Knoll Associates, Inc.

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

IN THE MATTER OF KNOLL ASSOCIATES, INC.

ORDER, OPINIONS , ETC. , IN REGARD TO THE ALLEGED VIOLATION OF SEC. 2(a) OF THE CLAYTON ACT Docket 8549. Complaint, Dec. 1962-Decision, Aug. , 1966 Order requiring a New York City manufacturer of contemporary furniture to cease discriminating in price between competing resellers of its products in violation of Sec. 2(a) of the Clayton Act. COMPLAINT The Federal Trade Commission, having reason to believe that respondent Knoll Associates, 1nc., the party respondent named in the caption hereof and hereinafter more particularly designated and described, has violated and is now violating the provisions of subsection (a) of Section 2 of the Clayton Act (U. , Title 15 .Case set aside by Court of Appeals, Seventh Circuit, 397 F. 2d 530 (8 S.&D. 772), June , 196H , on RTounds that use of stolen document- violated the Fourth Amendment. Order withdrawing complaint dated Dec. 8 , 1969. Complaint 70 F. T.

Section 13), as amended by the Robinson-Patman Act, approved June 19, 1936, hereby issues its complaint, stating its charges with respect thereto as follows:

PARAGRAPH 1. Respondent Knob Associates, Inc. , sometimes hereinafter referred to as Knoll, is a corporation organized, existing and doing business under and by virtue of the laws of the State of New York, with its principal offce and place of business located at ;320 Park Avenue, New York, New York. PAR. 2. Respondent is now, and for many years past has been engaged in the manufacture, sale and distribution primarily of furniture and furniture products. Respondent sells its furniture and furniture products to a large number of customers located throughout the United States. Respondent's sales are substantial amounting to over $6 000 000 for the year of 1960. PAR. 3. In the course and conduct of its business, respondent has engaged and is now engaging in commerce, as "commerce" is defined in the Clayton Act, as amended. Respondent sells and causes its furniture and furniture products to be transported from the respondent's principal place of business to the purchasers thereof located in the District of Columbia, and States other than the State wherein said shipments originated. There has been at al1 times mentioned l;erein a continuous course of trade in commerce in said products across State lines between said respondent and the purchasers of such products.

PAR. 4. In the course and conduct of its business in commerce respondent has been, and now is, discriminating in price between different purchasers of its furniture and furniture products of like grade and quality, by sellng said products at higher and less favorable prices to some purchasers than the same are sold to other purchasers, many of whom have been, and now are, in competition with the purchasers paying the higher price. Respondent Knob has separated its customers into various classification. For example, purchasers of respondent's said furniture and furniture products are classified as architects, interior designers, contract house, interior decorators, offce furniture dealers and furniture or department stores. Included among, but not limited to, the discriminations in price as above alleged, respondent, in its sales of said furniture and furniture products, has arbitrarily granted discounts of 5070 off the list price to some of its purchasers, while at the same time has granted discounts of 40% off the list price to others. These different discounts have been granted by respondent in the sale of said products to competing . .

KNOLL ASSOCIATES, INC. 313 311 Initial Decision purchasers located in each of the market areas of Detroit, Michigan, Cleveland, Ohio and Washington, D.

PAR. 5. The effect of respondent's aforesaid discriminations in price between the said different purchasers of its said furniture and furniture products of like grade and quality, sold in manner and method and for the purposes as aforestated, may be substantially to lessen competition or tend to create a monopoly in the lines of commerce in which the aforesaid favored purchasers are engaged, or to injure, destroy, or prevent competition with said fa vored purchasers.

PAR. 6. The aforesaid acts and practices of respondent constitute violations of subsection (a) of Section 2 of the Clayton Act (U. , Title 15, Section 13), as amended by the Robinson-Patman Act, approved June 19, 1936.

Mr. Peter DilLS, Mr. BernlLrd Turiel and Mr. Ernest Brod for the Commission.

Mr. Jacob Imberman and Mr. 8ILmuei V. Greenberg of the firm of Proskauer Rose Goetz Mendelsohn of New York, N. Y., for respondent.

INITIAL DECISION BY LEON R. GROSS, HEARING EXAMINER" FEBRUARY 25 , 1965 TABLE OF CONTENTS Page INTRODUCTORY STATE:\IENT OF THE ISSUES 314 Knoll' s Defenses - - - 314 Unreasonable Search and Seizure Issue 315 Burden Of Proof-Of Going Forward - - 315 The Modern Contemporary Furniture Industry 318 Legal Precedents -- - -- -- - -- - -- . 323 Knoll' s Ko Competition Defense 323 Knoll' s No Injury Defense - 327 Knoll' s Meeting Competition Defense 328 FINDINGS OF FACT _ - u u _ u u 331 Historical Background and Development of Knoll Associates, Inc. 331 Witnesses (List ofJ -- -- -- - -- 335 Business Firms Whose Representatives Testified (List of) 340 Knoll' s Price Discriminations - 341 Knoll' s No Competition Defense 350 Knoll' s No Injury Defense - 360 Knoll' s Meeting Competition Defense 365 Detroit, Michigan - 370 C. A. Finsterwa1d Company 370 Benon Products Co. 372 .SupplemeTJtary Ruling Upon Respondent's Motion to Suppress Based t:pon Record as Reopened, dated Feb. 25 , 1965 , reported p, 1739 hel ein. .. . . . ,;, .

Initial Decision 70 F.

Page Robinson Furniture Company 374 Gregory, Mayer & Thorn Co. 376 Adler Schnee Associates, Inc. 377 Casual Living Modes 378 Cleveland, Ohio 380 Leon Gordon Miller & Associates, Inc. 380 Wagner-Henzy-Fisher Company 382 New York, New York 385 Itkin Bros. , Inc. 385, R. H. Macey & Co., Inc. 388 W. & J. Sloane, Inc. - 390 Business Equipment Sales Co. , Inc. 391 Braun & Rutherford, Inc. 391 Desks, Inc. 391 Abraham & Straus - 392 Bloomingdale Bros., Inc. - 393 National Hospital Supply Co., Inc. 393 Alessi Bros., Inc. 393 B. Altman & Co. 394 Washington, D.C. - - - - 398 R. C. M. Burton & Son 398 Ursell' , Inc. 400 Decor Associates, Inc. - - - 402 Revere Furniture & Equipment Co. 403 Capitol Offce Supply Co" Inc. 404 CONCL USJONS OF LAW 405 ORDER - 406 APPENDIX 406 INTRODUCTORY STATEMENT OF THE ISSUES Knoll' s Defenses In this proceeding under Section 2 (a) of the Clayton Act, as amended,1 respondent Knoll Associates, Inc., a manufacturer or modern contemporary furniture, seeks to defend its admitted price discriminations 2 by asserting:

'15 lJ. A. sec. 12, et Bell.

Sec. 2. (a) That it shall b", unlawful for any person engaged in commerce discriminate in price between different purchasers of 'commodities of like grade and qmdity, ,. .' whe!' e the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any Jine of commerce, or to injure, de troy or prevent comlJetition with any j,erson \"ho either grants or knowingly receives the benefit of such discrimination, 0\' with customers of either of them; 'KnalJ admitted in its answer that it soid to some customers at 40% off list prj e and to other customers at 50% off list price. The Supreme Court of the United States has held that sales or lnoducts of Ii;'", grade ar.d Quality to r.competing customers at different prices is a price discriminatiun. C. v. \nheuser-BHBch, Inc., a6:- U. S. 536 49. "Rather, a. pri discrimination within the meaning of that provision is merely a price difference. B Known, on page 12 of its proposed findings of fact. asserts: , .; .;. KNOLL ASSOCIATES, INC. 315 311 Initial Decision (a) its favored and nonfavored customers do not compete with each other; or (b) if they do compete, there is no proof of probable competitive injury in this record; and even though (a) competition and (b) probable injury are proven, nevertheless (c) Knoll' s price discriminations are excused under the "meeting competition" defense.' These defenses wi1 be characterized as; (a) the "no competition " (b) the "no injury," and (c) the "meeting competition.

Unreasonable Search and Seizure Issue Kno1ls counsel has vigorously attacked Commission Exhibits 1914A through 1959B upon the grounds that such exhibits came into the Commission s possession in violation of Knobs immunity against unreasonable searches and seizures guaranteed in the fourth amendment to the Constitution of the United States. After exhaustive administrative and court hearings which held against Knob, the hearing examiner admitted the exhibits into evidence. Commission Exhibits 1914A th,' ough 1959B ha1Je not been used or referred to in writing this initial decision. Appendix I, which is attached, incorporated herein by reference and made a part hereof, contains copies of papers relevant to this issue, including a supplementary ruling based upon the entire record after its reopening by the Commission s order of November 19, 1964. Burden-Of Proof-Of Going Forward Section 7 (c) of the Administrative Procedure Act provides Respondent' s basic contention in this case is that it has not violated Section 2(a) of the Robinson-Patman Act when it grants a 50vlo discount off its list price in order to meet the lower prices of its competitors. Since sales in the furniture industry are sometimes made through llesigners, respondent also points out that the evidence in this proceeding demonstrates that designers do not compete with retailers in the purchase and sale of furniture. In any event, there has been no proof of any competitive injury to designers as a result of respondent' pricing pl'ctiees.

On page 1 of its orig-inal brief, Knoll states that the following are the legal issues involved; 1. \Vhether interior designers who, as part of the professional services which they render to their clients. specify aI1d sometimes order furniture for their clients are in competition with retailers of offce furniture. In the words of the Supreme Court, are they ' at the same functional level' FTC v, Sun Oil Co. , 371 U.S. 505, 520 (1963). 2. \\'whether there is any p)' oof in this case of competitive injury to a designer resultjn" from the fact that, acting as agent, he can older" furniture for his client at Ii discount of 400/ off the respondent s list price if the respondent, as the result of competitive pressures, sells furniture to some retail furniture dealers at a discount of 50% off the list price. 3. Whether the respondent has established, as a matter of fact and Jaw, that in granting a 50% discount to some retailers it acted in good faith to meet the eljually low price of one or more competing fui' niture mflnufacturers. 4 15 U. A. sec. 12 et BCq. Sectiol1 2 (b) inkr alia provides: (b) UPOI1 proof being made . ,;, ., that there has been discrimination in price nothing herein COl1tained shall prevent a seller rebuttil1g the prima facie Cflse thus made by showing that his . lowf' J" price was made in good faith to meet an equaliy low price of competitor Initial Decision 70 F.

inter alia Except as statutes otherwise provide, the proponent of a rule or order shall have the burden of proof. * * . no . . . order (shall) be issued except. . . as supported by . . . reliable, probative, and substantial evidence. Section 3.14 of the Rules of Practice for Adjudicative Proceedings of the Federal Trade Commission provides "Counsel supporting the complaint shall have the burden of proof, but the proponent of any factual proposition shall be required to sustain the burden of proof with reference thereto.

Complaint counsel' s prima facie case was established when Knoll admitted in its answer that during 1960-1962 it sold to some of its customers in New York City, Cleveland, Detroit and Washington, at 40 percent off list price, and to other customers in the same cities at 50 percent off list. Section 2 (b) of the Clayton Act provides that "the burden of rebutting the prima facie case thus made * . * shall be upon the person charged with a violation . . ." in this proceeding, upon Knoll. Having admitted a prima facie case of price discrimination in its answer, the legal burdens of "going forward" and "burden of proof" in the matter of Knoll's defenses to the prima facie case, were and are upon Knoll.' As a result of decisions in a long line of cases of which Morton Salt v. Federal Trade Commission 334 U. S. 37 (1948) is one of the most frequently cited, it is generally accepted that when there is an admitted price discrimination in sales to the secondary line of competition (those who sell to the ultimate consumer), competitive injury may, but does not necessarily have to be, inferred. See, the Commission s decisions in the United Biscuit Docket 7817 (64 F. C. 586); TTi- Valley Packing Association Dockets 7225 and 7496 (p. 223 herein), and American Oil Company, Docket 8183.

Upon appeal Tri- Valley, 329 F. 2d 694 (9th Cir. 1964), the Court pointed out:

The hearin;\ examiner, even at this late date, fails to understand why Knoll' s counsel compelled Commission counsel to consume approximately 1,720 pages of transcript and put in evidence approximately 1,890 exhibits to prove laboriously, and at great expense. a fact which was admitted in Knoll's answer at the outset. 8 The Couttof Appeals for the Fifth Circuit reversed in American Oil, 325 F. 2d 101. 104, aD the grounds "The price discrimination, no matter if substantial, must in the particular factual Bituation involved be capable of raisin" a reasonable probability of substantially lessening ability to compete. " (Emphasis added. Certiorari denied, 377 U.S. 954 (1964). 11r. Justice Douglas was of the opinion that certiorari should have be-n granted. The Court of Appeals (9th Cir. ) remanded in Tn-Valley, 32\JF. 2d 694 , but not on the grounds that the Commission had erred in articulating the standards by which probable competitive injury is to be evaluated.

KNOLL ASSOCIATES, INC. 317 311 Initial Decision There was testimony that those engaged in the resale of such products op erate on a very narrow margin-so narrow, in fact, that it is essential to take advantage of a 2 o/ discount for cash. The price discriminations, on the other hand, ranged from 2% to 10%.

In Sun Oil Co. 55 F. C. 955 , 962 (1959), the Commission held:

It seems self-evident that where a producer is sellng a homogeneous product, such as salt, automotive parts or gasoline, where competition is extremely keen among retailers, and where margin of profits or markups are small, a lower price to one or some of such competing retailers not only may" but must have the effect of substantially lessening competition. Mueller Co. v. Fedeml Trade Commission 323 F. 2d 44, 46 (7th Cir. 1963), held that it is suffcient if there is a finding that the effect of discrimination in discounts may be substantially to injure competition.

In Purola.tot PToducts, Inc. Docket 7850 (April 3 , 1964) (65 C. 8J the Commission ruled:

In the context of this case, therefore where the evidence shows a highly competitive market with narrow profit margins, we conclude that complaint counsel has established through the stipulation a prima facie case of competitive injury, the effect of which "may be substantially to injure competition. (at p. 28) In Universal-Rundle C01'pomtion C. Docket 8070 (June 12 1964) (65 F. C. 924, 959J the Commission stated: One test for determining the substantiality of a price differential in a secondary line case is whether, in the competitive situation shown to exist, the differential is suffcient, if reflected in the resale price of the commodity, to divert business from one dealer to another. Corn Products Refining Co. Federal Trade Commission 324 U. S. 726 (1945). Price discrimination does not per se constitute a violation of Section 2 (a) ," , but, one a prima facie case has been made out the burden of rebutting such prima facie case is by statute upon Knoll.

In appraising the effects of any price cut or the corresponding response to it both the Federal Trade Commission and the courts must make realistic appraisals of relevant competitive facts. Invocation of mechanical word formulas cannot be. made to substitute for adequate probative analysis. '" '" '" 8 In furtherance of such "adequate probative analysis" it is appro- ; American 01:1 Coml,any. 325 F. 2d 101 . 104 . (1964) citing Anheuser-B1isch Inc. v. Federal Trade. Commission 7 Cir. 289 F. 2d 835. Federal Trade Commission v. Sun Oil Co., 371 U. 505 527 (1963). Initial Decision 70 F.

priate to make some general observations about (1) the industry here involved; (2) the product Jine; (3) marketing and distribution practices; (4) pricing practices in the industry of the particular product line, and (5) the nature of competition. The years of alleged violation are 1960-1962, inclusive, and the trade areas are the cities of New York, New York; Cleveland, Ohio; Detroit, Michigan, and Washington, D.

The Modern Contemporary Furniture Industry The furniture business, as oridinarily conducted by retail furniture stores and the furniture departments of retail establishments, requires a large capital investment in inventory, display space, and warehousing facilities. Furniture is not subj ect to quick turnover such as can be achieved by promoting a sale of men s shirts, women s dresses, or children s play suits. Persons not needing furniture at a particular moment wil not buy it simply because it is sold at bargain prices. The capital invested in furniture inventory is tied up for longer periods of time than the capital tied up in inventory of quick turnover lines. Furniture requires much more floor space for display purposes and much more warehouse space for storage. This space is very expensive in today s real estate market.

Broadly speaking, we are dealing here with the furniture industry, but for purposes of our analysis, such a statement sheds little Jight. We are dealing with modern contemporary furniture. Modern contemporary" furniture is in contrast to UtradHional" furniture, but the distinction must be more precise than that. Traditional furniture is familar to a11 persons who have visited George Washington s home at Mount Vernon, Thomas Jefferson home at Monticello, the dupont' s beautiful collection at Winterthur outside Wilmington, Delaware, Mrs. James Ward Thorne miniature rooms at the Art Institute in Chicago and, of course the White House.

Modern contemporary furniture, which had a very Jimited appeal until recently, may be seen now in many of our modern public buildings, including, among others, Du11es International Airport in Virginia, the United Nations Building in New York, the new State Department Building in Washington, the new Columbia Broadcasting Building on West 52nd Street in New York and the Michigan Consolidated Gas Company Building in Detroit. Mrs. Thorne does have olle or two rooms done in modern contemporary. KNOLL ASSOCIATES, INC. 319 311 Initial Decision Traditional" decor and "modern contemporary" decor each have their staunch enthusiasts. "Modern" architecture has been criticized as being monolithic, unimaginative, and cold. Since modern architects have participated actively in designing modern contemporary furniture, the same criticism has been levelled against the furniture. De 'gustibus non disputandum. The modern contemporary furniture here involved is used much more extensively in furnishing commercial, as contrasted with residential building. Knoll' s estimate is that approximately 15 percent of its sales are for residences and 85 percent for nonresidential use. (Tr. 41) The enormous increase in modern contemporary architecture in building all over the world, has produced a corresponding increased demand for modern contemporary furniture. Modern contemporary furniture manufacturers, such as Knoll, utilze the services of world renowned artists in the fields of design, architecture and sculpture. Knoll has furniture pieces in its line designed by (Ludwig) Mies van del' Rohe, Eero Saarinen, Harry Bertoia, and Florence Schust Knoll. Knoll's competitors have utilized the services of equally renowned artists in styling their lines. For instance, Herman Miler, Inc. has pieces designed by Charles Eames and George Nelson. J ens Risom is the head of the furniture manufacturing company that bears his name. Modern contemporary furniture sometimes is made from materials different from the conventional materials usually associated with furniture construction. A particular item of modern contemporary furniture may have several factory prices, depending, among other things upon the fabric and other interchangeable feature the same basic chair may come in several differently priced fabrics, finishes and colors-and the particular fabric, finish, or color determines the factory price of the finished chair. A t its top level in qualiy and appeal, modern contemporary furniture manufacturing is, generally speaking, highly competitive, highly styled, and, in many aspects, highly artistic . Good modern contemporary furniture is well made and well designed. Because of its preponderant use in public buildings it must withstand great wear.

The following news articles "' from the New York Times of September 1, 1964, and October 16, 1964 , are not findings of fact by the hearing examiner, but are included at this place in the initial decision because they i111minate Knoll's participation in the mod- *New" articles with pictures we\'" omitt€d in printing. Initial Decision 70 F.

ern contemporary furniture business, and contain informative background material.

