Bond Appliance Centers, Inc.

Text (OCR of the scan at left; may contain errors)

which they have complied with the order to cease and desist. I" THE 1'IATTER OF BOND APPLIANCg CENTEHS , INC., ET AL.

ORDER, ETC., I REGARD TO THE .\ALLEGED VIOLATION OF THE FEDERAL TRADl co::nnsslO ACT Docket 7315. Complaint, Nov. 1958-Decis-ion, Apr. , 1.961 . :JIass. , sew-Order dismi si!)g, without pre.iudice, complaint charging a Boston ing machine retailer no long-er in business. with bait advertising, condllcting deceptive radio quiz contests, fictitious pricing, and furnishing misleading five-year guarantees.

lift. Garland 8. Fe1'9U80n for the Commission. llfr. George V. Flavan of Quincy, :Mass. , for respondents. IXlTL\L DEClSlOX BY \nXER E. L1PSCO:'IB HEil.RING EXA:'IINBR The complaint herein was issued on November 25, 1958, charging Respondents with violation of the Federal Trade Commission Act by the dissemination of false and deceptive statements concerning their sewing machines and the prices thereof. On February 2 , 1959, counsel for the Respondents filed a motion requesting an extension of time within which to file an answer herein, sta6ng that on December 29\ 1958, a Receiver was appointed for the corporate Hesponclent, Bond Appliance Centers, Inc. , in Suffolk County Equity Court, Massachusetts, in the matter of De Silva Vacuum Cleaner Co. vs. Bond Appliance Centers, Inc., Docket 74980. He further stated that under Massachusetts law, upon the appointment of a State Court Receiver, the corporation involved in such receivership and its offcers, were stopped from conducting the business of the corporation, and from defending or prosecuting any suit or action on behalf of the corporation. X 0 answer on behalf of Respondents has ever been filed.

Bong-WAH:\TER CORPORATI02' ET AL. 629 628 Syllabus On February 16, 1961, counsel supporting the complaint submit.ted a motion requesting that the compla.int herein be dismissed without prejudice. He states that n recent investigation of the R.respondents has been conducted by the Burcan of Inyestigat.ion to determine their present status, and that the final report of this invest.igation dated February 7 , 19(H , shows that the corporate Respondent. has been in receivership, as stated by counsel for the R.respondents, since December 29, 1958, and t.hat the liabilities of the corporate Respondent far exceed its assets, The report further shows that the individual Respondents have not been engaged in the business of sellhlg sewing machines, or in a similar business, since 1958 , and that they have stated that they have no intention of resuming such business. Counsel supporting the complaint states t.hat under the circumstances he believes that the further prosecution of this case would not be in the public interest.

The Hearing Examiner, after,r having considered the entire record herein, concurs in the conclusion reached by counsel supporting the complaint.. Accordingly, I t is o1'dered That the complaint herein be, and the same hereby dismissed without prejudice to the right of the Commission to institute further proceedings against the Hespondents herein, should future circumstances so 'Ivarrant.

DECISION UP THE CO::fMISSION Pursuant to Section 3.21 of the Commission s Rules of Practice, the initial decision of the hearing examiner shah, on the 22nd day of April 1961, become the decision of thc Commission. b, THE MATTER OF BORG-WARNER COllPORATION ET AL.

COX SENT ORmm ETC. , IN REGARD TO THE ALLEGED \'"OLATION OF SEC. 2(a) or THE CLAYTON ACT lJockct 7667. Complaint. lJee. 1 , I.9, Decisio' , Apr. .27, 1%1 Consent order requiring a Chicago manufacturer and its corporate sales subsidiar -maintaining warehouse stocks in many States and with overall sales in 1958 approximating $,"188 000 000-1:0 cease discriminating in price between different purchas.ers of their automotive replacement parts in violation of Sec. 2(a) of the Clayton Act, by giving jobbers hp10nging to buyer gt'OUps I1hdlf'l' rlise-ounts ()1J pll'chn,;,es tlWJI their non-member competitors.

630 FEDERAL TRADE CO:'flISSION DECISIONS Complaint 58 F.

C01\IPLAINl' The Federal Trade Commission having reason to believe that the parties respondent named in the caption hereof and hereinafter more particularly designated and described have violatcd and are now violating the provisions of subsection (a) of Section" of the Clayton Act, as amended by the Robinson-Patman Act, approved June 19 1936, (D. C. Title 15, Section 13) hereby issues its complaint, stating its charges with respect thereto as follows: \.GRAPH 1. Respondent Borg 'Varner Corporation, is a corporation organized, existing and doing business under and by virtue of the laws of the State of Illinois, with principal offce and place of business located at 200 South :Michigan A venue, Chicago, Illinois. Borg-"\Varner Corporation s numerous divisions and corporate subsidiaries are variously located and engaged in t.he manufacture, sale and distribution of many diversified products, including repair or replacement parts for installation and use in automotive vehicles. Borg-Warner Corporation s overall product sales for 1958 totalled approximately $533 000.

