Arkansas City Cooperative Milk Association, Inc., et al.

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IN THE JHA TTER OF ARKANSAS CITY COOPERATIVE :MILK ASSOCIATION, INC., ET AL.

CONSENT ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF SEC. 2 ( a) OF TI-IE CLA YTOX ACT Docket 6639. Complaint, Sept. 24, 1956-Deci:;;io' , Sept. 4, 1!)57 Consent order requiring a eooperatiye 1l13rl;;:eting association of some 2,000 cease discriminating in the dairy farmers in Kansas and Oklahoma to price of fluid milk in violation of Sec. 2 (a) of the Robinson-Patman Act by charging wholesale cU!';tomers in . \.rkam:as City prices ranging from to 31. less per quart than it charged their coml\etitors-mostly retailj!rocersthroughout the rest of its territory comprising a 50-mile radius of Arkansas City; and by reducing by 13( l)er gallon the price of milk it delivered ith two local to private homes, in which retail sale it was in competition ,,cash-and-carry dairies and with retail grocery stores, COMPLAINT The Federal Trade Commission, having reason to believe that the parties respondent named in the caption hereof, and more particularly designated and described hereinafter, have violated and are now violating the provisions of Section 2(a) of the Clayton Act (D. C. Title 15, Sec. 13) as amended by the Hobinson-Patman Act approved June 19, 1936, hereby issues its complaint stating its charges with respect thereto as follm'.

:Milk Asso- P.uU.GRAPn 1. Respondent Arkansas City Cooperative referred to as respondent Co-op, ciation, Ine., sometimes hereinafter is a cooperative marketing association organized and existing under the laws of the State of Kansas with its principal office and place of business located at 615 "'Vest Chestnut A venne, Arkansas City, composed of approximately 2 000Kansas. Respondent Co-op is members VdlO are dairy farmers located in the States of Kansas and Oklahoma.

respondent Co-op The c.control, direction and management of afta.irs, ponc.ies, practices and actions are vested in respondent Co-or s officers, directors and members. Respondents I-Iomer S. , are oflicers Call, Carl Fitzgerald, Ivan tT. Scott and .J ohn 'Veir, Jr. directors and members of respondent Co-op and are sometimes hereinn-iter referred to as respondent officials. constitutes a class so nu- The membership of respondent Co-op impracticable to specifically merous and changing as to make it Therefore, there name each member as a party respondent herein. \. ; () ARKANSAS CITY COOPERATIVE MILK ASSN. , INC., ET AL. 247 246 Complaint are named and inc.luded as respondents herein the respondent officials in their individual and official capacities and since they are 1ikmyise members of respondent Co-op and are fairly representative of the entire membership, they are also named as representative of an the members of respondent Co-op as a class so that those members not specificany named are also made parties respondent herein. The principal office and place of business of each of respondent officials is in care of respondent Arkansas City Cooperative :Milk Association, Inc., 615 "'Vest Chestnut .A venue, Arkansas City, Kansas. PAR. 2. Respondent Co-op was organized in 1933 and has been and is now engaged in the purchase of fluid milk and in the proeessing, sale and distribution of milk and other dairy products. It is primarily engaged in the production and sale of dairy products, including, but. not restricted to, butter, cheese and ice cream. It sells. bottled and packaged Grade " : milk, having a butter fat content of npproximately 3. , at both ,,-wholesale. and retail and it operates: and maintains home delivery service to consumer customers in Arkansas City only, ,which is located three miles north of the Kansas- Oklnhoma line. Its wholesale customers, to ",hom it also makes delivery, consist primarily of grocery stores reselling to the public. For the prist .:I: years the total annual sales of respondent Co-op for all products have ranged behyeen $2 500 000 and $i3 OOO 000, with sales of bottled milk amounting to approximately $4. 00O to $500 000. \n. 8. Respondent Co-op, in the course and conduct. of its said the~business, is engaged in commerce as "commerce:: is defined in Clayton .Act in that it sells nnd distributes fluid milk and other dairy p!'oduets to purchasers thereof 10ented in states other than the stale. of Origin of shipment and causes such products ,yhen sold to be shi pped and trnnsported from its place. of business in the State of Kansas to purchasers located in the State of Oklnhoma. There is no", and has been a constant course and flo'y of trade. and commerce in such products behyeen respondent Co-op in the State of E: ansas and purchasers located in the Strate of Oklahoma, as ,yell as in the State of Kansas.

Hespolldent Co-op is an instrumentality in the current of interstate eOlnmerce and is subject to the. jurisdiction of the Federal Trade Commission.

Respondent officials, through the mediulTl of respondent Co-op, in formulating the policies and directing the operations and activities thereof, are engaged in interstate commerce and are subject to the jurisdiction of the Federal Trade Commission. \R. 4. In the. course and conduct of its said business respondent Co-op has been and is no"" in competition ,yjth others in the sale , Complaint 54 F.

and distribution in commerce of fluid milk and other dairy products except as such competition has been substantially lessened by the pricing practices of respondent Co-op, as hereinafter alleged. Some of the customers of respondent Co-op are in competition with each other and with customers of competitors of respondent Co-op in the purchase and resale of fluid milk and other dairy products.