The increased demand for modern contemporary furniture has increased, correspondingly, the demand for the services of qualified interior designers and decorators capable of utilizing and sellng modern contemporary decor. Knoll has its own self-contained interior design department. Retail furniture firms, such as W. & J. Sloane, Inc. , B. Altman & Co. R. H. Macy & Co. , Inc. Bloomingdale Bros. , Inc., Itkin Bros. , Inc. , or Braun & Rutherford, Inc., of New York City; Wagner-Henzy-Fisher Company, Higbee Company, and F. W. Roberts Company of Cleveland; Robinson Furniture Company of Detroit; and Marshall Field & Company of Chicago, have interior design departments within their furniture departments, as do many other furniture stores and furniture departments of retail department stores. Retail furniture firms and the furniture departments of department stores who maintain their own interior design departments do so to furnish a service to a prospective customer, which they hope, will increase furniture sales. These interior design departments are, of cours, also used to promote the sale of traditional as well as modern contemporary decor. Retail furniture establishments with self-contained interior design departments prefer not to offer their design services separately from the sale of their furniture. The cost of such interior design departments is treated as part of the general furniture department overhead. A prospective retail customer interested in buying only design services, without furniture, could not ordinarily obtain such design services from a retail establishment basically interested in sellng furniture. the other hand, such a customer may obtain interior design services, without buying furniture, from interior design firms. The fees of interior design firms for design services which are not tied in with the sale of furniture may be computed on a different basis than if such services were incidental to promoting the sale of furniture. However, the record in this case demonstrates and the examiner finds that interior design firms do sell furniture, and furniture departments of retail department stores and retail furniture stores do sell design services-albeit very subtly. The interior design firm holding itself out chiefly as a design firm competes vigorously with retail furniture establishments having interior design departments.

If a prospective purchaser were to obtain design services from a New York retail furniture store or department store and should KNOLL ASSOCIATES, INC. 321 311 Initial Decision later decide that he or she was not interested in buying the furniture which the design department specified, such furniture store would endeavor to recapture from that prospective purchaser the cost of such design services, or the cost plus a profit. Interior design services which are purveyed by interior design firms are priced on differing bases a flat fee; a percentage computed upon and added to the overall cost of the entire package, including the cost of the furniture and furnishings; a percentage markup added to the cost of the furniture and furnishings to the ultimate consumer; a dollar charge computed on a time spent basis; a flat fee for the completed job; a percentage based upon the overall cost of all furnishings-furniture, wall hangings, floor coverings, incidental pieces, lamps, pictures, works of art, and maintenance and replacement after installation. This is not a complete description of the various pricing contracts of interior design firms, but it is illustrative of some of their more frequent pricing practices. Design firms definitely take into account in pricing their design services whether they wi1 or will not also order and buy the furniture which they have recommended. An interior design firm may be the controllng factor in the sale of modern contemporary furniture. Assuming no extraordinary budgetary limitations and a fixed decision to use modern contemporary decor in a building, the interior designer may cast his presentation in such manner that a prospective purchaser is convinced that a particular furniture line of a specific manufacturer is the only furniture that will effectively carry out the buys intentions and artistic purposes. The interior designer, may, of course, and frequently does, present several alternatives for the buyer s final decision. It is not helpful to assert that one manufacturer s modern contemporary chair, desk, or table is just as suitable as another manufacturer s chair, desk, or table. Artistic tastes may be, and are, gratified by more than one-albeit-very subtle, alternatives. A desired interior decorating decor is capable of achievement by buying from several competing furniture manufacturers. However, a purchaser who is determined to have a Saarinen chair or an Eames piece is not easily switched to substitutes.

Knoll asserts that architects do not buy or sell Knoll furniture. The uncontradicted evidence in this record is that the architectural partnership of Perkins & Wi1, Chicago, Ilinois, owns an interior design corporation called I.S. , Incorporated, (Interior Space Design). The president of Interior Space Design, Arthur Initial Decision 70 F. T. H. Arms, a registered architect in seven States, is a member of the American Institute of Architects. Louis M. S. Beal, respondent' s witness, vice-president of Interior Space Design, is not an architect. He was educated as an interior designer and testified that his speciality is contract interior design work. He characterized !'is firm as purveying . . . a design service to carry out the concept that has been established by architects in the interiors of the building, of the buildings, whether it be for Perkins and Will, other architects, or jobs that we get on our own. " (Tr. 2399) Joseph Dworski (Tr. 3892 et seq), a registered architect in the State of Michigan, was in charge of Knoll's Birmingham, Michigan, sales showroom for approximately ten years, ending December 31, 1963. (Tr. 3892) During the entire period his "job was to promote sales; to aid customers in designs, do color work, help them select the proper furniture " (Tr. 3894) His compensation for his design services was based on a comlnission on the Knoll furniture he sold. At the same time, Dworski practiced as an architect. (Tr. 3897) Dworski acted in a dual capacity as a specifying architect as well as a salesman for Knoll furniture. (Tr. 3931) Most manufacturers of modern contemporary furniture named in this record, priced their merchandise during the period covered by this proceeding at a percentage discount from list price. In Kno1ls case the discounts were usually 40 percent off, but during 1960-1962 in the four cities involved in this proceeding there were at least twenty-seven Knoll customers who received 50 percent off list. These are termed "favored" customers in this initial decision. Such favored customers were not in anyone category retailer they were not all architects, nor interior designers nor retail furniture establishments, nor the retail furniture departments of department stores. Some Knoll customers in each category received the 50 percent discount during the relevant period. There is some testimony concerning Knoll's cash discounts for prompt payment of bills, but such cash discounts are irrelevant to the issues in this proceeding, except that all Knoll customers who could, tried to obtain the cash discount because the net profit margin is not great.

Knoll sold its furniture, during the relevant periods, directly from factory to user (the General Motors' sale) ; to architects; to interior design firms; to interior design firms principally engaged in rendering interior design services; to interior design firms simultaneously engaged in interior design services and in buying KNOLL ASSOCIATES , INC. 323 311 Initial Decision and sellng furniture; to large department stores which carried no Knoll furniture in their inventory; to retail firms engaged almost exclusively in selling, at retail, offce equipment and furniture; to retail furniture stores engaged almost exclusively in selling only furniture and furnishings; to contract houses which specified Knoll furniture in bids submitted in response to written specifications; and to various retail outlets whose sole activity in promoting the sale of Knoll furniture was to keep Knoll catalogues and price lists on their business premises, along with the catalogues and price lists of other manufacturers of modern contemporary furniture. Some retail outlets had Knoll floor displays and warehoused Knoll inventory. Others spent no money for floor displays or warehousing. The record does not reflect that Knoll sales necessarily increased in proportion to the amount of money spent by the retailer in promoting such sales. The cost of floor-display space and warehousing could be substantial. Some Knoll retail sales firms rendered valuable and costly follow-up services after the sales were consummated. These cervices included among others, assembling the furniture and placing it in the most appropriate place consonant with the decor; replacing unsatisfactory pieces; adjusting customer complaints with the factory; harmonizing color, texture, and design; and, generally, obtaining and maintaining a satisfied customer. Such services were, and are rendered to an equal extent by retailers on behalf of other modern contemporary furniture manufacturers \vho are Knoll competitors, as well as on behalf of types of furniture other than modern contemporary.

Kno1ls marketing and distributing structure is not symmetrica1. There are overlaps, by-passes, and interweavings. (Overlapsseveral separate seeing procedures emanating from the same retail furniture establishment. By-passes - sales directly from factory to user. Interweavings - architects, interior designers, and retail furniture departments, all working together on the same sale.J A furniture department may sell more Knoll furniture by submitting written bids through its contract division than it sells directly from an elaborate floor display and large warehouse inven tory.

Legal Precedents Knoll' s No Competition Defense Knoll' s " no competition" argument reflects an over-simplification of its thinking about the evidence and the legal precedents Initial Decision 70 F.

applicable thereto. Prior to the introduction of evidence, KnoJl argued that a small interior design firm in New York, Cleveland or Detroit, with a minimum business overhead, receiving a 40 percent discount, and conducting its business chiefly by showing KnoJl catalogues and price lists to prospective customers, did not in fact, compete for the KnoJl retail dollar with the furniture departments of large retail establishments (such as B. Altman BJoomingdale s or Macy s). Knoll likewise argued that an offce equipment and supply house sellng Knoll furniture did not compete with the furniture departments of large retail department stores which had interior design departments, nor with interior design firms. The evidence shows that interior design firms seJl KnoJl furniture through several differing procedures: Some are merely order takers and have the furniture drop-shipped to the ultimate consumer; some do not pledge their own credit to KnoJl in payment of the furniture but pledge the credit of the ultimate consumer; some buy directly from Knoll, take title to the furniture, and resell it much as do the furniture stores and furniture departments of retail establishments. However, interior design firms themselves vary substantially in composition and modus operandi. Albert Herbert, for instance (Tr. 2061), an interior designer and industrial designer conducted his business from his place of residence, 340 East 74th Street, ='ew York, New York, and used one fuji-time employee and one part-time employee. On the other hand, S. J. Miller & Associates Corp. of the same city occupied 2 000 feet of space at 20 East 49th Street, and had thirteen employees.

Today, a high percentage of the retail furniture establishments whether the furniture departments of large retail stores, or stores devoted exclusively to the sale of furniture and furnishings, or a combination offce equipment and furniture establishments-maintain their own interior design departments as sales aids. Knoll has its own interior design department. Competition for the retail furniture purchaser s dollar may be and sometimes is between the interior design services rendered by an interior design firm which holds itself out chiefly as an interior design firm vis-a-vis the interior design services rendered by a retail establishment holding itself out chiefly as the purveyor of furniture at retail.

A housewife having in mind nothing more significant than the purchase of an occasional modern contemporary desk, chair, or table, may buy that chair, desk, or table from an interior design KNOLL ASSOCIATES, INC. 325 311 Initial Decision firm, from a furniture store, or from the furniture department of a large retail establishment. When that housewife sets out to purchase that chair, desk, or table she may not have in mind the name "Knoll" or the name of any other manufacturer. She may be interested solely in price, or in price plus style, or in style without regard to price. A small business or professional firm, refurnishing comparatively small business quarters and believing that it cannot afford the services of an interior designer, may buy directly from an offce equipment retailer or from the furniture department of a retail establishment without reference to any particular manufacturer s Ilne; or the interior design department of a retail establishment may suggest several alternative manufacturers. This record does not show what percentage of Know' gross sales dollar comes from occasional purchasers of individual pieces and what percentage is attributable to large contract sales to sophisticated purchasers who insist upon interior design services as a concomitant to the purchase of the furniture. Complaint counsel need not have proven in this record that all of KnoU's favored customers competed with each other, or that aU of the favored customers vied with the nonfavored customers for the purchaser s dollar, or that architects competed vis-a-vis interior designers and retail establishments, or that retail establishments competed vis-a-vis interior designers and architects. The record establishes conclusively that there is substantial cross-competition between the various classes of KnoU's retail sellers 1:. (a) architects vis-a-vis architects, interior designers and retail stores; (b) interior designers vis- vis interior designers, architects, and retail stores, and (c) retail stores vis-a-vis retail furniture stores, architects, and interior designers. An oft-repeated cliche in antitrust law is that Congress was concerned " with the protection of competition not competitors Even where all of the facts are thoroughly exposed the nature of competition in a particular industry is not always easy to articulate. This is particularly true in this case where we are not dealing with a fungible product, such as milk, ice cream gasoline, bread, canned fruits, etc., but are dealing with an entire line of furniture which may include as many as 200 different items, some of which are seating pieces, some case goods, some tables, some desks, etc. It does not i1uminate the subject to say, Well, a chair is a chair; a table is a table; a desk is a desk." K can we overlook the fact that the one housewife (aUuded to 10 Brou' n Shoe Co. , Inc. v. United States. 370 U. S. 294, 320. Initial Decision 70 F.

above) seeking to purchase a modern contemporary chair, desk or table, is as likely a prospect for Knoll furniture (even though she has never heard of Knoll by name) as the owner of a public building who may solicit bids for hundreds of thousands of dollars of modern contemporary furniture for just one building. Nothing in the legislative history, or the Commission s or courts' interpretations of Section.2 (a) suggests that Congress intended to protect competition only between litte vis-a-vis big business, or little business vis- vis little business, or only big business vis- vis big business from unlawful competition. Insofar as Knoll is charged here with violating Section 2 (a), it is just as unlawful for Knoll to employ a pricing system which may injure "little" competition as to use a pricing system which may injure "big" competition. A bidder on Knoll furniture on a milion-dollar contract-or on a hundred-dollar contract-buying at 40 percent off list and competing with a bidder buying at 50 percent off list has suffered the injury proscribed by the statute.

Complaint counsel is under no legal compulsion to prove that for every price discrimination alleged the evidence reflects a corresponding potential for injury to competition. On page 8 of the Federal Trade Commission s original opinion in T,';- V CLlley Packing Association Docket Nos. 7225 and 7496, reversed and remanded for different reasons in 329 F. 2d 694, the Commission ,:nter CLliCL held that the respondent's price discriminations "may result in injury to competition regardless of whether there is actual competition in the resale and distribution of the products involved ' , ' " (60 F. C. 1134, 1175) Upon appeal, the Ninth Circuit, in Tri- Valley inter CLliCL stated (329 F. 2d 694 at 697):

There is, as petitioner concedes, no requirement that there be favored and unfavored purchasers who compete with each other in the resale of the sells products, (citing Corn Products Refining Co. v. Federal Trade Commission 324 U. S. 726 , 731) , indeed, that they compete with each other at all. (Citing Federal Trade Commission v. Anheuser-Busch, Inc. 363 U. S. 536, at 542.1 (Emphasis added.

Continuing at page 698 , the court in Tri- Valley stated: As indicated above, this competition need not be in the resale of the seller products, nor need it be competition between favored and nonfavored purchasers from the accused seller.

In this record, witnesses testified to actual competition between favored and non favored customers in the sale of Knob furniture and named the competitors.

KNOLL ASSOCIATES, INC. 327 311 Initial Decision Knoll' s No Inju,.y Defense Knoll contends that despite its price discriminations and despite the competition which has heretofore been described, there , nevertheless, no inj ury. This particular position of Knoll was not taken during the hearings but was asserted more or less for the first time in its brief. Knoll's counsel rely especially upon the Commission s decision in Frank G. Shattuck, CompanJj, et al. Docket No. 7743, dated April 22, 1964, (65 F. C. 315) dismissing as to Wallace & Co. The Sh!kttuck case was heard by this hearing examiner. The Shattuck proceeding was against four separate corporations, each of which was dismissed for separate reasons as a reading of the initial decision wil reveal. The hearing examiner s dismissal as to Wallace & Co., one of the respondents, was based upon a finding in the initial decision that "Wallace & Co. s lower prices to some purchasers were made in good faith to meet the equally low prices of its competitors. " However, upon appeal to the Federal Trade Commission the Chairman, writing for the Commission inter alia stated (p. 359-360) : In a case such as this, where there is no proof of actual competitive injury and the non-favored retailers resell the products at a preticketed price, factors STIch as the net profit margins of the non-favored retailers and the extent to which they take advantage of the 2% cash discount take on an added significance in determining the probability of competitive injury. Thus, where the discrimination does not altcr the price at which the product is ultimately resold, the effects of the discrimination must bc measured with reference to such factors as the impact on average net profits. Where, as here, the non-favored retailers are engaged in different types of retail business, and the evidence reveals the net profit margins of only two, whose profits are somewhat divergent, there is little upon which to project the probable effects of a discrimination. In addition, although we are told that competition in the sal€ of packaged candy is keen, so much so that the cash discount of 2% is of extreme importance, the evidence reveals that four of the five non-favored retailers did not habitually take advantage of this discount. In these circumstances, we find that there is in this record no basis for an informed determination of the probable competitive effect of .Wallace s price discriminations. The product line in Shattllck was fungible, unlike the product line here involved, and the factu!kl sih,ation VJas so entirely different that Shattuck does not support in any way the no injury contention of respondent herein. Moreover, as with Knoll's no competition contention, there is positive uncontradicted testimony of competitive injury in this record.

328 FEDERAL TRAE COMMISSION DECISIONS Initial Decision 70 F. T. Knoll' s Meeting Competition Defense In Continental Baking Company, Docket No. 7630 (63 F. 2071 2163), the Commission stated inter alia Section 2 (b) of the amended Clayton Act enables a seller to justify a price discrimination by showing that it was made in good faith to meet a competitor s equally low price. The burden of justifying discriminatory conduct in such fashion is, of course, on the respondent. At the heart of Section 2(b) is the concept of "good faith." This is a flexible and pragmatic, not technical or doctrinaire, concept. The standard of good faith is simply the standard of the prudent businessman responding fairly to what he reasonably believes is a situation of competitive necessity. C. A. E. Staley Mfg. Co. 324 U.S. 746 , 759- 60; see Standard Oil Co. v. C., 340 S. 231 249-50. Such a standard, whether it be considered "subjective" or objective " is inherently ad hoc. Rigid rules and inflexible absolutes are espe cially inappropriate in dealing with the 2(b) defense; the facts and circum stances of the particular case, not abstract theories or remote conjectures should govern its interpretation and application. Thus, the same method of meeting competition may be consistent with an inference of good faith some circumstances, inconsistent with such an inference in others. Knolls s meeting competition defense in this proceeding poses issues that never had to be decided before by the Commission or the courts. Where a product line consists of more than 100 nonfungible items may a price discriminator meet its competitors highest discount by granting the price discriminator s highest discount? Is this "meeting the equally low price" permitted by Section 2(b) ? If a discount is merely a function of net price, and the net prices of competitor and discriminator are easily computed, it has been assumed that such a discount may, in fact produce an "equally low price" with which to match that of competitors. Complaint counsel argue that Knoll' s furniture is so unique" that the furniture of other manufacturers does not, in fact, compete. They assert that the Knoll furniture line being noninterchangeable and nonfungible, a discriminator cannot equal the price of a peach with the price of a pear even though both are fruit. Complaint counsel assert further that none of Knoll's competitors produce a chair like the Bertoia or the Saarinen chair. Therefore, if Knoll sells a customer a Saarinen chair or a Bertoia chair at 50 percent off list, instead of 40 percent off list, Knoll is not meeting the equally low price of one of its competitors for the Saarinen or Bertoia chair. Knoll replies that, granting that none of Knoll's competitors produce a chair precisely like the 11 They sought, without success, to introduce copies of patents which had been issued cover- ;ng some of the Knoll pieces.

KNOLL ASSOCIATES, INC. 329 311 Initial Decision Bertoia or Saarinen chair, nevertheless one or more of Knows competitors do produce a chair which would satisfy the decorating decor into which a Saarinen or Bertoia chair might be placed. Knoll' s counsel argue that all of Knoll's competitors combined do in the aggregate, manufacture furniture pieces which are interchangeable with Knoll pieces and capable of producing the same decor as Knoll furniture. Knoll asserts that such competitive furniture pieces, although not identical, are reasonably similar. Therefore, argues Knoll, the only way it can meet the co11active price challenge of its competitors is to allow its highest discount to customers who are getting its corapetit01' highest discount. Knoll' s counsel is "hoist with his own petar" " in the meeting competition argument. For purposes of this lawsuit they assert that any other modern contemporary furniture of good quality and design is a good as, and interchangeable with, even though not identical to, Knoll. For sales purposes they would argue there is nothing like Knoll. Complaint counsel's reply is that it would be very simple for Knoll to take itself out of this dilemma by adopting a net-pricing system in which the same net factory price is quoted to a11 Knoll customers who resell directly to the ultimate consumer.

Complaint counsel offered evidence that some Knoll competitors did and do use a net-pricing system.

The factual situation which sheds most light upon the meeting competition defense as asserted in this proceeding is Callaway Mill, Coraparny, " et ai Docket No. 7634 (64 F. C. 732). There Callaway, a late comer to the floor and carpet covering industry, sought to enter a business in which volume discounts had been granted on an industry-wide basis over a period of years. Calla way asserted that, in order to get into the market at a11, it had to adopt the discount practices of its competitors, or else not sell its products. The hearing examiner found that Callaway was, in fact meeting competition, but the Commission reversed on appeal and issued a cease and desist order. In its opinion inte?' alia (opinion of February 10 1964, pp. 739-741) the Commission said: '" '" '" It is equally incumbent upon the proponent of a meeting competition defense to identify with particularity both his goods and the competing goods whose price was met so that the fact finder can determine the validity of the defensive claims. (Emphasis added.