Respondent, Borg-VFarner Service Parts Company, a wholly-owned and controlled subsidiary of respondent Borg-Warner Corporation is a corporation organized, existing and doing business under the laws of the State of Delaware, with principal offce and place of business located at North ::fichigan A venne, Chicago, Illinois. Borg-vVarncr Service Parts Company is engaged in the sale aml distribution of the automotive replacement parts manufactured by its parent Borg-Warner Corporation. Borg-1Varner Service Part, Company maintains warehouse stocks for such purpose in the cities of Atlanta, Ga., Boston, Mass., Charlotte, N. C. , Chicago, Ill. CJcveland, Ohio, Dallas, Texas, Detroit, Mich., Houston, Texas, Kansa, City, J\1:0., Los Angeles, Calif. , )'IinnefLpolis finn. New York, K. Y. Oakland, Calif., Philadelphia, Pa., Pittsburgh Pa. Portland, Oregon Richmond, Va., Seattle, Wash. ane! St. Louis, Mo. Respondents, Borg-Warner Corporation and Borg-1Varner Service Parts Company, in the course and conduct of their business as aforesaid have caused and now cause the said parts to be shipped ane! transported from the State or States of location of their various manufacturing plants, warehouses and places of business, to the purchasers thereof located in States other than the State or States wherein said shipment or transportation originated. Said parts have been and are so sold to different purchasers for use or resale within the "United States and the District of Columbia, and respondents in the sale of saict parts have at all times relevant herein bp,en and BORG-WAR\TER CORPORATIO T ET AL. 631 629 Complaint now are engaged in commerce, as "commerce" is defined in the Clayton Act.

PAR. 2. The aforedescribed sales of said automotive replacement parts annually total in the substantial milions of dollars and respondents, in the course and conduct of their business as aforesaid, have been and now arc discriminating in price between different purchasers of their automotive replacement parts of Eke grade ana qnaEty, by seHing said parts at higher and less favorable prices to some purchasers than the same are sold to other purchasers, ma, of whom have been and now are in competition with the purchasers paying the higher prices.

For example, respondents classify said different purchasers of their automotive replacement parts and extend and set terms and eonclitions of sale for each such classification, according to the following agreements or arrangements:

(1 ) Jobber Franchise:

A purchaser classified as a "jobber" is normally engaged in reseHing said replacement parts to automotive vehicle fleets, and to garages, gasoEne service stations, and others in the automotive repair trade serving the general public. Jobbers purchase at a net price set out in re,spondents Jobber s Net Price List". .J0bhers are given it 15% discount 011 purchases of 100 or more in quant.ity of cross aurl bearing assemblies made at one time, but receive no discounts on the purchases of respondents' other parts. Respondents sell to approximately 2 500 such "jobber" purchasers throughout the United States. (2) warehouse Distributor Franchise:

A purchaser classified as a "warehouse distributor" normally resells only to jobbers. A warehousc distributor purchases from respondents Jobber s Net Price List" less 15%, less 2% freight allowance, in the case of all parts other than universal joints and cross and bearing assemblies. On universal joints and cross and bearing assemblies the warehouse distributor receives a 20%, plus 10% discount, which equals a 28% discount from the jobber s net price. Respondents sell to 43 such "warehouse distributors (3) Redistributor Franchise:

A purchaser classified as a so- called "redistributor" is a jobber who resells both as a jobber and on occasion as a warehouse distributor. Each month such a purchaser certifies as to ,whether the sale was made as a "jobber" or "warehouse distributor" and accordingly is allowed thereon either the "jobber s net price \ or a "jobber s net price" less the aforesaid applicable warehouse distributor discount. To obtain the warehouse distributor discounts the sales must be made by the "rcdistributor" to other and bona fide jobbers approved 632 FEDERAL TRADE CO:\I:MISSIOl'; DECISIONS Complaint 58 F, in advancc by respondents' authorized sales representatives. Respondents sell to 121 such "redistributors (4) Purchases made by individual jobbers engaged in so-called group buying In 1957 respondent.s commenced selling universal joints and components thereof to the Southern California Jobbers, Inc. organization at the net prices set out in respondents Jobber s Net Price List" whh a 15% discount on all purchases of said parts without regard to the quantity purchased. Southern California Jobbers: Inc. , a California corporation with principal offce and place of business in Los Angeles, California, has been a,nel is now maintained, managed controlled and operated by and for the particular individual jobber members associated together at any given time for the effectwltion of the purchasing poJjcies and practices described in P ARAGRAPI- THREE following of this complaint. On :JIarch 2G 1950 respondents classified said Southern California .J abbers, Inc., as a "warehouse distributor ' and commenced giving it. a 28% discount from jobber net price on purchases of universal joints and the components thereof. Shortly thereafter, in April 1959, respondents attemptcd, and without success, to induce the Sonthern California Jobb('rs Inc. organization to serve as such a "wflrehouse distributor ' for their entire line of other products subject to only the 15% discount and 2% freight allowance. Respondents' sales to the Southern California Tobbers, Inc. organization are substantial, as is indicated b r a gross billng therefor of 742.65 for April 1959 , and of 810,75;;.19 for May 1959.

-\R. 3. In practice flr d effect. Sout henl (',11 i fOJ'n i a .T ohLers. Inc.. has been and is now serving as the medium or instrumentality by, through or in conjunction with which, its numerous jobber members exert the influence of their combined bargaining power on manufacturers and sellers of automotive replacement parts. 1Vhen, and if, such recognition is granted by any particular seller, the subseCIuent purchase transactions between said seller and the individual jobber members have been and are biled to and paid for through the aforesaid organizational device of Southern California .Jobbers, Inc. S"id corporation thus purports to be the commodity purchaser, whe,n in truth and in fact, it has been and is now serving only as agent. for the several individual purchasers aforedcscribed, and is a mere bookkeeping device for facilitating the inducement and receipt by the said jobber purchasers from the said seller or discriminatory purchase prices.

Southern California ,Tobbers, Inc., has not and does not function as rt, purchaser for its own account for the use or resale or the commodities concerned. R.respondents' recognition of this device or so- BOBG-WAHNER CORPORATION ET AL. 633 629 Decision called "group buying" and consequent classification or said group as a "warehouse distributor, results in the granting of higher and more favorable purchase price discounts to these group-buying job bers as opposed to respondents' non- group-buying jobbcr customers who obtain only the purchase price discounts set forth and allowed in respondents' jobber s franchisc schedule. Many of these groupbuying jobbers are both competitively engaged with respondents non-group-buying jobber customers and are also potential customers or respondents' warehouse distributor purchasers. Jianufacturers and other sellers competitive with respondents, and not in such manner allowing actual or potential jobber purchasers the nse of this bookkeeping device of so-called group buying, have lost and may further lose substantial patronage in both customer number and dol1al' amount to respondents in the oflering for sale and the sale or their competitive products, as a result or respondents' continued recognition of this preferential buying practice.

PAR. 4. The effect of respondents' aforesaid discriminations in price between the said different purchasers of its said products of like grade and quality sold in manner and method and for purposes as aforestated, may be substantially to lessen competition or tend to create a monopoly in the lines of commerce.e in whkh respondents and the aforesaid favored purchasers Rre cngfl,ged, or to illinn destroy or prevent competition with said respondents, said favored purchasers, or with customers of either of theln. PAR. 5. The aforesflid acts and pr cticcs of j:respondents c.onstitute violations of the provisions of subscction (a) of Section 2 of the Clayton Act (n. c. Title 15, Section 18), as amended by the Robinson-Patman Act, approved .June 19 , 19:36. Mr. Eldon P. Schrup for the Commission. illi'. Chat/OS W. Houchins, Mr. Robert W. J11lphy and lift. Russell J. Parsons. of Chicago, Ill. , for respondents. INITIAL DECISION BY 'V ALTER R.. JOHNSON, ITEARIXG EXAMINER In the complaint dated December 1 , 1960 , thc respondents are chfLrgecl with violating the provisions of subsection (a) of section 2 of the Clayton Act, as amended.

On February 1, 1961, the respondents and their attorneys entered into an agreement with counsel in support of the complaint for a consent order.

