Lee Grocery Company- Everett. ~- _n - - n- - ---- - _00 -- - - --- - - 00 862. 704. Lewis, Hubbard Company----------------n_-_nn_-------_u- 247. 1. 230, -00 -__00 Franklin ~IacVefigh & Company---_n_n_----_n _------------- 3, 311. 751. l\lcLain Grocery Company----------------_n_--_n_----------- 9, 403. 7, (182. 75 Thos. G. l\Icl\lahon & Company -- -u - _u 3, !j23. 95 , 760. Milliken, Tomlinson Company----_n_----_n_-------------_n- 18, 31U. 500. Northern New York Grocery CO-----___nn__--__ _--n-------- 7 009. 070. NoweJI Wholesale Grocery COn__n --_--------------------- 2 952. 937. 0.3 Omar, Inc-_n_-_n_-------------_n_----------------_n_----_n 518. 724. Palmer- Simpson Company------------------------------_n_--- 2 487. , 445. ro I D. G. Penfield Co---____n__ooo..._ooo_____n____--_--______n 3, 278. 849. 50 I A. H. Perfect & Co., Fort Wayne----_n_------_ n_----------_n 9, 758, A. H. Perfect &: Co.. Sturgis_____--------------------------_n- _____ 00--__- :~~ l_n_ .1 Progressive Wholesale Grocery Co_- -- - _00 -- - - 3 570. 24 , 512. 83 112 Roundup Grocery Company----_n_n_--------n_----------_n 10 945. 315.80 F. E. Royston & Co"_n__u C_----__n_____n_____n_---__n_n 2 117. , 229. 3.'; I The Schumacher Company - -- - - n -- ---- --- - --- - -- - ---- --- - -- -- 20 0.31. 63 21, 781. 42 The Sisson Camp,mY-------------------------_n_--- _n__n_-- 4 231. 78 , 5CO. 00 W. T. Sistrunk &: CO__n_n __n______-n------ ---n_--___nn- 1 , ~M. J5 925.75Standard Grocer Company -- _n- - -- - - --- - ---- -- - - n_- - 7, 6P,4. 977. 84 I ~ta ~VhcI ~a1e Grocery Company------n_n-----_n_------_n ' 5 313. , 688. 79 81 I 119 "etfel au GlOcez Company. - - - - - 11 304. 9n, f55. 48 34 ' WBJamC'tte Grocery Company----_n_-_n_----_n__n_n_n _--- 4 6(0, 90 506. 67 Young:loyc Grocery Company------ -----_nn_--------------_n 7 8J2. , 457.80Zm' units Bros. Grocery Company----_n_-------------_n_n_--- 2 993. 83! 380. 40 i 1total__- - 278 O~O. 253, 276. 13 I 2, 289 787 920 FEPERAL TRADE COMMISSION DECISIONS Findings 48 F. T.

(c) The following is a statement of the amounts paid for advertising under such agreements during the years 1937 , 1940, and 1945 by six representative wholesalers or supply depots, together with the amounts of merchandise purchased by each during these years: Advertising Contracts Paid 1937 1940 1945 E. R. Godfrey & Sons COm--____ 301. 50 $12 750. $20 335. Franklin MacVeagb & Co------------------------------------- 049. 20 3, 239. 81 535. Northern New York Grocery 00__--___---------------------- 319. , (33. 17 018. Progressive Wholesale Grocery Co_..-------------------------- , 921. 97 558. 977. S5 Redman Wholesale Co_--------------------------------------- None None None Wetterau Grocer COnn_--___- --- , 969. 93 923. 700. Pill'cbases Tbrougb IGA Headquarters 1937 1940 1945 E. R. Godfrey & Sons Co_------------------------------------ $570 758. $542 502. $945, 034. 13 Franklin l\1acVengb & Co_------------------------------------ 201 F32. 158, 310. 231 137. Nortbern New York Gro(,ery Co----------------------------- 259, 226. ~, 223, 931. 66 590, 1\16. Progressive Wholesale Grocery Co_--------------------------- 138 074. 102 176. 254, 211. 85 Redman Wholesale Co_--------------------------------------- None None 11. 615. Wetterau Grocer CO_--n__----_---- ----- 334, 855. 02 532, 615. 596 371. PAR. 12. The aforesaid "Advertising and 1\1erchandising Agreement" referred to in Paragraph Eleven supra was not inaugurated and did not come in effect until after the passage of the Robinson- Patman Amendment to the Clayton Act, in June, 1936. Moneys allocated and paid each affiliated wholesaler by respondent 1. G. A. under such agreements were and are alloeated and paid each such individual wholesaler by said respondent directly in ratio to the amount of the commissions, brokerage, or other compensation, allowances, or discounts in lieu thereof collected from sellers by respondent T. G. A. on said individual wholesalers' purchases of I. G. A. branded merchandise. Said "Advertising and J\Ierchandising Agreements are distinct and apart from the advertising services furnished respondent 1. G. A. s affiliated retail stores in exchange for the payment for said advertising services made to respondent 1. G. A. by said retail stores and collected for by means of and through respondent I. G. A. wholesalers, as set out and described in agreements entered into by and between said wholesalers and said retailei's. Said "Advertising and 1\1erchandising Agreements" are not based on the monthly fee and percentage of sales payments made by affiliated wholesalers as set out and described in agreements between respondent 1. G. A. and said INDEPENDENT GROCERS ALLIANCE DISTRIB. CO., ET AL. 921 894 Findings wholesalers, as saicllatter payments by the wholesaler to respondent I. G. A. are for the services rendered said wholesaler by respondent 1. G. A. through its various departments, including its Sales-Service Department. Said territorial "Advertising and :Merchandising Agreements cover only, and are restricted to, advertising by the said wholesale buyers of merchandise under or bearing labels, brands, or insignia owned or controlled by respondent I. G. A. or its ownedsubsidiaries.PAR. 13. (a) Respondent Jersey Cereal Company is a corporation organized and existing undgr and by virtue of the laws of the State of Pennslyvania, with its principal office and place of business located at 10 South Lasalle Street, Chicago, Illinois. (b) Respondent Stokely-Van Camp, Inc., formerly Stokely Brothers & Company, Inc., is a corporation organized and existing under and by virtue of the laws of the State of Indiana, with its principal office and place of business located at 940 North Meridian StreetIndianapolis, Indiana. ( c) Respondent Dean l\Iilk Company is a corporation organized and existing under and by virtue or the laws of the State of Illinois with its principal office and place of business located at 20 North Wacker Drive, Chicago, Illinois.

(d) Respondent Cupples Company is a corporation organized and existing under and by virtue of the laws or the State or :Missouri, with its principal office and place of business located at 401 South Seventh Street, St. Louis, 1\1missouri.

