Maguire Industries, Inc.

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IN THE MATTER OF MAGUIRE INDUSTRIES, INC.

CONSENT ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMIVllSSION ACT AND OF SEC. 2 (:1) OF THE CLAYTON ACT Docket 7090. CompICl-i. , Maj'. 20 , l.958-Decision, Scpt. , 1958 Consent order requiring a manufacturer of electronic compone!lts, including coils and transformers, in Mt. Carmel, Il1., selling principally to jobbers or distributors of television. and radio repair parts for resale to dealers industrial accounts, and radio and television repair shops, to cease discriminating in price by giving a 10 percent rebate to customers whose purchases from it were equnl to their total purchases from all sources in the previous twelve months, 71.,,2percent rebate if they equaled 75% of the total, and 5 percent if they equaled 50% of the total purchases; and to cease offering illegal inducements to customers to handle its said products exclusively by (a) utilizing aforesaid sales program, (b) granting a 10 percent rebate to customers who agreed to purchase solely from it, and (c) buying up their stocks of competitive products and selling them to competitors' distributors at l::ss than cost or much less than the prices charged by competitors.

COMPLAINT The Federal Trade Commission, having reason to believe that the party respondent named in the caption hereof, and hereinafter more particularly designated and described, has violated and js now violating the provisions of subsection CD.) of Section 2 of the Clayton Act, as amended by the Robinson-Patman Act, approved June 19, 1936 (D, , Title 15, Sec. 13), and Section 5 of the Federal Trade Commission Act (D. , Title 15, Sec. 45), and it appearing to the Commission that a proceeding by it in respect thereof, would be in the public interest, the Commi~sion hereby issues its complaint, stating its charg.es as follo'.:vs : Count I Charging violation of subsection (el) of Section 2 of the Clayton Act as amended, the Con1missiol1 alleges: PARAGRAPH 1. l\laguire Industries, Inc., is a corporation organized, existing and auing business under and by virtue of the laws of the State ('1' Ne'vv Yark \with its office and principal place of business lolXtted at 7th and Belmont Streets, l\ft. Carmel, Ill. PAR. 2. rlespondent is principally engaged in the business of nlanuf.xcturing, selling and distributing electronic components in- MAGUIRE INDUSTRIES, INC. 307 306 Complaint cluding coils and transformers. Respondent' s business in electronic components is conducted by and under the name of its wholly owned division, Thordarson-Meissner l\lanufacturing Division. Respondent' s total sales in 1957 exceeded $2 400,000. A principal market for respondent's products consists of jobbers or distributors of television and radio repair parts. Said jobbers or distributors (hereinafter referred to as distributors) resell electronic components purchased from respondent or from respondent' s competitors to dealers, industrial accounts and radio-television repair shops.

Respondent manufactures and produces electronic components in its factory in IVIt. Carmel, Ill., and sells and ships said components to its distributor customers located in ~very n1major trading area of every state of the United States. Respondent in the sale of said components has at all times relevant herein been and now is engaged in commerce among the several States of the United States and in the District of Columbia. PAR. 3. In the course and conduct of its business, the respondent has been and is now in substantial competition in the sale of electronic components .with other sellers of such products. In many trading areas throughout the United States respondent sells its products to two or more electronic components distributors, who are in substantial competition each \with the other in the resale of such products.

PAR. 4. In the course and conduct of its business in commerce, the respondent has been and is nOVl, in each of several trading areas, discriminating in price in the sale of its products of like grade and quality by selling then1 to some distributors at higher and less favorable prices than it sells them to other distributors who are competitively engaged each "\with the other in the resale of said products.

Respondent has effected said discriminations between and among its distributor custon1ers in the manner and by the methods hereinafter described.

Respondent secures from each of its customers and from prospective customers, statements of total purchases of transformers and coils from all suppliers during the previous 12 months. Respondent then offers to extend and pay, and does in fact extend and pay, annual rebates to said customers on their purchases from respondent in the ensuing 12 lllonths on the following basis: 10 % rebate if purchases from respondent are equal to total purchases from all sources in the previous 12 months; j j; ;

Complaint 55 F.