Continuing, the Commission said:

1. Hnmlet Act III.

11 Petition to review filed May 4 , 1964 , in CA 5. No. 21499. .g.

Initial Decision 70 F. T. * * * There is no showing in this record that respondents' carpets at various price levels were comparable in materials and construction to the carpets of competitors at similar price levels. Rugs and carpets are not fungible goods of the nature of cement, oil or glucose. The quality and saleabilty of carpeting depend upon many variables and it offends our common sense to completely ignore all such possible differences and hold, sans affrmative evidence, as did the hearing examiner, that carpeting made by Callaway to sell at a certain price level is similar in grade and quality to all carpeting made by CalIa way s competitors to sell at approximately the same level. As a matter of fact, there is some evidence in this record that certain of the favored buyers did not consider the goods they were buying from Callaway as either competitive" or "comparable" with goods they were buying from others. Respondents should have introduced proof as to the comparative quality and saleabilty of their goods and the competitive goods allegedly defended against. Lacking such proof the finding that Callaway was meeting the price of its competitors is speculative.

Respondents failed to meet their burden in other particulars. We have searched this record in vain for some showing that on any particular grade of carpeting the respondents rice was set to match a competitor price on a similar grade. There is a good deal of evidence concerning respondents' and competitors ' discounts, but discounts can only be compared in conjunction with gross prices on equivalent merchandise. The discounts here involved are not overly large and a slight variation of gross price or, perhaps, wool content makes it impossible to compare transactions. Certainly buyers are not so unsophisticated as to prefer a rug selling for $10 per yard less 5 percent discount over a rug of equal quality sellng for $9. 50 per yard. And it seems equally obvious that they wil not blindly select a rug because of an available discount over a rug of superior quality, color or design in the same price range but without discount. Buyers are concerned with buying the best possible quality rugs at the lowest available prices. Where discounts are involved al1 other things being equal, they wil undoubtedly select the supplier offering the " longest" discount. This is respondents' position, but they haven t introduced proof from which we could find that in fact all other things are equal. \Vithout this necessary showing, proof that their discounts met a competitor discounts is meaningless.

If Knoll's extra ten percent discount in this case had been granted to only one class of its customers (e. the furniture departments of large department stores which must have a higher markup in order to make a profit) this examiner might, by some strained application of the Shattuck (see ante p. 327) ratio decidendi find a slight indication of meeting competition. But here Knoll readily admits and ardently argues that because its discriminations did and do not follow a definite pattern-i. does not discriminate in favor of one class of purchaser as against another class, that the discriminations are excused. Not so. The lack KNOLL ASSOCIATES, INC. 331 311 Initial Decision of pattern or design in the discrimination may rule out a finding of predatory intent-but Knoll's unfavored customers may be competitively injured by the discriminations, with or without predatory intent. The case law does not prescribe predatory intent as an essential element of unlawful price discrimination. There are no overtones of business buccaneering in the 2 (a) phrase ' discrimination in price (FTC v. Anheuser- Busch 363 U. S. 536, 549).

Proposed findings, conclusions and briefs have been filed and argued. The hearing' examiner heard and observed the witnesses in the hearing room and on the witness stand. He observed their demeanor and their manner of answering questions. He was able to, and did, form an opinion as to their reliability and credibiJty. He was also able to, and did, form a judgment as to the weight and probative value of the testimony of each of the witnesses. He has considered the reliability, credibility and probative value of the witnesses' testimony in making his findings of fact, as well as their respective interest in the outcome of this proceeding. Proposed findings not made herein in the form proposed, or in substantially that form, are rej ected. Any motions heretofore made and not previously ruled upon are denied. The undersigned hearing examiner has careful1ly considered the entire record, including the exhibits, pleadings, and the testimony of the witnesses. Based upon the entire record in this proceeding, the hearing examiner makes the following:

FINDINGS OF FACT Historicrl Background and Development of Knoll Associates, Inc. Respondent, Knoll Associates, Inc. (hereinafter referred to as Knoll), is a New York corporation with its principal offce and place of business located at 320 Park Avenue, New York, New York (Ans. ; Tr. 39, 51). It is now, and for many years past has been, engaged in the manufacture, interstate sale, and distribution of furniture and furniture products to a large number of customers located throughout the United States. Hans Knoll and Florence Schust founded Knoll Associates Inc., in 1943 (Tr. 3742, 3744-3745) as a partnership, with Louise Myers its sole employee. (Tr. 3746) Three years later, Hans Knoll and Florence Schust married, and in June, 1946, the business was incorporated. (Tr. 3746) Hans Knoll was president of the company continuously until his death in 1955 (Tr. 3742, 3760) ; and Initial Decision 70 F. T. after his death, Florence Knoll became president of the company. (Tr. 3760) Hans Knoll came to the United States in 1937 at the age of twenty-three. (Tr. 3742) He was the son of a furniture manufacturer in Henenberg, Germany, a community near Stuttgart. (Tr. 3743) The Knoll family had strong artistic interests. While touring the United States, Hans Knoll was particularly interested in observing the manner in which the furniture industry functioned in the United States. (Tr. 3743) He was interested in improving the artistic content of American interiors and furniture. After his visit to the United States, he immigrated to this country and eventually established permanent residence here. (Tr. 3743-3744) Hans Knoll, who was intimately acquainted with architects and designers outside the t:united States, acquired a few designs which he considered good, and began to show them to American architects (Tr. 3744) and to encourage these architects to specify these designs. (Tr. 3744) When he first started in business, Mr. Knoll upon getting an order for a few chairs, had them made up by someO)1e else. (Tr. 3744) He was president and general manager of the small company and handled the financial, administrative and selling phases of the business. (Tr. 3759) Florence Knoll handled the artistic and design requirements of the business. Florence Schust Knoll, a graduate architect at the time Hans Knoll met her (Tl' 3745), worked with Hans Knoll from the inception of the company. (Tr. 3744-3745) A graduate of Cranbrook Academy, a design and art school near Detroit (Tr. 3744- 3745), she had studied under thes van del' Rohe, and, to some extent, her education \vas guided by Eel'o Saarinen, one of the great architects of this era. (Tr. 3745) Florence Schust, before her marriage to Hans Knoll, spent time abroad with the Saarinen family, and studied in London and other places. (Tl' 3745) Mrs. Louise Myers, the first employee of Knoll Associates, Inc., is still the secretary of the company and has been with it continously from the beginning. (Tr. 3746) Florence Knoll headed up the design end of the business and her husband devoted himself to the sales, financial, and administrative end of the business. (Tr. 3759) The Knoll Planning t:nit was established in the early years of the company by Florence Knoll to educate prospective furniture buyers in the appreciation and use of modern contemporary furniture, and, thereby, to increase substantially the demand for furniture of modern contemporary design in the t:united States. (Tr. KNOLL ASSOCIATES, INC. 333 311 Initial Decision 3747) Today Knol1s Planning Unit is used for somewhat the same purpose except that the demand for modern contemporary furniture and genuine artistic interest in such decor is a fait accompli. The Planning Unit now is more directly part of Knoll' sales techniques.

In the early days, Knoll operations were not particularly successful from a financial point of view, although it made a small profit in 1953 and 1954. (Tr. 3760) Beginning with limited resources, the partnership set up business in a small, six-story, oldfashioned building in New York City, with a small showroom and offces combined. (Tr. 3748-3749) Two years later, in 1945, the partners purchased for $28 000 a woodworking plant in Pennsburg, Pennsylvania and installed machinery for the manufacture of furniture. (Tr. 3749) In the early 1950' , Hans and Florence Knoll used their accounts receivable as security for loans (Tr. 3754-3755), and factored textile invoices. (Tr. 3754-3755) In 1953, the Knol1s closed the Boston and Washington showrooms because they did not make enough money in those areas to justify the expense. (Tr. 3755-3756) The Boston and Washington representatives worked out of their apartments. (Tr. 3757) In 1952 the company lost money, and Mr. W. Cornell Dechert was hired as comptrol1cr to assume responsibility for the financial aspects of the business. (Tr. 3759) In 1953 , the total billings reached approximately 83 milion but there was no cash. The profits were small, but the business was growing. (Tr. 3750) During the early years of Mr. Dechert's tenure, he had an ever-present problem of lack of working capital (Tr. 3750) and had diffculty in finding cash with which to pay bils. (Tr. 3750-3751) Knoll' s sales for fiscal 1960 were in excess of 36 milion, and for fiscal 1963 between $9 million and $10 milion. (Ans. ; Tr. 58) The principal place of business of Knoll's parent, Art Metal, Inc. also a New York Corporation, is Jones and Gifford Avenue Jamestown, New York.

Knoll was one of the early, leading manufacturers of modern contemporary furniture in the United States. (Tr. 3761-3763) and aided greatly in developing thc prescnt large public demand for this particular decor. During the past decadc its volume of sales and its profits have increased substantially. (Tr 3753-37603764)Knoll International, Ltd. , is a wholly-owned subsidiary corporation of Art Metal, Inc. (Tr. 79- , CX 1871-1873; and Win- '334 FEDERAL TRADE COMMISSION DECISIONS Initial Decision 70 F. T. ner Manufacturing Company of West Trenton, New Jersey, is a wholly-owned subsidiary company of KnoJl Associates, Inc. (Tr. , 80, 595-597) The pricing policies of KnoJl are controlled and directed by its parent corporation, Art Metal, Inc., and the pricing policies of Art Metal, Inc., and KnoJl are coordinated by the same individual W. CorneJl Dechert, the chief executive of both corporations. (Tr. 82-91 ) During the years 1960-1962, Knoll products were sold through Art Metal, Inc. , and in such instances the KnoJl price lists were used for establishing resale prices. (Tr. 86-90; CX 350-358 678-825, 1018-1130) Consolidated net sales for Art Metal, Inc. , and wholly-owned subsidiaries for the fiscal years ending May 31, were: 1961 $32 991,210 1962 567,178 1963 334 175 (CX 1870-1873) At aJl times relevant to these proceedings, KnoJl has maintained a continuous course of trade in commerce in its products. (Ans. ; Tr. 49-50; CX 193-1863) In the course and conduct of its business, KnoJl has engaged and is now engaging in commerce, as commerce" is defined in the Clayton Act, as amended. In addition to its principal place of business at 320 Park Avenue, New York, New York, Knoll maintains manufacturing plants in New Jersey and Pennsylvania and showroom sales offces in Boston Philadelphia, Washington, Atlanta, St. Louis, Chicago, San Francisco, Dallas, Los Angeles and Cleveland. KnoJl causes its furniture and furniture products, when sold, to be transported in interstate commerce from KnoJl's principal place of business and manufacturing plants to the purchasers thereof located in various States of the United States and the District of Columbia. The Federal Trade Commission has jurisdiction over the parties and the subject matter of this proceeding. This proceeding is in the public interest.

KnoJl, in the manufacture and sale of its furniture and related products, is in substantial competition with other manufacturers and interstate sellers of furniture and furniture products of like grade and quality.

Witnesses Witnesses who testified in this proceeding, their business .

KNOLL ASSOCIATES, INC. 335 311 Initial Decision affliations and the transcript pages at which their testimony begins are:

WITNESSES Knoll Associates, Inc. Docket 8549 Name Transcript Page Numbera Adams, Robert H. - - 1096 comptroller, W. B. Ford Design Associates, Inc. Detroit, Michigan.

Alessi, Joseph H. - - 216, 2540 president and salesman of Alessi Bros. , Inc., 17 South Wiliam Street, New Yark City.

Allen, Robert F. - 2955 d€partment manager, Revere Furniture & Equipment Co., 950 Upshur Street, N, , Washington, D. Anderson, Diana - - 2447 who does . interior design offce planning for Planned Offce Interiors, a partnership, 24 E. 38th St., New York Aronoff, Irving B. -- -- - -- - - -- -- - - - 2317 buyer of modern furniture for Abraham and Straus department store, Fulton Street, Brooklyn, N. Baiardo, Wiliam - - 2910 president, Revere Furniture & Equipment Co. , 950 Upshur St., N. , Washington, D.

Bass, Willam - 2764 clerk, Gregory, Mayer & Thorn Co. , offce furniture supply company, Detroit, Michigan.

Beal, Louis M. S. -- -- - - -- 2396 a resident of New York City, vice-president of I.S. Incorporated (Interior Space Design), a wholly-owned corporation of Perkins & Wil, architects, principal offce, 609 W. Jackson Blvd., Chicago, Illinois. Beals, Gary A. - - 4455, 4553 regional manager, Detroit Territory of Knoll Associates, Inc.

Beitel, Vernon - 1015, 1044, 2550 owns Benon Products Co. , Detroit, Michigan. Brown, Chilton P. - - 4239 director of sales, Directional Contract Furniture' Corporation, 41 E. 57th Street, New York, N. Buck, Albert -- -- -- -- - -- - -- 3130 accountant, Capitol Offce Supply Co., Inc., 1621 L Street N. W., Washington, D.

Burgham, Frank H. - 4014 general sales manager, Thonet Industries, Inc., 1 Park Avenue, New York, N.

_ Initial Decision 70 F.

Name Transcript Page Numbers Burton, Almon - 3002 president, R.C.M. Burton & Son, 911 E Street, N. Washington, D.

Copeland, Paul R., Jr. - - - - - -- 3831 national sales manager, Knoll Associates, Inc. , since December, 1958.

Cutler, Philip - -- -- -- -- - 2259 manager of modern occasional furniture, R. H. Macy & Co., Inc., Herald Square, New York, N.

Dechert, W. Cornell - - 37, 3741 president of Art Metal, Ine., and its wholly owned subsidiary, Knoll Associates, Inc.

Demant, Harry G. - 1307 interior designer for Walter Herz Interiors, Incorporated, 18647 Livernois, Detroit, Michigan. Dworski, Joseph - - -- - - - - - - 3892, 4382 3311 Dogwood Court, Birmingham, Michigan, architectural and interior designer. From 1954-December 31, 1964, regional manager of Birmingham, Michigan, show room of Knoll Associates, Inc.

Finsterwald, Maier B. 764 , 820 formerly president, C. A. Finsterwald Company, Detroit, Michigan.

Giesey, Maria G. -- -- - 3227 owns M. G. Associates. 110 South Fairfax St., Alexandria, Va.

Goldman, Morris - - 4168 president, J. G. Furniture Company, 160 E. 56th St. New York City, N.

Gregory, Willam M. -- 1497 manager, offce furniture division, Capitol Offce Supply Co., Inc., 1621 L Street, Washington Haspel, Donald P. (see Homer Lay) - - 1562 employee of National Stationery & Offce Equipment Association, 1511 K Street, N. W., Washington, Heminway, Mrs. Nan F. -- 2877 president, Design Specifications, Inc., a corporation, 903-20th Street, N. , Washington, D. Herbert, Albert -- -- -- - -- -- - - 2061 interior designer and industrial designer, Albert Herbert Design, business and relidence in same address, 340 E. 74th St. , New York, N.

Hor-wtz, Joshua - - 1150 operations manager, Robinson Furniture Company, Detroit, Michigan.

Humphrey, W. L. -- - -- - 2820 vice president and general manager, Wagner Henzy Fisher Company, retail furniture, 1852 Euclid Avenue Cleveland, Ohio.

. . . . KNOLL ASSOCIATES, INC. 337 311 Initial Decision Name Tranacript Page Numbers Itkin, Abc - - 317, 2132 vice president and treasurer, Itkin Bros. Inc., 290 Madison Avenue, New York City, N.

Joma, Donald R. - 581, 622, 3245, treasurer, Knoll Associates, Inc. 3343, 3414, 3862, 4585 Kaufman, Austin, J. - 1430 vice-president in charge of sales, F, W. Roberts Company, 1009 Rockwell Ave., Cleveland, Ohio. Keilor, James A., Jr. - - 170, 2194 furniture buyer, B. Altman & Co. , Fifth Ave., & 34th St., New York, N. Y.

Kirby, Willam K. -- -- - -- - 4304 Flintman, Kirby and Company, business and financial consultants, 6615 East Jefferson Street, Detroit, Michigan. Kohr, Wiliam E. - 1176 staff attorney for Michigan Consolidated Gas Company, Detroit, Michigan.

Kovacs, St€phen -- - - - 2215 salesman, contract department, W. & J, Sloane, Inc. 414th Fifth Avenue, 38th Street, New York City, N. Lay, Homer B. - ---------- 1521 assistant general manager, National Stationery & Offce Equipment Association, a trade association, 1511 K Street, N. , Washington, D.

Linden, Leonard G. - -- -- 1622 owner, Linden-Kickleighter, a gift and furniture shop, lD608 Carnegie Avenue, Cleveland, Ohio.

Long, Rita -- -- -- - - 242, 2524 Rita Long Interiors, interior designer, 20 East 49th Street, New York, New York.

Major, Edgar - 4445 Retail sales agent for Herman Miler, Inc., 970 East Maple St., Birmingham, Michigan.

Malina, Emily -- - - 2001 owner of Emily Malina Associates, Inc. , 509 Madison Avenue, New York, N.Y., interior and color design con su1tant.

Merzin, Aaron - - --oo 1354 secretary-treasurer Detroit Offce Suply, Inc. Detroit, Michigan.

Miler, Leon Gordon - - 707, 750, 3266 of Leon Gordon Miler & Associates, Inc., 1220 Huron 3337 Road, Cleveland, Ohio.

Miler, Lilian - 378 , 2467 offce manager, S. J. Miler & Associates Corp. , 20 E. 49th Street, New York, N.

Initial Decision 70 F. T. Name Transcript Page Numbers Mils, Beaven W. - 0000000000 4028 sales manager, J ens Risom Design, Inc., 444 Madison Avenue, New York, N.

Murray, David -- 4058 sales merchandise manager, Thayer Coggin. Niedringhaus, Charles W. - - - - - 3768 in charge of N ew York sales district for Knoll Associates Inc., Park Avenue, New York, N.

Nolan, William J. ------_ _u_n u--u 590, 634 vice-president and general manager of Knon Associates Inc. ; executive vice-president of Art Metal, Inc. Osetek, Jesse - -_u -",u_-- u_n_--_uu - 3609 4476 1204 Kensington, Grosse Point, Michigan, formerly Knon Associates, Inc., agent in Birmingham, Michigan, showroom, 1080 north Woodward, Birmingham, Michigan and also worked for Joseph Dworski (Tr. 3611), presently owner of Contract, Inc.

Peratt, Valentine - - , - - - - - - - - - - - - - - - u - - - - - -- - - - 1128 interior decorator for Irvin & Co., Incorporated Cleveland, Ohio.

Prosser, Herbert - 4500 employer of Gary Beals and Joseph Dworski, who operated Birmingham, Michigan, showroom for Knoll Associates, Inc.

Race, Wiliam Keith -- -- -- -- -- -- - -- - -- - -- - - -- -- - -- 3057 former manager of the executive department for Gregory, Mayer and Thorn Co. Detroit, Michigan.

Risom, Jens -- - - -- -- -- -- -- -- -- - 4048 president, Jens Risom Design, Inc. , 444 Madison Avenue New York, N.

Robinson, Morris - -" - - - - - - - - - - - u - - - u - 2701 of Robinson Furniture Company Detroit, Michigan, one of largest furniture companies in Detroit, $9 000 000+ per year.

Ross, Donald - - - - 118, 1806 of Architectural Interiors, Inc., 160 East 56th Street New York, N.

Rutherford, Charles F. - - - 484 2374 of Braun & Rutherford, Inc., retailer of offce equipment 164 Wiliam Street, New York, N.

Sanborn, Charles C. - - ----- 1389 salesman, Charles G. Stott & Co. Inc., 1310 New York Ave. , N. , Washington, D.

Sander, Mrs. Kathryn - 4493 employee in Birmingham, Michigan, offce of Know Associates, Inc.

Schmelzer, Stephen F. 2336 president, Business Equipment Sales Co. , Inc., 300 Park Avenue South, New York, N.

.

KNOLL ASSOCIATES, INC. 339 311 Initial Decision Name Tru118Cript Page N1tmbeT8 Schnee, Edward - -- - 2655 Adler-Schnee Associates, Inc., 0'\'J8 his own furniture company, 16805 Livernois Street, Detroit, Michigan. Schwander, Jack G. - - - - - 4188 sales representative for B. L. Marble Furniture, Inc. Bedford, Ohio.