(e) The aforesaid corporations are designated and referred to in this proceeding as "seller-respondents " and are now, and since June , 1936, have been, engaged in the busin~ss of selling commodities particularly foodstuffs, groceries, and allied products, to numerous buyers, including the buyer-respondents hereinbefore mentioned. Said sellers are fairly typical and representative members or a large group or class of manuracturers, processors, and producers engaged in the common practice of selling a substantial amount of their commodities to buyers who purchase through respondent I. G. A. PAR. 14. (a) In the course and conduct of its business since June 19 1936, respondent I. G. A. receives, and has received, orders from the aforesaid buyer-respondents for commodities and transmits, and has transmitted, such orders to the said seller-respondents, and as a result or the transmission of said orders by said buyer~respondents to respondent I. G. the execution of same by said respondent 1. G. A. and the acceptance of said orders by said seller-respondents, commodities, particularly foodstuffs, are, and have been, by said sellerrespondents shipped from the respective States in which such commodi.. 922 FEDERAL TRADE COMl\:USSION DECISIONS Findings 48 F. T. C. ties are located at the time of sale into and through various other States of the United States, directly to said buyer-respondents at their respective locations in various other States of the United States other than those in which said shipments originate. In the course of these transactions, said seller-respondents, since June 19, 1936, have transmitted, paid, and delivered, and do transmit, pay and deliver to respondelit 1. G. A., brokerage fees or commissions, the same being percentages agreed upon by said seller-respondents and respondent I. G. A. Respondent I. G. A., since June 19 , 193(), has received and accepted, and is now receiving and accepting, such brokerage fees or commissions upon the purchases of the aforesaid buyer-respondents. All of said buying and selling transactions and the transmission and receipt of said brokerage fees or commissions, conducted as aforesaid constitute a current of trade in commerce among and between the various States of the United States.

(b) Sellers of merchandise under labels or brands mvned or controlled and nationally advertised by them do not in some instances allmv respondent I. G. A. brokerage on purchases of said merchandise but restrict said brokerage payments to purchases of merchandise under or bearing labels owned or controlled by respondent I. G. A. or its owned subsidiaries.

(e) For more than eight years prior to 19-4:5, respondent I. G. A. entered into annual agreements with approximately 200 sellers, of whom the seller-respondents are representative. Said agreements ere made effective only as to transactions pertaining to merchandise pac.ked under labels, brands, trade-marks, or insignia owned or controlled by respondent I. G. A. and purported to license said sellers to use such labels, brands, trade-marks, or insignia. Certain other sellers were not required to execute such a formal agreement in order to thus pack and sell their merchandise. The form of this agreement has been changed occasionally, but typical of those frequently used since June 19, 1936, is one executed :May 15, 1937, between respondent I. G. A. and Elyria Canning Company, which contains the following provisions:

THAT 'WHEREAS Headquarters i:,; the sole owner of, or controls various and sundn- trade-marks, trade names, in:,;ig:nias, and other identifying characteri:,;Ucs (hereinafter sometimes referred to a~ "I. G. A. Trade-marks ) , which Headquarters has al)plied to and is nmv using on and in connection with nll'iol1s nnd sundry articles and merchandise used hy the grocen- trade and in the grocery field. said nrtkles and merchandise being standardized as to quality, packing. etc. ; and \VHEREAS Headquarters is the sponsor of a Movement known as INDEPENDE~T GROCERS' ALLIANCE OF A:.1ERIC.\ (1. G. A. ), and under saicll\lovement has granted ('hartel's to certain wholesale grocers to supply 01' make mo ailable I. G. A. goods, wares and mel chandise to affiliated retail grocers, each charter covering , INDEPENDENT GROCERS ALLIANCE DISTRIB. CO., ET AL. 923 894 Findings specific telTitory, as per the list nttaehed hereto and made a part hereof; and * * * 1. Headquarters does hereby~' grant to the l\lanufacturer fl nonexclush' e, nonas::.:ignable and indivisible licen~e to use the 1. G. A. trade-marks on and in eonneetion with the items hereinalJove mentioned, for the period of one year from the date hereof. This agreement mny be renewed from year to year thereafter upon the ndnlllce of such Hnnunl fee as nU1Y from time to time be fixed by mutual 1 agreement between the parties hereto, and provided further' that the. mn 1!ufaeturel' has fnithfnlly kept nnd l)el'fol'med all of the eovenants and conditions herein contained. It is agreed, however, that if and when headquarters notifips the IlHll1ufa cturer thn t the cha rter agreement of nn:\" wholesale grocer. men tinned all sn id attached list 11a s expired, then this agreement, as to such: wholpsaler and the territory selTiced by it, shall also be considered as having expired under the exviration date of said charter. Headcl1.Hlrters further agrees that in the event that it enters into charter agreements with ,,' wholesale grocers other than those mentioned on said aUnched list, it will so notify the manufadurel' find thereupon the names of such \vholesale grocers shall be included (In the lb;t attached hereto(), and shall be considered a part thereof. 3. The mHnnfndnrer further agrees that all merchandise, commodities food products nwnufadul'ed and sold 01' distributed by it under, or bearing thereon any 1. G. "\. trade-marks shall in all respects conform to the description or df'signation cal'l'ied by 01' appearing on said mel'C'hnlldise, and all grade and qnalit~- requirements fb.:ed by hendquHl'ters, and shall be in strict conformity with all rules, regulations, statutes, laws, and/or ordinances, if any, of properly constituted authorities, and the manufacturer further' agrees that headquarters shalllun-e the right at all times to inspect or analyze the said merchandise, com- 1l1O(1ities 01' food pl'(Hlucts for the purpose of ascertaining that all of the requirel11ents herein mentioned have been complied ,with. Xotwithstanding said right of examination and analysis, the manufacturer does hereby agree to indemnify and ~aye hnl'lllle~s headquarters from ally find all liability claims, if any, which llln~- result from the adulteration of or impurities in, 01' misbranding of any l11el'ehamlise llacked or shipped hereunder, 01' from the unh1 \yful or unauthorized use of any 1. G. A.. trade-marks.

4. The manufacturer agrees that nny merchandise, commodities or food produets manufactured, sold or distributed by it under the 1. G. A. trade-marks shall lie' i';old by it only to the wholesale grocers now 01' hereafter included in the nttnc'hed list, it being understood and agreed that nothing herein contained shall estop the manufacturer from manufacturing, selling or distributing the same or identknlmerehandise under some other name, and without the 1. G. A. trademarks to any and nil purehnsers \Yhatsoeyer. G. The manufacturer agrees to manufacture, prodnce and deliver the merchandise, commodities or food products herein mentioned in such quantities as may flom time to time be required to till the needs and requirements of the wholpsale grocers herein mentioned, 1)l'oYided howeyel', that the manufacturer shall first lwye the OllpOl'tunity of passing: upon and apIJl'oYing the credit ratings of said wholesalers or nny of them, and 11ro'-ided further that the price at which 8n id merehamlise, commodities or food products are to be sold to said wholesale grocers slwll be mutually agreed upon by the pn rules hereto. 6. It is understood and agreed that nothing herein contained shall give to the manufact11ler nny right, title, interest or claim ill and to the name 1. G. A. and/or to the I. G. A. trade-marks, except the light of usnge as herein mentioned Findings 48 F. T. lJ.

for the particular wholesale grocers mentioned on the attached list, and for the period of time herein specified on the above-described articles, and in accordance with the terms and conditions herein set forth, and the manufacturer shall have no right to use said 1. G. A. trade-marks on any article or commodity other than as specifically mentioned herein, without the written permission of headquarters being first had and obtained. It is further understood and agreed that this agreement shall not in any manner \Yha tsover restrict headqun rters from additional licensing of said I. G. A. trade-marks to any other manufacturer, or interfere with or limit the use of the said I. G. A. trade-mall.:s on the same or other products handled by the grocery trade or used in the grocery field. Attached to such an agreement is usually a list of the wholesalers to whom the products are to be sold.