PAR. 5. Respondent Co-op has been for several years last past and is now, directly or indirectly, discriminating in price. between difierent purchasers of its bottled or packaged fluid milk by selling such products to some purchasers at substantially higher prices than it sells such products of like grade and quality to other purchasers some of whom are engaged in competition with the less favored purchasers in the resale of such products. Respondent Co-op has charged and now charges prices for the sale of fluid milk in various places in its area of operations in the States of Kansas and Oklahoma, which have been and are now substantially higher than those charged by respondent for the same grade and quality of milk sold and distributed in Arkansas City. Such lo-wer prices in Arkansas City have been and are to the injury of competitors of respondent Co.:op and also to the injury of those purchasers who are charged the higher prices and are in competition in the resale of such products with the purchasers receiving the benefit of the lower prices.

PAR. 6. The respondent Co-op has priced and sold its bottled and packaged fluid milk in quart, half gallon and gallon size containers in the trade area of Arkansas City to purchasers thereof at 'Tholesale prices ranging from 1~ to 3~ per quart less than is charged for the same product in the same. size and kind of containers sold at ,,'holesale to other purchasers located in places as near as 3 miles to Arkansas City and to still other purchasers located in various places in Kansas and Oklahoma 'within a radius of approximately 50 miles of Arkansas City, with most of such purchasers being engaged in the retail grocery business.

P,,\B. 7. Among the competitors of respondent Co-op is an independent dairy located in Arkansas City. Such competitor has been for several years last past and is now engaged in the sale of , asfluid milk and other dairy products on a cash and carry basis ell as on a delivery basis at wholesale. In or about August 1D54 responde.nt Co-op reduced its prices for bottled or packaged fluid milk for sale in .Arkansas City only, to the extent of 3~ per quart. the. same time respondent sold its fluid milk of the same grade and ARKANSAS CITY COOPERATIVE MILK ASSN., INC., ET AL. 249. Complaint quality to purchasers located in all other places within its sphere of operations at wholesale prices amounting to 3i per quart higher. than those at which it sold Inilk of the same grade and quality to its. Arkansas City purchasers.

Respondent Co-op, while maintaining one schedule of prices for bottled or packaged fluid milk in all the various places within the States of Kansas and Oklahoma in which it does business, has, at the same time, in the area of Arkansas City only, substantially reduced tile prices of such products.

Respondent Co-op has continued to maintain a differential between the prices at which it sells its fluid milk at wholesale to purchasers in .A.arkansas City and those at "which it sells the identical products in places other than Arkansas City. Such difi'erential has been from 2~ to 3~ per quart below this respondenes prices at which it sold the identical products at ,yholesale in all other towns and places within its sphere of operations.

PAR. 8. In addition to its ,yholesale business, respondent Co-op sells its dairy products, including fluid milk, at retail only in Arkansas City. There it operates and maintains a delivery service to private homes. In so selling the respondent Co-op is in competition ,,'ith two local dairies in that these competitors also sell fluid milk to the consuming public but on a cash and carry basis. Furthermore, said respondent, in this phase of its business, competes with retail grocery stores who resell to the public in Arkansas City an nearby areas. In 1954 respondent Co-op reduced its retail fluid milk prices in Arkansas City by 13~ per gallon delivered to the purchaser which price was less than its competitors' prices for the sale of fluid milk on a cash and carry basis.

PAR. 9. The discriminations in price on the part of respondent Co-op being substantial, it is alleged that the efiect thereof may be substantially to lessen competition and to tend to create a monopoly in the respective lines of commerce in which respondent and the purchasers receiving the preferential prices are engaged and to tend to injure, destroy, and prevent competition between respondent and its eompetitors and bet~Yeen and among purchasers of the aforedescribed products from respondent.

Furthermore, the aforesaid discriminatory pricing practices of respondent Co-op hate an additional tendency of adversely affecting the business of those dairy farmers who supply fluid milk to the competitor or competitors of respondent Co-op who are also engaged in the sale of milk in the Arkansas City area. , ,, , ,, Decision 54 F.

. PAR. 10. The discriminations in price, as hereinbefore alleged are in violation of the provisions of Section 2 (a) of the Clayton Act as amended by the Robinson-Patman Act.

ill T. Le?ois F. Deli/'0 for the Commission. Te1nplwr, lV'right and TemplaT by illi'. Gem' ge Te1npla1' of Arkansas City, Kans., for respondents.

