Fertig's Fifth Avenue, Inc., et al.

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IN THE MATTER OF FERTIG' S FIFTH AVENUE, INC., ET AL.

cox SENT ORDER, ETC., IX REGARD TO THE ALLEGED VIOLATION OF 'file FEDERAl TRADE CO)DfISSION ACT Docket 8186. Complaint, Nov. 1960-Decision, May, 1961 Consent ordcr requiring a New York City retailer to cease making such deceptive pricing and savings claims in newspapers and otherwise as that "Heg. $30, $33 , S55 , and $60 bedspreads were "Now" $J9. , $22. , $37. , and $30. , respectively, when tbe higher prices were fictitious; and that rnan;y items available at the advertised prices for several periods during the year were offered at "EX'l' RAORDI ARY OJ\TCE- YEAR SAVINGS!" COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the authority vested in it by said Act, the Federal Trade Commission having reason to believe that Fertig s Fifth Avenue, Inc. , a corporation, and Saul B. Fertig: individually and as an offccr of said corporation, hereinafter referred to as respondents: have violated the provisions of saiel Act, and it appeal"ing to the Commission that a proceeding by it in respect thereof would be in the public interest hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. Respondent Fertig s Fifth Avenue, Inc. is a corporation organized, existing and doing business under and by virtu of the laws of the State of C'ew York, with its offce and principal place of business located at 417 Fifth Avenue, Kew York ew York. Respondent Saul B. Fertig is an offcer of the corporate respondent. He formulates, directs and controls the policies, practices and acts of said corporate respondent, including the practices and acts hereinafter referred to. His address is the same as that of the corporate respondent.

PAR. 2. Respondents are now, and for some time last past have been, engaged in the advertising, oflering for sale, sale a,nd distribution of various household items, including linens, sheets, towels, pillows, comforts and bedspreads.

PAR. 3. In the course and conduct of their business, respondents nm\ cause, and for some time last past have caused, their products when sold to be shipped from their place of business in the State of N ew York to purchasers thereof located in various ot,her states: and maintain. and at ajj times relevant herein have maintaine.d. a substantial course of trade in said products in commerce: as " lInerce is defined in the Federal Trade Commission Aet. _____ 974 FEDERAL TRADE COMMISSIOK DECISIOXS Complaint 5S F.

PAn. 4. In the course and conduct of their business, respondents are engaged in substantial competition in commerce with corporations, firms anrl individuals Jikewise engaged in t.he advertising, offering for sale, sa.1e and distribution of various household items ineluding linens, sheets, towels, pilows, comforts and bedspreads. PAR. 5. In the course and conduct of their business, ,md for the purpose of inducing the sale of their household items, respondents have made statements in newspapers and other media, typical of which, but not all inclusive, are the following: Magnificent Trapunto Quiled DECORATOR BEDSPREADS in Rich Antique Punja" Satin with a Soft l\luted-Tone Finish Twin Size --- ------ Reg. 30. Kow 19. Double Size --------- - Reg. 33. Now 22. 60 in. Queen Size -- -- neg. 55. Kow 37. 78 in. Hollywood Size ------- - Reg. 60. Xow 39. Wonderful 1Vasllable E:\fBROIDERED NYLON RUFFLED ACRILAN-FILLED COMFORTS Hollywood Size, 108" X 90" Heg. 30.00 OW 19. EXTRAORDI:\ARY ONCE- YEAH SAVIKGS! (Following this phrase are listed various items of merchandise offered at certain prices) PAR. 6. By means of the aforesaid statements, acts and practices respondents represented, directly, or by implication that the amount designated as "Reg. " in the advertisements were respondents' usual and customary retail prices for the advertised merchandise and that the differences between said prices and the lower prices represented savings from respondents' usual and customary retail prices; and that the merchandise listed under the statement "EXTRAORDI- NARY ONCE-A- YEAR SAVINGS!" was aVRilablc at the listed prices only once a year.

PAR. 7. Said stat ments and representations were false, misleading and deceptive. In truth and in fact, the prices designated as Reg. " were not respondents' usual and cust.omary retail prices for the advertised merchandise, but were in excess of such prices and the differences between such prices and the lower prices did not represent savings from respondents' usual and customary retail prices. Many, if not all, of the items of merchandise listed under the statement "EXTRAORDINARY m,CE-A- YEAR SA V- INGS 1" were available and offered for sale at the designat.ed prices for several periods during the year. Respondents' method of merchandising, as aforesaid, was a deceptive plan or scheme designed to establish fictitious retail prlccs for use in promoting the sale of the advertised items at Jesser prices. 1Vhi1e respondents did sell the FERTIG' S FIFTH AVENUE , IXC. , ET AL. 975 973 Decision varlOlls items of merchandise at the prices designated as "Reg." at various times, such sales were so limited in number that they did not, in fact, establish respondents' customary and usual retail prices and were fictitious prices.

PAR. 8. The use by respondents of the aforegoing false, misleading and deceptive statements and representations has had, and now has the capacity and tendency to mislead members of the purchasing public into the mistaken and erroneous belief that such statements and representations were, and are, true and into the purchase of substantial quantities of respondents' products by reason of said mistaken and erroneous belief. As a consequence thereof, substantial trade in commerce has been, and is being, unfairly diverted to respondents from their competitors and substantial injury has thereby been, and is being, done to competition in commerce. PAn. 9. The aforesaid acts and practices of respondents, as herein alleged, were, and are, all to the prejudice and injury of the public and of respondents' competitors and constitut.ed, and now constitute unfair and deceptive acts and practices and unfair methods of competition in commerce, within the intent and meaning of the Federal Trade Commission Act.

llfr. Alan R. Lyness for the Commission. Rosenberg, Stone Notleins by lir. 11forton G. Rosenberg, for respondents.

INITIAL DECISION BY HERitIAN TOCKER, IIEARIXG EXAj1nner The complaint in this proceeding, issued November 28 , 1960 charged the respondents, Fertig s Fifth Avenue Inc., a ::;;cw York corporation, and Saul B. Fertig, individually and as President thereof, both located at 417 Fifth A vcnue ew York cw York with violation of the provisions of the Federal Trade Commission Act, by misrepresenting the usual and customary prices of household goods advertised for sale, sold and distributed by them in commerce. After tho issuance of thc complaint, respondents (with the advice of their attorney), and counsel supporting the complaint entered into an agreement, containing consent order to cease and desist, thus disposing of all the issues as to all parties to this proceeding. It was expressly provided in said agreement that the signing thereof is for settlement purposes only and does not constitute an admission by respondents that they have violated the law as alleged in the complaint.

By the terms of said agreement, the respondents admittcd all the jurisdictional1 facts alleged in the complaint and agreed that the Order 58 F. 'l' record herein may be taken as if the Commission had made findings of jurisdictional facts in accordance with the allegations. By said agreement, the parties expressly waived any further procedural steps before the hearing examiner and the Commission; the making of findings of fact or conclusions of law; and all rights they may have to challenge or contest the validity of the order to cease and desist entered in accordance therewith. Respondents agreed further that the order to cease and desist issued in accordance with said agreement, shall have the same force and effect as if made after a full hearing. It was further provided that said agreement, together with the complaint, shall constitute the entire record herein; that the complaint herein may be used in construing the terms of the order issued pursuant to said agreement; a.nd that said order may be altered, modified or set aside in the manner prescribed by the statute for orders of the Commission.

The hearing examiner has considered such agrecment and the order therein contained and it appearing tha.t said agreement and order provide for an appropriate disposition of this proceeding, the same is hereby accepted and, upon becoming part of the Commission s decision in accordance with Sections 3.21 and 3.25 of the Rules of Practice, shan be filed; and, in consona.nce "ith the tenns thereof, the hearing examiner finds that the Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents named herein, and that this proceeding is in thc interest of the public, and issues the following order: ORDER , a cor- It is ordered That respondent Fertig s Fifth Avenue, Inc. poration, and its offcers, and Saul B. Fertig, individually and as an offcer of said corporation, and respondents' representatives, agents and employees, directly or through any corporate or other device in connection with the offering for sale, saJe, or distribution of bedspreads, comforts, or any other merchandisc: in commerce, as "' colnmerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

1. R.epres811ting, directly or indirectly, that any amount. is rcspondents' usual and customary retail price of merchanllise when sneh amount is in excess of the price at \,which said merc.ulJ1c1ise is usually and customarjly sold at retail by respondents in the normal course of business.

GIANT FOOD , INC. 977 973 Syllabus 2. Representing, directly or indirectly, that any savings are afforded in the purchase of respondents' merchandise unless the prices at which it is offered constitute a reduction from respondents usual and customary retail prices.

3. fisrepresenting in any manner the amount of savings available to purchasers of respondents' merchandise or the amount by which the price has been reduced from the price at which it is usually and customarily sold by respondents.

4. Using the word "Reg. " or any other word of the same import to designate prices of merchandise, unless they arc the usual and customary prices charged by respondents for said merchandise in the recent, regular course of business.

5. Using any merchandising plan or scheme to promote the sale of merchandise which involves the use of a fictit.ious price which is represented to be the respondents' usual and customary retail price. 6. Representing: directly or indirectly, that merchandise is offered at certain prices only once a year or any other llunber of times a year, or during any other period, unless such is the fact. DECISION OF THE COl\DlISSION AND ORDER TO FID REPORT OF C01\fPLIANCE Pursuant to Section 3.21 of the Commission s Hules of Practice the initial decision of the hearing examiner shall, on the 26th day of May, 1961, become the decision of the Commission; and, accordingly:

It is ordered That respondents herein shall, within 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 complied with the order to cease and desist. Ix TUE IATTER OF GIANT FOOD, INC. (FORMERLY KNOWN AS GIANT FOOD SHOPPIKG CENTER, IKC.

ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE CO::D-IISSIOK ACT Docket 6459. Gomp aint, Nov. , 1955 Decision, June 1961 Order requiring a large supermarket chain with retail outlets in Maryland, Virginia, and the District of Columbia, t.o cease soliciting and accepting as compensat.ion for advertising and promotional services, discriminatory payments from its suppliers which it knew or should have known were not . Amended add Supplemental Complaint, May 8, 1957 681-237--63-- 978 FEDERAL TRADE CO:\'\ISSION DECISIONS Decision 58 F.

made available on proportionally equal terms to all its competitors, such as contributions of $37 875 made by some 150 suppliers for its chain-wide 19th Anniversary Sale in return for advertising and promoting the suppliers products.

Mr. Andi'e1c C. GoodlwJ!e, ilh. FredTio 1'. Snss and J1h. Alvin D. Edelson for the Commission.

Mr. Joseph B. DCl1zansky; ilh. Raymond R. Dickey; 1Jh. Bernard Gordon; and MI'. Robed F. Rolnick aJ1 of Danzansky and Dickey, of 'IVashin"rton, D. , for respondent.