(d) A partial list of such seller-respondents-manufacturers, processors, and producers-together with the names of their products, the rate of brokerage paid, and the total amount of brokerage received by respondent 1. G. A. from said seller-respondents, is as follows: Amount of Brokerage Name of Principal Product BrokerageRate of 1937 1938 1943 1944 Blue Seal Food Prod. Mayonnaise and 2% and 6%---- - , 105. 112. 308. $8, OIfi. 30 ucts, Inc., Chicago, salad dressing.

III.

Dean Milk Company, Canned milk__-- 5~ a case-m_u- 584. 483. , 603. 48 2, 696. 24 Chicago, Ill.

Cupples Company, St. Household sun. 2~%, 3% and 376. 812. 074. 742. Louis, Mo. dries. 5%. lllinois Food Products Syrup products- 4% to 5%m---- 870. iO 718. 105. , 301. 64 Co.. Chicago, III.

Hoberg Paper Mills, Paper products-- 3% to 6%------- 728. 17, 040. 73 17, 283. , 389. 69 Green Bay, Wis.

Thinshel1 Products Co., Cookies and 2%, 3~%, 5Y2%. _--_---Un ----------- 700. 298. Chicago, IJI. candy.

Purity Oats Co., Keo- Rolled oats____-- 4% and 8%----- , 291. 35 359. 574. 044. kuk, Iowa.

Woolson Spice Co., To- Tea and spicesn 3%, 5%, l~t 329. 058. 10, 515. 546. lodo, Ohio. dozen. The Weber Fleur MiJJs Flour- - ---- --- -- lot to 1St per, 352. 4S 982. 800. 634. Co., Salina, Kans. barrel. Rosenberg Bros., San Canned fmitsn- 2~%__n_____-- ----------- n____n_n, 036. 32 , 201.59 Franci~co, Cali!.

Loyal Packing Co.. Canned meatsm 3%---__-------- 1 g, 364. 63 516. , 193. 50 685. Chicago, Ill.

BaJJ Bros., Muncie, Ind- G !ass\l"are_--- - - - 2% and 5%-_--- 7, 903. 71 , 003. 61 502. W5. PAR. 15. Prior to the enactment of the Robinson-Patman Act in June 1936, 80% of the brokerage fees and commissions paid by the sellers to respondent I. G. A. as intermediary upon the purchases of the respondent buyers "as transmitted to said buyers by respondent I. G. A., and received and accepted by them. After the enactment of said Act, respondent I. G. A. discontinued the practice of relnitting _ INDEPENDENT GROCERS ALLIANCE DISTRIB. CO., ET AL. 925 894 Findings said brokerages and commissions directly, as such, to said buyer-re- ~pondents. Respondent I. G. A., however, has since inaugurated and has now in effect, "Advertising and :Merchandising Agreements llereinbefore described in Paragraph Eleven, with all franchised or chartered I. G. A. wholesale grocers and supply depots, and in accordance therewith has passed on and now passes on, such brokerages and commissions, to said buyer-respondents and other buyers in the form of the advertising allowances more particularly hereinafter set forth and continues to pay respondent The Grocers Company dividends on the stock owned by said respondent The Grocers Company in respondent I. G. A., for the benefit of the affiliated ,vholesalers, who own more than 60% of the capital stock of said respondent The Grocers Company.

PAR. 16. (a) Respondent 1. G. A. received from sellers brokerage fees or commissions upon the purchases of the buyer-respondents during the years 1937 to 1946, from January 1 to November 30, 1946, as follows :