7~/~ 7~) rebate if purchases fronl respondent are equal to 75 of total purchases from all sources in the previous 12 months; 5 % rebate if purchasers from respondent are equal to 50 % total purchases from all sources in the previous 12 months. Through the operation of respondent's sales program as above described, those customers \vho do not purchase from respondent an amount equal to 50 ~/C of their previous year s total requirements of transformers and coils are charged higher and less favorable net prices than other competing customers who buy from respondent an amount sufficient to qualify for one of the rebates set out above. Those customers who purchase from respondent an amount equal to 50 of their previous year s total requirements but less than 75 ?C are charged higher and less favorable prices than other competing customers who purchase from respondent an amount equal to 75 % 01' 100 % of their previous year s requirements. Those customers who purchase from respondent an amount equal to 75 of their previous year s total requirements but less than 100 are charged higher and less favorable prices than other competing customers who purchased from respondent an an10unt equal to 100 X, of their previous year s requirements.

PAR. 5. The effect of respondent' s discriminations in price, as above alleged, n1ay be substantially to lessen, injure, destroy prevent competition between respondent and competing sellers of similar electronic components and between and among respondent' s distributor customers.

PAR. G. The acts and practices of respondent as above alleged constitute violations of the provisions of subsection (a) of Section 2 of the Clayton Act (D. , Title 15, Sec. 13), as amended by the Robinson-Patman Act, approved June 19, 1936. Count II Charging violation of Section 5 of the Federal Trade Commission Act, the Commission alleges:

PAR. 7. Paragraphs 1 through 4 of Count I are hereby incorporated by reference and made a part of this charge as fully and with the same effect as though here again set forth verbatim. PAR. 8. In the course and conduct of its business, respondent as an inducement to customers and prospective customers who handle and stock the coils and transformers of respondent's competitors to discontinue handling and stocking such competitive products and thereafter to handle and stock respondent's products MAGUIRE INDUSTRIES, INC. 309 306 Complaint has engaged and is now engaging in the following methods and practices:

de- (a) Utilizing and placing into effect a sales program as scribed in paragraph 4 above, which grants progressively lower prices through annual rebates to customers who purchase progressively higher percentages of their total requirements of such products from respondent.

(b) Granting or paying a 10% rebate to those customers vvho agree to purchase their full requirements of coils and transformers from respondent and thereafter not to deal in the products of competitors of respondent.

(c) Offering or agreeing to take over and buy up and by taking over and buying up the stocks of competitive products in the hands of customers and prospective customers. (d) Selling or offering to sell the products of competitors purchased from customers or prospective customers as alleged in the preceding paragraph, to the distributor customers of competitors at prices below the cost of such products to respondent or at prices substantially lower than the prices charged by respondent' s competitors for such products.

PAR. 9. The aforesaid methods, acts, and practices, as alleged in paragraph 8, have had and now have the following capacity, tendency, purpose and effect:

(a) To induce distributor customers of competitors of respondent to discontinue purchasing, stocking and selling said competitors' coils and transformers and instead to purchase, stock and sell respondent's coils and transformers exclusively; (b) To enable distributors who purchase coils and transformers from respondent which were originally n1anufactured and sold by competitors of respondent to sell such products at prices below those at which competitors' customers are able to sell the same products;

(c) Unreasonably to injure, hinder, hamper and restrain competing manufacturers and to demoralize their markets, in that by selling, or offering to sell at low prices and below cost, products originally manufactured by competitors, the respondent has severely damaged the reputation of such competitive products and created a condition whereby distributors who have been buying from competitors at regular prices, are forced either to discontinue such purchases, or, by continuing to purchase from conlpetitors of respondent, to risk the necessity of meeting the low 310 FEDERAL TRADE GOMMISSION DECISIONS Decision 55 F. T.

resale price offered by other distributors who purchased identical products from respondent.