INITL\L DECISION BY ABNER E. LU' SCO)IB, I-IEAIUNG EXAMINER The complaint herein "-as issued on September 24, 1956, charging respondents with violation of the provisions of 9 2 (a) of the Clayton Act. (U. C. Title 15, 9 1:3) as amended by the Robinson-Patman Act, approved .June 19 , 193(;, by unlawful discrimination in price in the sale of their bottled and packaged fluid milk. On June 4 , 1957 Respondent .Arkansas City Cooperative )Iilk Association, Inc., by its President, Homer S. Call; Respondent Carl Fitzgerald; their counsel; and counsel supporting the complaint entered into an Agreement Containing Consent. Order To Cease And Desist which was approved by the Director and the Assistant Director of the Commission s Bureau of Litigation, and thereafter submitted to the I-Iearinp: Examiner for consideration. Respondent Arkansas City Cooperative ~lilk Association, Inc. is identified in the agreement as a Kansas corporation, with its office and principal place of business located at (;15 'Vest Chestnut Avenue Arkansas City, Kansas, and Respondent. Carl Fitzgerald as an individual and manager of the respondent corporation, and having the same address as the respondent corporation. B to Respondents I-lomeI' S. Call, Ivan T. Scott, and John 'Veil' Jr., named in the complaint individually, as representative of all the members of the corporate respondent cooperative, and as officers and directors thereof, the agreement sets forth a stipulation that the complaint. he dismissed insofar as it relates to these three Respondents in their individual and representative capacities. The parties to the agreement state therein that the reason for such dismissal of the complaint as to these Respondents is the belief that adequate. relief will be secured, by an order directed to the corporation, its officers, clirec.tors, representatives, agents and employees, and to Respondent. Carl Fitzgerald ho personally directed the operations of the respondent corporation.

Respondents Arkansas City Cooperative :Milk Association, Inc. , and Carl Fitzgerald admit all the jurisdictional facts alleged in the complaint; agree that the record may be taken as if findings of jurisdictional facts had been duly made in accordance ,,-it h such allegations; and ,,-aive any further procedure before the Hearing Examiner ARKANSAS CITY COOPERATIVE MILK ASSN., INC. , ET AL. 251 246 Order and the Commission, the making of findings of fact or conclusions of law, and all the rights they may have to challenge or contest the validity of the order to cease and desist entered in accordance with the agreement.

All signatory parties agree that the record on which the initial decision and the decision of the Commission shah be based shall consist solely of the complaint and the agreement; that the order to c.ease and desist as c.contained in the agreement shah have the same force and effect as if entered after a fun hearing; and may be altered, modified or set aside in the manner provided for other orders; that the complaint herein may be used in construing the terms of said order; and that. the agreement is for settlement purposes only and does not. constitute an admission by J~esponc1ents that they have violated the law as alleged in the complaint. After consideration of the allegations of the complaint and the provisions of the agreement. and the proposed order, the Hearing Examiner is of the opinion that such order constitutes a satisfactory disposition of this proceeding. Accordingly, in consonance ,,-ith the terms of the aforesaid agreement, the J-Iearing Examiner accepts the Agreement Containing Consent Order To Cease . nd Desist: finds that the Commission has jurisdiction over the Hespondents and over their acts and practices as alleged in the complnint; and finds that. this proceeding is in the public interest. Therefore I t is oT'de'l' That respondent Arkansas City Cooperative l\Iilk Association, Inc., a corporation, its oiticel's, directors, representatives agents, and employees, and respondent Carl Fitzgerald, individually and as manager of respondent Arkansas City Cooperative :Milk Association, Ine., directly 01' through any corporate or other device, in connection with the sale of ftuid milk in commerce as "commerce is defined in the Clayton Act, do forth,,-ith cease and desist from discriminating in price by selling ftuid milk of like grade and quality to any purchaser at a. price 'yrhich is Imver than the price charged any other purchaser engaged in the same line of commerce: (1) ,,-here such lower price undercuts t1)e. price. at which the purchaser charged the lower price may purchase fluid milk of like grade and quality from another seller; or.

(2) where any purchaser who does not receive the benefit of the lower price does in fact compete in the resale of such product with the purchaser who does receive the benefit of the lower price. It i.'5 fu.'l,th.eT onlered That the complaint herein, insofar as it relates to respondents J-Iomer S. Can, Ivan J. Seot.t, and .John 'Yeir T 1'. , be, and the same hereby is, dismissed as to them individually 52S577-GO- Decision 54 F.

and as representative of the entire membership of Arkansas City Cooperative :l\Iilk Association, Inc.

DECISIO~ OF THE COl\DIISSION AND ORDER TO FILE REPORT OF COMPLIANCE Pursuant to Section 3.21 of the Commission s Rules of Practice the initial decision of the hearing examiner shall, on the 4th day of September, 1957 become the deeision of the Commission; anel accordingly:

It is once1' That. respondent Arkansas City Cooperative ~Iilk Association, Inc. , a corporation, and respondent Carl Fitzgerald individually and as manager of respondent Arkansas City Cooperative :Milk Association, Inc., shall, wi thin sixty (60) days after service upon them of this order, file with the Commission a report in writing, setting forth in detail the manner and form in which they have com plied with the ordet to cease and desist. THE VENDO co. 253.

Complaint