1937_____ -- $608, 452. 91 1938______--------- 540, 522. 14 1939______----------------------------- 539, 060. 84 1940-__--_----------------------------- 495, 300. 26 1941______----------------------------- 484, 970. 70 1942______-- ----------------- 447, 591. 1943___-__-------------- 430, 598. 24 1944___-__-------------- 401, 181. 60 1945-_____----------------------------- 396, 112. 27 1946 (11 1l10nths)____------------------ 390, 859. (b) The total income of respondent 1. G. A. during the said period of time is set forth in the following table: Brokerare bership Advertising other Year Service Fees Mem and Com- All Dues Div. Income Income missions 1937 ._n. -- - - -- - n - - - -- - - -- -- - $02, Oed. 82 $276 540. $98, 403. $~08 452. 91 $40 368. 69 J 938. - --- --- - n- ------ n___- --- -- , ('.55. 52 236 90, 256. 34 540, 522. 14 56, 125. 1939. - - , 620. 11 2)8 991. 37 112, ~7S. It, 589. 0:0. 114 , 278. 83 1940.__- __n - - - - n - - - -- n -- - --- -- - , 19S. 13 255, on 131 , (3S. 97 495, 3rO. 26 73. 220. 1941 ---- - - - - n - n- - - - n - - n -- -- - , 6SG. 39 24.5, 799. 75 122 344. 484, 970. 70 , 253. 07 1942__- -- - -- - n - - --- - n _n_- - 110. 232, 944. 76 , 298. 4J 4017, Em. 251. 1943_- _n - _-_on - n - - - , 079. 205, 9J3. 24 70, 237. J4 430, 598. 24 , 241. 49 1944_----_- - - n - - - - -- n __-_non -- 9;)7. 211 4::4. , 6:39. 37 401 , IS1. co, SIS. 40 1945_--___- - - - - - - - - - - - - - - -- - - -- - i'O4. OS 211 0:8. , co, 414. 87 396, 112. 616. 1946 , - - - -- - - _n - - - - - -- - n- -- --- -- , 035. 65 213 159. 062. 390, 859. 37 435. 11946 includes 11 months only, or from January 1 to November 30th. (c) For comparative purposes year by year, there follo\vs a schedule which groups the t\xpenditures of the gross income of respondent , ,, ). ___ 926 FEDERAL TRADE COMJ\HSSION DECISIONS Fjndings 48 1" .r. C. 1. G. A. Such expenditures are represented by (1) salaries and other disbursements in connection with its brokerage business, (2) administrative and general expenses, (3) advertising expenditures other than so-ealled territorial ad vertisillg, (4) payments pursuant to said Advertising and lvIerchandising Agreements " otherwise known as territorial advertising, " a,nd (5) miscellaneous. S~:Jes General and Adnrtising Territorial AJl other Year Service Admin. Expenses Expenses Expenses \.d vertising Expenses 1__- 1937- n_ ---------_U_------------ $15() 1~0. $158, 6B.5. - $:?59, 208. 72 $437. f)20. 53 $21 309. 1938-- -- n- - - - 0 -- -- - - --- - - - --_On- 175, 732. 14 J 83. 8i6. 29 2'1iJ, :;24. 811 3G7. S09. gf) . G2J. 58 1 939_ nn- - - - -- - - _0 - - -- - - 169, 738. 21 181 304. 2I1J 641.50 374 731. 15, .545. 00 1940-_---- - - - - - - - - - - - -- 0 - --- - _u_- 15i, 827. 28 ai, 942. ()4 2i2, 8112. 302, 791. 25 11) 420. 1941 n - un - _n - - _u -- ---- l.'i3 , 091. 55 2 196, 650. 3li ')0, 205. 30!' , 341'. 54 If). 208.06 1942-- n_- - - - -- - - - - - - - -- - -- 0 - - - 14(), 934. 179 403. 4J 185 974. 282 1('.3. 003. 1943_ - - - - - 0 - - u- - - 138 0')9. lfil 180. 11,3. 253. 278. 000. , 813. 72 1944_--_-_ n - - ---- - --n - - nnnn- 131 140. 16i, 7211 184 97. 253 276. 13 193. 1945 - n - - 0- 0 - - - - - - - - - - - - - - - - - - - - - - 1411, 1329. 78 1 63 2'J.!. 44 193 0'11. 72 228, 5.)3. 84 flue8 1946 1u - -- u -- n _uu- - - -- -- -_u- 142 988. 2187. 147. 2lJ. 27.UJ4 1(:3 243. 1H1. g8 11946 includes 11 months only, orfrom Jannary 1st to November 30th. 2 Includes cost of producing SI)ecial J 8th and 20th A Dllinrs:1ry ismes of " The Inc!ependent Grocergram. The amounts in the column headed "Territoriftl Advertisin. " for the respective years 1037 to 10-::1:6 both inclusive, represent. the amounts paid buyer-respondents and other buyers in accordance with said territorial "Advertising alld :J\Ierchandising Agreements hereinbefore mentioned in Paragraphs Eleven and Fifteen, and have been paid by respondent I. G. A. to said buyer-respondents and other b11yers in lieu of said brokerage fees and commissions. m. 17. (a) The gross income of respondent 1. G. A. for the year ending December 31, 1937 from all sources, amounted to $1 141 0-::1:9.43 of which $608 452 91 ,vas received in the form of brokerage and commissions. Expenditures for territorial achertising, as previously sho,,' amounted to $-::1:37 620.;'53. The net profit for the year was ~68)0!).47 which, added to the surplus on hand, produced a total surplus of $105 131.0:3 , out of ,which dividends in the amount of 863 000 "' ere paid to stockholders of record. The outstanding capital stock ,vas valued at one million dollars, and the principal assets listed as labels, copyrights, contracts, etc., in the sum of $999 000. Respondent The Grocers Company received one-half of the dividends paid that year, or approximately $31 500.

(b) For the year 1943, respondent. I. G. A. received a total income (;f 8840 069.24 from all sources; $430 598.24 was received that. year in the form of brokerage and commissions; and $278 mW.4G was paid out for territorial advertising. The net profit after the payment. of .

INDEPENDENT GROCERS ALLIANCE DISTRIB. CO. , ET AL. 927 894 Fintlings income taxes amounted to $51 757. , from which a stock dividend of 5% was paid on capital stock valued at one million dollars, of ,which respondent The Grocers Company received 50%. (c) In 1944, income of 1. G. A: received from all sources amounted to $830 070.8;"5. Of this income from brokerage and commissions amounted to $401 181.60, and the amount paid out. for territorial advertising ,vas $25;\276.13. The net profit after taxes amounted to ~58 H6.91. The surplus carried over into that year amounted to $44 504. ;')1 , supplying a total of $103 041.40 available for the payment of dividends. The record does not show the exact amount of stork dividends paid that year, but it. is estimated at approximately $50 000 since $5i1 041.42 ,vas carried over as surplus. (d) Income of respondent I. G. A. for the year 1945 received from all sources amounted to $807 816.75. Of this, income from brokerage and commissions "'as $396 112.27. The total amount expended for territorial advertising was $228 5-1B.84. The net profit that year after deduction for income taxes amounted to $45)398. , which, when added to an available surplus of $5:3J)41.42, totaled $98 439. 51. Stock dividends were paid that year to the amount of $25 000, leaving $73 L1:3DJi1 in the surplus account, available for the payment of dividends in 1946.

PAR. 18. (a) In the transactions of purchases and sale hereinbefore described, respondent Independent Grocers Alliance Distributing COlnpany has, by reason of the facts already set forth, including more particularly those referred to in this subparagraph, acted for and in jts own behalf and for and in behalf of the buyer-re,sponclents and other buyers.

(1) The cn pital stock of respondent Independent Grocers Alliance Distributing Company is and has been owned and controlled by two holding corporations-:Market Specialty Company and The Grocers Company-the controlling stock of both of ,which is owned by individuals, partnerships, 01' corporations which also own or control, diredly or indirectly, through stock ownership, or otherwise, wholesale grocery firms which are andlwve been buyers through said respondent Hnd ,which directly or indirectly receive and have received the benefit of brokerages or commissions paid by sellers to respondent Independent Grocers Alliance Distributing Company on said buyers purchases; and, further, each of respondent Independent Grocers Alliance Distributing Company s officers and directors, with the exception of \Villiam 'V. Thompson, is an official or director of a whole- ::;aJe grocery firm ,which is 01' has been a buyer of merchandise through Independent Grocers Alliance Distributing Company and which dil'ectlv or indirectly receives and has received the benefit of broker- 21:::840-54- Findings 48 F. '1'. C. ages or commissions paid to Independent Grocers Alliance Distributing Company by sellers upon said buyers' purchases. (2) Through the operation of franchise agreements executed between respondent Independent Grocers Alliance Distributing Company and its affiliated wholesale grocers, said respondent collects and receives from said wholesale grocers certain monthly fees as compensation for purchasing services and for other services rendered to said wholesale grocers in connection with their purchase and sale of merchandise; and, further, in connection with merchandise pac~;:ed for . sale under 1. G. A. labels, allots, restricts, and designates the territory and channels through which said merchandise may be sold. (3) Through the operation of contracts executed between respondent Independent Grocers Alliance Distributing Company and selected seller-respondents and other selected sellers, packers, manufacturers and producers, respondent Independent Grocers Alliance Distributing Company specifies and controls the quality of merchandise which said sellers may pack and sell under the 1. G. A. brands; controls, restricts and designates the number and type of buyers to whom said merchandise may be sold, and determines through negotiation with said sellers the prices at which said merchandise may be sold to said buyers. ( 4) Respondent Independent Grocers Alliance Distributing Company passes on and has passed on said brokerages, commissions, or other compensation received by it from sellers to the buyer-respondents and other buyers in the form of services, including advertising allowances restricted to the promotion of 1. G. A. branded merchandise and known as "territorial advertising" and in the form of stockdividend payments, 50 percent of which said respondent paid to its stockholder respondent The Grocers Company, for the benefit of the buyer-respondents (except 'Vinston & Newell Company) and other buyers who own the majority of the stock of respondent The Grocers Company.