PAR. 10. The aforesaid methods, acts and practices of respondent, as herein alleged, have the tendency and capacity to unfairly divert, and have unfairly diverted, trade to respondent from its competitors, and, in consequence thereof, injury has been done, and is now being done, by respondent to competition in commerce among and between the various states of the United States and the District of Columbia, and said methods, acts and practices are all to the prejudice and injury of the public, and of respondent' s competitors, and customers of respondent' s competitors, and constitute unfair methods of competition in commerce and unfair and deceptive acts and practices in commerce, within the meaning of the Federal Trade Commission Act. MT. William liv. Roga,z supporting the complaint. MT. James TV. Cassedy, of Washington, D. , for respondent. INITIAL DECISION BY J OR N LEWIS, HEARING EXAMINER The Federal Trade Commission issued its complaint against the above-named respondent on March 20, 1958, charging it with having violated Section 2 (a) of the Clayton Act, as amended, and Section 5 of the Federal Trade Commission Act, by discriminating in price between competing customers and by offering customers and prospective customers certain illegal inducements to discontinue handling competitive. products and to handle respondent' s products. After being served with said complaint respondent appeared by counsel and filed its answer thereto. TrLereafter the parties entered into an agreement, dated July 10, 1958, containing a consent order to cease and desist purporting to dispose of all of this proceeding as to all parties. Said agreement, which has been signed by respondent, by counsel for said respondent, and by counsel supporting the complaint, and approved by the director and assistant director of the Commission Bureau of Litigation, has been submitted to the above-named hearing examiner for his consideration, in accordance with Section 3.25 of the Commission s Rules of Practice for Adjudicative Proceedings.

Respondent, pursuant to the aforesaid agreement, has admitted all the jurisdictional allegations of the complaint and agreed that the record may be taken as if findings of j urisdictional facts had been duly made in accordance with such al- MAGUIRE INDUSTRIES, INC. 311 306 Order legations. Said agreement further provides that respondent waives any further procedural steps before the hearing examiner and the Commission, the making of findings of fact or conclusions of law and all of the rights it may have to challenge or contest the validity of the order to cease and desist entered in accordance with such agreement. It has been agreed that the order to cease and desist issued in accordance with said agreement shall have the same force and effect as if entered after a full hearing and that the complaint may be used in construing the terms of said order. It has also been agreed that the record herein shall consist solely of the complaint and said agreement, and that said agreement is for settlement purposes . only and does not constitute an admission by respondent that it has violated the law as alleged in the compaint.

This proceeding having now come on for final consideration on the complaint and the aforesaid agreement containing consent order, and it appearing that the order provided for in said agreement covers all of the allegations of the complaint and provides for an appropriate disposition of this proceeding as to all parties, said agreement is hereby accepted and is ordered filed upon this decision s becoming the decision of the Commission pursuant to Sections 3.21 and 3.25 of the Commission s Rules of Practice for Adjudicative Proceedings, and the hearing examiner, accordingly, makes the following jurisdictional findings and order: 1. Respondent Maguire Industries, Inc., is a corporation existing and doing business under and by virtue of the laws of the State of New York, with its office and principal place of business located at-Seventh and Belmont Street, Mt. Carmel Ill. 2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondent hereinabove named. The complaint states a cause of action against said respondent under the provisions of the Clayton Act, as amended, and the Federal Trade Commission Act, and this proceeding in the interest of the public.

ORDER It is ordered That respondent Maguire Industries, Inc. , a corporation, its officers, representatives, agents and employees, directly or by any corporate or other device, in or in connection with the sale, for replacement purposes of electronic components including transformers and coils, in con1merce, as "commerce" is defined in the Clayton Act, do forthwith cease and desist from: Decision 55 F.

Discriminating, directly or indirectly, in the price of such products and supplies of like grade and quality by selling to any one purchaser at net prices higher than the net prices charged to any other purchaser who, in fact competes with the purchaser paying the higher price in the resale and distribution of respondent's products.

It is further ordered That respondent Maguire Industries, Inc. a corporation, and its officers, representatives, agents, and employees, directly or by any corporate or other device in, or in connection with, the course and conduct of its business of selling electronic components, including transformers and coils, for replacement purposes, in commerce, as "commerce is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

(a) Granting or offering to grant a lower price, by means of a greater annual rebate or otherwise, to any customer for purchasing a greater percentage of its total requirements of any said product from respondent.

(b) Granting or offering to grant a lower price to any customer for agreeing to purchase all of its requirenlents of any said product from respondent.

(c) Purchasing from any customer or prospective customer said customer s stocks of competing electronic components including transformers and coils.

(d) Selling or offering to sell competitive electronic components, including transformers and coils, at prices lower than the prices charged by respondent' s competitors for the same products or at prices below the cost of such products to the respondent. DECISION OF THE COMMISSION 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 11 th day of September 1958 become the decision of the Commission; and, accordingly:

It is ordel'ed That the respondent herein shall within sixty (60) days after service upon it of this order, file with the Commission a report in writing setting forth in detail the manner and form in which it has complied with the order to cease and desist.

MOORE PRODUCTS CORP. ET AL. 313 Decision