INITIAL DECISION BY LOREN H. LAUGHLIN, hearing EXA:\INER 1 This proceeding has been submitted for initial decision OIl evidence adduced by the Commission under the amended and supplemental complaint, as amended, and respondent s answer to the amended and supplemental complaint which also incorporaie and re-a.Ieges all matters set forth in its answer to the original complaint. The evidence presented under' the issues as framed by these pleadings in substance, involves determinations of whether the Commission two basic charges have been sustained. The proceeding is premised upon alleged violations of Section 5 of the Federal Trade Commission Act (15 FS. A. 1)45), hereinafter generally referred to as the Act, which violations are f1Jleged to be unfair competition and unfair acts and practices in interstate commerce. The first charge (charges hereinafter referred to trc as made in the amended and supplemental complaint), Paragraphs Five to Nine, inclusive, in substance, is that respondent knowingly induced or received payment from its suppbcrs in connection with various sales such as its 19th Anniversary sale in 1955, which payments by suppliers for advertising said sale amounted to $37 875. 2 many of such suppliers not offering or making arailable similar payments on proportionally equal terms to those granted by them to respondent in connection with advertising and promoting its sales. The second charge, Paragraphs Ten and Eleven, alleges a different, although 1 During the course of the I1tigo.tion the respoGflent changed its corporate name to Gi!l!Jt Food, Inc" and OH' hearing e-examiner on :Marcb 24, 1958, ordered the compla.int and proceedings aUleuded in accordance thercwitJJ. (n. 447-448) The title of this ca1'e . however, has not been formally changed following the Commission s regular practlce in such regard (R. 575) and uniformly followed by it and countiel for the parties in all fiings ma(le herein after 1farch 24 , 1!Jii8 ;J The total of the amounts paid by the respondent' s several contrJbutJn.l suppliers was alleged to be 831 825 (Pars. Six and Ten of tlle Amended and Supplemental Complaint). The proof showed it to be $37,875 , and on motion of counsel supporting the complaint by formal order issued February S, 1960, the figures were changed in the Amended and Supplemcntal Complaint to conform to the evidence. The original fiDswer and answer to the amended and supplemental complaint are considered herein as joining issue on said amended totftl amount.

GIA. T FOOD , INC. 97\J 9i7 Decision related, violation of g5 of the Act by respondent in that the amounts of money solicited and received from its suppliers in the course of its advertising of its several anniversary and candy carnival sales in 1954, 1955 , and 1956, are alleged to have been diverted in substantial amounts from such suppliers to respondent's own use. The case was submitted for decision upon the evidence presented in the Commission s case-in-chief, the respondent waiving the introduction of evidence. Upon the whole record, it is herein found and determined that each of the tvw said charges are sustained, and an practices is issuedorder to cease and desist from such acts and accordingly.

The history of this case is somewhat involved, tortuous, and confused although when the procedural and jurisdictional questions arb cleared away the basic facts upon ,which this initial decision is based are comparatively clear and simple. There were a considerable number of appeals to the Commission from various orders and decisions of the hearing examiner. Both sides were represented by their respective able and resourceful counsel. And as a result strong contests on all issues and the several interlocutory and other appeals taken, the Commission has settled the basic law of this particular proceeding. This initial decision will therefore be devoted chiefly to findings of fact. At this point a brief recitation of the important matters in the procedural record made will aid in a succinct application of the law to the facts hereinafter found. The original complaint consisting of nine paragraphs charging the unfair solicitation and procurement of financial contributions , 1955.by respondent from its suppliers was filed :Kovember 21 Hearing Examiner Frank Hier was designated to hear the proceeding on January 6 , 1956. On January 20 , 1956, respondent filed a motion to dismiss the complaint upon the ground, in substance that the proceeding was illegally brought under the Federal Trade Commission Act rather than under the Clayton Act. On February , lD5G, the examiner ordered this motion denied and granted leave to answer. 1\0 appeal was taken from this order. Answer wa.s filed March 5, 1956. On March 9 , 1956, respondent filed a motion to consolidate its hearings (but not its case) TVith hearings in cases against seven of its suppliers in Commission Dockets Kos. 6460 to 646G, inclusive. This motion was denied by the examiner .March 15 1956. Thereafter, respondent pcrfected an interlocutory appeal to the Commission from such ruling rmd on April 25, 1956, the Commission denied such appeal.

1-Iearings were then held in \Vashins:ron, D. , on August 6 and 7 1956 (R. 1-123). On December 27 , 1956, counsel supporting the Decision 58 F.

complaint fled their motion to amend the complaint by adding certain language charging diversion to respondent's own use of some of the funds solicited by it and received from its various suppliers for advertising their products during respondent s said sales, which matter had developed from certain evidence received during such hearings. This motion was denied by the examiner J an uary 4 1957 , for "'lit of jurisdiction only, his ground being that the amendment alleged an cntirely different charge from the one contained in the original complaint, which amendment 'was not within his authority to grant, not being "reasonably ,within the scope of the proceeding initiatcd by thc original complaint" as provided in of the Commission s Rules of Practice. Counsel supporting the complaint appealed from this denial on January 17, 1957. The Commission disposed of the appeal on J\lay 8 , 1957, by dismissing it but at the same time ordering and issuing its own Amended and Supplemental Complaint containing thc said proposed amendatory matter as a new and additional charge in Paragraphs Ten and Eleven thereof. It did this in the exercise of its own responsibility as requircd in the public interest. In its said order the Commission further rulcd that evidence alrcady of record ".ould be considered and have the same force and effect as though received at hearings under the compJn,illl as amended ;lnd supplemented but. ,without prejndic.e ta t.he exa,millel' s a,uthorir.y and duty to rule appropriately on any application by respondent for further cross-examination, ar to take such further action as might be appropriate to protect respondent' s rights. Respondent did not request any such action however, and is therefore deemed to have waived the exercise of such rights on its part.

Further hearings were then held in Vashington, D. , on January 7 and 8 (R 124,290), and in New York City on January D 1957 (R. 291-343-A), and again in Washington, D. , on January 24, 1957 (R. 344-411). On this last date, pending disposition by the Commission of the appeal then pending before it from the examiner s denial of the motion to amend the complaint, counsel supporting the complaint eonditional1y rested, and respondent was put OIl notice by the examiner that it should be ready to proceed with its evidence (R. 411).

Subsequent, however, to the issuance of the Amended and Supplemental Complaint on May 8, 1957, and prior t.o the case-in-chief having been rested, respondent filed it.s motion, supported by an ex parte showing, on Tune, 1957, to dismiss the complaint on the ground of lack of jurisdiction over respondent, claiming itself to be a "packer" subject to the Packers & Stockyards Act of 1951 , 7 GIAX'l' FOOD , INC. 981 977 Decision C. 181 et 8eq. and as such "packcr" exempted from the Commission s jurisdiction under 5 of the Federal Trade Commission Act. This motion ".,:s sustained by the examiner who issued his first initial decision dismissing the proceeding on August 7, 1957. On appeal from this final order and decision of the examiner, the Commission, however, on December 19, 1957 , ordered said initial decision vacated and remanded the case to the examiner for further proceedings.

Respondent, after filing its answer to the amended complaint on February 24 , 1958, filed its second motion to dismiss on the ground of jurisdiction on March 24, 1958, renewing its prior motion to that effect but setting forth an additional ex parte showing that it had on March 21 , 1958, acquired 100 shares of stock in Armour & Company, claiming this definitely made it a packer, which fact had not existed and therefore had not been considered on the prior appeal. The examiner in due course granted this motion and again by his initial decision dated April 17, 1958, dismissed the proceeding for lack of jurisdiction. An appeal was again taken from this second initial decision, and, on February 10 , 1959, the Commission vacated it and remanded the case for further proceedings. Further hearings were then held in "\YasJ1ington, D. , OIl February 24, Thhrch 24, and April 6, 1959 (R. 412-55D), in order for counsel supporting the complaint to complete their evidence upon the second charge of the complaint. On the last of said dates counsel supporting the complaint finally rested the case-in-chief, indicating appeal to the Connnission, however, from a cert.ain ruling of the examiner striking certain exhibits oflerec1 by them but stated that such alleged error would be reserved and appealed in connec tion with the final presentation of the case to the Commission rather than by interlocutory appeal (R. 5oG, 558-559). Hearing of responclent:s evidence was then set for 1\Iay 25, 1859 , but prior to sa, date respondent filed its mot.ion to strike the testimony of the Commission s witness ,Villi am H. England, an accountant, which the examiner denied on )Iay 14- , 1D50 , at the ame time resetting the hearing of respondent's evide,nce for .Tune 30 , 1858. Before thc date last fixed for hearing the defense, JIearing Examiner Frank Hier died on .Tune 10\ 1059, a.nc1 on .June 15, the proceeding \'-as duly assigned to the undersigned hearing examiner to complete the hearings and initially dispose of the li6gation in the place of said Examiner lrier, deceased.

IIearing was thereupon held on July 13 , 1859, at which time it was most fairly stipulated by counsel for the parties that the present examiner might further hear and complete the case, and 982 FEDERAL TRADE CO)'.L\IISSION Decisi01\ Decision 58 F.

any objections by them to his passing on questions of credibility or otherwise in the record made before :Examiner Hier were \waived by the parties (R. 561). At that time respondent then movcd for a dismissal of thenction on the ground that there -was a failure of evidence of probative force to support the principal alle,gations of tl1A complaint on the two charges thereof (R. 564-565), which motion, after argument-, ,,,as denied without prejudice to it.s renewal at the close of a11 evidence in the case (R. 569-570). This motion was later rene\yed in respondents proposals and its counsel's oral argument. Thereupon, respondent rested: \yaiving the introduction of evidence on its behalf (R. 571). On July 17 , 1959, the examiner issued his order closing the case for the taking of evidence, fixing time for the submission of the parties' respective proposed findings of fact, conc.usions of law, and order nnd reserving a time for oral argument thereon. On September 28, 195D, each of the parties filed such proposals, and oral argnmEmt.s thereon by the respective cOllnsel were heard in "\Vashington, D. , on October 26, 1959, after which the entire C lse was taken under advisement. During this oral argument, counsel supporting the complaint moved to amend the complaint "ith respect to setting fort.h the correct amount of money shown by the proof to have been contribut.ed to respondent by its suppliers in connection with its 19th Anniversary sale held in 1955 (R. 607-608), which motion was granted over objection on February 8 , logo. In referring to the highlights of the history of this ease no mention has been made of the numerous other procedural matters which appear on the record, such as necessary settings, resettings, and continuances, a,nd the numerous and extensive motions, briefs and arguments before He lring Examiner Hier and the Commission which make up the bulk of the procedural record. The present examiner repeatedly announced upon the record that he would make no attempt to revise any of the rulings of his predecessor, but would accept the record as already made (R. 562 601 , 617 , 653). Counsel for neither of the parties have filed any motion 01' requested any such action on the part of the examiner. The present examiner, after carefully l'evicl'- ing the record, does not believe that any error has been committed. But if error there be in the proceedings had before the preceding examiner, it has been inherited, and any possible error committed by either examiner who has heard t.his case can be jllst1:y eorrectecl by the Commission upon appeal or review from this initial decision. It. is the present examiner s position, of course, that to attempt ex proprio motu the correction of any possible error that might have been c.ommitted GIANT IiOOD , INC. 983 977 Decisioll by his eminent predecessor would only further delay the final dis. position of this already extensive and strongly contested proceeding. This initia.l decision is therefore premised upon the record as made before t.his examiner s predecessor, except, of course, as to those few matters already recited which transpired after the death of Examiner Hier.

Inasmuch as the primary law of the case has be,en settled by tlw orders and opinions of the Commission on a.appeals from the examiner s rulings, they merit. brief discussion insofar as material to thc issues now raised in the. proposals of the respective parties presently before, this examiner. In justification of the various rulings made by the preceding examiner in this case, it must be said that many of the questions presented in the instant case at the time they ",were presented.rl ",were somewhat noyel and without any precisely dear precedents. During tbe course of this litigation many of such matte,rs were clarified by t.he said rulings as ",yell as by certain co1lateral decisions of the Connnission, its examiners, and the, courts in similar 01' relntecl proceedings. It, is thcrcfore not necessary to recite all the reasoning and authority upon ,,-hidl such several rulings have been premised.