(b) Seller-respondents Jersey Cereal Company, Stokely-Van Camp, Inc., Dean :NIilk Company, and Cupples Company, together with numerous other sellers as hereinbefore specified, while engaged in commerce and in the course of commerce, since June 19, 1936, have paid and granted brokerages and commissions, or other discounts and allowances in lieu thereof, to respondent Independent Grocers Alliance Distributing Company upon purchases of merchandise bearing trade names or trade-marks owned by said sellers or by respondent Independent Grocers Alliance Distributing Company which purchases were made by buyer-respondents and other buyers of merchandise and in connection with which respondent Independent Grocers Alliance INDEPENDENT GROCERS ALLIANCE DISTRIB. CO., ET AL. 929 894 Order Distributing Company acted for and in its own behalf and for and in behalf of said buyer-respondents and 'other buyers. ( C) During the aforesaid period, respondent Independent Grocers Alliance Distributing Company has received and accepted brokerages commissions, other compensation, and allowances, or discounts in lieu thereof, upon purchases made by respondents Franklin :Mac V eagh Company, E. R. Godfrey & Sons Company, \Vetterau Grocer Company, Inc., other buyer-respondents, and other buyers. In connection with said purchases, respondent Independent Grocers Alliance Distributing Company received and accepted for and in its own behalf and for and in behalf of said buyer-respondents and other buyers and has passed on and now passes on,. directly or indirectly, to respondent The Grocers Company and to said buyer-respondents and to other buyers, brokerages, commissions, other compensation, and allowances, or discounts in lieu thereof, which payments have been received and accepted by respondent The Grocers Company, said buyer-respondents, and other buyers. Respondent Independent Grocers Alliance Distributing Company, acting in the aforesaid manner and capacity, has not reildered, and is not now rendering, any service for or to said seller-respondents and other sellers, except for such incidental services in the form' of benefits as may have accrued to said sellers in not having to seek other outlets for ll1erchandise sold through said respondent.

CONCLUSION The payment by said seller-respondents and other sellers of brokerage fees or commissions or other compensation to respondent Independent Grocers Alliance Distributing Company 011 the purchases of said buyer-respondents and other buyers, and the receipt and acceptance t~lereof by respondent Independent Grocers Alliance Distributing Company, and by respondent The Grocers Company, and by said buyer-respondents and other buyers, in the manner and form hereinabove set forth, constitute violations of the provisions of subsection ( c) of Section 2 of the Clayton Act as amended by the Robinson- Patman Act, approved June 19, 1936.

ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission, answers of certain respondents, substitute answers of certain other respondents, stipulations, including statements of fact and exhibits therein set forth entered into by and between counsel in support of the complaint and counsel for certain other respondents (the details of all of which are , ., Order 48 F. T. C.

more fully set forth in the findings as to the facts herein), testimony and other evidence taken before a trial examiner of the Commission theretofore duly designated by it, recommended decision of the trial examiner and the exceptions thereto, briefs, oral argument and reargument of opposing counsel, one of said a118"'ers and the a foresaid substitute answers admitting certain material allegations of the complaint and, together with said stipulations, providing in part that the Commission may, \\"without the holding of hearings, the taking of testimony, the adduction of other evidence, and ,vithout intervening procedure, hear this matter upon the complaint, said answers, substitute answers, stipulations of fact, and briefs aill1 oral argument of opposing counsel, and proceed to make and enter its findings as to the facts, including inferences and conclusions based thereon, and enter its order disposing of this proceeding; and the Commission having entered its order disposing of the exceptions to the recommended decision of the trial examiner and having made its findings as to the facts and its conclusion that the respondents have violated the provisions of subsection (c) of section 2 of the Clayton Act as amended by the Robinson-Patman Act (U. ~3. C. Title Ii) Sec. 1:)) : I. It is oi'del'ecl That respondents ~Tersey Cereal Company, Stokely- Van Camp, Inc., Dean l\Iilk Company, and Cupples Company, and their respective'ofhcers, agents, representatives and employees, directly or through any corporate 01' other c1eyice. in 01' in connection with the sa Ie of grocery products or other commodities in commerce, as "commerce" is defined in the Clayton Act, do fortlHfith cease and desist from:

Payino' or t-.oTantino'1::-' directly or indirectly. to anv buyer, or to L' brespondent Independent Grocers Alliance Distributing Company, or any other agent, representative or intermediary acting for 01' in behalf or subject to the direct or indirect control of the buyer, anything of value as a commission, brokerage, or other compensation, or any allowance or discount in lieu thereof, upon any sale for such buyer' s o\,n account.

II. It 18 fui'thel' o'J'deJ' That respondent Independent Grocers Alliance Distributing Company: its directors, tT. Frank Grimes, L. G. Groebe, 'Villinm ",Y. Thompson, James D. Godfrey, Ned N. Fleming, Robert. H. Peretz, and its officers~ flg-ents, representatives and employees, directly or through any corporate or other device, in or in connection Ivith the purchase of grocery products or other commodities in commerce, as "commerce" is defined in the Clayton Act do forthwith cease and desist. from:

Rec9.iving or accepting, dii'ectly or indirectly, from any seller, anytiling of value a:3 a commission, brokerage, or other compensation ..: &:. &: , , &: &:. INDEPENDENT GROCERS ALLIANCE DISTRIB. CO. , ET AL. 931 894 Order or any allowance or discount in lieu thereof, upon any purchase for the account of respondent Independent Grocers Alliance Distributing of respondent Inde-Company or for the account of any stockholder pendent Grocers ..:\Jliance Distributing Company 01' respondent The Grocers Company, or for the account of any ,yholesale grocery concern affiliated or under' contract ,with respondent Independent Grocers \Jliance Distributing Company, or in connection with any purchase to thewherein said respondents ad. in fact for or in behalf or subject direct or indirect control of any party to the transaction other than the seller.