Schwartz, Joseph Norman - - 4149 Eastern regional sales manager, Herman Miler, Inc. Zeeland, Michigan.

1904 1976Sens, Ralph D. - H - H H - - - H - - H - -- -- - -- - - 440, secretary-treasurer, Desks, Inc" dealers, retailers and jobbers of offce fu niture, 71 Fifth Avenue, New York New York.

Sherman, Bernard - - - 2782 owner of Casual Living Modes, 22961 Woodward Avenue Fcrndale, Michigan.

Short, Ben - 3691 regional manager, Washington, D. C., offce, Knoll Associates, Inc., 1640 Wisconsin Avenue, Washington Smith, Walter - - 667 purchasing agent, Wayne State University, Detroit Michigan.

Stevens, Mary - - " 4421 saleslady, Herman Miler, Inc., 970 East Maple Road, Birmingham, Michigan.

Stovering, Frank _ - 826 manager, Contract Division, Higbee Company, Cleveland Ohio.

Thorn, George H. -- - - -- - - 0 - -- -- - -- 1235 president of Ideas, Incorporated, 10004 Freeland, Detroit Michigan.

Tombs, Lucile E. - 2298 buyer of modern furniture Bloomingdale Bros., Inc. New York, N.

Urdang, Jack - 0- - - 2086 salesman, National Hospital Supply Co. , Inc., 38 Park Row, New York, N.Y., (a contract furniture and hospital supply house).

Ursell, Erich - - - - - - -- - -- - - -- -- - 3150 president of UrseH' , Inc., retail contemporary furniture 3243 Q Street, N, W., Washington, D, Wagner, F. W. 930, 1003 secretary-treasurer, Wagner-Henzy-Fisher Company, Cleveland, Ohio.

Wiley, George W. -- - 3558 regional manager, Know Associates, Inc., Cleveland Ohio, region; lives in Chesterton, Ohio. .

Initial Decision 70 F.

- H - 1661, 1691 Wilkoff, Wiliam L. n - - - n n n n - former owner of Decor Associates, Inc., 3131 M Street , Washington, D, , a furniture accessory and interior decorating shop.

Wilmot, Francis E. - - - - - -- -- 4375 commercial manager, Michigan Bell Telephone Company, Detroit, Michigan.

Wiseman, Irving Henry - - - - - - - -- - - - - - 433-9 former general manager (1959-1963), C. A. Finsterwald Company, Detroit, Michigan.

Business Firms Whose Representatives Testified The businesses whose offcers, employees or representatives testified, listed by the names of business, are: Businesses Whose Offcers or Employees Testified (Knoll Associates, Inc., Docket 8549) Abraham & Straus Co-ordinated Interiors, Inc. Irving B. Aronoff Irving Henry Wiseman Adler-Schnee Associates, Inc. Decor Associates, Inc. Edward Schnee Willam L. Wilkoff Alessi Bros., Inc. Design Specifications, Inc. Joseph H. Alessi Mrs. Nan F. Hcminway B. Altman & Co. Desks, Inc. James A. Keilor, Jr. Ralph D. Sens Architectural Interiors, Inc. Detroit Offce Supply, Inc. Donald Ross Aaron Merzin Art Metal, Inc, Directional Contract \V. Cornell Dechert Furniture Corporation Benon Products Co. Chilton P. Brown Vernon Beitel C. A. Finstcrwald Company Bloomingdale Bros., Inc. Maier B. Finstcrwald, Vernon Lucile E. Tombs Beitel, Irving H. Vnseman Braun & Rutherford, Inc. Flintman, Kirby & Company Charles F. Rutherford Wiliam K. Kirby RC. M. Burton & Son W. B. Ford Design Associates Inc. Almon Burton Robert H. Adams Business Equipment Sales Co., Inc. Gregory, Mayer & Thom Co. Stephen F. Schmelzer Willam Eass Capitol Offce Supply Co., Inc. W H1iarn Keith Race Albert Buck Albert Herbert Design Wiliam 11. Gregory Albert Herbert Casual Living Modes Walter Herz Interiors, Incorporated Bernard Sherman Harry G. Demant Contract, Inc. Rig'bee Company Jesse Osetek Frank Stovering KNOLL ASSOCIATES, INC. 341 311 Initial Decision Ideas, Incorporated Joseph Norman Schwartz George H. Thorn Mary Stevens Irvin & Co., Incorporated Leon Gordon Miler & Associates, Inc. Valentine Peratt Leon Gordon Miler Itkin Bros., Inc. S. J. Miler & Associates Corp. Abe Itkin Lilian Miler 1. S. D., Incorporated, (Interior National Hospital Supply Co. Inc. Space Design) Jack Urdang Louis M. S. Beal National Stationery & Offce Equip- J. G. Furniture Company ment Association Morris Goldman Donald P. Haspel Linden Kickleighter Homer B. Lay Leonard G. Linden Perkins & Wil (Architects) Knoll Associates, Inc. Louis M. S. Beal Gary A. Beals Planned Offce Interiors Paul R. Copeland, Jr. Diana Anderson W. Cornell Dechert Revere Furniture & Equipment Co. Joseph Dworski Robert F. Allen Donald R. J orno WilJam Baiardo Charles W. Niedringhaus F. W. Roberts Company Wiliam J. Nolan Austin J. Kaufman Jesse Osetek J ens Risom Design, Inc. Herbert Prosser Beaven W. Mils Mrs. Kathryn Sanders J ens Risom Ben Short Robinson Furniture Company George W. WHey Joshua Horwitz Rita Long Interiors Morris Robinson Rita Long W. & J. Sloane, Inc. R. H. Macy & Co. , Inc. Stephen Kovacs Philp Cutler Charles G. Stott & Co. Inc. Emily Malina Associates, Inc. Charles C. Sandborn Emily Malina Thayer Coggin B. L. Marble Furniture, Inc. David Murray Jack G. Schwander Thonet Industries, Inc. M. G. Associates Frank H. Burgham Maria G. Giesey Ursell' s, Inc. Michigan EelI Telephone Company Erich Ursell Francis E. Wilmot Wagner-Henzy-Fisher Company Michigan Consolidated Gas Company W. L. Humphrey Wiliam E. Kohr F. W. Wagner Herman Miler, Inc. Wayne State University Edgar Major Walter Smith Knoll' s Price Discriminations During the years 1960-1962, inclusive, in the cities of New York, New York; Cleveland, Ohio; Detroit, Michigan; and Washington, D. , Knoll discriminated and now is discriminating in price between purchasers of its furniture and furniture products Initial Decision 70 F. T. of like grade and quality who compete in the resale at retail of said furniture and furniture products. Knoll grants to its "favored" customers a discount of 50 percent off its catalogue list prices, and to its "nonfavored" customers a discount of 40 percent off the list prices. (Ans. ; CXs 142, 193 through 1863 , inclusive. Among others, the favored purchasers, and some of the non favored purchasers, were and are:

Favored PUTch(Uets N onfavored Purchasers Detroit Benon Products Co. Detroit Offce Supply, Inc. C. A. Finsterwald Company Ideas, Inc. Alder- Schnee Associates, Inc. Walter Herz Interiors, Incorporated Casual Living Modes J. L. Hudson Company Contract, Inc. Gregory, Mayer & Thorn Co. (1962) Robinson Furniture Company (1960) Eastern Cabinet Works Gregory, Mayer & Thorn Co. (1960) Robinson Furniture Company (1962) Rayhaven Equipment Co. (1960) Rayhaven Equipment Co. (1962) Cleveland WagnerMHenzy-Fisher Company F. W. Roberts Company Leon Gordon Miler & Associates, Inc. Higbee Company Interior Craft, Inc. Linden-Kickleighter Irvin & Co.

Holzheimer Wirtschafter Washington Capitol Offce Supply Co. , Inc. Charles G. Stott & Co., Inc. Revere Furniture & Equipment Co. W. D. Campbell Co. Decor Associates, Inc. Chase Furniture R. C. M. Burton & Son Lord & Taylor U rsell ' , Inc. The Door Store Keyes, Lethbridge & Condon New York W. & J. Sloane, Inc. Architectural Interiors, Inc. B. Altman & Co. Rita Long Interiors R. H. Macy & Co. Inc. S. J. Miler & Associates Corp. Itkin Bros., Inc. Emily Malina Associates, Inc. Bloomingdale Bros., Inc. Designs for Business Alessi Bros. , Inc.

Braun & Rutherford, Inc.

Desks, Inc.

Business Equipment Sales Co. , Inc.

Abraham & Straus ational Hospital Supply Co., Inc.

KNOLL ASSOCIATES, INC. 343 311 Initial Decision Following are examples of Knoll sales of identical items to competing purchasers at discriminatory prices in violation of Sec 2 (a) (footnote 2 supra). In some instances the same sale to one purchaser is repeated on the next line in order that it may be juxtaposed to the sale of the identical item to a different purchaser at a differing price. These ilustrations do not include aU of the price discriminations which are proven in this record, but establish that Knoll's price discriminations permeated all of its distribution and sales channels and were not limited to one class of Know customer architects, interior designers, furniture stores, the furniture departments of retail department stores, and offce equipment and furniture retail stores. No.

IS06131214921356 128413021361136813741377128011611163 Exh. CX1187 No.

446113848585904019941804408344480240199 41439425994399245958411\054:192545004426724542541439 429::408:\443961448014187644:J49 4168241296386794072341583415834022938485:18217 Inv. Date 9/19/629/28/629/26/629/19/6211/28/6211/16/li27/11/627/12/628/28/629/2Ej/629/10/6211/21/618/28/62 9/19/6210/11)/6211/6/6212/18/629/26/6211/2/621l/28/6210/11/6212/6/629/19/62 10/IIi/629/10/1;211/2/6211/21/629/27/6211/13/62 !1/25/629/17/627/16/629/7/620/21/629/21/628/28/627/11/627/18/62 Inv. I 61.00 61.0055.55.55.49.49. 34.32.34.79.46.90. Price 00. 51) 4l.5041.504l.iO43.43.79. 79.79. 79.103.103. 108.32. $79.125.272.272.33.78.40. 63.fi3-$63. Purchaser sloane Rutherford Rutherford Rutherford Hutherford RutherfordRutherford Bros. SUIJplyRutherfordRutherfordRutherfordRutherford & & & & Hasp. Bros. fit.os.Bros.Bros. Bros.,r &&&&Inc.IJros.81"0';. &&Bros. EQU11iment E,!upimentEfluipment l AltmanBros. Bros.B,.os.Bros. Altman I!l &Altman Favored ItkinWB.BraunMacyBraunItkinItkinItkinBraunMacyB.Itkin ItkinItkinItkinBns.Bus.BraunItkinBraunBraunItkin Bus.il1acy:vacyB.Blooming-daleMncyDesks.Nat'BrannBraunBraunBralinDesks,ItkinItkin YORK No.

NEW Exh. CX176317721773 1599 171916851722168516861719168616871722 0YQltl(, No. 1 31 43944439350400454033543256449993878840070418244:J012443894570340045435224500,4021445440402574052344205392754352244999422fJ4495445983381188399143\135219144007038G8840070425773!):,52NEW Inv. . Date 9/ 9/26/611/26/6 12/ 11/13/(j210/19/E;27/:JO/(j27/27/t;28/21/62\1/10/6210/HI/6211/28/627/18/628/221Gi9/25/6210/16/6211/1:J/6212/13/628/21/6210/24/6211/28/628/28/626/6212/1\/29/1124/62 11/0/627/27/6210/24/6211/28/6210/4/f1211/27/6212/10/627/16/628/16/1127/27/r,28/16/628/22/627/16/628/22/6210/10/627/27/62 Inv. f10 f10 75.75.11075.t;073.73.73.66.66.66.59.59.59AO62.40.3D.40. 62A,J94. 3\193. 48.49.49.49.5l.6051.6094.94.8!J94.94. 94.124.124. IS0.327. 129.3D. Price $94. Assoc. Ass.oe. DesignAssoc. & BusinessBusinessBusiness. Son Assoc. Purchaser Interiors Assoc. Busines.s Business Business Business rue Taylor Taylor &. Karplus & Karplus For For For For Assoc.Space ForForFor Urflnhalt KarplusLcfconrte Tea Malino Frost Malino MalinaMalina Miler MalinaMaJino Teague, Miller ScharfZeveloffBarnes iI'iller Miller &Miller Long"Long" Conrad D. C. D. Gallin L. J. J. .T. J. ,T. . . desig"ns Non-Favored s.Rit.anita ArchitecturalArt-DecorFricrlin-StudleyPaulGerhardS.S.Fen.em: Emilys.SaphierInterior Gerhard DcsiITnsDesignsOO'sig-nsSmythJ.GerhardAlbel.tW.FerrenzDollyB1oom-E.Desig:nsEmilyD"signsEmilyEmilyDesig:nsEmilyEmily No. Chair Chair Chair Chair Chair ChairChair Chair ChairChairChair Chair Chair Chair ChairChairChairChairChair 2 l l Chair Chair l l l Chair Chair 1 Table Chair Chair ChairChair Chair ChairTable Model 1 1 TableTableTable Chair 1 - 1 Chair 1 Chair 71USC-lf157If17MC 421AP-71ULB-72ULH-72UHC-l721JBC-l72UBC-l151-151-7111BC-l 71UBG-l71UBC.-UBCl7171DBCl71813C-271S0C.-24f1SPC-4f1SPC4fiSPC-l72H8BC- 72U8BC-2150-1:'0-IS0-11518-151S 768lfjOF160WHOFDBC717r,SUHC7171WS160W No. 12542142Z 400 127 Exh. ex No.

3355641776153W4177837471 43338 3513435026 32935 Inv. Date 5/24/625/4/62 3/20/62 aj21/606/9/607/18/627/18/629/26/629/21/624/2/629/26/6212/4/629/26/626/21/62 10/22/62 Inv. 37.37. 92.55.78.49.49.61.00 43. 61.5061.50 Price 142. $18. 103. Purchaser Furn.BurtonFurn.Furn.Furn.Offee Furn.Burton Offce Offce Favored RevereR.C.M.RevereRevereRevereCapitolUrsdl'RevereR.C.M.Ursell'Capitol Umen' Uracil'Capitol Uracil' D No. 139585 585 CX138 Exh.

No.WASHINGTON, 337224168345532437863934937288437614435237288320843353029844 Inv. 3/4/2/621/25/62 Date 4/21/60S/19/607/21/62 7/21/62 4/4/629/25/6212/7/6210/30/627/27/626/19/6210/30/6211/13/626/19/625/62 Inv. 45. 111.00 Price 171.00 66.93.59.59.7:.73.51.6051.6073.73.73.124. $22. Mart Smith Smith Purchaser Dove Dove Wil Stott Stott 0,- Wright L. L. && G. G. Taylor & Daley Metcalf Mehdsc. Andrews & Favored L. MilmanMi1manH. S. R. illiam -',lon- u.Vi'Charles Charles J. WilliamBrownCampbellSattcrlLordPerkinsSatterleeH.H.W. No. Chair Chair Chair ChairChairChairChair ChairChair Chair Chair Chair Model 3N 1 USB Chair 420- 70 72 71SBG-l 150--ULB-l71151S1151S-116SHG-l 151-1 150S-1150S-1 7lSBG-2 (a) 83289791885' 57 exl Exh.No. No.

Inv. 42021396353187443612965142554032914 Date a; 3/11/605/25/603/23/605/17/60 5/25/605/31/602/25/602/11/602/29/603/.31/602/24/603/2:J/603/11/601/28/602/24/608/24/62 3/29/623/28/629/14/627/30/6210/Hi/628/1/622/62 10/29/623/2:1/603/311602/2/603/2:1/60 Inv. Price 55.55.7!:. !J2.33.3:1.50.'38.!i07!J.20.14.56.55.33.33. 79. 92.124.49. 1.$56. $49.43.92_79.71)75.44. Tb & Modes Modes Modes Modes Purchaser Liv. Liv. Liv. Products ProductsProducts Products Liv. Schnee F:tvored HenonFinstcrwaldFinsterwaldBenonHenonFinsterwaldFinsterwaldBenonFinsterwaldRobinsonGregory-MayerCasllal FinsterwaldFinsterwaldFinsterwaldFinsterwald Fim;tn'waldCasual Finste!'waldCasualFinsterwaldFinsterwaldCasuaJFinsterwaldl"insterwaldFinsterwald IAdj,' Adler-Schnee No. 67H2697370767778788787967082969969981 CX78 MICHIGAN Exh. -- ------DETROIT, I H05940213 45720540255402554025354 I Inv. I ' 33468 Date 2/60 S/31/603/28/f;04/21/60'5/17/60S/26/605/:11/60'6/27/605/17/60 a/23/602/2/602/5/603/2/603/a/3/28/60:J/28/601/2H/601/28/604/26/624/2/626/12/6/12/62 7/24/11/6/628/28/62,/29/fj22/12/I:J/622/2/602/2/603/10/60 ' . , 6060 6060 30 60 80 ice 5!J.40 60.0045.9039. 95.405:1.067.2040.5039.6066.39.6094. 94.8094.8061; 94.80 67.20 148.80 111.00 111.00 5\).40 51.6Q111.0010Llo10Llo10Llo53.10 $ Equip. Equip. Purchaser Equip. Hasp. Mason Morris Monis MasonMason Furn. London & &. Johnson ,Johnson D. Offce D. OffceHen Omce D.Inc. Inc. Inc. Hud,;onGinnsOffceOffce Searles LakesHudson InteriorsFurn.I"urn. InteriorWrig-htInterionl Favored, , L. L. obinson Non- G"or!,eIdeas.IdeasNathanRayhavenIdeasNathanJ.SheldoDetroitDetroitEdmundMath.Geon.:eGeor!,eGn,imelGreime! lien,:RobinsonRohinson Herz;CliffordHerzGreatJ.DetroitDetroitDetroitWalter No. I:i:1 Chair Chair Chair 1ChairChairChair ChairChair ChairChair Chair ChairChairChairChair Cha;r Model Chair Chair ChairChairChairChair Chair ChairChair ChairChairChairChairChair 1 1 unc unc 1S-1 150S76S76S7lUnC7l7l718421421150151422HC421-2N151S150Snus420L421AP421AP7line7lSBC SI- 1!iis-l1,,1,.71SB('71Unc71UBCnunc151S 1:II C!.

(b) (a) No. 206 222234239257 2331!J5 Exh.

No.

34158 3862345606356964298930785374343928242!J8!J18183762931520 Inv. Date 1/22/60'3/3/606/23/601/22/625/15/624/12/626/26/627/12/6212/12/625/16/6210/16/622/9/626/20/627/27/6210/16/624/14/606/25/622/22/62 Inv. 18.89. 75.20..-8.51.0079.7!J.39.39.40.78.78.4!J.61.0061.00103. Price $90. MilerMiJerMillcr Miler Purchaser Henzy CraftsHenzy Miller Favored WagnerWag-ner-HenzyInteriorWagnerWagncr-lIenzyWagner-HenzyWag-ner-HcnzyWagner-HenzyWagner-IIenzyWagner-HenzyG.LeonWagner-HenzyWagner-HenzyG.LeonG.LeonG.LenWagner-HenzyG.Leon 114110109294302290 290 114305331OHIO No. Exh.

No.CIJWEI.Acts, 3710144298313923824738057442!J9540383610331392 Inv.