Prior to answer: the respondent attacked the original complaint by motion to dismiss it upon the grollnds that it failed to state cause of action upon which relief could be granted within the meaning and intent of 85 of the Fec1er111 Trade Commission Act. Respondents counsel argued extensi, eJy upon the history of the enadment of the Act as well fls t.hat of the Clayt.on Act. and contended tllft the complaint ",yas draftecl in n,n effort to Circ1l1l\-ent the restrietions of the Clayt.on Act and particularly the decision in Automatic Canteen Co. of Amel'icn v. FTC (1053), 346 U. S. 61, with special reference to page 72 thereof. It was urged that the history of the two Acts sho",ycd that they \', ere mutually exclusive, and it was concluded, therefore, that if any matter ,were touched upon or de.liberately excluded by Congress from the Clayton Act no proceeding might be brought under' the Federal Trade Commission Act. The examiner, however, foJJmyed the, law cited. and rea,soning of counsel supporting the cornp1nint and ruled in substance, that under the decisions the Federal Trade Commission Act was a suppleme,Dt to the Clayton Act as well as to the Sherman Act, citing and discussing the Jeading eases of FTC v. Cement Instihlte (1948), 333 v. R. F. Keppel S. 683 Teheann g denied 334 e.S. 839: FTC BTO. , Inc. (1934), 291 U. S. 304; FTC v. 1lotion Picture Ad1Jertisinq Service Co. (1952), 344 U. S. 392; and Carter CaTouretor Corp. FTC (C. A. 8, jfi40), 112 F.2d 722. WhiJe this order was not 984 FEDERAL TRADE CO IMISSION DECISIONS Decision 58 F.

appealed from, related questions permeated some of the further appeals as well as being succinctly posed in the present proposals of respondent (p. 9 , 64, Conclusions of Law 42-44). Since the said ruling of Examiner Hiel' on February 10 , 1956 several other cases, however, have been adjudicated within the Commission and the same conclusions reached as arrived at by Examiner Hier. See Initial Decisions of Examiner .John Lewis, now pending on appeal before the Commission, in Docket No. 6927 SllJanee Paper COTp. and Docket No. 6973 The Grand Um:on Co. mimeographed copy of initial decision, pages :H-35. It "ppe.ars to the undersigned examiner that there can be no question but that the intent of Congress ,,-as to provide language in the Act suffciently broad to cover all unfair methods of competition, and, since the original Act was not disturbed in this respect by any subsequent amendments to it or to the collateral Clayton Act, t.he complaint as origina,lly framed in this case covering what is now Charge paragraphs Five to Nine, definitely states a proper cause for complaint under the Act. This language of the complaint will be hereinafter quoted in connection wit.h the findings on the evidence supporting the first charge.

Little need be said with respect to the Commission s order and opinion sustaining the, bearing examiner s refusal to consolidate 1'espondents hearings in this case ,with those of its suppliers in Dockets Nos. 160 to 6466, inclusive as it is more thfln evident that to have consolidated these hearings 'would have entailed an undue burden on all concerned with reference to time, eport, and expense. \Vhile this refusal is not now defllitely urged as a ground of reversal in the respondent's proposal, nevertheless the thread of this argument runs through al1 of its cont.entions that because of this refusal to consolidate, the decisions of the Commission nnd the other cases alluded to have no bearing upon rpsponclenfs acts herein and can be considered for no purpose in deciding this proceeding. The fallacy of this position is, of course" clear. Respondent did not request that its case be consolidated wit.h those of the respondent.s in t.he other,r cases above, referred to which involve a number of its suppliers and the general faetnnl subject nUlttpl' ,,- which is fllso in issue here. IIad it been :ioined in all the hearings in those proceedadjudicata. as to it iningsit would 51:i11 have claimed there, was no )'' any of the other cases. And certainly the record would have been so inextricably intermingled with all the ot.her eases t.hat it ,,' ould challenge more than the judgment of a Solomon to untangle the evidence. Actually ,vhat respondent asked for "' as ft consolidation of hearings. And as hereinafter shown, the only decisions of , . , .

GIANT FOOD , INC. 985 977 Decision the foregoing suppliers' cases which are given consideration are those which were contested, Docket No. 6463, decided :\lay 8 , 1958 by the Commission nd ffrmed by the Court of Appeals for the Fourth Circuit January 5 , ID5D , in Crosse Blackwell v. FTO 262 F. 2d E500, Docket K o. (164 , decided December 20 , 1056, by the Commission and reversed by the COlllt of Appeals for the Second Circuit July 28 , 19:58 , in Atalanta l'rudin q Corporation v. FTO 258 F. 2d ,)65, and Docket 6465 Ohestnut F,mns Ohm)Y Ohase Dniry, decided by t.he Commission :May 21, ID57. Each of these three cases is hereinafter appropriately discussed.

On December 27 , 1956, cO\lnsel supporting the complaint filed their motion to amend t.he complaint by adding what are now Paragraphs Ten and Eleven in the amende,c1 and supplemental complaint. The hearing examiner on .January 4, 1857, denied the motion on the ground that he had no jllrisc1ictioll since the new charges although gro\ying out of the same transactions \yould require somewhat different evidence and ,,'ould 81 and upon a different legal basis and therefore were not \within his authority under the Commission s Hules. The Commission sustained his position on appeal but follo\ying ils earlier order dated J\fnreh 12 , 1957 , in Food Fair Stores: Inc. Docket Xo. 6458 : on J\Iay 8 , 1057, issneel an amended and supplemental complaint in this present proceeding including saiel brief,fly that, undersimilar language. At this point. it may be the principles relat.ed to t.he breadth of the Commission s jurisdiction and discretion relating to issnillg complaint.s under 95 of the Act, there can be no doubt that it appropriately exercised its administrative responsibility in the public interest correctly in charging that moneys solicited and received from its suppliers in connection \yit.h its several sales were not used for such services but were diverted in substantial amounts for its own 1\8e. As urged by counsel supporting the complaint it is quite evident t.hat if large buyers of merchandise can be permitted to induce t.their suppliers to pa.y for part or a,n of t.their advertising or other sales costs in can. nection with such sales, the Commission would be derelict in its duty of preventing monopoly and unfair practices in their very incipiency. This is true because of the economic influence exerted by a very Jarge buyer, such as this respondent is, upon its suppliers. It is immaterial that such contributing suppliers may be complacently indifferent to what happens to the money they paid for advertising their own products. This matter win be discussed more fully in connection with the fmdings relating to the second charge. The two motions of respondent to clislniss the, complaint because it is a "packer" subject to the Packers & Stockyards Act, and ex- 986 FEDERAL TRADE CmIMISSIOK DECISIONS Decision :')8 F. empted under the Federal Trade Crnnmis,':ion Act, \will be considered together as the second substantially duplicates the first, adding only one new factor, respondent's recent purchase 01 a few sha.res of Armour & Co. stock. On .June 18, 1957, respondent filed its first motion, supported by affdavits, photographs, and an extensive brief which the Commission in due Course denie,d on December In, 1957. The appe,al \yas largely premised on the Commission s decision of Se.ptember 27, 1957 , in Food Fa,'11'8t01' , 81lpra.. This opinion distinguished that case from the one at bar by shmving t.hat. respondent here was not engaged jn "the slaughtering- nnd meat-packing industry" as was Food Fair but was engaged only jn minor find sl1applement.aJ operations such as grinding and seasoning of already manufactured meat food products. It foJlowe(1 its own later opinion in Orosse Blackwell, supm. TherPfLfter the Court of Appeals of the Fourth Circuit denied the petition to re.\iew the Commission s decision in this latter case and held said respondent therein was subject to the jurisdiction of the Federal Trade Commission. In respondenes second motion to dismiss for lack of jurisdiction filed 11arch 24, 1958, the same grounds, in substance, were Llleged as in its prior motion, but an additi011al showing ,,-as made that Giant had, three days previously, purchased 100 shares of stock in Armour & Co. which latter matter it was conteneled clearly brought Giant within the statutory exemption as It packer as found by the Commission in Food Fail' Store. , supra. In again rever-si1lg the examiner, the Commission, on February 10, 1959, not only held that the Court of AppeaJs had sustained the Commissioll S jurisdiction in OroRse Bla.ckwell supra. but also noted that Congress had meanwhile enacted Public Law 85-909, which amended both the Packers & Stockyards Act and the Federal Trade Commission Act which law became effective September 2, 1958, and clarified the Commission s jurisdict.ion in this case and others instituted by it prior to the said date of enactment of said law. The Commission therefore found that it had lull jurisdiction over the unfair trade practices in connection with the packers transactions involving retail sales and other matters which form the basis for this proceeding. further ruled that the purchase of 100 shares of Armour common stock by Giant made it the owner of only .002137 of one percent of Armour s common stock for ",which it. paid only $1 450 p,nd that this infinitesimal ownership of Armour stock nwde Giant s contention that it had thereby become a packer free irom the Commission jurisdiction an absurdity.

It is of special importance moreover t.hat in these several appellate proceedjngs before the Commission relating to the respondent s al- GIANT FOOD , IKC. 987 977 Decision leged claim of exemption as a packer in this proceeding its presentations of supporting evidence were made ex parte and were not opposed as such by counsel supporting the complaint for the special purposes of those appeals. But these ex parte facts thus presented are not before the hearing examiner for decision upon the. record of evidence in this case and no waiver of such proof by counsel supporting the complaint has been made. 1Vhile this case must be decided upon the whole record, it is obvious that there is a clear distinction between the pleading and procedural docket of the Commission and its record of evidence in a litigated proceeding. No evidence has been offered upon the trial record by respondent relating to its alleged activities as a packer or its purchase of any stock in Armour & Company. In fact it has not offered any evidence in its own behalf, as hereinbefore stn ted. 1Vhile the Administrative Procedure Act provides jn Section 7 (c) that " any oral or documentary evidence may be received :' this does not mean that the trial rp.-ord may be encumbered ,with ex parte briefs: aiIdayits or other documents not offered and received in the regular course of the hearings. In fact said section (c) insures the right of "Every party. . . to conduct such cross- examinat.ion as may be required for n. full and true disclosure of the facts. :' The Commission s Rules also provide with respect to "all hearings in adjudicative proceedings:' that "Every party. . . shall have the right of . . . cross-examination, presentation of evicleTlce, objection, motion, argument, and all other fundamental rights...." And also this section and the Commission s Rule 3. 21 (b) provide that decisions ': shall be based upon a consideration of the whole record and supported by reliable, probative, and substaniiaevidence." It is therefore clear that even in atlIninistrative proceedings ex parte affdavits and other shmvings in support of interlocutory motions are not matters to be considered on deeisions which must be made upon the eyiclence presented on the merits of the. ca.se. It is, of course, elernentary in judicial prOCecllll'e that aHidavits for attachment, gaxnishment, injunctions and restraining orders, for example, are. not evidence in a tl'iaJ on the merits unless received in evidence in aceorclance with appropriate rules of evidence long grounded in our jurisprudence. They are received in such anciJ1ary proceedings only for their specific purposes. Since the respondent introduced no evidence, there is none before the cXD.miner on which to make a. finding upon the. proposals with reference to the respondent' s status as a "packer:' and that (IUestion having been heretofore disposed of by the Commission as already stated has now become final and is not properly presented on any appeal upon the trial record upon which this decision is rendered. Even if the respond- 988 FEDERAL TRADE CO:lonSSIOX DECISIONS Decision 08 F. T.

ent' s ex parte sllOwings shonlc1 be considered herein, the result \\' olllc1 be the same. J\'evertheless, respondent still urges in its brief and findings that it is a packer. Its argument on that point is not extensive and \vas not presented in the oral argument. Although not presenting any such evidence on the trial record: in its proposals (pp. 25- , affdavits, ek, 61- , Proposed Findings os. 25-28), respondent refers to the said matters it. had theretofore presented to the Commission ex parte in the two sflic1 appeals on this subject. j"-nd as tile question is inhe.rent, respondent's proposed findings on this issue are specifically rejected.