III. It is fudhe'l' onle?'ed That respondent The Grocers Company, its directors, James D. Godfrey, Ned N. Fleming, Robert H. Perlitz T. G. I-Iarrison, Robert :L\IcLain, E. F. Brewster Joseph Parker, N ormal Youngloye, Harry K. Grainger, and its officers, agents, representatives and employees, directly or through any cori)orate or other device, in or in connection with the purchase of grocery products or other commodities in commerce, as "commerce" is defined in the Clayton Act, do forthwith cease and desist from: Receiving or accepting, directly or indirectly, from any seHer, or from respondent Independent Grocers Alliance Distributing Company, anythil1g of ynlue as a commission, brokerage, or other compensation, or any allmyance 01' discount in lieu thereof, upon any purchase for the account of respondent Independent Grocers Alliance Distributing Company or for the account of any stockholder of respondent Independent Grocers Alliance Distributing Company or respondent The Grocers Company, 01' for the account of any wholesale grocery concern affiliated or under contract "ith respondents Independent Grocers Alliance Distributing Company, or in connection ,with any purchase wherein said respondents act in fact for or in to thebehalf or subject to the direct 01' indirect control of any party transaction other than the Sener'.

IV. It i8 frul'the?' ordered That respondents Franklin :MacVeagh & Company, E. R. Goclfrey & Sons Company, 'Vetteran Grocer Company, Inc., Gannon Grocery Company, DeVoe Grocery Co., The Fleming Company, Inc., I-Iolmstrom- Pileher Co. A. H. Perfect Co. Lewis, Hllbbard Co. Grainger Bros Co., The F. N. ,Johnson Co. ZHrnitz Brothers Grocery CompallY~ The Schnmacher Company, Gary ,Yholesale Grocery Co. Standard Grocery &: :Milling Co. Inc., The Inter- State Grocer Co. j\fiJJiken Tomlinson Co., Bnrlington Grocery Co. , The IIolbrook Grocery Co. The :McLain Grocery Co. Blake Curtiss Co. No,vell ,Yholesale Grocery Co. , 'V. T. Sistrunk Co. The F. H. Cobb Company, Progressive ,Yholesale Grocery Co. Thomas G. j\lcl\1ahon Co. Bro\\"nell &: Field Co. Haas Brothers, Utah ..

Opinion 48 F. T. C.

Wholesale Grocery Co., Roundup Grocery Co., and Lee Grocery Co. (the first three of which are named in the complaint as representative of the others as a .class), and all other wholesale grocery concerns which now are or in the future may be affiliated or under contract with respondent Independent Grocers Alliance Distributing Company or stockholders in respondent The Grocers CoDlpany, and their respective officers, agents, representatives and employees, directly or through any corporate or other device, in or in connection with the purchase of grocery products or other commodities in commerce, as commerce" is defined in the Clayton Act, do forthwith cease and desist from:

Receiving or acceptil1g~ directly or indirectly, from any seller, or from respondent Independent Grocers.A.Jliance Distributing Company or respondent The. Grocers Company, or from any other agent, representative or intermediary acting for or in behalf or subject to the direct or indirect control of said respondents named in this paragraph, in the form of money or credits or in the form of services or benefits provided or furnished, or otherwise, any commission, brokerage, or other compensation, or any allO'vnnce or discount in lieu thereof, upon purchases made for said respondent:: ' own accounts. V. It -is fw,thel' onlc1'ecl For the reasons stated in the Commission s findings as to the facts in this PI'oceeding, dw.t the complaint herein be, and it herehv is, dismissed as to resnondent ,Vinston & Newell Company.

VI. It is fuTtne?' ordered That the respondents, except. vVinstoll & Newell Company, shall, within sixty (60) days after service upon them of this order, file ,with the Commission n. report. in writing setting forth in detail the manner and form. in which they have complied with it.

OPINION OF THE COl\1l\IISSIO~ ptngarn ,Oln'l7U88W1Wl'.

There is nothing new or novel in this ease. The Commission and the courts have many times held that intermediaries acting in behalf or under the control of buyers may not receive brokerage payments upon the purchases of such buyers (Biddle Purebasing Company, et aI. v. F. T. C., 25 F. T. C. 564, 96 F. (2d) oB7 (19:s8J; Oliycl' Brothers Inc., et. aI. v. F. T. 26 F. T. C. 200 102 F. (2d) 768 (1939J ; ""\Vebb- Crawford Company, et aI. v. F. T. C., 27 F. T. C. 1099j 109 F. (2cl) 268 D940J; Quality Bakers of Amel'iefl, et aI. , v. F. T. 28 F. T. C. 1507 114 F. (2d) 393 (1940J; l\1'oc1eln J.\Iarketing Service, Inc.. , et aI. , v. F. T. C., 37 F. T. C. 386, 149 F. (2d) 970 (1945J ; F. T. C. v. Herzog, et aI., 35 F. T. C. 71 , 150 F. (2c1) 450 (1945J; F. T. C. v. David M. INDEPENDENT GROCERS ALLIA."N"CE DISTRIB. CO., ET AL. 933 894 Opinion Weiss, 35 F. T. C. 65, C. C. A. 2nd Cir., July 28, 1945; and numerous cases in which the Commission s orders were not appealed to the courts, including the significant case against United Buyers Corporation, et aI., 34 F. T. C. 87, (1941) and the recent case against Paul M. Cooter, et aI., Docket No. 5460, decided on December 13, 1951). This ease does not affect the rights of small business units to engage in lawful cooperative activities for their mutual benefit, but neither the law EOI' this decision provides special pr.ivileges for anyone class of buyers against another.

This case presents the situation in which an intermediary acting for and in behalf of buyers receives brokerage payments from sellers in connection with interstate sales of merchandise to the buyers. There is no dispute about the facts-they were stipulated; there is no uncertainty that those facts constitute violation of the law-the Commission is unanimous on that; and there is no doubt concerning the Commission s obligation to enforce the law-to which end the order to cease and desist has been entered.

These are .simple and compelling considerations. They should not be confused or clouded by exaggerations of the scope of the decisions or by suggestions of frightful consequences which find no support the record or in the past experience of the Commission in the a pplication of thelaw to many similar situations.

CONCURRING OPINION OF col\fl\nSSIONER LOWELL B. MASON Because this case so closely parallels the recent Carpel decision in its economic injury to small grocers, to which I dissented, it is proper to set forth in this opinion the factual differences that I believe require me to concur in the instant order.

This proceeding, brought under the brokerage clause of the Robinson-Patman Act (Section 2 (c) of the Clayton Act), involves a voluntary chain" composed of 4300 independently owned and operated grocery stores, some 43 independently owned wholesalers and the Independent Grocers Alliance Distributing Company. The Alliance, one of the pioneers in the voluntary cooperative movement, has just celebrated its twenty-fifth and, with this order prohibiting the collection of brokerage, perhaps its last, birthday. In a free economy, brokers are an important segment of our distribution system. vVithout them, small packers and producers would be at a loss to compete with the industrial giants who maintain their own sales forces. The. brokers' social utility guarantees their existence. vYithout them and the other avenues of independent distribution, retailers wollldlose an alternative choice for their supplies a.nd might he chained to some one manufacturer or producer. Opinion 48 F. T. C.