,te 2/601/601/602/621/620/62 J/62 5/622/629/625/622/623/622/603/629/62 D v. 1/2'5/3'/15/2H/2 8/2 6/11/12/1 1/1 5/22/1 93. 59.4094. 46. 48.93.93.59.4073.73.108.21.60 Price $108.90.24.58. Purchaser Inc. Co. Co. Co. Service Co. Co.Co.Co. ('... &GalleryTrend & & & Industries & Rose,Traves Non-Favored IrvinGiftModernHigbeeHigbeeHigbee Higbee CarolDesignWirtschaftcrIrvinS.R.IrvinIrvinWirtschafter No. ChairChair ChairChairChair ChairChair Chair lChair Model TableChair Table Chair2BN Chair 2N ULB 7lS 71421-160M151S71UBC 161F 72ULH-l7lULB-l7lULB-151&-172USBG-272USBG-27lS42071ULB ;;. t;. No. No- Exh. CX471369 436123 Exh. CX1356 119811781161116111611374 11671379 11601206131211781506 1187 1492 1429302 1173 competing No- No. to Inv. 40912 4498541296 40199 Inv. 374713879538795417763501 /62 Date pieces Date Inv. 11/28/62 7/29/4/627/11/627/24/627/11/629/21/62 7/27/629/21/62 7/11/6211/26/629/26/629/4/629128/629/10/629/1!J/62 9/19/62 11/28/629/17/62 8/28/62 Inv. 1/22/627/30/626/21/627/17/627/18/629/26/625/25/60 76..iO79. 78.47. furniture Price 61.0037.10:UO 272. 19. 34. 53. Price $33. 103.65.78.58.40.79. 43. 24.38.272.272.125. $47.49. Knollitems: Sloane Ruther- Ruther- Ruther. RutherM Sloane OffceFurn.Furn.Furn. Purchaser BurtonM. & & & J.Bros.Bros.Bros.nros. J.nros.Bros. Bros. & Hasp. Bros. Bros. Bros. & & foru ford Altman . ford ford Supply FavoredPurchaser Macy W.ItkinItkinItkinItkinBraun ItkinBraun ItkinItkinlJros.B.Itkin ItkinItkinnraun Braun Nat.!. Itkin Favored UrseU'C.R.CapitolRevereRevereRevereBurton identicalidentical Chair ChairChairChair Chair ChairChairChairChair Chair Chair Chair No. 1 Chair Table Chair YORK Chair Table ChairTable ChairChair are AB F alwaysof M WTableTableTableChairChair Modesto. ULB-l SBC D. Model NEW 421AP-t 71SBG-3160MCTabie71ULB-lnUSPC,-l72ULB-l71UEC 1;)1-1163 421-2HN-216:Jlfi7MC167MC657150U-l71USG-l167MC 421 160 76 ISIS151S46SBC..72USB-l71SBG-l71151-S not sales No. No. YORK. 174817501751175117621763 17641764 176717711771 1772 17631773 1599 1722 1719 136 butthe Exh. CXlS9!J WASHIXGTON, Exh. CX631eX631 I , NEW ! No. No. 948 same 44308 43681 44308 39352 38688 39349391383913839138 Inv. Inv. II I theinstances, II some DateInv. 11/13/62 7/11/627/18/627/18/627/18/629/10/629/26/62 10/HJ/6210/19/62 8/2/6211/20/6211/20/62 11/26/6210/29/629/26/625/6212/ 11/13/62 7/27/62 7/16/62 DateInv. 4/.:/624/4/627/27/627/24/627/24/627/24/62a/23/60 I I In 62.40 78.0094.67.49.94. 51.6049. 25.49.327. 150.91.80 73.45.45.90111.90. 94.327. 28. '39. Price 115. Price $51.6051.60$ substantially of StoreStoreCo.StottStottStott G.G.G.Furn. sales MiJer MinerMi11erMillerMillerMiller MilerMiI1er Long"Lon" Long- Lon"Mil1erMillerLon for forns DoorDoor J. J. J. .T.,J. J. .J. ,J. prices. Interiors Business Purchaser Interiors Business the Non-Favored Non-Favored Purr.ha.set Architectura! S. S. S. S. S. j)('si TheTheCampbellCharlesCharlesCharlesChasc S. S. RitaRita Rita RitaJS..T.Rita Architectural Desip;ns I I differing Chair ChairChair Chah:' Chair Chair Chair ChairChair at No. Chair lChairChair 1 Table Chair Table Chair Table Chair Following Model AP-t FTable F Chair APChair Chair MouelNo. ChairChair customers 421 71UPG-3HOME71UBG-t72USBC-l72USBG-I71USG-l 151-1163 421-2AB-l163167MC 657150U-l71USC167MCTable 421 160WTable 768 15115146SBG-l72TJSB-71SBC-l71USB.l151 N No. Exh. CX832832864886 Exh. CX222 257203256 206222222234239257 No. No. 143314355081 1773 1508 37434 449303973840040 44930 Inv. Inv. Date 8/ 11/26/628/2/628/21/621/22/624/12/624/12/626/26/627/12/6212/12/6211/26/R2 Inv. 3/29/623/29/6210/29/b22/22/625/17/605/17/602/25/603/23/604/14/60 4/6/60 Date 4/12/626/20/6212/12/62.2/62 Inv. 49. 49.39.?S.61.5078.79.48.49.79.79.a9.39.61.50 214.92.24.79.55.57.55.44. 59. Price $" Price $124.

MillerHen'lYMilernzyH(' Purchaser ProductsProductsProducts Purchaser G. G. HenanHenanHenanFinsterwaldFiD!;tcrwaldFinsterwaldFinsterwa!dFinsterwaldFinsterwald Robinson \Vagner-Hen'lYWagner-UenzyWagncr.Hen'lYLeonWagner.LeonWagneT-Wagner-Ilenzyv,-agner-Henzy\Vag-ner-Henzyner-Hen'lYWf!.\Vagncr-HenzyWagner-Henzy\Vag-ner-Henzy Favored IF'avored Chai Chair ChaiChairChaiChair ChairChair Chair No. Chair No. ChairChair ChairChairChairChair Chair Chair Table TableChair TableTableChair 1 1 UEC UPC-l UBC ULA-l 50S-1 OI-Iio Model Model J 51 71 151S151S--1161F71ULB-l 5271SBC-l421-2BN-l 7176876S76SISIS 150S 71160M151SMICHIGAN 7171UBC161F161F150S No. No. 958955957 200290290 294302290 200DETJlQIT. CX958 Cleland, CX289A Exh. Exh. No.

No. 3959395954462 54281 fi025 41049 43284 Inv. Inv. Date 5/62 2/ 3/ 8/20/628/20/628/20/629/1:i/62 4/12/625/21/628/20/62 8/20/62 10/22/62 Date 2/15/622/15/6212/13/(;21/17/625/.:1/605/31/602/10/604/21/605/602/ 2/60 Inv. Iov. 46.94.67.94. 58.59.94. 46. 66. 111.00 24.94.66.68.4066.45. 60. Price 59.40$ Price $145.252. Co.Co.Co. Co. Inc.Inc. Inc-Inc.Inc.HudsonInc.Offce Offce Roberts RobertsRobertsRobert.Robert. Hudson L. W. W.W.W.W. Purchaser L. Equip. Equip. Purchaser Non-Favored Ideas.Ideas,J.IdeasIdeas,Ideas,J.Ideas,Detroit Detroit Non-Favored F. F.1".F.F. HigbeeHig-beeHigbee Higbee Kicklighter Chair No. Chair No, Chair ChairChair Chair Chair Chair Table Table Chair Chair 2 Chair ):l ChairChairChairChair Chair Model IF Mode! W-4 USC I) ISOBC UBC-l IS LFTabJeUBCChair 5152W-47lSBG-l421--2AN-l7176876876S151 150 %) Initial Decision 70 F.

Knoll' s No Competition Defense The contention by Knobs lawyers that there is and was no competition between any of Knoll' s favored and nonfavored customers reflects total ignorance of or disregard for the law and the facts relating to Knoll's way of doing business. The compeUtion referred to in Section 2 (a) of the Clayton Act as amended, is not esoteric. Section 2(a) competition involves a struggle between rivals Lipson v. Socony Vacuum Corporation 87 F. 2d 265, 270; or a "contest" for sales S. v. StlLndlLrd Oil Co. of New Jersey, 47 F. 2d 288, 297; or a vying for trade Brown Shoe Co. , Inc. v. 179 Fed. Supp. 721; ILff' 370 U.S. 294; or a contest for trade Federal TrlLde Commission v. Anheuser Busch, suprlL. Webster s New International Dictionary, 2d Edition, defines "competition" as an "act of competing, especially of seeking, or endeavoring to gain, what another is endeavoring to gain at the same time. . . .

In its original answer, filed March 11, 1963, Knoll admits that respondent sells furniture to architects, interior designers, contract houses, interior decorators, offce furniture dealers and furniture or department stores, among others, and admits that in the cities of Detroit, Michigan; Cleveland, Ohio; and Washington, D. C., some customers receive discounts of 50 percent (50 off list price and other customers receive discounts of 40 percent (40%) off list price. (Italic supplied. However, after extensiveprehearing conferences, Knoll counsel shifted their position, and, upon appeal from an adverse ruling by the hearing examiner were given leave to, and did, fie on August , 1963, an amended answer stating that Knoll 4. denies the allegations contained in Paragraph Four, and specifically denies that respondent sold furniture to, or for resale by, architects, interior designers and interior decorators (except for possible sales to them as consumers) ; but admits that respondents sold furniture to contract houses, offce furniture dealers and furniture or department stores, among others, and admits that in the cities of Detroit, Michigan; Cleveland, Ohio; and Washington, D . C., some customers received discounts of 50 percent (50%) off price and other customers received discounts of 40 percent (40 0/) off list price. (Italic supplied.

The evidence proves overwhelmingly that Knoll' s original answer stated the facts. Knoll' s allegation in its amended answer that it does not sell its furniture to architects, interior designers and decorators for resale has been proven false. Interior design firms buy furniture, including Knoll furniture KNOLL ASSOCIATES, INC. 351 311 Initial Decision and resell it to the ultimate users, the consumers. See the testimony of the following witnesses:

DONALD ROSS, Tr. 125- , 1846 , 1848 , 1852: LILLIAN MILLER , Tr. 380- , 385- , CX 1744-1766; Tr. 2521; RIT A LONG, Tr. 245, 253;

EMILY MALINO, Tr. 2029;

LEON GORDON MILLER, Tr. 723-745- , 3322-23; HARRY G. DEMANT, Tr. 1311;

EDW ARD SCHNEE, Tr. 2672, 2679, 2680;

LOUIS M. S. REAL, Tr. 2419-24;

ROBERT H. ADAMS, Tr. 1126, 1127;

Representatives of furniture manufacturers who are Knoll competitors: Thonet, Industries, Inc., Herman Miler, Inc. , J. G. Furniture Company, and Directional Contract Furniture Corporation, testified and it is found that they sell their furniture to designers, decorators and architects. (Thonet, Tr. 4019-4020; Herman Miller, Tr. 4156; J.G. Furniture, Tr. 4174; Directional, Tr. 4249) .

Interior designers testified that the terms of the sales from Knoll to them are negotiated exclusively between the interior designers and Knoll. See the testimony of: ALBERT HERBERT, Tr. 2084;

DIAN A ANDERSON, Tr. 2466;

NAN F. HEMINWAY , Tr. 2894;

MARIA GIESET , Tr. 3238 Retail furniture establishments which sell furniture (including Knoll furniture) to the ultimate consumer, the user, also render to their customers services which are, in effect, the same services rendered to retail furniture buyers by architects, interior designers, and interior decorators. Charles F. Rutherford of Braun & Rutherford, Inc., a retail furniture establishment in New York summarized the situation accurately in his testimony. A. Yes. I don t know that we used it on all of those jobs but I am pretty sure we used some on General American Investors and some at National Distilers.

Q. What about White & Case? A. Yes, we have used some Knoll in there. Q. And Drew Chemical A. No. I think there is Knoll furniture in their lobby. That's right, the lobby is Knoll.

Q. You say you employ a designer on your staff. Does he have any training in this field? A. \Vell, he is graduate of a design school. Q. Would you know which school? Initial Decision 70 F. T. A. Parson, I believe.

Q. You stated that you sell Knoll furniture? A. That's right.

Q. Have you utilized your design service in conjunction with the sale of Knoll furniture? A. Yes.

Q. Do you sell most of your Knoll furniture through the design department? A, Most of it? \Vell, we sell a good deal of it through the design department. Of course, there is quite a little that is not sold through the design department. What I mean is that a man may be opening up an offce and may come in and look at a few desks on the floor, select a Knoll desk. He doesn have a designer. It is just a case of fitting up an offce. He doesn t feel he needs a designer. We sell quite a little of it that way. Q. Did General American Investors utilize the services of your design department? A. I believe so; to the best of my knowledge, yes. Q. What about White & Case? A. No.

Q. Drew Chemical? A. Yes, they used our designer.

Q. National Distilers? A. Yes, they used the designer.

HEARING EXAMINER GROSS: Mr. Rutherford, you have been in this business for 45 years. "When did you first add the designer to your staft', approximately? THE WITXESS: I guess a matter of about six or seven years ago. HEARING EXAMINER GROSS: Prior to that? THE WITNESS: Prior to that we had no design service except what we did ourselves and we weren t too bad.

Q. vVhy did you add a designer to your staff? MR. IMBERMAN: Objection, immaterial.

HEARING EXAMINER GROSS: Overruled. Why did you add a designer to your staff? A. Wel!, there is a lot of detail in designing. Braun and myself used to do a certain amount of designing. The thing got too voluminous so that we had to have a designer and we put him on. Of course, I might also add that because of changing trends in the offce field, it was necessary to have a designer.

Q. Which trends are you talking about? A. Pardon me? Q. Which trends are you referring to, Mr. Rutherford? A. Wen, I am talking about new buildings with all contemporary fittings and furnishings and so forth and so forth. Those arc the trends that changed in our line. Years ago we would sell a man a desk, a table and a chair. It would be a wood chair, a wood desk and a wood table. If he bought a leather chair, it would be black. It was the exception to buy leather pieces. The trend changed. Today we are in the design business. As well as being merchants of offce furniture, we are in the design business. The trend has changed, making it necessary for us to survive.

KNOLL ASSOCIATES, INC. 353 311 Initial Decision Q. During this change in the trend, have you been getting competition from other designers? MR. IMBERMAN: Objection.

HEARING EXAMINER GROSS: Overruled.

A. I suppose so. (Tr. 492-94).

For the same testimony, in substance, regarding other retail furniture establishments, see:

W. & J. Sloane, Inc. , Tr. 2241- , 2246, 2257-58. Desks, Inc., Tr. 444-51.

B. Altman & Co. , Tr. 171-78.

Bloomingdale Bros. , Inc. , Tr. 2315-16. Alessi Bros. , Inc. , Tr. 220-23.

CharJes G. Stott & Co. , Inc., Tr. 1397-98. Capitol Offce Supply Co. , Inc., Tr. 1508-10. Decor Associates, Inc., Tr. 1677-86.

lJrsell' s Inc., Tr. 3207-13.

Wagner-Henzy-Fisher Company, Tr. 934-37. Higbee Company, Tr. 830-35.

. W. Roberts Company, Tr. 1437-40.

The competition may be easy to discern when it is, for instance between two large retail establishments rendering an interior design service such as Macy s and Altman s. The competition may be subtle when it is between an architect or interior designing firm, designing an interior with Knoll furniture specifically in mind, vis-a-vis a retail furniture store with an interior design department which suggests several alternative lines of furniture. Between the two extremes, the obvious-and the subtle-there are varying aspects of competition, but within the context of Section 2(a) it is aJl competition, vying for the dollar spent by the ultimate consumer-the retail user-of KnoJl furniture. The evidence proves and the hearing examiner finds that in the contest for the sale at retail of KnoJl furniture to the ultimate consumer-the user-the following classes of KnoJl customers compete with each other and with members of each of the other classes:

1. Architects 2. Interior Designers 3. Interior Decorators 4. Retail Furniture Stores 5. The Furniture Departments of Department Stores 6. Offce Equipment and Furniture Stores 7. KnoJl Associates, Inc.

8. Art Metal Inc.

, Initial Decision 70 F.

However, in order to dispel a continuing misconception by Knoll' s counsel, it may be helpful to reiterate that complaint counsel need not, in order to obtain an order in this case have proven (as he has) that all of the classes above named compete within the class, and with each other class. Discrimination in price as between two department stores, or furniture stores, or interior designers, or architects, who compete with each other in the sale of Knoll furniture would have been suffcient for a prima facie case. However, complaint counsel have proven-not a bare bones case, on this issue-but have adduced preponderant proof sometimes from the mouths of Kno11s own witnesses. A resume of some of the evidence of competition follows: JAMES A. KEILLOR, Jr., of B. Altman & Co. testified that his firm s competitors are Anyone who sells furniture." (Tr. 178) RALPH D. SENS of Desks, Inc., was asked: "In recent years, Mr. Sens, have you been getting any competition in the sale of furniture from decorators and designers 7" He replied: " I think in New York you get competition from everybody. As a general answer, yes, we get competition of all types. " (Tr. 455) ABE ITKIN, of Itkin Bros., Inc., stated that if designers and decorators did not handle any furniture for clients, " . . . we would be in a better position, yes. We would be in a wonderful position. (Tr. 337) AARON MERZIN, of Detroit Offce Supply, Inc., a 40 percent purchaser (Tr. 1359), testified that his firm engaged in contract work (Tr. 1360) and listed among his competitors Benon Products and C. A. Finsterwald both 50 percent purchases, and Robinson Furniture and Gregory, Mayer & Thorn, which were 50 percent accounts in 1960. He also named as competitors Ideas, Inc. J. L. Hudson, Triangle Furniture and Art Metal, Inc. (Tr. 1362-63 ) GEORGE H. THOM, of Ideas, Incorporated, named as competitors Benon Products; C. A. Finsterwald; Adler-Schnee Associates; Robinson Furniture Company; Gregory, Mayer & Thorn; J. L. Hudson; Detroit Offce Equipment Mart; Service Offce Supply; Sables; General Fireproofing; Shaw-Walker; Contract, Inc., and Art Metal. (Tr. 1250) HARRY G. DEMANT, of Walter Herz Interiors, Incorporated named as competitors Benon Products; C. A. Finsterwald; Adler- Schnee Associates; Casual Living Modes: Robinson Furniture Company; J. L. Hudson Company; Ideas, Incorporated; and Englander Furniture Company. (Tr. 1320-24) KNOLL ASSOCIATES, INC. 355 311 Initial Decision BERNARD SHERMAN, of Casual Living Modes, included Walter Herz Interiors and Adler-Schnee among his several competitors. (Tr. 2792) MAIER B. FINSTERWALD, of C. A. Finsterwald Company, mentioned the following 40 percent purchasers as his competitors J. L. Hudson; Ideas, Incorporated; Detroit Offce Supply; and Gregory, Mayer & Thorn. (Tr. 798-99) VER!\ON BEITEL, of Benon Products Co., classified only C. A. Finsterwald and Jesse Osetek's firm, Contract, Inc. , as his sole competitors in the resale of Knoll products during 1960 through J 962. Beitel stated that Robinson Furniture Company and Gregory, Mayer & Thorn were competitors in the resale of Knoll furniture only during the time that they were receiving the 50 percent discount, but not when their discount was reduced to 40 percent. (Tr. 1027-28) Beitel testified Ideas, Incorporated, J. L. Hudson, and Robinson Furniture Company, were not his competitors in the resale of Knoll products because of his price advantage in purchasing products from Knoll Associates (Tr. 1020-31) : Q. What about the J. L. Hudson Company? A. J. L. Hudson Company did not buy Knoll furniture at fifty off, so I do not consider them competitor "\with Knoll furniture. Q. What about Ideas, Incorporated? A. Same.

Q. SO your basis what about Detroit Offce Equipment? A. The same. (Tr. 1028) Q. Your definition of a competitor on the Kno111ine depends on the type of discount that the particular:r purchaser is getting is that correct? A. Correct. Yes.