Passing to the merits of this case, although counsel agreed that the examiner might pass upon all questions of crec1ibility and otherwise as though he had personally presided throughout the entire ca.se, since he did not see. and hear the wit.nesses he has examined with special care all the testimony to determine the weight and credibility thereof. From this examination he does not believe there is any real or substantial dispute as to the facts involved in such testimony. Such differences as do exist are as to '."hat proper inferenc.es should be derived from the testimony as 'wen as from the documenta.ry exhibits. It is, of course, now fundamental in federal administrative la,y that Government agencies have the right to draw fair and reasonable inferences from proven facts in the record. See Republic Aviation 001'1" v. NLRB (1945), 324 r.S. 793, 798 , 800; and Radio Offcer' Union, etc. v. NLRB (1954), :147 U.S. 17 48-52. In such connection the examiner has not only carefully considered t.he testimony of each witness and carefully examined each exhibit separately for its myn wOltl but has also consider,reel each of such matters in conne,ction with an other evidence in the record. The trial re.cord itself is not extensive,. Stripped of numerous arguments a,nd discussions relating to various lnotions ancl other procedural matters: and stricken testimony also subtracted therefrom, it consists of npproximntely 300 pages of testimony and idens ex-tification and receipt of exhibits. A total of 168 Commission hibits were received in evidence. The test.imony of two witnesses (Thomas, R. 174-232, 392, ancl Anderson, R. 201-217) who were employees of Sideway Stores: lne. : was stricken by the Bxaminer (R. 407-410) and 37 proffered exhibits (Commission Exhibits 169 through 204) were rej ccted. These were tabuhltions by the Commission s accountant of his me,asurements of advertising lineages etc. , which are subsequently referred to herein. The documents received in evidence consist of responaent s cont.racts with, and letters 1'0-and other comnnU1ications to and from, irs suppliers, in which GIANT FOOD , lnc. 989 977 Findings spondent urged their financial support in advertising respondent' several sales involved herein; the suppliers' replies thereto, some rejecting and some complying with respondent' s lett.ers; tear-sheets of the "\Vashington newspaper advertisement.s of respondents sales; and certain computat.ions and listings prepared by respondent. at the request of Commission s coullsel relating to the name of suppliers the amounts and names of the contributing suppliers and related data.

The examiner closed the case for the taking of evidence on July 1959. The parties on September 28 ID59 duly anrl1'espe.ctive1y submitted their proposed findings of fact, conclusions of law and order, together wit.h extensive bricfs thereon upon which oral arguments were heard on October 26 , 1059.

In reaching the findings of fact, fun and careful consideration has been given to all proposed findings of fact, conclusions of la,w and the orders presented by the respective parties and insofar as they have been adopt.ed they are incorporated in this initial decision. Those not specifically found or adopted either verbat.im or in substance and eilect have been rejected. Also all legal and factllflJ arguments of counsel have been fully and carefully considered and the authorities cited or referred to by counsel, as well as other cited herein by the examiner, studied in their full context and application to the established facts.

The evidence stricken by Examiner I-lieu' is, of course, not considered in making the following findings. 111 determining the facts in this proceeding upon the "whole record as required by lrnv, the examiner has given full, careful and impartial consideration to all the evidence properly presented on the record and to the rail' and reasonable inferences arising therefrom. lie has c lrefully examined the pleadings and found as true those facts alleged in the complaint uponas amended which are admitted by the tws\ver. Therefore, consideration of the whole record, the examiner makes the following FINDINGS OF FACT The question of respondent s cla.im of exemption from the Commission s jurisdic.tion by reason of being a "packer': has already been discussed. The examiner finds no probative evidence received upon the record made iri the COllrse of the trial of this proceeding from which it can be found or inferred that. the rcspolHlellt was a ;'pHckcl' '\Vhile the. Commission determined the. question ndyersely to responde11t on its ex parte evidence upon each of the tire) a.appeals 11'om the exmniner s r."\,"o c1isrnissals on such ground: there can be no fmding 990 FEDERAL TRADE COM nssIO:\ DECISIONS Findings 58 :F' on this issue based on the' evidence before this examiner which has been received strictly in accordance with the Administrative Procedure Act and the Commission s mnl Rules of Practice of the COIlmission for Adjudicative Proceedings. The examiner consequently must find that this issue of :i urisc1iction is abandoned by respondent particularly inllsmuch as it. specially raised this issue collaterally and elected on the tl'ialnot to present any evidence in its own behalf OIl this or any other issne.

As already noted, there are t'lvn different charges in this case. fost of the evidence relates to both charges. 1;Vhile that relating to the second charge is eomprehencled \within that pe.rtaining to the first charge anclis not subject to distinct separation thel'eirom the subsequent determination of the facts pertaining to each it ,,,in be more logical and clear to tre,at the two charges separately and in order. Before such matters are passed upon, however, there are a substantial number of facts in the case, including those admitted by the pleadings, concerning which there is no dispute as to their actual existence. And there is but little diiIerence bet\ycen the parties as to the inferences a,J'ising t:he.refrol1. Such facts are a follows:

Respondent Giant Food Shopping Center, Inc. , \"as organized under the corporation laws of the State of Delaware in 1936. Its princip,tJ offcc and place of business is now at 6900 Shcriff Road Landover. :Maryland, although its prior offce ncldre,ss was 18"15 Bladensburg Hoad, X. , \Vashington, D.C. During the course of the litigatioll respondent s corporate name was changed to Giant Food, Inc.

Respondent is now and during its entire existence has been engaged in the retail sale of groceries. It has shown remarkable growth from small beginnings, and while respondent raise,s a minor issue as to \vhether it can properly be called a large food chain, the evidence shows that at some times material hereto the respondent had a total of 32 reta.il stores-14 in the District of Columbia, 8 in the Commonwealth of Virginia, and 10 in the State of Maryland. Actually it lmcJ just 28 retail stores in the area at the time of its 1955 or 19th Anniversary Sale, and two more were added during the taking of evidence herein. The total sales from such stores in the fiscal year ended April 30 , 1955 , ,ras approximately S60 miJJion with a total weekly customer traffc in the stores of 235 000. This ccrta.inly characterizes it as it aetllally represents :itself by its very than chainname, a "Giant': . Any contention that it is sma,ller united Statesgroceries operating throughout pract:cally an of the l GIAc,T FOOD, lKC. 991 977 Findings disregards the fact that it is a colossal business when compared to most of the small retail grocerics operating within its own trade area. espondcnt purchases all types of canned foods, fresh vegetables meats, dairy products, and numerous other food items and household and other articles in gene,lal use, which it resells at. retail to the consuming public. H.respondent buys such products from approximately 500 different manufacturers, processors, and handlers of such products ,,,hose places of business are located at various points throughout the United States. It advertises those products of its suppliers extensively throughout its trade area in the '\lashingtoll l\Ietropolitan ne,vspapers and otherwise in order to create a consumer demand and acceptance of its products. Respondent in the course and conduct of its business has engaged and is nmv engaging in commerce, as " commerce" is defined in the Federal Trade Commission Act. R.respondent 101' many years has been purchasing the products which it sells in its various chain stores 11'0111 a large number of suppliers located throughout the United States and the District of Columbia and respondent causes these products ".,;hen purchased by it to be trn,nsported from the place of manufacture and purchase without the States of :Maryland and Virginia or the District of Columbia to stores or wtLrehouses located in the States of laryland and Virginia. and the District of Columbia for resale to the consuming ptLblic. There is now, and has been for Hla.ny years, a constant current, or trade in commerce in said products between and among the various States of the United States and in the District 01 Columbia. ln the course and conduct of lts business, respondent has been for many years in competition in the sale and distribution of food and grocery prod uets in commerce bebvcen and among the various States of the United States and in the District of Columbia with other corporations, persons, firms and partnerships. There is substantial evidence in the record that there are a. great multitude of stores in respondent s said trade area engaged in the sale of food ac-and related products. There 'v ere in the District of Columbia, cording to Commission s Exhibit log, Preliminary Report 1954 Census of Business Retail Trade (dated K av. 1955), issued by the "1), 1 1 foodDepartment of Commerce, Bureau of the Census (p. store establishrnents with annual gro,ss sales in that year of approximately $225 million. There ,were 1 i3D7 other food-selling competitors in the eating and drinking places in the District of Columbia in that year with gross sales of about $110 million (id. ). The ",ilness Abel considered them competitive to some degree with Giant. 992 FEDERAL TRADJ' COMMISSION DECISIONS Findings 58 F.

Commission s Exhibits 107 and 108 (similar re.ports covering the sa,me period for l\Iarylanc1 and \Tirginin) disclose large llllInbers of all such establishments throughout those states. But the.re is no breakclmvn from ,,-which the approximate Humber thereof in respondent:s pnrticnlar trade alc,l, in the two states can be determined. That there is very substuntia! competition ill this basic business of sel1illg foods in said area, howeve.r, is actually not in dispute. The first clulrgc in the amended and supplemental complaint (Paragraphs Five to Nine inclusive): insofar as material to the following discussion, states:

In the course and conduct of its business in commerce, respondent has knowingly induced or received the payment 01' contracted for the payment of something of value to respondent or for respol1l1ent's l)€11e:6t as compensation or in consideration for services and facilties furnished by or through re- Rpondent in connection Vi'itll respondent' s offering for sale or sale of products sold to respondent by many of its suppliers, and which payments were not made available by such suppliers on proportionally equal terms to all other customers of such suppliers competing with respondent in the sale and dish' bution of such suppliers' products.

:?lany of respondent' s suppliers. . . did not offer or otherwise make available similar compensation or things of value or allowance for advertising or other service or facility on proportionally equal terms to those granted the respondent to all other of their customers which were competing with respondeut in the sale and distribution of the same supplier s products. Respondent knew or should have known that it was inducing or receiving a payment or allowance for advertising or other service or facilty from it.s suppliers which its suppliers ,,-ere not offering or otherwise making available on proportionally equal t.terms to other of such supplier s Cllstomers who were competing with respondent in the sale and distribution of such supplier s products The genesis of this case is that in conductiug certain so-called Anniversary" sales and special1 "Candy Carnival' sales in the years 1954 to 1956, inclusive, Giant prepared a large number of so-called contracts of participation " \which it c1istrjbutec1 to its some 500 suppliers. Both by letter and wire Giant urged such suppliers to execute an(1 return such c.contracts and join respondcnfs said sales by contributing money to promote and advertise such suppliers' o\\'n particular products during the course of such sales. These contracts called for different amounts of payments by such suppliers, the sort of cont.ract submitted apj)arently being at the discretion of Giant and in view of the amount of business sllch supplier did with it. 1'Vhile many of the suppliers utterly fnilec1 or neglected to ans yel' these letters, others definitely refused to comply for various reasons. )Jevertheless, about 150 of such contracts "ere executed by suppliers throughout the country, as a result of which, during its 10th Anniversa.ry Sale in 1D:55, the respondent received a total of 8;)7 875 from GIANT FOOD , INC. 993 977 Findings such contributing suppliers. These contracts (Commission s Exhibits I6-A to - , inclusive) follo\\ea in general the, form used the previous year in eOJlllBction with Giant~s 18th Anniversary Sale (Commission s Exhibit 6). These 1955 contracts were all substantially the same, varying only in that the advertising and services purported to be provided by respondent to such suppliers during said 1855 Anniversary Sale were some\vhat increased as the amount of contribution was increased in the respective forms. Commissioll Exhibit 16-A called for the supplier to pay 8100; 16- , $250; 16- $500; 16- , $750; and 16- , 81 000, respectively. The supplier was to pay such snm upon receipt of invoice from Giant with supporting proof of its performance of the contract. It would serve no useful purpose to recite these contracts in detail, inasmuch as the major features of this identical type of contract were thoroughly considered in the Commission s opinion of May 21, 1957, in Docket 6465 Ohestnut jl'arrll8 Chevy Ohase Dairy, 8'upra from which a substantial quotation will hereinafter be made.