This order ",ill channel fees back to brokers which have been spent on improving the lot of small retailers. In justification of the law it is urged that these small merchants must be so restricted else the big chains may use the same aids. There is no doubt but that some chains used the. brokerage subterfuge as a means of covering up unlawful price discriminations, an unfair act and practice ,which could be prohibited under the Federal Tr.Hle Commission Act. But it is by no means necessary for the chains 01' any other large buying power to engage in such subterfuge, for the truth is, they will always have the advantages here taken a,yay from the small merchant. "Integrated function," as :l\Icn air has pointed out, rather than buying power, is the principal source of chain store economies. There is no doubt but that this decision will have a major impact upon distribution in this country. It "ill apply in many other fields such as small to",n retailers of dresses, hats, furs and other specialties who merchandise through resident buyers acti11g in their behaH which buyers receive compensation from the manufacturers. This proceeding is not brought under the Federal Trade Commu;sion Act. An examination of the report of the Trial Examiner who heard the evidence reveals that it "Ollld not be feasible to bring this case under that statute. Actions under the Federal Trade Commission Act must be based on a sho"ing of public interest or injury to competition, and from a study of the Trial Examiner s conclusions of fact as well as from a. reading of the testimony, I do not believe there was either public interest or injury to competition in this case. This decision "ill do much to (and not for) the little independent dry goods store because the instant defense controls are lifted, their competitive disadvantage will be further aggravated by the multinlillion dollar expansions on the part of the chain dry goods stores in the field or suburban neighborhood competition just waiting around the corner to get going. The similarity of operations here condemned and those of all cooperative merchandising movements should be the cause of grave concern to those interested in saving the small merchant.

Up until the decision in this case, buyer interest (as disclosed in the findings of fact herein) indicating direct or indirect control in an intermediary operation had not been declared illegal. As a c.onsequence, in the grocery field alone over 120 000 small independents buy their supplies today through retail-Q\yned wholesalers, voluntary cooperatives or straight. cooperatives to the tune of around 000 000 000 annually.

1 McNair Marketing Functions and Costs and the Robinson-Patman Act, 4 Law Con temp. Prob. 334 (1937).

, ,, . . INDEPENDENT GROCERS ALLIANCE DISTRIB. CO., ET AL. 935 894 Opil1ion. The unaffiliated stores not. affected by this decision distribute over O()O OOO OOO worth of foodstuffs.

In those locations -where they are in competition with affiliated stores, the decision in this case could set off a chain reaction of countless vexatious triple damage suits between small grocers. Probably not many ,yould be filed, but to harass all affiliated grocers with the. fluent of such unwalTnntecl and vexat.ious suits by the unaffiliated is litigious and mischieyous, to say the least. Thus it can be seen that this decision cuts deeper into our food economy than any other case that has ever come before this agency for consideration.

The la" of this case in n nutshell-to steal :Mr. Justice Jackson famous phrase-is that seller-paid compensation or allmvHnces to any intermediary is illegal if purchasers (retainers or ,vllOlesalers) are interested in the intel'll1ecliury, and if the Commission chooses to infer that that interest amounts to a direct or indirect control. hat makes a purchaser interested in an intermediary? Or, to be more specific as to this case hat makes H grocery man interested in the intermediary ,,-ho supplies him? A grocery man likes to sell food. In fact, the only reason he puts the stuff on his shelf is so he can hear the cash register ring as the food leaves the store. Food is like music. A bugler can blm" himself blue in the face, but if the music doesn come out of the horn, there is no room for more tunes at the mouthpiece. ~\..nd the same goes for the groceries which ~l manufacturer s intermediary gets a grocer to take. The intermediary ",hose only concern is to pocket his own brokerage as the food crmnls into the grocery shop is not nearly as attractive to the corner grocer as the intermediary ,\'ho helps the grocer move the food out.

One way the small grocer (01' his ,-dlOlesaler) could assure that his intermediary ,,"ould be interested in his \,eHare was to own stock in the intermediary corporation. Another ,yay ",as to stop doing business ",itll those intermediaries who '"ere just order- takers, and start doing business with intermediaries ,,-ho ",ere retailer-minded and furnished marketing and merchandising services and stock controls to the small grocer, either gratis 01' on a part-pay basis. Those intermediaries ,vho absorbed part or all of the cost of those retailer aids out of their own earnings ,,-ere the ones the Commission infers are under the control of the small grocery buyers. And COlH!Less has commanded that. n manufacturer s intermediarv cannot be under the direct or indirect control of the buyer. To give a high moral tone to this mandate, it is said that in law as well as morals, a man cannot serve two masters. A more inept application .

Opinion 48 F. T. C.

could hardly be found, for in the .American business scene, the merchant serves not one, but thousands of masters if he would succeed. In the words of the greatest Teacher of all: ".And whosoever of you will be the chiefest, shall be the servant of all. But to make doubly sure that an intermediary employed by a manufacturer didn t serve the retailer, we are here enforcing a law which in effect decrees that a certain cut of the housewife s gocery dollar must go as a broke.r s gabelle or else be pocketed by the manufacturer himself rather than have it seep down to aid either groeer or consumer. As the Yale Law Journal more euphonistically put it: Because a direct buyer is denied functional compe,nsation, an unneeded broker picks up business or a seller pockets the value of the Junction. The clause thus grants a legal toll gate to the broker or a windfall to the seller. Ironically, small wholesalers' cooperative buying agencies are conspieuous victims of the strict FTC 'brokerage clause' enforcement.

If we were permitted to weigh the welfare of the small merchant our course might be quite the opposite to what it is. During the argument before the Examiner, when discussing the handicaps facing the small grocers, namely, their inability to obtain merchandising, stock control and other.r management services, and the lack of mass advertising and advice on marketing, Examiner Haycraft Bta ted :

It is recognized that organizations such as the respondent IGA are probably the best solution of this problem from the standpont of the reail dealer.

Any student of food distribution will agree with this viewpoint, but under the mandate of the Hobinson-Patman Act, the Trial Examiner was constrained to recommend an order, and I find myself in much the same boat. But I row with the horrid knowledge that our order is directed against a voluntary alliance of wholesale grocers because they gave certain merchandising advantages to small business men heretofore gellerally available only to large chains. The small grocers obtained these benefits at considerably less cost than if they paid for the same out of their own pockets. As a matter of fact, the services were, for the most part, out of the each of little independent merchants except through some sort or voluntary alliance or cooperative agreement like the one challenged in this present case.

Defendant IGA was the capillary that fed down through its wholesaler associates to small retailers, the merchandising skill, the lack of 2 Yale Law Journal, June 1951 , p. 958.

::.:

INDEPENDENT GROCERS ALLIANCE DISTRIB. CO., ET AL. 937 "894 Opinion which in the past had nearly spelled genocide to the little independents. To place the small shops on a par with their chain competitors required ~L highly talented management organization. To maintain such a costly staff at each individual store would be prohibitive. Hence it was that the 4300 corner grocers affected by this order hoped to find a way of using.a central organization such as the chains always use. They wanted to meet the competition of the chains and yet not lose their identities as independent stores, keeping their own names, paying their own taxes, pocketing their own profits, and running their own businesses.