Q. If the purchaser is getting a forty per cent discount, you do not consider him a competitor? A. No, I do not.

Q. Why is that? A. How can he compete when I am buying at a twenty per cent edge? (Tr. 1028-29) In connection with furniture sold on a "bid" basis, Benon Products' competitors included such 40 percent purchasers as J. L. Hudson and Ideas, Incorporated. (Tr. 1030) WALTER SMITH , purchasing agent for Wayne State University, solicited bids for some modern contemporary furniture from C. A. Finsterwald, a 50 percent purchaser; Benon Products, a 50 percent purchaser; and J. L. Hudson, a 40 percent purchaser. (Tr. 670) Robert H. Adams, of W. B. Ford Design, solicited bids from Initial Decision 70 F. T. the same three firms on specifications for the McDonnelJ job. (Tr. 1108) Austin J. KAUFMAN, of F. W. Roberts Company, Cleveland, a 40 percent purchaser, named as competitors two 50 percent purchasers in Cleveland: Wagner-Henzy-Fisher and Leon Gordon :Miller & Associates. He also named as competitors the Higbee Company, Irvin & Co. and Wirtshafter s. (Tr. 1441-42) Mr. Kaufman testified that his company is in competition "at the local level" with Ohio Desk Company, Wagner-Henzy-Fisher the contract departments of the Higbee Company and Halle Brothers department stores, Ace Desk Company, Wirthshafter and Irvin & Co. (Tr. 1441) and that ". . . our biggest competitor in the design work is Leon Gordon Miller Associates, Arthur Lawrence Associates, who is a more recent competitor, and I am not really familiar with any others in the Cleveland area. " (Tr. 1442) WILLIAM M. GREGORY, of Capitol Offce Supply Co. , Inc. , included W. D. Campbell, a 40 percent purchaser, in his list of competitors.

WILLIAM L. WILKOFF, of Decor Associates, Inc., in Washington C., a 50 percent purchaser, testified that his firm competes with Knoll 40 percent discount accounts in Chase Furniture and The Door Store in the Greater Washington area. Mr. Wilkoff testified that Burton, UrselJ' , and Modern Design are retail outlets for contemporary furniture in the Washington area, and compete with Decor Associates and with one another. (Tr. 1665-69) DONALD Ross, of Architectural Interiors, Inc. , a 40 percent purchaser, included the following 50 percent purchasers among his competitors: W. & J. Sloane, B. Altman, Macy s and Itkin Bros. Ross, an interior designer, stated that a1l interior designers decorators, and wholesale or retail stores with a design department are his competitors. (Tr. 123 , 124) He further stated that both Macy and Itkin furnish services to their prospective Knoll purchasers which correspond to those of his own firm-Architectural Interiors, Inc. (Tr. 123-125) Ross had observed Itkin ads, advertising the same services that Architectural Interiors renders. (Tr. 1869-70) Ross testified: (Tr. 123 et seq.

Q. Who are your competitors, in a general manner? A. Well, our competitors, to my knowledge, are other designers, possible KNOLL ASSOCIATES, INC. 357 311 Initial Decision decorators and retail 5stores or wholesale stores or establishments that maintain a design department, their own design department. wholesale stores that fit into the Q. Can you name some retail stores or category that you just described? A. Well, in the :!ew York area, there are many. Some that come to mind would b2 some of the stores which-for example, I would say W. & J. Sloan(e); B. AHman; Macy s; some of the offce furnishing specialists such as Itkin Brothers; Charles Nathan. They are numerous. I would ready have to spend a long time to think and enumerate them. LEON GORDON MILLER, head of Leon Gordon Miler & Associates, Inc. , an i"dustrial and interior designing firm in Cleveland, Ohio, and Chai,'man of the Board of the Industrial Designet seq. that he had held everyers Institute, testified (Tr. 708 elected offce in the Institute, a nationwide organization with approximately 350 senior professional industrial and interior deown firm signers, with four or five international associates. His had employed as many as 32 professionals, and had been the interior designers for Sunny Acres Tuberculosis Hospital, Western Reserve Medical School and Institute of Pathology, Cleveland In- Ohio, and stitute of Music, Fairview Park Hospital, Cleveland , had supplied Vanderbil University in Nashville, Tennessee, with design and planning services for an $18 milion health-science deits clients. velopment program. His firm purchases furniture for (Tr. 716 et seq. He knew that the furniture departments of "department stores around the country have contract departments with design staffs." (Tr. 721) " . . . MarshaB Field in Chicago is nationaBy known for its contract department." (Tr. 722) The Higbee Company in Cleveland, a department store, had a furniture department which furnishes services similar to those of Mr. Miler s firm. Mr. Miler testified in substance that the contract divisions. of retail furniture establishments compete not only with firms. each other, but also with industrial and interior design This competition includes other Knob customers in Cleveland who reseB Knoll furniture at retail to the ultimate user. . in the interior field, I would say, our prime competition are furniture dealers that supply some type of a professional service." (Tr. 728-29) Naming Wagner-Henzy-Fisher as an example Mr. Miller testified that department stores around the country have contract departments with design staffs (Tr. 729, 721) CHARLES C. SANBORN, of Charles G. Stott & Co., Inc., a 40 percent purchaser, named as competitors; W. D. Campbell Offce Furniture, Inc., Stern Offce Furniture, Capitol Offce Supply, R. P. Andrews Offce Equipment Company, General Fireproofing . . . . . . Initial Decision 70 F. T. Company, Shaw-Walker, Sloane-Mayer & Company, Revere Furniture Company, the contract department of the Hecht Company, Design Specifications, the architectural firm of Keyes, Lethbridge & Condon, and "local designers, architects. " (Tr. 1399-1402; CX 641-644 ) RITA LONG, of Rita Long Interiors, a 40 percent purchaser named as competitors: W. & J. Sloane, B. Altman, Macy, Itkin Bros., Bloomingdale, Alessi Bros. and Braun & Rutherford-a11 50 percent customers. (Tr. 248-49) She testified " anybody who offers the services that I offer and the merchandise that I can offer is a competitor. " (Tr. 252) She stated that firms such as Itkin Bros., B. Altman, and Sloane s are "involved in the same work I am involved in, essentially. That's it. " (Tr. 253) She stated that Bloomingdale, Macy, Lord & Taylor, Alessi Bros. and Braun & Rutherford offer design and planning services just as she does. (Tr. 252 et seq.

LILLIAN MILLER, of S. J. MiJer Associates Corp. , another 40 percent purchaser, named as competitors Itkins, Alessi Bros. Braun & Rutherford, W. & J. Sloane, Art Metal, Inc. , and Knoll Associates. (Tr. 381-82) Mrs. MiJer testified: \Ve prefer to think that other design firms only are our competitors, but unfortunately many firms that supply furniture are also within recent years in our field as well.

They are doing decoration and planning and layout as well as selling furniture. (Tr. 381) A young lady, a colorist, with W. & J. Sloane, Inc., for years, performed the same professional services for S. J. :viJer & Associates, Corp. , on an occasional, free lance basis as she had been doing for Sloane. (Tr. 382) JACK URDANG, of National Hospital Supply Co., Inc., testified to being in competition on bids with Designs for Business. (Tr. 2107) DIANA ANDERSON, of Planned Offce Interiors (a 40 percent discount) testified:

Q. Do they (ItkinJ render services which are similar to yours? THE WITNESS: Itkin, I guess, is in the retail furniture business. But they do have a planning service, and this is the only rub that we have with them, really.

Q. In the rendering of this service, you are in competition with each other? A. Yes, in that respect.

. .

KNOLL ASSOCIATES, INC. 359 311 Initial Decision Q. So that a potential client of yours could go to Itkin s and obtain similar services that you would render? A. It's diffcult. They are not the same quality that we are. But the average offce person doesn t realize this. I don t know how to answer this (Tr. 2463-64) .

LOUIS M. S. BEAL, of I.S. Incorporated (Interior Space Design) , testified:

MR. IMBERMAN: Concerning these questions about Itkin Brothers, do you consider that Itkin Brothers is a competitor of yours in interior design services? THE WITXESS: They have been in the past. I don t consider them now. (Tr. 2445) F. W. WAGNER, secretary-treasurer of Wagner-Henzy-Fisher Company, a retail store iYl Cleveland, which was a 50 percent Knoll customer in 1960 and 1962, testified that the store employed the services of interior designers or interior decorators and that interior design services were rendered on about haJi of their furniture sales (Tr. 936)-75 percent of their Knoll sales were made when their design service was supplied. (Tr. 944) He named as competitors Ohio Desk Company, Ace Desk Company and the contract department of Higbee Company and Halle Brothers-also The Roberts Company. (Tr. 947) Wagner-Henzy-Fisher competes with Wirtshafter s only in metal furniture (Tr. 948)-Mr. Wagner further testified:

My understanding and our understanding of our arrangement with Knoll was that at all times they reserved the right to sell to the architect and to the interior decorator or any other furniture dealers directly, and that those people would have the privilege of using' our showroom where we have a display of Knoll on the flOOT, in that Knoll can sell to the architect and the interior decorator direct or we can sell them, but we are put in competition in that respect. (Tr. 950) Mr. Wagner stated his company was in competition with Leon Gordon Miller "more on design service than we are on furniture, (Tr. 958) Wagner-Henzy-Fisher "would be in competition with designers on design service" (Tr. 958) and such design service " usually rendered in conjunction with the sale of furniture. . (Tr. 959) Wagner-Henzy-Fisher' competes with intcrior decorators-Irvin & Company and Holzheimer. (Tr. 961) In connection with the Bailey Meter job, which used Knoll furniture, four companies received invitations to bid-the Higbee Company, The Initial Decision 70 F. T. Ohio Desk Company, F. W. Roberts Company and Wagner-Henzy-Fisher. (Tr. 986) FRANK STOVERING, of the Higbee Company, stated that his firm s competitors are offce furniture firms, interior design firms and interior decorating firms (Tr. 845) He further testified that on the basis of his experience in the furniture field, interior designing firms compete with offce furniture dealers and that the same is true of interior decorating firms. (Tr. 846) He named Wagner-Henzy-Fisher (Tr. 835) and Leon Gordon Miler (Tr. 847) as competitors. tovering testified to losing $50 000 to $60 000 worth of business on one job to Wagner-Henzy-Fisher on a bid for the Bailey Meter contract. (Tr. 874) " (WJe could not sell as someone who could buy at a wider margin of discount. (Tr. 875) STEPHEN KOVACS, of W. & J. Sloane, Inc. , testified that his firm competes with interior designers. (Tr. 2248-49) Interior and industrial designers on the one hand, and stores dealers and contract houses on the other, cross-compete in that designers buy and sell furniture in addition to their design service; and stores, dealers, and contract houses provide design services in addition to buying and selling furniture. Knoll' s No Injury Defewe Knoll' s price discriminations among its customers who are competing sellers to the ultimate consumer have had the effect of lessening and injuring competition and wi1 continue "to lessen competition" or "to injure, destroy, or prevent competition " between its favored and nonfavored customers. All the witnesses who were questioned on the subject, testified that competition for the Knoll retail purchasers ' dollars is very keen. (See for example the testimony of Donald Ross (Tr. 123) ; Li1ian Miler (Tr. 381) ; Leon Gordon Miller (Tr. 727) ; F. W. Wagner (Tr. 964); Jack Urdang (Tr. 2094); W. L. Humphrey (Tr. 2862); Diana Anderson (Tr. 2463); Frank Stove ring (Tr. 849) ; Charles G. Sanborn (Tr. 1405) ; Wiliam M. Gregory (Tr. 1517) ; William L. Wilkoff (Tr. 1675). J Knoll's counsel have not disputed this fact nor offered evidence to contradict it. The price at which the retail sellers of Knoll furniture are able to buy from Knoll is a very important element affecting the ability of such retail sellers to compete with other retail sellers of Knoll furniture. (See the testimony of Donald Ross (Tr. 131); Rita Long (Tr. 261); Li1ian Miler (Tr. 391); Ralph Sens (Tr. 461); F. W. KNOLL ASSOCIATES, INC. 361 311 Initial Decision Wagner (Tr. 964); George Thorn (Tr. 1258); Aaron Merzin (Tr. 1362) ; Austin Kaufman (Tr. 1455) ; Leonard Linden (Tr. 1635) ; Emily Malino (Tr. 2030); Louis Beal (Tr. 2429); W. L. Humphrey (Tr. 2865-66); Wiliam Baiardo (Tr. 2940); Wiliam Race (Tr. 3073); Leon Gordon Miler (Tr. 3294). Knoll's nonbvored customers in some instances did not submit written bids on contract solicitations because they knew they would be competing with favored Knoll customers who could buy from Knoll for $100 the same item for which the nonfavored customers had to pay Knoll $120.

Several favored customers went out of business. C. A. Finsterwald in Detroit went into bankruptcy. This coincidental fact does not legally mimimize the likelihood of competitive injury attributable to Knoll's price discrimination. Knoll's counsel did not show any causal nexus between being a favored Knoll customer and lack of business success. The silence of the record on the reasons for Knows few favored customers going out of business cautions against any findings or conclusions to be drawn therefrom. In Forster Mfg. Co. 335 F. 2d 47 (1 Cir. 1964) (7 S.&D. 943J the first circuit, reversing and remanding for other reasons inter alia states (p. 952) :

Additionally the respondents contend that the record does not support the Commission s conclusion that their above price discriminations had the fined effect upon competition, which, they say, is that the discriminations were "likely to result in injury to competition. " This contention rests upon the erroneous interpretation of the Act pointed out herein above. As we have shown it does not need to appear in order to establish violation of the Act that a discrimination in price is "likely" to have the effect of substantially lessening competition, or of tending to create monopoly or of injuring, stroying or preventing competition. It is enough to show violation of the Act if it is "reasonably possible " (not even " reasonably probable ) that price dis crimination "may" have an effect. ' Although the above-quoted section referred to the standard for , it is ascertaining adverse competitive effect, in primary line cases an equally suitable guidepost for measuring competitive inj ury in this-a secondary line case-where the proof of anticompetitive effect need not be as strong and, where there is respectable decisional authority to the effect that in a secondary jine case anticompetitive effect competitive injury, may be inferred. (See ante p. 316 et seq.

Lilian Miler testified that a 50 percent discount from Knoll instead of her present 40 percent discount, would permit her to Initial Decision 70 F. T. compete more effectively by being able to provide "the most fui1y weil-designed offce" possible within a given budget. (Tr. 391-92) Donald Ross emphasized the importance of being able to purchase Knowl products at a 50 percent discount: "N aturaI1y, if we were obtaining a larger discount and if we were selling on a percentage basis, certainly we would be in a better position in certain instances to retain a client or make a client. " (Tr. 136-37) The cost of Knowl furniture to Ross' firm is a significant factor in effectively competing for the job. (Tr. 158-59) Ross testified that clients with whom hc has discussed the respective merits of his firm s (a non-favored customer) services and those of Itkin (a favored customer) have been concerned with price. (Tr. 157-58) Rita Long testified that a 50 percent discount by Knowl would place her in a better competitive position with regard to competitors such as Itkin, Sloane, etc. (Tr. 266), and would enable her to stretch her clients ' budgets farther. Cost is particularly important in Miss Long s business because she depends chiefly upon word-of-mouth recommendations for business. (Tr. 261 , 299) Charles Sanborn testified that a 50 percent discount from Knoll would put Charles G. Stott & Co. Inc., in a better competitive position, and enable it to do a better job for its customers on Knowl products. (Tr. 1406) Aaron Merzin opined that with a larger discount Detroit Offce Supply could " compete with anybody. " (Tr. 1383-81 ) Austin Kaufman, of F. W. Roberts Company, stated that his design department frequently must apologize to clients and point out that although it recommends that Knoll furniture be used, the client cannot buy it from his company as cheaply as it can from someone else in the market. He said that Knoll furniture " . . . is well designed particularly favored by our designers who we feel are knowledgeable about contemporary furniture and we would like to use more Knoll. But we feel on the one hand it will give the client design but he is going to pay a penalty premium, 1 would say, for that merchandise. " (Tr. 1492-94) Vernon Beitel of Benon Products Co. , a 50 percent purchaser, stated that " J. L. Hudson Company din not buy Knoll furniture at fifty off, so I do not consider them a competitor with Knoll furniture." He said the same is true about Ideas, Inc. , and Detroit Offce Supply. (Tr. 1028) Beitel did not consider any other firm as his competitor for Knowl business, unless that firm was getting the same 501'0 discount that Beitel was getting. "How can he compete when I am buying at a twenty per cent edge?" (Tr. 1029) KNOLL ASSOCIATES, INC. 363 311 Initial Decision Austin J. Kaufman stated that his (F. W. Roberts Company normal markup range on bid jobs was from 10 to 25 percent. . . . We don t try to hide from them that we buy Knoll at 40 off and Wagner-Henzy-Fisher buys Knoll at 50 per cent off, and as a direct result of this we wil almost take ourselves out of getting bids on that particular segment of a job because it is not to the client's best interest to buy Knoll furniture from us because with our normal margin or markup over cost on it would be higher than Wagner-Henzy-Fisher s would be on a direct bid. Because of this I feel and I am sure that we \vauld have had more invitations to bid on Knoll equipment, whether it be substantial or not as to the percentage of the total job if we .were buying Knoll on a 50 percent off list basis... . (1'1'. 1492-93) Aaron Merzin stated that there were occasions when Detroit Offce Supply was invited to bid on Knob furniture but failed to submit a quotation. "I didn t stand a chance to get even part of the job. " (Tr. 1382) Merzin s firm did not bid on Knob merchandise on the Wayne State University job because; "We felt we didn t stand a chance to get it with our discount they are giving to us. " (Tr. 1362) Harry G. Demant of Walter Herz Interiors, Incorporated, testified:

Well you have two strikes against you when you have to pay twenty per cent more on cost for the merchandise than the next guy who would get the maximum discount. (Tr. 1325) He continued:

If I was offered a larger discount by a manufacturer (Knoll), I .would go back into bidding more of the jobs, yes. . . . I have practically quit. I have not bid any Knon furniture lately because it is senseless. . . . contract bids in this town go possibly for less than ten per cent over cost, and when we have to pay 20 per cent above cost, it is very obvious that it doesn t pay to bid. (Tr. 1349-50) George Thorn, eommenting upon his firm s (Ideas, Incorporated), lack of success in bidding Knoll furniture on the Wayne State University, Parke-Davis, and Pontiac Motor Car contracts testified;

. it is ridiculous to try and bid against people who do get a fifty per cent. We have already a twenty per cent differential, at a forty per cent discount.. . if you buy something for fifty off, it is twenty per cent less than you buy jf for forty off, so jf you already have twenty per cent difference you can t add much to it and be competitive. There is no use being in business to go broke. You are in business to make a profit. (Tr. 1259) Frank Stovering of the Higbee Company testified: . . . it is taken for granted that if they are buying at abetter price, they most certainly could sell at a better price. Initial Decision 70 F.