The record is replete with varying responses of certain numerous suppliers to whom the proposed contracts 'lBre sent in 1955 , as well as some pertaining to its similar sales in prior years. These letters arc included within Commission s Exhibits 23-A through 105. In xamining the answers received from those suppliers who rejected the proposed contracts, it will be noted that they varied from easy, noncommittal refusals to tho e ,dlich explained in full why uch supplier could not accept the proposed contract. A number of them definitely advised respondent that they could not proportionalize their advertising to other buyers, while some went so far as to tell respondent that their attorneys would not permit, them to enter into such contracts because to do so would violate the R.obinson- Patman Act. Nevertheless, it is urged that there is no evidence that respondent knew or should have kno\vn that. the inducement of these contracts by it would cause its suppliers to violate that Act. Of course, the fundamental presumption is that an men know the law. This presumption may be somewhat drastic if it extends to grocery dealers understa.nding the Robinson-Patman Act since few if a.ny, of most eminent ant.i- trust lawyers in the Unit.ed States can claim that high distinction! Nevertheless, the respondent, its officers a.nd other oiIcials must be presumed to know the exist.ence of that statute. Knowledge of the facts, however, is fl different thing. Such knowledge cannot be presumed, but must be proved. believe the Upon the record made here, the examiner cannot Giant' s President X. I. Cohen find his other c011eflgues in this vast GS1-237--G3-- 994 FEDERAL TRADE COMMISSION DECISIOXS Findings ,)8 F. and growing enterprise 3 did not know that the contract they offered to the suppliers was, upon its very face, impossible to proportionalize. The Commission s decision in Ohe8tnnt Farm. , 81tpJ'a is not binding on this respondent as findings of fact. But it definitely states the law applicable to this case. The facts in that case arose in part at least, out of Chestnut Farms' transactions with this 1'8spondent Giant during the period hl question. The Commission in its opinion held relevantly to the contentions of respondent here that its supplier, Chestnut Farms, had violated subsection (d) of 2 of the Clayton Act as amended by the Robinson-Patman Act. A considerable part of the opinion is so relevant upon the facts and so binding as to the law that it may bc appropriately quat cd : On this appeal, respondent contends in the main that under Section 2 (d) a supplier is not obliged in the first instance to affrmatively offer an advertising allowance, but that even if such is a valid requirement, the evidence is insnfIcient as a matter of law to sustain a 2 (d) violation finding on the ground either that respondent breached the affrmative offer requirement or that the advertising allowances granted to respondent's customers were paid to them on proportionally unequal terms.

2(d).The Commissionas requirings interpretationan offerofhas beenthe clearlyword "available"expressed inusedthe inmattersSectionof 1J Windsor Procks, Inc. , et al. Docket No. 5735 , and Henry Rosenfeld, Inc. et al. Docket No. 6212. It is that, under the Act an allowance cannot be rleemec1 "available" to a reseller, and a denial of opportunity to share therein occurs, when a seller fails to inform or otherwise offer promotional allowances to a customer while granting such payments for similar services to the reseller s ri.als. This record shows that the respondent has not informed resellers, such as independent stores, as to advertising allowances, while granting such allowances to their competitors, such as large chain organizations, and so has not made the allowances "available " as required by Section 2(d). But that is not the entire case against respondent. It appears that respondent either did not have a plan or policy for granting its promotional payments 01' , if it did, that the plan was not followed in all cases. Some favored customers, over the IS-month period covered by the evidence, received allowances in excess of the percentage of purchases claimed by respondent as a basis for the payments. Thus, some of the payments have a11 the appearances of individually negotiated deals. This is exemplified, perhaps, in the arrangements made with Giant Food Shopping Center, Inc. An offcial of the respondent testified that the amount .' Giant Food, Inc. has shown substantial growth since the period covered by the etidence In this case. As of October 14. 1959, it operated 11 chain of 49 supermarkets . 40 of them in the WashiIlgtoIl, D.C. metropolitan area, and was grossinf: an average of 650, 000 pel' store annually, with total sales in the last fiscal year of $116, 617 056. These facts appear in a registration with the Securities and Exchange Commission for fl pnblic "offering of stock". See article in the Washington . D. C. Evening Star, October 14 , 1959, page 22. The examiner takes offcial notice of these facts, but If they are in question by either party to this proceeding, opportunity to disprove such facts w11 be granted upon timely motion therefor, in accordauce with P(d) of the Adminhtrative Procedure Act and 14(c) of the Commission s Rnles of Practice for Adjudica. tive Proceedings.

GIANT FOOD , INC. 995 977 Findings paid under the contract with Giant was not in excess of that which the customer could have collected on the basis of 11,4 % of purchases, and that it was, therefore, a payment under an agreement the same as that available to other customers. Such an interpretation strains all reason. The contract itself provides that it is not to alter or replace currently existing advertising or merchandising or merchandising agreements between that customer and the respondent. Thus, it cannot be construed on its face as being \within whatever regular policy on advertising allowances the respondent might have had. Furtherrnore, there is no provision in the contract that pa;yment is to be based on purchases as in the case of the plan which respondent claims it employs. Clearly it was an arrangement negotiated with a customer on the customer terms. The resulting payment was an allowance for services or facilities which was not available on proportionally equal terms or on any terms to customers competing in the distribution of the products, since it involved a separate and indi'ddual aiTangement, and it is surely within the proscription of the statute. Such individualized and preferential treatment was the very thing Section 2 (d) was designed to prevent. In addition, whatever respondent' s policy llay have been, there is no question that independent stores generallr were not informed of it. Of the witnesses from this group, eight of the nine testified that they had not been advised as to respondent' s advertising allQ\vances. The reasonable conclusion is that respondent did not, as a general rule, reach such customers with information as to auvertising allowances. On the other hand, respondent was most dilgent in giving such information to the favored group. It went so far as to notify the favored customers by mail or phone as to the amounts to which they \were entitled. The effect of its practices was to deny to some of its customers an opportunity to share in the promotional payments while granting payments to other customers competing in the distribution of the products. Vile must conclude from the evidence that customers generally a somewhat particular group have not been advised of the allowances. Respondent argues that a majority of its customers were not interested in advertising and that if respondent is ne,erthe1ess obliged to make an offer, it is being required to do a vain and useless thing. Once a seller determines upon a plan of advertising allowances, the plan must be affrmatively made known to every customer. Whether or not a customer participates therein is a decision for the customer. 'lhe customer obviously must know the specific terms of a plan before he can determine whether he is interested in participating. In this respect the seller s offering of a plan serves a worthwhile 111' pose.

In the case at bar there are also other considerations which emphasize the impossibility of any supplier proportionalizing the Giant type of contracts and offering them at large to all its buyers. "Wile respondent's stores may in the main fonow the same general exterior and jnterior arrangements, there is no evidence that any two of them are exactly alike in size or arrangement, and in the said contracts of participation provisions relating to feature, mass window, and other displays would naturally difler from store t.o store. The contributing seller could not break down such special services and then reapply them realistically to its small store cus- , Findings 38 F.

tomers. As so many of the suppliers who rejected the contracts stated, it would be a,n impossibility for them to proportionalize such matters with other buyers. The Giant " contracts of participation were prepared for the peculiar a.ncl unusual needs of Giant in utter disregard of the ability of Giant's small competitors to receive proportionalized payments from the suppliers. The owners of Giant have done a tremendous job of empire-building by ,vise merchandising, location and building planning and a.ction to fit such planning. This company has become a great institntion in the \Vashlngton metropolitan area and those connected therclyith deserve high compliment. But like many other immense corporations it luts now become somewhat disdainful toward its small competitors. The testimony of Leonard I. Abel, its grocery buyer and director of frozen food operations, who was a witness for the Commission nevertheless spoke for respondent's manage,ment in this CD. , shows (R. 100-102) that they watched "most closely" their large chain store competitors Safe'yay Stores ) the Atlantic & Pacific Tea Company, the Grand T union Food1 Fair Stole.s, a. sllbsidlary of Grand Union, and the American Stores in their merchandising activities. As to the small independent grocers in the arelL, he said I ,,ould say that I have enumerated the majority of the stores with which we compete. There may be some Cindepenclent groceriesJ that you by defiition, extend into that group. . . I don t know how to describe how lightly we regard their material lactivities and advertisementsJ as opposed to the extent to ,,which we regard that of the other stores " and further stated that he did not shop such small stores for prices or make a. traffc count and the like. Giant, he said, did not even watch their prices advertised in ncsvspapers "except on a very cursory basis. " N evertheles8, the In:w considers these small stores in the light of competitors to Giant and fu1Jy entitled to all the protection afforded to them and the public by the Robinson-Patman Act.

There is abundant evidence that these small stores were not offered contracts by their suppliers on a proportionally equal basis to those which Giant obtained from such suppliers. Respondent contends that those particular small competitors who testified were not in fact competitors of Giant. The witness Al Kaufman testified that he operated a Federal Super :Jlarket in the District but that each of the Federal Super larkets are individually owned and arc sponsored by Union Wholesale Grocery COlnpany, through which concern each market buys all its merchandise. hence, Giant argues they are', not buying direct from the suppliers as Giant does and therefore could not be offered proportjonalized C011- GIANT FOOD) INC. 997 977 Findings tracts by the sellers. Respondent also contends that Bernard Brager testified that as a wholesaler he sold the products of some of Giant's suppliers to a number of individually owned stores which operate under the over-all name of Garden Food Stores in the District. also ran joint newspaper ads of such small grocers under the name of Garden Food Stores which were paid for through cooperative allowances from the suppliers. It is contendcd by respondent that since Brager does the buying as a wholesaler for these small independent retail grocery businesses he cannot be Giant' s competitor and therefore the suppliers were not obligated to offer him or the Garden Food Stores any proportionalized contracts. These contentions disregard the fundamentals. Through whatever plan these independent merchants may use to buy from the same suppliers that Giant does, such plan is merely a cooperative means of buying groceries from such suppliers which does not change the facts that they are actually competitors of Giant which the suppliers know, but still foil to offer contracts propori.ionalized to the Giant "participation contracts.

The examiner gathers that the main contention of respondent is that it has no responsibility for knowing how its suppliers ' businesses are run, as the law does not impose a duty upon it to inquire into or understand such suppliers~ internal business operations or to kno" whether they proportionalize among their customers \vho compete ,,-ith Giant by contracts like the Gia.nt "participation " contracts. It is therefore urged t.hat this \yollld require specllJative inferences upon inferences contrary to fundamental principles of adjudication. But there is no need to pile sllch inferences upon inferences in this case. As has already been found Giant's offcials prepared their own contract of participation which by its very terms did not alter nor replace the currently existing advertising or merchandising agreements bet\fcen it and its suppliers. They had to know from this that they \\'ere endeavoring to change the entire advertising program of such of their suppliers ,,-ho executed such contract. Giant:s oflkials therefore knew that: \yould leave the competitors operating only under the usual type of cooperative advertising contract customa.rily based upon the amount of merchandise purchased and which could be determined by each to an equitable degree in advance of aJJocating and distributing such funds as it chose to grant its customers for advertising and other promotional costs during the course of any given fiscal year or otlwr fiscal period. Xow \\hen the letters began to come back from numerous suppliers teJ1ing Giant jn no uncertain terms that they could not proportionalize with other buyers and that to enter into this special , 998 FEDERAL 'TRADE CO:VLVIISSIO DECISIONS Findings 58 F.

contnwt with Giant \\01l1c1 render them, liable to violation of the Hohinson-Patman Act, most certainly these smart businessmen, who have built up Giant to its present terrific proportions, knew that they ere a.asking for something unlawful to be clone by their suppliers.