Under the, foregoing agreement, the respondents a.admit the jurisdictional facts nJleged in the c.complaint. The parties agree among other things, that tlle cease and desist order there set forth may be entered wjthout further notice and have the same force and effect. 634 FEDERAL TRADE CQ:\DnSSIOK DECISIOKS Decision 58 F.

as if entered after a full hearing and the document includes a waiver by the respondents at all rights to clutl1enge or contest th validity of the order issuing in accordance therewith. The agreement further recites that it is for settlement purposes only, does not constitute an admission by the respondents that they have violated the law as alleged in the complaint, and that said complaint may be used in construing the terms of the order.

The hearing examiner finds that the content of the agreement meets all of the requirements of Section 3.25 (b) of the Rules of the Commission.

The complaint insofar as it concerns the allegation of "primary line injuri\ llmnely, to substantially lessen competition or tend to create a monopoly in the lines of commerce in which respondents are engaged, or to injure, destroy or prevent competition "\with said respondents, may be dismissed on the grounds that the evidence at hand in the light of subsequent developments is insl1Hicient to substantiate such allegations.

The agreement does not preclude a further investigation and the issuance of a complaint against Borg-\Varner Corporation s sales of replacement parts to original equipment manufacturers, if such he indicated.

The agreement also provides that the term "purchaser'. as used in the order to cen.se and desist herein shall include any purchaser buying directly or indirectly from respondents, or a subsidiary, division, or affliate of respondents by means of group buying or any related device but shall not be construed in the instant proceeding to include original equipment manufacturers, their divisions, subsidiaries, or affliates purchasing automotive parts from respondents for replacement use or sale.

The hearing examiner being of the opinion that the agreement L1d the proposed order provide an appropriate basis for disposition of this proceeding as to all of the parties, the agreement is hereby accepted a,nd it is ordered that the agreement shall not become a part of the offcial record of the proceeding unless and until becomes a part of the decision of the COJl1mission, The. following jurjsdictiona.l findings are made and t.he following order issued. 1. Respondent Borg \Varner Corpora60n is a. corporation organized1, existing and doing business under and by virtue of the laws of the State of IJlnois, with principal offce and place of business located at 200 South :Mic.higftJ1 A venue, Chicago, Illinois. Respondent is engaged in the manufacture and sale of many diversified produc.s including the manufacture and ale to automotive vehicle rnanufac- , ,, BORG-WARNER CORPORATWX ET AL. 635 Dccision hirers of parts for both original installation and replacement use in automotive vehicles.

Respondent Borg- ,Varner Service Parts Company, a -wholly-owned and controlled subsidiary of respondent Borg- arner Corporation is a corporation organized, existing and doing business under the laws of the State of Delaware, with principal office and place of business locat.ed at 6 North JIichigan Avenue, Chicago, Illinois. Borg-"\Varner Service Parts Company is engaged in the sale and distribution, principally to automotive parts wholesalers, of automotive l'cplacemcnt parts 1l 11mfaC'nJ'('(1 b;y Vnl'iOll'i nncl mnne.rolls manllfncturers including Borg-\Varner Corporation. 2. The Feclera.1 Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents. ORDER It is ordered That the respondents Borg-"\Yarncr Corporation, a corporation, and Borg-\Warner Service Parts Company, a corporation, and saiel respondents ' offcers, representatives, agents, and employees, directly or t,through an)' corporate or other device, in connection -with the sale to purchasers engaged in jobber dist.ribution or redistribution to jobbers of automotive replac.ement parts and such related items as are shown on pricing sheet.s of Borg- ,Varner Service Parts Company, in commerce tS "commerce" is defined in the Clayton Act, do forthwith cease and desist from discriminating in the price of such products of like grade and quality: 1. By selling to anyone purchaser at net prices higher than the net. prices charged to any other purchaser \Vho, in fact, competes \With t.he purchaser paying. the higher price in the resale and distribution of respondents' said products.

I t is jnTthe;' orde/wl. That the allegation in thc complaint to substantially lessen competition or tend to create a monopoly in the lines of commerce in ,which respondents are eng-agecl, or to injure destroy or prevent competition with said respondents, be dismissed. DECISION OF THE COl\DnSSION AND ORDER TO FILE REPORT OF CO:iIPLIAXCE Pursuant to Se.cion 3.21 of the Commission s Rules of Practice the initial decision of the hearing examiner shall, on the 27th day of April 1961, become the decision of the Commissionj and accordingly:

It i8 ordei' That the respondents herein shall within sixty (60) days after service upon t.hem of this ordcr' file with the Commission a report in writing setting fort.h in detail the manner and form in which they have complied ,,-ith the order to cease and desist. 636 FEDERAL TRADE COl\l11ISSIO:\ DECISIONS Decision 58 F.