Stove ring pointed out that Higbee could not bid successful11y against a competitor paying 20 percent less than it does. For this reason Higbee was unable to bid Knoll furniture on the Bailey Meter job. (Tr. 860-65) Vernon Beitel of Benon Products, testified that although his usual markup on bids was approximately 25 percent, his average markup in the Wayne State Vniversity job was 10 percent. Walter Smith, purchasing agent for Wayne State University, testified that the Knoll furniture was purchased from Benon Products even though bids had been solicited from Benon, FinsterwaJd, Robinson Furniture, J. L. Hudson, Englander, Eastern Cabinet and Knoll Associates, and quotations were received from Benon, Finsterwald, Englander and Knoll. Seven months later the Vniversity purchased another group of Knoll chairs based upon the bid submitted by Benon in the earlier solicitation. The prices arranged with Benon for these chairs were lower than the prices quoted by Benon s competitors in the earlier solicitation (Tr. 670, 677 & 679), so Benon got the business. Complaint counsel' s substantial proof of the anticompetitive effect of Knoll's price discrimination (which proof abounds in this record) is not contradicted by specific testimony or exhibits cited by Knoll's counsel. The only "proof" is the statement by Knoll' counsel at the oral argument that interior decorators and designers do not compete with other retail sellers of Knoll furniture go there was no Robinson-Patman anticompetitive effect resulting. The hearing examiner sought, unsuccessfully, at the oral argument, to impress upon Kno1Js counsel that proof of price discrimination between rLny two competitive retail sellers of Knoll furniture would be suffcient to make operative the ratio decidendi of Morton Srtlt, United Bisc"it and Forster Mfg. Co. all supra. The hearing examiner pointed out to Kno1Js counsel that if all testimony by and about interior decorators and interior designers were removed from the record, there would remain overwhelming proof of both price discriminations between other Knoll customers, and anticompetitive effects resulting therefrom. However Knoll' s counsel insists upon maintaining erroneously to the bitter end that the inclusion of interior designers and interior decorators in the evidence in this record somehow immunizes Knoll from long-established and well-recognized decisional authority. n - , , , KNOLL ASSOCIATES, INC. 365 311 Initial Decision Knoll' s Meeting Competition Defense The key words of the meeting competition statute are "meeting" and "equally low price." Those are the words in the statute and, no matter how persuasively Knoll's counsel may argue, nor how strongly they may feel, the evidence does not prove that the 10 percent additional discount which Knoll gave to its favored customers " was made in good faith to meet an equally low price of a competitor " Knoll's 2(b) defense boils down to this: When Knoll felt it would promote the distribution and sale of its furniture, it gave its highest discount (50 percent) to Knoll customers who demanded it as a condition precedent for marketing Knoll furniture aggressively-with floor displays and minimum purchases. Customarily, Knoll' s customers, so favored, usually were receiving, coincidentally, the highest discounts granted by Knoll' s competitors.

Some categories of Knob' s customers retail department and furniture stores, would not aggressively promote the sale of Knoll furniture stock it and display it on the floor, unless they did receive the maximum discount. It cost such retailers so much money to stock Knoll and maintain a floor display that they had to have a 100 percent markup to make a reasonable profit. Nothing in the text of the meeting competition statute, says specifically, or by inference, that a price discriminator has proven his meeting competition defense by granting his highest discount to match the highest discount of a competitor. Stocking and floor displays were not Knoll' s conditions precedent for interior designers obtaining the maximum discount. Other subtle factors determined which interior designers and decorators received the extra 10 percent discount. Moreover, there are instances in this record of the extra 10 percent discount being taken away after it was originally granted even though competitors' discounts remained at a maximum.

'" * * The seller has the burden of bringing himself within the exculpating provision of 2(b), which has been interpreted to afford an absolute de fense to a charge of violating 92 (a), notwithstanding the existence of the statutorily prohibited anticompetitive effect, Standard Oil Co. v. Federal T?"ade Comm 340 L. S. 2 Knoll' s meeting competition defense wi1 exculpate its discriminatory higher discount only if such discriminations were made in good faith to meet individual competitive situations. Good faith is Federal Trade Commission v. Sun Oil Co. , Bupra. 871 L. S. 505, 514. Initial Decision 70 F.

not present if a seller adopts the unlawful discriminatory pricing system of a competitor. The meeting competition defense is not available to justify higher discounts on the basis of an inherently discriminatory pricing system. The "equally low price" of a competitor must be the equally low "lawful" price for a given quantity of an identified item. If a seller increases his discount so as to establish a discriminatory lower price to some customer such seller must have reasonable grounds upon which to conclude that the competitor s "lower price" does exist and what that price is. Good faith is not proven in a record if the seller acts entirely on unsupported, unverified verbal statements, nor is good faith established if the seller knew or should have known that his competitor s price or pricing system was unlawful or inherently ilega1.

Inasmuch as meeting competition is an affrmative defense, the burden of going forward and the burden of proof are upon Knoll. The statute does not speak in terms of rebates or discounts, and Knoll was therefore under the burden of putting in this record the best evidence available from which this examiner could ascertain the competitor s price which was being met, proof that such price was a lawful, lower price, and proof that such price was not part of an inherently discriminatory pricing system. In that connection, it should be noted that in the modern contemporary furniture business, marketing practices include among other things, the so-called "protected" bid. In other words on large orders which are worked up by a specific furniture dealer and upon which written bids are submitted, the manufacturer did, and does, endeavor to protect the sales representative who worked up the bid, and prevent such sales representative from losing the contract because of price cutting by some other sales representative. In the case of Herman :Willer, this was called "Job Registration." At page 2593 of the transcript, Vernon Beitel of Benon Pl'clucts Co. testified: HEARING EXAMINER GROSS: Mr. Beitel, every time one of your competitors "vauid give a bid for Herman Miler Company, would you be notified by the Herman Miler Company that you better not bid on that contract because if you did you would have to pay more for the merchandise than the fellow that had worked it up? '" See C. v, A. E. Stale!. Mfg. Co. 324 U. S. 746 (1945) : C. v. Standard Oil Co. 355 S. 3% (1:1513); F. C. v. Cement In3tit1te 333 U. S. 683 (1948); C. v. National Lead Co., 'i2 U. S. H9 (HIS?) : e. v. Standard Brands, Inc. 189 F. 2d 510 (2nd Cir. 1951) : Standard Oil Co Broll' 238 F. 2d 54 (5th Gir. 1956) ; Standard Oil Co. v. C., 340 U. S. 231 (1951) : Corn Prodl/ds Ref. Co. v. C" 324 U. S. 726 (19.J5). KNOLL ASSOCIATES, INC. 367 3ll Initial Decision THE WITNESS: Yes, sir.

WilJam Kirby, former president of Eastern Cabinet Works and for twenty years a member of the City Council of Grosse Pointe Farms (Michigan) testified:

A. We had bid a job which I wil refer to as the Ferndale High School job. A portion of the job involved a substantial amount of Knoll furniture. We were the successful bidders on the job, and subsequently, within a matter of a day or two, I was visited by Mr. Osetek, who was the Knoll representative in Michigan, at which time he advised me they would not sell me Knoll furniture at the 50 percent discount.

He further advised me they would not even sell me the furniture for the Fernda1e High School job at the 50 percent discount, at which time I told him, or reminded him that I had always purchased at the 50 percent discount and had never been advised to the contrary. He advised me that he was changing it at that time. I told him that unless he would put it in writing, and so advise me I would assume that I was going to buy it at the same discount I always had. He suggested that I cancel the contract with Ferndale High School so that it could go to the next bidder. I, of course, advised him we had as I remembered it, put up a performance bond or bid bond and that I would take no further action on any part of it until I received a letter from him tcllng me that they would refuse to sell it to me, and when I received the letter I would then decide what action to take. Q. Did Mr. Osetek tell you why he would not sell you that furniture for 50 off? A. He stated that he was surprised that we were even bidding that job; that somebody had been doing the work on it and they were the ones that were supposed to have gotten the job.

Q. Were you eventually able to buy the furniture to fin that job? A. Yes. Apparently they decided that it was Mr. Osetek who decided that it was inopportune to cancel my contract at the 50 percent discount at that time.

MR. IMBERMAN: May I object to the answer? HEARING EXAMINER GROSS: An after the word "Yes" may go out. (Tr. 4310--3I1) In Forster Mfg. Co. v. 335 F. 2d, 47 (1964) page 361, supra the court, in reversing and remanding, held in substance that the Commission had laid down an overly strict standard which the discriminator s "good faith" in meeting competition should be judged. In the instant case, however, other more basic questions must be answered in Knoll's favor before we reach the good faith" issue.

contains a The Supreme Court' s decision in Sun Oil Co., supra summary of the criteria by which Knoll's meeting competition evidence must be judged if it is to exculpate Knoll' s price discriminations. The Commission s decision in Callaway Mills Company, , Initial Decision 70 F.

Docket 7634 (supm pp. 329-330) was issued February 10, 1964 after the Sun Oil Co. decision. The following furniture manufacturers, among others, do, and did, compete during the relevant period with Knoll for the retail dollar in the sale of furniture to the ultimate user-the consumer: (RX 57 as corrected) Name Address Herman Miler, Inc. Zeeland, Michigan Lehigh Furniture Corporation New York, N. Y. Directional Contract Furniture Corporation New York, N. Y. Stow & Davis Furniture Co. Grand Rapids, Michigan B. L. Marble Furniture Inc. Bedford, Ohio Taylor Chair Co. Bedford, Ohio American Chair Co. Sheyboygan, Wisconsin Do More Offce Furniture Elkhart, Indiana Dux, Inc. Burlingame, Cal. Laverne Originals New York, N. Y. J ens Risom Design, Inc. New York, N. Y. Founders Furniture Co. Pleasant Garden, N. C. J. G. Furniture Company New York, N. Y. Robert John Co. Philadelphia, Pa. Thonet Industries, Inc. - New York, N. Y. Standard Furniture Co. Herkimer, N. Y. Dunbar Furniture Corporation - Berne, Indiana Thayer Coggin High Point, N. C. However, each of the competitors named does not compete with Knoll in the retail sale of each and every item in the Knoll line. Some compete only in one category (e. seating pieces, desks etc. ) ; some compete in several categories. A few may compete as to the entire line. As a group they represent tough and sharp competition for Knoll.

During the years involved, and in the cities involved, it was and is Knoll's usual practice to attempt to sell its furniture to its customers at a 40 percent discount from its published list price. In no instance in this record has Knoll sold its furniture at a price Jess than 50 percent discount of its list price. The extra 10 percent discount-the subject matter of this proceeding-was not granted exclusively to any class or category of Knoll customers architects, interior designers, retail department stores, offce equipment and supply houses, etc.

Most of Knoll's competitors named above, during the period involved, also priced their furniture to Knoll customers at stated but varying, discounts from list prices. A few instances of manu- KNOLL ASSOCIATES, INC. 369 311 Initial Decision facturers using net prices have been mentioned in this record, but as a general rule, most of the manufacturers of modern contemporary furniture price their lines to their customers, as Knoll does at a stated discount from the published list price. Complaint counsel have not proven any predatory intent on Knoll' s part which prompted it to grant the extra 10 percent discount in those instances in which it did so. Likewise, Knoll' counsel have not proven in a single instance as to a specifically identified item of furniture that Knoll met a competitor s price with an equally low price.

Knoll did not, without exception, always grant the highest 50 percent discount to any customer who demanded it to meet another manufacturer s highest discount. Knoll' s 50 percent customers were selected because it was believed they would put forth a better effort to selI Knoll furniture, i. , they would stock the furniture, display it on the floor, carry a minimal inventory, push the line when possible, and at the same time, not impair the public image of prestige which Knoll sought and seeks to create. Even after giving the 50 percent discount, KnolJs prices for its furniture are stil higher than most competitors for comparable items. Dealers have indicated that the reason why they have done such a small volume in Knoll furniture is that Knoll does not charge as Iowa price as other companies. (Respondent's proposed findings, p. 44; Tr. 109, 1003, 1981-82. ) The furniture manufacturing industry was characterized by witnesses as one marked by sharp price competition. (Respondent's proposed findings, p. 21; Tr. 2100.

Interior designers and decorators are customarily compensated for their services on one or more of the following bases: (1) a flat fee fixed in advance with the client; (2) a fee measured by the number of square feet of space in the client's premises; (3) an hourly rate for the services of the designer and his staff; (4) a percentage of the cost of all work done in and about the client' premises; (5) a percentage of the cost of the furniture and furnishings the designer specifies and/or acquires for the client. (Respondent' s proposed findings, p. 12. Knoll' s extra 10 percent discount to its favored customers was not granted to such favored customers so that Knoll might meet or match an identified or identifiable competitor s price for an identified or identifiable item of merchandisc. Knoll seeks to exculpate its price discriminations by asserting, contrary to decisional authority, that it may meet or match its competitor s high- Initial Decision 70 F.

est discount with its own highest discount, irrespective ot what such action may mean when translated into terms of price. A resume of some of the evidence relating to the granting of the extra 10 percent discount by Knoll to its favored customers follows:

Detroit, Michigan C. A. Finsterwald Company-Vernon Beitel, a Finsterwald salesman, and Raymond Werbe, the Finsterwald vice president and general manager, negotiated the 50 percent discount from Knoll in 1955 with Mrs. May Festa who was in charge of Knoll' Birmingham, Michigan, showroom. Finsterwald had decided to get into modern contemporary furniture Jines. It negotiated its first contract with Herman Miler, Inc., at 50 percent off Jist. (See Tr. 2555 et seq. Beitel testified:

.. .. * but I can say this: That all in a bunch, within roughly a six month to a year period, we took on the Lehigh line, the Risom line, the Dux line Knoll, and two or three others, I think. They don t come to mind. (Tr. 2558) Beitel further testified:

The only one I can remember of ever talking to, and I don t remember if they had a representative, was a woman whose name was Mrs. May Festa who was primarily in charge of the showroom, functioning as a showroom manager and offce person rather than a traveEng sales person. (Tr. 2560) Q. Now, you knew this lady, Mrs. Festa? A. Right.

Q. Was she the lady who ran the showroom and the offce and with whom people talked to when they wanted to talk about Knoll furniture: A. She was the only one, very much on the ball. Q. She ran the whole place at that time: A. Yes, sir.

Q. Did you and Mr. Werbe go to see her:

A. Specifically on such and such a day and at such and such an hour, I cannot say yes. But we made many visits in that area. I would have-yes, yes, but when I couldn t tell you.

Q. All right. We realize you are talking now about something that occured in 1955, am I right:

A. Yes.

Q. You do have a recollection of having gone to see her with Mr. Werbe? A. Yes.

Q. Do you recall talking with her about the Finsterwald Company taking on the Knoll line of furniture:

A. Yes.

Q. Now, in the conversations that you and Mr. Werbe had with Mrs. Festa did you talk to her about the discount that the Finsterwald Company wanted to take the line on at? KNOLL ASSOCIATES, INC. 371 311 Initial Decision A. Definitely, yes.

Q. What was that discount? A. Fifty.

Q. Did you tell her that Finsterwald was then carrying Herman Miler furniture? A. Yes.

Q. And you had either taken on or were in the process of taking on these other lines of furniture? A. Yes.

Q. Did you tell her at what discount you were carrying the Miler line of furniture? A. Yes.

Q. And at what discounts you were either than carrying the other lines or were talking about carrying the other lines? A. Yes.

Q. Were each of these Jines at a 50 and 10 discount off the list price? A. Yes.

Q. All of this was communicated by you and Mr. Werbe to Mrs. Festa, am I right? A. Yes.

Q. Now, prior to the time that you had talked with Mrs. Festa, had you bought occasional pieces of Knoll furniture if you needed them to fill in on job? A. I don t think so. I can t remember specifically, no. Q. All right. Did there come a time when Mrs. Festa told you, in words or in substance, that Knoll Associates was wiling to sell Finsterwald its line of furniture? A. Yes.

Q. Was that at a 50 percent discount off the published list price? A. Yes.

Q. And from that time on until you left the Finsterwald Company, did they continue to carry the line of Knoll Furniture at a 50 percent discount off the list price? A. Yes.

Q. During all that time and until you left was Finsterwald carrying the Miler line and the Lehigh line and Dux and the others that you mentioned? A. Yes.

Q. Were they also carried at a discount of 50 or 50 and 10 off the list price? A. Yes. (Tr. 2561-64) Irving Wisemau, general manager of Finsterwald from 1959 to 1963 and the man responsible for final decisions on purchasing from furniture manufacturers, testified that he never asked anyone from Knoll Associates to match or meet the discount of any other manufacturer (Tr. 4347) ; never discussed discounts with Joseph Dworski (Knoll's representative) during that period (Tr. Inital Decision 70 F.

4343) ; only knew Dworski casual1y; might have met him in person once or twice in a period of ten years; and Dworski had never been in Finsterwald' s place of business. Beitel testified that when the original 50 percent discount was negotiated with Knoll, the Finsterwald organization was seeking to buy furniture at what was known to be the established maximum Knoll discount. (Tr. 2602-04) Beitel further testified that Finsterwald would have purchased from Knoll regardless of the discount so long as it could buy at Knoll's lowest prices. (Tr. 2637-38) The evidence does not indicate what identifiable items of their competitors Knoll was seeking to match in price when it allowed the 50 percent discount to Finsterwald.

Benon Products Co. Three years after Vernon Beitel had negotiated the 50 percent discount for Finsterwald, he started his own company (l958)-Benon Products Co. where, from its inception, he received Knolls highest (50 percent) discount. Jesse Osetek, Knoll's representative, testified that in his conversations with Benon s representatives no specific items or specific prices were compared. (Tr. 3648-49) Benon s primary price consideration was to buy at the lowest available prices from the manufacturers, irrespective of discount. (Tr. 1093-94) Beitel' testimony (Tr. 2623) was to the effect that the Knoll and Miler lines are interchangeable if one wishes to achieve a certain effect, motif or decorating decor, even though the lines may not be the same. The Knoll line might appeal to different esthetic tastes, and this would be true if the Knoll line were being compared with the lines of its competitors other than Herman Miler who have been mentioned in this record. (Tr. 2623) The interchangeability of the various manufacturers' Jines of furniture boils down to a question of the decorator s and customer s personal taste. (Tr. 2607) Jesse Osetek, Knob' s representative, testified inter alia concerning Vernon Beitel's Benon Products:

A, Yes. His major supplier at that time was Herman Miler, Inc. He told , and Mr. Werbe told me, they were receiving a discount of fifty and ten. Q. From Herman Miler? A. Yes.

Q. Is Herman Mjller one of Knoll's principal competitors? A. I would say so.

Q. Did :\fr. Beitel tell you he would not buy Knoll furniture except at fifty percent? A. Yes, he did.

KNOLL ASSOCIATES, INC. 373 311 Initial Decision MR. TURIEL: Objection. This is a leading question. HEARING EXAMINER GROSS: Yes. Please try to refrain from leading. Just ask the witness what was stated. Otherwise, it diminishes the value of his testimony.

By Mr. Imberman:

Q. Tell us in your own words, to the best of your recollection, what Mr. Beitel told you at that time about this topic. A. Again, starting a new business, he indicated he was interested in han dling Knoll if he could receive a fifty percent discount. In no uncertain terms he said he would not consider selling Knoll unless he received the fifty-percent discount inasmuch as he was getting a fifty-and-ten percent discount from Herman Miler. (Emphasis supplied.

I think it was the same fifty-and-ten percent from Simmons Manufacturing Company. He had quite a few: Lehigh Furniture Company, I think, was fifty and ten, and Dux. I can t recan any more, but I am sure there were. Q. Did you have occasion, from the time of this first conversation that you had with Mr. Beitel, to go to his showroom from time to time? A. Yes.

Q. Did you call on him from time to time, from the time of this first conversation until 1960, when you left? A. Yes.

Q. And did he have furniture on display in his showroom? A. Yes.

Q. \Vhat manufacturers? A. Herman Miler, Simmons, I think some Dux, or some Danish-type wood furniture.

Q. Did you continue to sell him at a fifty-percent discount from the time of this first conversation until 1960, when you left? A. After we agreed to the fifty-percent discount, which was maybe four or five months after the initial talk, yes, we did. Q. You negotiated this thing out with him about giving him the fifty-percent discount? A. I recommended it to Mr. Dworski. He went along with the discount. Q. Why did you continue to sell him at a fifty-percent discount? A. Well, at one time we did suggest that maybe we should not have the fifty-percent discount for Mr. Beitel, at which time he unequivocally again stated that he would not sell our furniture at any discount less than fifty percent.

Q. Did he say to you at that time what he was getting from others? A. That I couldn t recall specifically, but I assume there was no change in most of the discounts. Judging from the maintenance of his display that he had in there, he maintained the Herman Miler equipment. I assume that he had the same discount.

Q. Is that your judgment from everything you knew about the business? MR. TURIEL: I object and move that the last answer be stricken. HEARING EXAMINER GROSS: That part of the question as to what the witness assumed? MR. TURIEL: Yes.

Initial Decision 70 F.