Giant's offcials must have known that many of its suppliers executed the contra.cts ancl paid the requested a,mounts in due course only because of the tremendous buying power of Giant. It requires no great seer to knQ)v that a concern doing even $60 million worth of business enn exert an economic pressure upon it.s sellers, large and small, to obtain concessions that no small competitor could possibly attain. For every supplier who contributed anywhere from $250 to $1 000 to Giant's 1955 Anniversary Sale, Giant well knew that in the cost acconnting of such snpplie.r that expense item ,,' ould have to be considered a.nd reflected at some time in the cost of the merchandise bought by other grocers. Such amounts, even though iniinitesimal would ultimately not only increase t.he cost to other grocers but "-'ouJc1 add to the consmners' cost. The,se subtle attempts of this very large buyer to obtain special concessions amollnt to improper and undue pressures upon its suppliers. Such conduct is one of the monopolistic types the Robinson-Patman Act is intended to prevent. If the big chrtin competitors of Giant were all permitted to follow the same practices as GifUlt with the tacit 01' express approval of the Federal Trade Commission, the small grocery competitors in this area of competition that ,,' ere not illstantly throttled would surely suffer a slmy and painful cleath. Gifl,nt s offcials also knew that it ",yould be impossible for any of its suppliers to proportionalize similar contracts with retail compet.itors of Giant ,yho were also customers of such suppliers because of the infinitesimal1y small amounts that ""ould be involved in such proportionalization, fllcl as a llmnber of suppliers ""rate in substance, that in any event it. "oulc1 entail a terrific burden upon them to work out such matters and for which they did not have funds. For example, take a fairly small corner grocery doing approximately 8100 000 'worth of business per year. In 1955 this would have ,been 1/60 of the size of Giant business. Taking (1, $100 contrilmtor fllllong the suppliers and dividing this by GO ,yould leave a,n allowance of $1.67 which "cmJd hardly pay the postage, entailed in working out such a transaction. .And, of eol1lse, there are many small grocers doing far less business than that "here the transaction would become even more ridicllJous. This points up the fact that ,,-while cooperative contracts pertaining to advertising may be proper 110 retail buyer is in a po ition to insist upon a contract GIANT FOOD , INC. 999 977 Findings by reason of jt,g great buying power that could not be accepted by any supplier and applied to its trade at large in the area of competition involved. To put it plainly, Gianfs offcials not only should have known but in the opinion of this examiner from the evidence actually did know that their suppliers could not apply the Giant contracts to Gianfs competitors in (he 'iVashington metropolitan area.

In addition to the Connnission s decision in Ohestnut Fa1'n1s: supra the Commission approved the examiner s decision to like effect in Docket Xo. 6463 01' 0886 cD Black1oell. s1/"pra which concern was also a supplier who executed Gianfs cont.ract and favored it over other competitive buyers. IVhile the Commission in the Atalanta Trading case supra" also decided this precise point with respect to that respondents dealings with Giant, its order nls reversed by the COllrt on the ground that Giant 'was the on 1y customer of Atalanta in the 'iVashington area during the time involved and Atalanta therefore could not proportiona.lize arlvertising allowances to nonexistent customers. That case is therefore no authority in the case at bar. Those decisions on their particular facts do not bind the respondent 011 the facts. But they are so applicable and arise out of the entire state of facts presented(1 on the record in this case that to unduly lengthen this decision by further outlining the evi. dence ,yould therefore serve no useful purpose. The second charge, Paragraphs Ten and Eleven, of the amended and supplementa.l complaint is as follmys: The amounts of money solicited and received by the respondent from each of its suppliers were paid by such Bupplien; for advertising to be done by respondent in promoting each such supplier s products during respondent' anniversary sales and candy carnival sales in the years 1954, 1955 and 1956 and prior thereto. However, it has been the regular and continuous practice of respondent not to use the entire amounts of money received from its suppliers t.o advertise such suppliers' products during such sales but to divert substantial amounts of such payments to its own use. For example, during the year 1955, respondent solicited its suppliers and 134 paid respondent substantial amounts of money totallng $31 S2G for advertising which respondent was to do on such suppliers' products during its anniversary sale beginning April 18, 19fJ5, and lasting t"wo weeks. However, re. spondent did not expend tbe entire amount of money received from each of its suppliers as an advertising allowance in advertising each such supplier products during such sales, but diverted substantial amounts of such payments froll its suppliers to its own use.

The aforesaid acts and practices of respondent as herein alleged of inducing and receiving advertising allowances from its suppliers and not expending the entire amount of money received from each such supplier as an advertising also,vance in actual advertising of such suppliers' products and of diverting substantial amounts of such money to its own use are all to thc prejudice and 1000 FEDERAL TRADE CO L\nSSIOK DECISIO::S Findings fjS F. iury of such suppliers and of competitors of respondent and the public and constitute unfair metllOds of competition and unfair acts and practices in commerce within the intent and meaning of and in violation of Section 5 of the Federal Trade Commission Act.

,Yhile an order requiring responcle,nt t.o cease and desist issued plll'Snant. to the first charge ,,- 01l1c1 also prohibit the specific type of activities Giant engaged in in its said sales in col1ncetion with the use of any contract of participation offered to suppliers by Giant such as those used in the instant case, other sih1utions differing from those so presented in this case might arise "\ylwl'cby n straint of respondent from any other diversions of suppliers' monies ,youlc1 become necessary. Both the former hearing examiner and the Commission in their respectjve orders, as ",yell as the brief of counsel supporting the complaint, state the reason 1011y this charge is entirely distinct from the first charge. Sneh reasons win not now be repeated. The first charge would be maintainable even though there had not been any diversion of the funds cont.ributed by its suppliers during t.he 1055 Anniversary Sale to Giant s own persomll purposes but there could be diversions of suppliers monies to respondent' s O"yn use under the regular type of proportlona.lized cooperative adycrt.ising contracts many of such suppliers employ. The record clearly demonstrates that of the $37 875 so contributed by the suppliers in 1955 Giant used a. substantial portion for adycrtiseme.nts which could not directly v benefit any of the suppliers, such as iis radio and televjsion spot aclvcrtjsements which cost $6 87:2. The names and products of these suppliers '1;ere not even mentioned in such broadcasts although a fair construction of the contracts indicates Gia.nt would provide such. Upon Giant' s own computations made by the witness AbeJ (R. 460-481), the various a.advertisements of its anniversary sale which appeared c1aiJy throughout the b1;o-week saJe j-\.april 18 to 30 , 195!, , inclusive, in the three Washington daily newspapers show that of the total cost thereof- $26 132. , only $15 072. 19 'vent to the contributing suppliers whiJe Giant obtained $11 060.38 worth of space for itself (Com. Ex. 162and -B). The record contains considerable controversy over these figures but the former examiner struck from the record all evidence relating to the Commission s effort to establish the fact that actually Giant received a much larger proportion of the space than the foregoing admitted figures indicate. This examiner ,yas urged in oral argument by counsel supporting the complaint to personal.l1y make measurement of the numerous ads although the evidence indicates there are a number of ways to measure such ads, and there js no agreement between the parties as t.o how they should be measured. This examiner then refused and still refuses to attempt to GIANT F'OOD, INC. 1001 977 Findings make such measurements. It is not his duty to do so any more than it is the duty of a trial judge in a controversy over boundary lines to go personally ,vith rod and transit a,nd survey the metes and bounds of the contested land area involved therein. After all such specific determination is entirely unnecessary since this is not private proceeding to recover money for any individual but a proceeding brought in the public interest and the wishes of the contributing suppliers a,nd the amounts they might possibly recover should they in some most unlikely event press civil actions against definite fact re-Giant therefor flre "holly immaterial here. The mains that of this 837 87;), these suppliers contributed to Giant, at most S15 072. 1D ,,,as spent in their behalf. It is of special note that Giant used a substantial part of these contributing suppliers' money t.o advertise products of other suppliers who had not contributed to Giant 1055 Anniversary Sale, an inc.ongrnolls situation to say the Jenst. The amount of sllch advertising is immaterial but an examination of a number of thc Commission s exhibits, between Nos. 131 and leu, reveals that many of these noncontributing firms received some sllbstantia.l advertising of their name and products at the expense of the contributing suppliers. It may be remarked that this is but another evidence of the looseness of respondent's sales methods in its H)55 Anniversary Sale. .Just how Giant. expected the contributing suppliers to proportionaJize to their other customers the amount.s to be spent for; competitive non-contributing suppliers is not. explainable.

Furthermore, as between the contributing suppliers \Vhile exact or even approximate lineage of their ac1yeltisements has not been nttmnpted by the examiner from an inspection of the advertising it. is deal' that for the $1 000 contributed by a number of suppliers a very disproportionate amount of space went to a,dvertise Swift & C01lIXU1:(S products as against an the others. The total space given to Armour, Atalanta Trading Co., Briggs, Chestnut Farms, Fulham Bros., Inc., and George I-Iormel, an packers, appears to be only approximately half of that space which advertised Swiffs meats and other products 1mt each paid the same amount, 81 000. It may be added that not ani)' does this show an unfairness to these cont.ributors but also demonstrates that Giant had no definite fixed plan for its advertising from ".which any supplier could legitimately learJl just henv he could proport.ionalize such a contract amoIlg Giant: competitors, which has to do "ith the first charge herein. Giant, in a post hoc attempted justification of the expenditure of monies during its sale, contends t.hat the actual cost of exterior a, interior decorations in its stores, interior displays, a,nd special em- 1002 FEDERAL TRADE COMMISSIO DECISIONS Findings 58 l!\1' ployee caps should be taken into account in determining whether there has been any misuse by it of the funds contributed by its suppliers. '.' these various items of expense are: $2 240 for exterior decorat.ions of 28 stores at an estimated cost of $80 per store; interior displays totaling 82 661.85, and $199.23 for caps as shown by Commission s Exhibit 162-13 and also testified to by the witness Abel. It is further contended there. should be iaken into account the estimated value of l1HlSS end displays in various stores made on belmJf of various suppliers. As already state,l, respondent presented no evidence and the examiner therefore has not had the benefit of the testimony of the executives and other offcials of the store who planned this sale aside. from ::\11'. Abel who was called as a Commission ",,,it-ness. Since these figures are apparent after-thoughts and respondent has produced no accounting, the llse of and intermingling of contribut.ed funds with Giant:s own funds c1ming the sale leaves t.he matter subject to t.he reasona,ble and fair inference t.hat there was 110 accounting and no explicit planning with respect to t.he allocation of cha.rges to its suppliers either in the nev,spaper ads 01' othenyise. Giant contends that according to its own figures including the estimates of substantial portions thereof the total cost of the sale 'influ S46 043.08. Of this largely speculative cost however, there is fl precise figure of $87 87;) contributed by various suppbers. This amounts to approximfltely 8:2 percent of the costs of the sale on Gianfs said figures. This seems scarcely equitable to the contributing suppliers since Giant according to its own figures got the benefit of approximately 5 h percent of the advertising cost although loosely eontending that the suppliers got the general benefit of all the money they paid because of the intangible benefits of such a sale and the publicity given to the products of each eontributor. This reasoning is not appealing t.o the e,examiner particularly in view of the failure of respondent to come forward with precise accounting figures demonstrating the truth of its estimated figures.