What the retailers received at the hands of IGA is disclosed in some measure by the Commission testimony. To support the charge 'on which this complaint is grounded, namely, that defendants were aiding and abetting small merchants in the operation of their stores without charging them, it was disclosed as a part of the Government' ,case that the defendants' function was to: install efficiency and other service systems * * * to make business and market analysis for such organizations, to assist in financing * * * to publish bulletins and newspapers for the industries oj: * oj: dealing with such commodities; to acquire and disseminate information regarding the production, preparation, distribution and consumption of said * * * commodities; and to generally aid and assist wholesale and retail merchants * These aids must have been very real, judging from the rapid recruitment of small retailers to the defendants' alliance, and as the findings 'of fact point out:

"Respondent 1. G. A. supplies its affiliated wholesalers with trade information and market trends; investigates new products before attempting to sell them in order to be assured that the products are worthy, will fill the demand of buyers, and will meet consumer acceptance;, investigates the responsibility of new or unknown manufacturers entering the field; arranges in some instances for cooperative advertising between the seller and the buyer or the buyer s affiliated retail stores; checks performance of any such cooperative advertising arrangement; and supplies said retail grocers with retail merchandising servic~s. In the latter connection, assistance to the retail grocer has been in the form of store layouts which have been furnished, departmental plans, merchandising aid for day-to-day selling and for special sales, assistance on low-price selling, advertising materials and posters, weekly bulletins and monthly house-organs, advice as to trends or changes in the retail store operation and management, advice 938 FEDERAL TRADE COMl'd ' SSION DECISIONS Ovinion 48 F. T. C.

as to market conditions and proper inventories, advice: and forms as to: bookkeeping. methods, etc.

I shall not burden this opinion with a recital of all the benefits,. but I cannot pass without commenting on two. It gave the small grocers a voice in the control over the quality . of merchandise they obtained from producers and which they in turn sold to the public. It also gave the small grocer the privilege of identifying his merchandise. with his own individual store by use of private' brand From the standpoint of the public interest, this encouraged the labels. feeling of responsibility for good quality between the consumer and his neighborhood grocer (the man on the other side of the counter) ra ther than between the consumer and a man on the other side of the continent (the producer).

In my opinion, the ultimate welfare of our nation depends not only on the 16 billion dollar productive cftpacity of our food industry, but is tied to the three feet of counter that separates the consumer from his gl ocery man.

Be that as it may, the Congressional mandate prohibits these aids 3 and I must therefore subscribe to the to mllall independent retailers order herein entered. I do so, however, with one reservfttion. The complaint names as buyer-respondents Franklin :Mac V eagh 8: Company, E. R. Godfrey & Sons Company and ,Vetteran Grocer Company, Inc., as representative of parties respondent, both individually and as a group or class of a large number of wholesale grocery concerns, each of whom is likewise affiliated and under contract with respondent IGA and is a stockholder of respondent "Grocers Company. These three respondents ,,-ere served and given. an opportunity to defend the charges filed against them. They have had their day before our quasi-judicial agency.

The order to cease and desist, hmvever, includes other companies . which were not named as parties defendant in the complaint, to-wit: Gannon Grocery Company, De V oe Grocery Co., The Fleming Company, Inc., Holmstl'on- Pilcher Co., A. H. Perfect &: Co., Lewis, Hussbard &, Co., Grainger Bros. Co., The F. N. J olmson Co., Zarnitz Brothers Grocery Company, The Schumacher Company, Gary ,Wholesale Grocery Co., Standard Grocery & ~filling Co., Inc., The Inter- State Grocer Co., ~lilliken Tomlinson Co., Burlington Grocery Co. ~ The majority findings of fact (p. 9.26) trace disbursements of IGA profits (in lily opinion. accruing from their operation as an intermediarr bet\\"een sellers arid buyers) in to the han(ls of burel's in the fonll of diyidends nJHl other pa~'ments to those wholesalers who held a stock interest in IGA and who were otherwise affiliated with it, and also traced other benefits to the retailers who bought from the respondent wholesalers. &;

INDEPENDENT GROCERS ALLIANCE DISTRIB. CO., ET AL. 939 894 Opinion The Holbrook Grocery Co., The :McLain Grocery Co., Blake Curtiss Co., Nowell ,Yholesale Grocery Co., ,V. T. Sistrunk &; Co., The F. H. Cobb Company, Progressive ,Vholesale Grocery Co., Thomas G. :Mc- :Mahon & Co., Bro\\'nell Field Co., Haas Brothers, Utah wholesale Grocery Co., Roundup Grocery Co., and Lee Grocery Co. These business men have been tried in absentia and found guilty. l\loreover, they are required to file a report in writing within sixty days setting forth their compliance ,,-ith an order entered in a case to which they "'ere not parties. The burden of the order also runs against officers, agents, representatives and employees of these unamed respondents.

There are~ of course, precedents in favor of class suits, the leading ease involving the Danbury Hatters. l\lembers of a labor union who owned their o,"n cottages found a judgment for a quarter of million dollars levied against their homes for violating an order in a ease they had not been a party to. ,Ye, too, have entered such orders. Though we have never sought to collect damages in a District Court against unnamed respondents, the orders hate been dra "\"\"n, nevertheless, to include persons not parties to the litigation. In F ederal Trade C ommission vs. 8 ouhthern II anlware (1922) such an order "as entered. In ()hambej' of CO'llunel'ce Ys. Federal T' ade Comm,i88ioll ))3 F. (2cl) '(:;7:3, an order against conspiracy ,"as entered hut a report of compliance "'as not required of persons unnamed in the complaint. A similar order for compliance was also directed against named respondents only in United Buyers Corporation, et al. F. T. C. 104.

In the above and other cases, there were allegations in the complaint that the defendants in a certain class "~ere too numerous to be individually named as respondents ",without manifest inconvenience and delay. No such allegation "as made against this class of defendants in the instant case.

28 companies not named as In this order to cease and desist, defendants in the complaint have been specifically included in the findings of tact and the order to cease and desist. Never having had their clay in court in this case, they are required to file with the Commission a report in writing, setting forth in detail the manner and form in "which they have complied 'with its order. in its scope. An order by the Federal Trade Commission is wide The unnamed officers, agents, representatives and employees as "ell as unnamed respondents, none of whom have had their day in court may be subject to a contempt proceeding for violation of a court' enforcement decree.

, Opinion 48 F. T. 0.- Little by little our powers and authorities creep up. We approach a condition with relation to the liability of large number of smallbusiness men unnamed in litigation that resembles the liability of unnamed individual laborers in the infamous Danbury Hatters case. As the late President "\Vilson said The history of liberty is the history of limitation of governmental power, not the increase of it. I do not concur in that portion of the order requiring an affirmativ& action from persons not named as defendants in the complaint. , STATE SE\VING :I\1MACHINE CORP., ET AL. 941 Syllabus