Respondent set this ent.ire proceeding in motion; no one else had anything to do with its inception. Its offcers conceived the whole plan of the special anniversary and candy carnival sales including the contracts of participation which it promulgated to all of its suppliers and which many of them executed. The essence of the defense in t.his case is that, Giant' s offcers had no -way of knowing the e.i'eets of these acts. The.re is a basic principle of law that every man js presume(l to know the reasona.ble a.nd probable conscqnenees of his acts. This, of COllrse, applies to a.n jncorporeal statutory creature sneh as Giant beca.use the knovdedge of its offcers and j.

GIA. T FOOD , INC. J003 977 iIulings agents is attributable to it. n is charged in the complaint that respondent "knowingly induced or rece.ived the payment" of the contributions it received in connectioll with its participation contracts, and upon the whole record the examiner specifically finds that respondent did know that the result of its obtaining and using payments made as contributions to its said sales would produce those matters which have already been fully recited herein. These acts produced an avalanche of procedures and orders against respondent' s suppliers for violation of e2(d) of the Clayton Act as amended by the Robinson-Patman Act. n adversely affected respondent' s competition and the buying public has also been hurt to some degree. Since the orders of the Commission look to the future it is necessary that respondent be required to cease and desist henceforth from any such acts.

n is therefore found as to the first charge that in the course and conduct of it.s business in commerce, respondent has knowingly induced or received the payment or contracted for the payment of something of value to respondent or for respondent's benefit as compensation or in consideration for services and facilities furnished by or through respondent in connecbon with respondent's offering for sale or sale of products sold to respondent by many of its suppliers, and which payments were not made available by such suppliers on proportiona1Jy equal terms to a1J other customers of such suppliers competing with respondent in the sale and distribution of such suppliers' products.

n is further found with respect to the second charge that the responde,nt in connect.ion with its 1955 Anniversary Sale diverted substantial amounts of money paid by its suppliers for promotion of their own products during such sale to its own use in the advertising of its own products and its own business generally. The evidence having sustained the material a1Jegations of the complaint on both the first and second charges, upon such evidence as hereinbefore found the examiner draws the following conclusions of law:

1. The Commission has jurisdiction of the subject matter of this proceeding and of the person of the respondent corporation. 2. There is substantial and specific public interest in this proceed- Ing.

3. That as to the first charge the respondent's knowledgeable inducement of its various suppliers) in getting these suppliers to grant special aJJO"Tances which .were not to be and, in fa.ct, were not offered to the competitors of the respondent dealing in the same goods as the respondent, is all to the prejudice and injury of competitors of 1004 FEDERAL TRADE CO:VL\IISSIO:\ DECISIONS Findings 58 F.

respondent, and the public, and has the tendency and effect of obstrueting and preventing competition in the sale and distribution of food and grocery products and has the tendency to obstruct and restrain and has obstructed and restrained commerce in such merchandise and constitutes unfair methods of competition in com fierce and unfair acts and practices within the intent and meaning and in violation of Section 5 of the Federal Trade Commission Act. 4. That as to the second charge the acts and practices of the respondent of inducing and receiving advertising allo\Tanccs from its suppliers and not expending the entire amount of such monies received from each such supplier as an advertising allowance in actual advertising of such supplier s products, and of diverting substantial amounts of such money to its own use, are all to the prejudice and injury of such suppliers and of competitors of respondent and the public and constHute unfair methods of competition and unfair acts and practices in commerce within the intent and meaning of and in violation of Section 5 of the Federal Tr de Commission Act. The following order is therefore entered:

It is o-rdered That Giant Food, Inc. , a corporation, and its offcers, and respondent's representatives, agents and employees, directly or through any corporate or other device in connection ith the sale to them of products or merchandise distributed or resold by them in the normal course of their business jn commerce, as "cornmerce ' is defined in the Federal Trade Commission Act, or in connection ,with any other transactions between respondent and its various suppliers or dealers involving or pertaining to the regular business of thc respondent in distributing and selling commodities and products in commerce, as "commerce" is defined in the Federal Trade Commission Act, do forth,with cease and desist from: 1. Offering to enter or entering into any cont.ract, agreement understanding or arrangement or in any other way formulating, creating or adopting any scheme or method which has for its purpose the inducing of, or actually does induce, any persons to grant pa.yment of anything of value to or for the benefit of respondent as compensation or in consideration for any services or facilities furnished by or through respondent in connection ,,-ith the processing, handling, snlc, or offering for sale of any products or commodities manufactured, sold, or offered for sale by such persons, unless such payment or consideratjon is available on proportionally equal terms to all otller customers competing with respondent in the distribution of such products or commodities; 2. Rece,iving payment of value for promotion or advertising of commoc1itie,s and products of its snpp1iers or others ,md failing to GIANT FOOD INC. 1005 977 Opinion expend the full value received for the promotion and advertising of such commodities and products.

OPIXroK OF THE CO: DIIS8TOX By KBRX CmnmiS8?:owner:

The hearing examiner ill his initial decision found that t.he allegations of the amended and suppJementa.l complaint were susta,ined. J-lis order directs respondent to c.ense and desist from the acts and practices found to be unlawful. Respolldent has appealed from that decision.

The respondent operates a chain of supermarkets in the District of Columbia, Virginia, and Maryland for the retailing of fresh and canned vegctab1es, meats, and other foods and household artic.es to the consuming public. In 1955, when this proceeding began, it had 28 stores and its sales were approximately $60 000 000. Respondent purchases its merchandise from approximately 500 manufacturers and supplie.rs located throughout the lTnited States. In 1954, 1955 and 1956 it conducted va.rious prornoti011S called Anniversary Sales or Candy Carnival Sales. Respondcnfs program for these sales included the soliciting of its suppliers to enter into participation contracts calling for payments to it of 5100, 5250, $:)00 $750 , or $1 000 in return for advertising and promoting of the suppliers' products. Typifying those promotions was its chain-wide 19th Anniversary Sale held from April 18 through April 30 , 1855 for which approximate)y 150 Giant suppliers contributed a total of 837 875. The amended and supplemental complaint alleged that respondent engaged in unfair acts and pracHces in violation of Section 5 of the Federal Trade Commission Act in that it (1) induced and received payments or allowances from the suppliers which it knew, or should have known, ,were not offered or made available by the suppliers to all of their customers competing with respondent in the resale of the suppliers' products, and that it (2) failed to expend the entire amount of money received from each supplier for advertising to be done in promobng his products and diverted substantial amounts of such payments to its own lise. In contending that the hearing eXaJniner erred in finding the first of the above charges to be sustained, respondent argues that there was a failure of proof that its suppliers neglected to make like proportional payment.s to its competitors in violation of the public policy expressed in Section 2(d) of the Clayton Act, as amended. The evidence received however, includes the testimony of a representative of one of the suppliers participating in the 1955 Anniver- Opinion 58 F.

silry Sale who reported that his company marketed coffee and tea to approximately 30 accounts in the 'Vashington metropolitan area and that no contract similar to that entered into with Giant was offered to any of its other customers. Another witness testified that his company paid $100 in 1954 and again in 1955 to participate in Giant' s sales. Even though this concern s customers in the 'Vashington area included various food retail chains and voluntary cooperative organizations, the allowances to respondent were t.he only ones which it granted there during those years. The record also contains testimony by representatiycs of five other companies participating in the 1955 Annivel's lry Sale and evidence of the participation of another supplier was stipulated into the record. Granting that certain of those suppliers participat.ed in special promotions conducted by one or more other retail chains and voluntary cooperative grocery organizatiolls "'v hen so solicited, it does not follow that. such suppliers "-ere offering their '\17 ashillgton area customers generally opportunities to participate in payments of the type granted to Giant. There accordingly is sound record support for the hearing examiner s conclusions that. many of respondent' s suppliers failed to offer like payments or make t.hem available on proportionally equal terms t.o their other customers who competed with respondent.

The evidence \VO have just discussed, without more, provides adequate basis for the conclusion that many of respondent s suppliers violated Section 2(d) of the Clayton Act. The initial decision however, also stated that two groups of wholesaler sponsored grocers found by the hearing examiner to be competitors of Giant, had not been granted the same type of allmnmces as Gia,nt. A witness testifying about one of these groups, who was president. of Federal Supermarkets, Inc. , a voluntary chain of eight independent grocery stores, also operated his own grocery in \Vashington, D.C. He bought some of the products resold by him through his wholesaler and purchased others dire,ctly from the manufacturers or suppliers some of which contributed to Giant's 1955 Anniversary Sale. He further testified in etrect that none of the suppliers whose products he handled offered him advertising or promotional allmyances kindred to those provided in the Giant contract. The record funy supports the conclusion that t.his retailer was a customer, within the meaning of Section 2(d) of the Clayton Act, of cel'ULin of the suppliers who contributed to the Anniversary Sale and was duly entitled to participate in their promotional payments. As to the other group of retFl,il grocers: namely: the fifty or more independently o,yned outlets doing business as (J-anlen Food Stores GIA.'iT FOOD, !KC. 1007 977 Opinion a representative of their sponsoring wholesaler stated that the only advertising contracts made available to his company and the stores were the regular standard cooperative advertising contracts. The record contains indications that some. of the suppliers whose products were resold by the member stores participated in a spe.cal promotion conducted by another voluntary organization of independent stores operating in the \Vashington area. This circumstance notwithstanding, we do not believe that the record is adequate to show whether the proprietors of the Garden Food Stores ",were customers within the meaning of Section 2(d) of the Clayton "cct of participating suppliers. To the extent that thc initial decision may imply thc contrary, it is hcrcby modified.

Respondent further argues that the conclusion that its suppliers had a lcgal duty to proportionalize their payments to Giant is pl' eluded inasmuch as there is no evidence that disfavored competitors bought wares of like grade and quality to those advertised in thc Anniversary Sale. The articles and brands advertised by Giant. patently included many whose names are household bywords throughout the country. :Moreover, as previously noted: representatives of certain of the suppliers attested that their respective products were sold to both chain organizations and other retailers in the area where the sale was held. Hence, it is re,asonable to infer that products of grade and quality similar to those respondent promoted in the sales were also being resold by its competitors not sharing in the allowances. Furthermore, the services outlined in Giants contracts included both media, advertising and in store advertising services. The contracts implied that one of the latter, a supervisory service, would extend to all products being handled for the suppliers, Respondent s contracts contained no blanks or spaces for identifying the grade or quality of products to be advertised and other wording in t.hem clearly indicates that "wide discretion respecting products to be promoted \yas vested in Giant. Respondents contention relative to inadequacy of proof respecting like grade and quality of products is rej ectec1.

Respondent further argues that the he-aring exam111c.r should have: found that no knowledge could be imputed to respondent that the payments which it induced constituted violat.ions by the p lyorsuppliers of Seetion 2(d) of the Clayton Ad, as amended. TrllB respondent may ha \-e belieyccl that one or several of its c.ornpetitors had receive.cl payment.s from suppliers for conducting special promotions, particularly Food Fair, Inc. , whuse contracts H'spolldent used when preparing its own participation contl'aci . But. this js no eXCllse, Ilesponc1ent solic.ited a11 of it.s suppliers for payments, not 1008 FEDERAL TRADE CO),IMISSION DECISIONS Opinion 58 F.

merely those suspe,ctec1 of having contributed to compet.it.ors' retailer promotions. The heart. of respondents argument on this phase, however, is that pay1ne.nts made to it would ripen into or become legal violations by the pa.ying seHers only if they later failed to grant like proportional payments to respondent s competitors and thflt respondent would have no way of knowing if defaults in that re.spect. occurred. To discuss all record matters leading to the conclusion of actual or constructive kn0'yledge by re-spondent that. :mch payments were and would be withheld from its competitors would unduly lengthen this opinion. A few salient record facts will sllfJice. on this issue.

At the time its 19t.h Annjyersary Sale \YClS p1canned, responde,TIt alre Hly had promotional agl'eelnents in effect ,,,it h Inflny of its suppeers. :JIany of those were standard types of cooperative advertising agreements instituted by the sellers which contained statements that they were available on proportionally equal terms to their other customers. The provision in respondents participation contracts that they ",were not to alter or replace currently existing advertising or merchandising agreements bebyeen respondent and the contributing manufacturers thus clearly placed the solicited suppliers on notice that individual and preferential treatment wns l'e(plested by respon cl en t.

That preferred treatme,nt was expected mll;;t have been further evident to the tnlde from companion plo\' isions or the contracts. Thus, the $100 contract provided for advertising or one product in two newspapers but specified no linage; and it called for supervised display.y or merchandise and requests lor orders but ",,,as likewise s1Jent as to kind or amount. The other contracts were similarly vague, except that they specified linages for ne,,-spaper advertising. The hearing examiner also correctly found that respondent and the trade were aware that it would be impossible or prohibitive for the suppliers to duly proportionalize those payments among their other cust.omers competing wjth Giant. Evidence stressed by respondent as showing the contrary is unpersuasive and does not se.riously detract from thc hearing examine, s conclusions. For example the witness referred to in respondent's brief did not by any means outline bases for fairly proportionalizing his payments to Giant among his other customers. After testifying that his company had not offered a contract similar to the Giant contract to others, he conceded "a possibility " that an equitable alternative could have been worked out for the others and " also the possibility that it could not. " \Ve think the evidence is clear and conclusive that the respondent knew or should have known that. the payments \which it induced GIANT FOOD, INC. 1009 977 Opinion and received were made by its suppliers in violation of Section 2( d) of the Clayton Act, as amended.

The exceptions to the conclusion of 1aw in the initial decision that respondent' s knowing receipt of the advertising allowances constituted unfair acts and practices within the purview of the Federal Trade Commission Act also are denied. Its arguments are similar to those discussed and rej eded by us in our decisions in the Grar V union a.nd A rnerican N eW8 cases. * Next to be considered are respondent's exceptions to the findings by the hearing examiner which sustained the second charge of the amended and supplemental complaint. Under' this charge, it is alleged that the moneys solicited and received by thc respondent from each of its suppliers were paid for advertising to be done by it in promoting each such sl1ppIier s product.s during the sales. Such complaint further alleges that t.he respondent did not expend the entire amount of money re,ceived froln each in advertising his particular products, but unla fully diverted sl111stantiid amounts thereof to it.s own use. It is undisputed that respondent took in $37 875. from the suppliers for the 1905 anniversary promotion and that expenditures for newspaper advertising t01 alcd S 132.58; and the cost of its radio and t.television n.advertising ,vas SG S72. , but such advertising vms limited to spot announcements public.izing Giant' name and sale, no products of participating suppliers boing mentioned.

To these outlays, respondent also would add, among other things 100.00 for costs of store decorations, and argues that t.total sale expenditures exceecled $38 000.00. IIowever, there ca-D be no doubt but that only $15 072.19 at most of the $26,132. 58 worth of space purchased for ne,wspapBr advertising was used in feat.uring the products of the contributing suppliers. Other space in such advertisements puhlicized Giant and its own trade-marked products and a substantial amount featured the products of suppliers who did not contribute.

All of respondents various participation contracts, however, made provision for in-store promotion or advertising by the respondent in addit.ion to t.he promised media advertising. For example, the $100 contracts ealJe.d for, among other matters, supenr1sory services for assuring prominent display of the suppliers' wares and bulletins public.izing the merits of their products among Giant' s personnel. In addition, various of the other contracts, particularly the S750 and $1000 contracts, provided for signs featuring the products or * The Grand Union Company, Docl,et 6973, decided August 12, 1960; add The i4mer can News Company et al., Docket 7396, decided Janua.ry 10, 1961. 6S1-237--ti3---ti5 1010 FEDERAL TRADE COMMISSIQX DECISIONS Opinion 58 F.

mass displays or other special store displays for them; and the rocord also includes evidence suggestive of steps taken or expenses incurred by the respondent for full1ishing certain of the in-store services integral to the contracts.

Although Section 2(d) of the amended Chtyton Act docs not authorize payments for services grossly in excess of their cost or value, neither docs it prohibit a seder from compensating his buyer.rs for any type of service provided its other standards are met, including a. reasonable relationship between the payments and the services being rendered. Cf. Lever E,'others Oompany, 50 F. C. 49'1, 511- 12 (1953). The record in this proceeding, however, affords no criteria for evaluating, separat.ely frolll the media advertising services performed, the relationship which ex istec1 between the payments induced by the respondent and the benefits or vahws conferred on the suppliers by the in-store facilities and services furnished. For that reason, we are unable to say that thb combined value of the in-store services lnd the aforementioned media advertising was not reasonably related to the amount of the suppliers' payments. There , therefore a. failure of proof of the allegation that a part of such funds was diverted for respondent' s own use. Hence, vie think that respondent' s appeal from the ruling sustaining this charge, should be granted and the findings and conclusions reversed. Respondent's contentions that it is a packer subject to regulat.ion under the Packers & Stockyards Act of 1921 and exempted from the Federal Trade Commission Act were rejected by the Commission in two previous rulings for reasons there stated. See COHunission order issued December 19, 1957, vacating initial decision dismissing proceeding for hlCk of jurisdiction, and Commission s order issued February 10, 1959, vacating a subsequent initial decision "which also dismissed for lack of jurisdiction. Those rulings are controlling here. Respondent excepts to the order to cease and desist contained in the initial decision as unusually broad ' and argues that such orde.r prohibits conduct wholly unrelated to the practices found unlawful. lye think (hat the first prohihition of the order should be modified to make it clear that its target is the inducing of t.he discriminatory allowances with actual or constructive knowledge by respondent that they a.re discriminatory. Responclenfs exceptions to the first paragmph of the order are to that extent granted. The second pri'graph of the order contained in the initial decision relates to the aforementioned diversion charge. Since such paragraph is being set ,:, Grant FOOD , INC. 1011 1177 Order aside in conformity with our dismissal of that chaTge for failure of proof, discussion of respondent's exceptions on this aspect would be an act of supererogation.

The appeal of the respondent is denied in part and granted in part as noted hereinbefore nd the initial decision modified in conformity with this opinion is being adopted as the decision of the CommlSSlOn.

Chairman.n Dixon and C0111missioner Elman did no! participate in the decision of this matte.r.

FI1\1"AL ORDER This matter having been heard by th Commission upon the respondenes appeal from the initial decision of the hearing examiner; and the Commission having rendered its decision denying the appeal in part and granting it in part, and having determined, for reasons stated in the accompanying opinion, that the initial decision should be modified:

It ordered That the findings of fact and conclusions of law contained in the initial decision hereby the hearing examiner held that the allegations of 1,l'Y violation contained in para.graphs ten and eleven of the amended and supplemental complaint have been sustained by the record be, a,nd they hereby are, reversed. 1 t is further ordered That the initial decision of the hearing examiner be, and it hereby: is, modified by substituting the following order tor the order contained in the initial decision: It 78 ordered rhat Giant Food, Inc. , a corporation, and its offcers, and respondent's representatives, agents and employees directly or through any c.corporate or other device, in or in connee. tiOIl with the purchase in commerce, as 'commerce' is defined in the Federal Trade Commission Act, of products for resale by the respondent, or in connection with a.ny other transactions between respondent and its various suppliers involving or pertaining to the regular business of the responde-TIt in distributing and selling commodities and products in commerce, as 'commerce' is defined in the Federal Trade Commission Act, do forthwith cease and desist from: Inducing, receiving or contracting for the receipt of a.anything of value from a.ny supplier as eompr.nsation or in consideration for services or facilities furnished by or through respondent in connection with the processing, handling, sale or offering for sale of products purchased from 6uch supplier when respondent knows or Decision 58 F.

should kno\v that such compensation or consideration is not affrmatively offered or otherwise made aVRilabJe by such supplier on proportionally equal terms to all of its other customers competing with respondent in the sale and distribution of such supplier s products. It is further ordered That the allegations contained in paragraphs ten and eleven of the amended and supplemental complaint be, and they hereby are, dismissed.

It 7:8 further ord6?' That the initial decision as herein modified , and it hereby is, adopted as the decision of the Commission. It is further OI'de?' That the respondent Giant Food, Inc., 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 as modiiied.

Cha.irman Dixon and Commissioner Elman not participa6ng. Ix THE 11A TTER OF COL1JMBIA RECORD SALES CORP. ET AL.

ORDER: ETC., IN REGARD TO TI-m ALLEGED VIOLATION OF THE FEDERAL TRADE C03I:nSSIO)i ACT Docket 7968. Complaint, June 1960-onler, June, 1961 Order dismissing without prejudice-the public interest con!;idered to be fully protected by recent amendment to the Communications Act of 1934complaint charging ilegal payment of "payola" to radio and television disc jockeys.

Mr. lla.Told A. Kennedy and lift. Arthur Wolter, JT. for the Commission.

Rosen?nfln Oolin Kaye Pet8c!wk FTeund by lift. Ra-lph F. Oolin Mr. Walter R. Yetni!,of! and Mr. Asa D. Sokolow of :'e", York , for respondents.

INITIAL DECISION BY Anner E. LIPSCO::1B : I-IE.\RIXG EXX:.\I1XER On June 23 , 1960, the Commission lssued its eomplalnt herein charging the Hespondents, which arc engaged in the distribution offerlng for sale, and sale of phonograph re.cords to distributors and varlous retail outlets, with vlolation of the Federal Trade Commission Act, in that Hcspondents, alone or ,with certain unnamed , COLV'::IBIA RECORD SALES CORP. ET AL. 1013 1012 Order record distributors, have negotiated for and disbursed "payola which consists of the payment of money or other valuable consideration to disk jockeys of musical programs on radio and TV stations to induce the disc jockeys to select, broadcast expose" and promote cert.ain records, in which the Respondents are financially interested, on the express or implied understanding that the disc jockeys win conceal the fact of such payment from the listening public.

On March 27 , 1961 , prior to the offering of any evidence herein counsel supporting the complaint submitted a nlotion requesting that the complaint be dismissed without prejudice. In support of their request. counsel supporting the complaint state that. the Communications Act of 1934 has been amended in several particulars and that, as a result of those amendments, they consider "the continued prosecution of this matter an unnecessary expenditure o:f time, effort and funds in determining the legality of the alleged practice, since t.he protection of the public interest is now :fully assured by specific statute . Counsel for the Respondents offers no objection to the granting of this motion.

A.after considering the motion to dismiss, the law and amendments referred to therein, and the oral reply thereto of counsel for the Respondents: the I-Iearing Examiner accepts the reasons offered in support of the motion, and concurs in the opinion of counsel supporting the complaint that the dismissal without prejudice of the complaint herein will be in the public interest. Therefore It is OJ.dered That the complaint herein be, and the same hereby , dismissed "without prejudice to the right of the Commissjon to initiate further proc.eec1ings against the Respondents, should future events so 'warrant.

FIN AI, ORDER By its order of Iay 9 , ID61 , the Commission e,xtended until further order the date on which the initial decision of the hearing examiner herein .'ould become the decision of the Commission; and The Commission now having concluded that said initial decision dismissing the complaint 'without prejudice constitutes an appropriate and adequate disposit.ion of this proceeding: It onle1'ed. That the initial decision of the hearing examiner fied April 5 , 1 DG1 , be, and it hereby is, adopted as tlle decision of the Commissi on.

Order 138 F.