HEARING EXAMINER GROSS: Yes, that may go out. Ey Mr. Imberman:

Q. Well, did you make a judgment as a marketing man and knowledgeable in the furniture business, and based on everything you had heard from Mr. Beitel, as to whether or not he was continuing to get a fifty or a fifty-and-ten discount from Knon's competitors? MR. TURIEL: I object, your Honor. The question is vague and ambiguous. Furthermore, the witness stated he doesn t know and he doesn t recall. :\R. IMBERMAN: He has not said that at all. HEARING EXAMINER GROSS: You say what you want to say, sir. Go right ahead. I wil overrule both of you and let the witness talk. A. I am sure that he maintained the fifty-and-ten percent discount at least from Herman Miler, because he had bid on several jobs against other people who handled the fifty-and-ten with Miler and he was successful in it. It is not possible that he could not be getting that maximum discount. I knew he was getting the maximum discount from all these people. Q. Let us go on to C. A. Finsterwald, Mr. Osetek. When you started to work for Mr. Dworski, was Finsterwald then an account? A. Yes.

Q. That is, to whom Knoll was selling furniture? A. That's right.

Q. At what discount? A. At fifty percent.

Q. Did you continue to sell them a fifty percent until 1960, when you left? A. Yes, I did.

Q. Did you ever have a conversation with anyone at Finsterwald during these years with respect to the discount that they were either getting from Knoll or getting from other competitors of Knoll? A. Yes, I did.

Q. With whom did you have such conversations? A. Well, initially, with Mr. Werbe, who was there before they started Benon Products; and after that with Mr. Irving Wiseman. (Tr. 3621-25) Robinson Furniture Company-Robinson Furniture Company negotiated with furniture manufacturers for a number of lines of modern contemporary furniture about 1959. (Tr. 2751-52) During the conversations with Knoll's representatives, Robinson representatives mentioned that they were getting at least 50 percent off Jist from other furniture manufacturers (Tr. 3617), and showed Knoll's representatives a Dux invoice reflecting a 50 percent discount. (Tr. 3617-18) Robinson Furniture Company, one of the largest furniture companies in the Detroit area, operates several retail outlets (Tr. 2701-02) and also engaged in bid and contract solicitations. In several instances bids were solicited on Knoll furniture. (Tr. 2723-28) In 1959, Robinson negotiated its 50 percent discount from Knoll with Jesse Osetek. Morris Robin- KNOLL ASSOCIATES, INC. 375 311 Initial Decision son testified that he never asked Osetek to match or meet the discounts of any of Knobs competitors. (Tr. 2714-15) At Tr. 2711 Mr. Robinson testified:

Q. In your conversations with Osetek, did you tell him that you would consi. der taking the Knoll line for a certain discount? A. No. I didn t tell him that I would consider taking it at a certain dis count. He advised me of what the discounts were. I didn t bargain with him as to discount. He advised me that there was a certain discount for a dealer who would show merchandise on the floor and that he had a lower discount for people who didn t show it on the floor. Q. You mean he told you that decorators and designers- A. Architects.

Q. -would get one discount, and that he was offering you, or you were negotiating with him, on the basis of another discount? A. That's right. And the reasons for that was that he caned this type of operation with us a stocking dealer, one who would show samples on the floor whereas the lesser discount was being quoted to people who did not stock or did not show samples.

(Continuing at Tr. 2712) :

We sold a lot of furniture, sir, that we did not show on our floor. In other words, we sold it from a catalogue as well, without representation of the merchandise on our floor.

(Continuing at Tr. 2715) :

Q. What was the principal consideration for getting the 50 percent discount? A. To display merchandise on our floor and offering the same merchandise to the public at large.

Q. So that you were required to display and stock merchandise in order to get the 50 percent discount? A. We were required to display. The requirement, as I understood it then, was to stock as well, but they had agreed to make a concession from the standpoint of stocking and Emit it to display. In 1961, the discount granted by Knoll to the Robinson Furniture Company was reduced from 50 percent to 40 percent. At Tr. 2721 Morris Robinson testified:

Q. Do you know, Mr. Robinson, why the discount was reduced? The question of the volume of business was approached and it was brought to my attention that the Know Company did not consider the volume of business that the Robinson Furniture Company was producing for them suffcient to warrant the 50 percent discount.

Q. And, in turn, they reduced your discount io 40 percent? A. And they told me from that time on that our discount would be 40 per cent.

Initial Decision 70 F.

Gregory, Mayer Thom Co. Gregory, Mayer & Thorn Co. was engaged in sellng furniture at retaij, and on a bid or contract basis in the Detroit area. (Tr. 3062, 3074-75) Knob furniture was sold by them on a bid or contract basis in competition with other Knob dealers. Prior to 1957, Gregory, Mayer & Thorn purchased Knob furniture at a 40 percent discount. In 1957 and 1958, Jesse Osetek of Knob and Wiliam Keith Race of Gregory, Mayer & Thorn discussed that firm s discount from Knoll. At Tr. 3065 Mr. Race testified:

Occasionally we would have a customer in a job in which the Knoll furniture would work very, very well. We could not buy it at a maximum discount. We bought it at a 40 percent discount. I believe the maximum at that time was 50 percent.

At Tr. 3071 , Mr. Race testified:

Q. Mr. Race, in response to Mr. Imberman s question with regard to the upshot of the conversations that you had with Mr. Osetek, you indicated that you became a Knoll dealer is that correct? A. I believe I said that, yes.

Q. And the Knoll dealers were entitled to a 50 percent discount to your knowledge, isn t that correct? THE WITNESS: believe at the time, a dealership-so-called-the name YOlJ call a dealer or a company who is promoting and displaying and receiving a 50 percent discount.

t that correct? Q. And that was KnoH's maximum discount, isn A. To my knowledge.

Q. Yes, and what you were seeking was Knoll's maximum discount. Isn that correct? A. Web, obviously.

Q. And you were interested in buying products from Knoll at their lowest available prices, isn t that correct? A. Well, are we not saying the same thing? Knoll continued to sell its furniture to Gregory, Mayer & Thorn at the 50 percent discount until sometime in 1960 when the discount was reduced from 50 percent to 40 percent. (Tr. 2778, 3071, 3093) During 1960, Knoll was never asked by Gregory, Mayer Thorn to meet or match the price granted by any of Knoll's competitors to Gregory, Mayer & Thorn for an indentified item. Joseph Dworski, Knoll's representative, testified that no one at Gregory, Mayer & Thorn ever told him what discounts the firm was receiving from Kno11s competitors, although he did know KNOLL ASSOCIATES, INC. 377 311 Initial Decision what discount they were receiving from Jens Risom during the period 1960 to 1962.

At Tr. 2777, Wilham Bass testified:

Q. Well, did you ever discuss with Mr. Osetek the purchase price at which furniture would be sold by Knoll to Gregory, Mayer & Thorn? A. Yes.

Q. Did you ever discuss discounts with him? A. Yes.

Q. Now, there was an occasion when the discount to Gregory, Mayer & Thorn was reduced from 50 percent to 40 percent; isn t that correct? A. That's when T- Q. Discussed prices? A. --iscussed it, yes.

Q. Did he tell you why the discount was being reduced from 50 to 407 A. Well, as I recall, his answer to that was that the amount of business that we were doing, we didn t warrant the maximum discount. Q. That was the only reason given for the reduction of the discount? A. That's all that I recall.

Q. Was any issue relating to competitive prices of any other manufacturers brought up during this conversation? A. No, I don t recall. No, I don t recall. Q. Do you recall ever asking Mr. Osetek to match the discount of any other manufacturer who was in competition with Knoll Associates? A. No, I didn t because I didn t think it was necessary because we were particularly interested in the Knoll line. The items that I was interested in was Knoll.

Q. And the thing that you were interested in was buying the Knoll items at the lowest available prices; is that correct? A. Right.

Adler-Schnee Associates, Inc. Adler- Schnee Associates, Inc. has been purchasing Knoll furniture at a 50 percent discount since 1950. It is engaged in the business of sellng home furnishings at retail and rendering interior design services in the Detroit area. AdJer-Schnee s interior design services are interwoven into a substantial portion of its furniture sales. Approximately 85 percent of Adler-Schnee sales are made as a result of or in conjunction with its design services. Only 15 percent of its furniture sales are made at retail. Adler-Schnee submits bids on furniture and furnishings in response to solicitations therefor. Edward Schnee testified that he discussed his discount in conversations with Knoll sales people in Knoll's New York offce in 1950: (Tr. 2659 et seq.

A. Well, in substance the pricing policy of Knoll at that time was 40 percent to anyone in the trade with a 50 percent discount to people who were Initial Decision 70 F.

particularly active or who showed some of the furniture on the floor, on the sales-floor, and we felt we had furniture of theirs on the floor and were active with Knoll Associates, and we thought we ,were entitled to a better discount than an architect who had no sho.wroom or anything. Q. Did you tell them that you were carrying other lines at '50? A. It might have come up. I don t recall exactly. We were principally concerned with a better discount from Knoll. Q. Isn t it true, Mr. Schnee, that in your discussions it was mentioned what other lines you carried? A. Right. It was almost common knowledge at that time. I am sure it was discussed at one point or another.

Q. Did you tell them what discounts you were getting from these people? A. Well, it' s diffcult to remember after 13 years. My best recollection is too vague at this point. I can t say actually whether we discussed other discounts or not.

Q. When you came back to Detroit had you achieved your purpose: A. Yes. 'We were on a 50 percent discount from that point. Q. SO that really is the upshot of the thing, am I right: A. How we achieved it, I don t honestly "recall but we did get a 50 percent discount from Knoll. (Emphasis supplied. Casua.! Living Modes-Casual Living Modes, 22961 Woodward Avenue, Ferndale, Michigan, is located just outside the Detroit city limits. It operates a furniture shop and provides interior de. sign services in conjunction with the sale of furniture and furnishings in the Greater Detroit area. The firm employs two interior designers who also act as sales persons. (Tr. 2282-84) Casual Living Modes competes with Adler-Schnee Associates, Inc., Walter Herz Interiors, Incorporated, Shorewood Furniture Company, Triangle Funiture and Englanders. (Tr. 2792) Prior to 1959 Casual Living Modes was buying Knoll furniture at a 40 percent discount. Bernard Sherman, the owner of Casual Living Modes (at Tr. 2782) testified: "It is primarily a furniture shop. It offers interior design services, and it is a gift shop as wen, accessories. We service communities nearby with a fun range of furniture and we offer our design services as a tool or a means of exposing furniture to the folks who are primarily residential customers." Casual Living Modes has about 4400 square feet, and Bernard Sherman is the sole owner. He has two interior designers, a secretary, a driver-handy man, and a part-time bookkeeper. The designers are sales personnel as well. Mr. Sherman was buying furniture from Thayer Coggin, Dux , KNOLL ASSOCIATES, INC. 379 311 Initial Decision Knoll, Metropolitan and Glenn of California at a discount of 50 percent off.

At Tr. 2787, Mr. Sherman testified that he would not have bought Knoll during the years in question if he had received only a 40 percent discount. He first started to carry Knoll in late 1959 or early 1960, and had previously sold Knoll at a 40 percent discount. (Tr. 2788) In 1959, Mr. Sherman told a Knoll representative ". . . I would be very much interested in stocking their merchandise if I were given the normal 50 percent discount that we were accorded by other manufacturers of similar type merchandise, and he agreed to proceed on a 50 percent discount and had hopes and expectations that we would feature enough of a display to make it a worthwhile situation. And that was the best I can recall regarding that conversation." This conversation was with Jesse Osetek who ran the Birmingham, Michigan, showroom of Knoll. (Tr. 2789) At Tr. 2790, in response to a question as to whether he mentioned the discounts that he was receiving from other manufacturers, Mr. Sherman testified:

A. Yes. I would say that I did mention it, because I also mentioned, I am sure, that I wouldn t carTY stock unless we got the maximum discount of at least 50. (Emphasis supplied.

At Tr. 2794, Mr. Sherman testified . . . I didn t get to buy Knoll merchandise at 50 off until the latter part of ' 59 or early part of ' 60. I think it was ' 60.

At Tr. 2797, in response to the question ". . . do you on occasions charge a customer a design fee ?"

A. Only if they do not purchase their merchandise through us, We have a policy that they are entitled to free design and decorating service jf there is a minimum purchasing arrangement of $250 , and there have been possibly two or three occasions in all the year" I have been in business where they have reneged on their purchasing agreement and they bought and paid for our time that we have involved ourselves in deccrating and setting up some plans for them.

At Tr. 2808 the following colloquy took place: Q. Mr. Sherman, when you sought the 50 percent discount from Knoll, were you seeking the so called dealer s discount? A. I wasn t aware of anybody as a fact receiving' 50 or 40. It wasn t my normal nature to check other dealers to see as to what discount they received. All I was really concerned ,with is what I was getting- and how could I profitably operate my enterprise.

Initial Decision 70 F.

At Tr. 2812, Sherman testified:

A. My interpretation, as I pointed out earlier, is one that if a store displays one of half a dozen or a dozen pieces of furniture from said manufacturer, he is entitled to be called stocking dealer. There has been no situation other than one that I can recall in almost 11 years of business where there has been any stipulated amount required before being called a stocking dealer.

And at Tr. 2813, in response to a question of whether that also applied to Knoll, Mr. Sherman testified: A. Yes, with reservations. I say that nothing specific has been insisted upon by Knoll or their representatives. There was an overall conversation at the time that the 50 percent was inaugurated as a standard condition that they would hope that I would bring and show more furniture, as much as our space would allow. At that particular time I had a smaller shop than I am in right now and space was even more of a factor than it is now. . Sherman testified that he was getting "the stocking dealer s discount. " At the time that the 50 percent discount was negotiated he testified (Tr. 2814) that the conversation involved: A. N"ot so much the display but carrying a few pieces that would be truly representative of the type merchandise we wanted, and, of course, truly representative of the popular pieces that Knoll was featuring. Cleveland, Ohio Leon Gordon Miller Associartes, Inc. Leon Gordon Miler & Associates, Inc., 1220 Huron Rd., Cleveland, Ohio, an industrial and interior design and decorating firm, purchases and resells furniture as a part of the professional services which the firm renders. (Tr. 723-25) Approximately 65 to 70 percent of the firm s gross income is from interior design planning and furniture sales. Of this percentage, approximately 60 percent of the firm s income results from the sale of merchandise. Its purchase and resale of furniture is an important and significant aspect of the firm s operations. (Tr. 745-47) The firm has been buying products from Knoll Associates, Inc., at a discount of 50 percent since prior to 1960. (Tr. 3607-08) Mr. Miler testified that his firm does purchase furniture at discounts of less than 50 percent, and that it generally specifies contemporary furniture and "very little" period or traditional furniture for its clients. (Tr. 758) The firm has bought furniture from Brunswick at no discount. (Tr. 759) KNOLL ASSOCIATES, INC. 381 3II Initial Decision Leon Gordon Miler testified:

Q. Let me ask you this: Would you in those years buy furniture from a supplier who would not give you a price for at least 50 percent off list? A. Yes, we would under certain conditions. Q. You mean "\vhere the manufacturer had something you couldn t get any where else? A. If two items were competitive in quality design, and other factors involved, in what is in a specification, "\ve would obviously for the interest our clients purchase it at the lowest price, see. Eut there are times when a specific item is received that meets a specific need, and there is no alternate period.

Q. But in general, in buying furniture from suppliers, didn t you buy from suppliers who gave you a discount of 50 per cent or better off published list price? A. I would say that this has been our discount from most suppliers. Q. Isn t it true that you tell your suppliers that this is your policy of purchasing, and this is what you expect? A. No, we don t tell them that this is the policy of purchasing. This is what has been offered to us by the manufacturers, you see, as a purchasing discount for our type of a business. (Tr. 755-56) By :VIr. Turiel:

Q. Are there some Knoll items that cannot be replaced in a similar manner? A. Well, to some degree, yes. It depends to ,vhat degree a designer is a purist. I would say that if he is a purist he couldn t replace the Mies Vander- Rohe chair with another, but if you are pressed hard enough to meet a budget and you want a similar type of chair, you wil buy somebody else, as I was compelled to do in this period of 1960 and ' 62 for one of my clients. Q. How many Eames chairs have you bought through your firm since you have been in business? MR. DIBERMAN: Objection.

HEARING EXAMINER GROSS: He may answer.

A. I can only answer many. I have no way to know except many. Q. Did you eve?' tell Knoll tha.t you would not buy any of their furnitw' products unless they sold you at 50 per cent ofl list? A. , I did not.

Q. Did y01 soz.fJit a 50 per cent discount from Knoll? , I did not. (Emphasis supplied.

Q. Mr. Miler, isn t it a fact that you re actually interested in knowing the net price that you '.viJ be paying for a particular item rather than the discount that you win be getting from. a manufacturer? R. IMBERMAN: Well, I am going to object to that, Your Honor. You come out at the same place. It is simple arithmetic. HEARING EXAMINER GROSS: Overruled.

A. I think that you re basically interested in a net price, but I think anybody who is honest himself in business today also wants to be assured that he is receiving a competitive price. I think both of these items arc essential to know.

Initial Decision 70 F. T. Q. You say you are interested in a competitive price, is that correct, Mr. Miler? A. That is right.

Q. Why are you interested in a competitive price? A. Because I have an obligation to my clients. Q. To do what, Mr. Miler? A. To see that when they have a contract with me that they are not penalized as a result of buying a contract through a professional organization. I don t know whether you understand this, but this is very basic to our business, at least in our community. As I explained, we are in competitionreally not in competition. I shouldn t say that. We are bidding the same type of products with the same clients as stores that have design or professional services.

Q. And that includes Wagner, Henzy, Fischer? A. Yes.

Q. And the Higbee Company? MR. IMBERMAN: Oh, I am going to object.

A. No, I have not named the Higbee Company because I have not come personally in contact with the Higbee Company, You see (Tr. 761-63) Wagner-Henzy-Fisher Company-Wagner-Henzy-Fisher 1852 Euclid A venue, Cleveland, Ohio, an offce furniture store, purchased Knoll furniture in the years 1960 through 1962 at a 50 percent discount off list. (Tr. 933) The business of Wanger-Henzy-Fisher is evenly divided between walk-in customers, large institutions, large corporations, and institutions like colleges and hospitals. (Tr. 933) The company sells chiefly for commercial use. Five percent of its sales are residential sales. The company characterizes itself as a retail store (Tr. 934), but it handles a lot of contract business. The company has employed as many as four interior designers or interior decorators. An interior decorator knows colors and designs, but an interior designer actually knows how to design furniture, rooms, or areas, and knows what to put in them. An interior designer is qualified to sketch furniture to scale so that a manufacturer may manufacture furniture from the drawing. The interior designer also makes color renditions, floor plans, and floor layouts. On approximately 50 percent of the sales which Wagner-Henzy-Fisher made in 1960 and 1962 they rendered their interior design and interior decorator service. (Tr. 936-39) During the two years in question, the annual volume of business of the firm was around $800,000. The company has been in business since June 1923. It carries other modern contemporary furniture lines: Herman Miller, Inc. ; B. L. Marble Furniture, Inc. ; Designcraft; and J ens Risom. KNOLL ASSOCIATES, INC. 383 311 Initial Decision F. W. Wagner, secretary-treasurer of Wagner-Henzy-Fisher (Tr. 944-45) testified:

. . . I would say probably seventy-five per cent of the design service jobs use Knoll. and. . . in the design department, in about seventy-five per cent of the cases it has some Knoll furniture in it. The firm sold about $40,000 worth of Knoll furniture a year. The firm s competitors in the Cleveland area include Ohio Desk Company, Higbee Company, Ace Desk, F. W. Roberts Company and HaJle s Contracting Department (Tr. 946) Holzheimers and Irvin & Co., Incorporated. (Tr. 961) Wirtschafter s competes in the metal furniture line. F. W. Wagner testified in substance that KnoJl itself competes with them sometimes. (Tr. 949-50) Wagner-Henzy-Fisher is in competition with Leon Gordon Miler on design services. (Tr. 958) Design services are usually rendered by Wagner-Henzy-Fisher in conjunction with the sale of furniture. (Tr. 959) The firm is also in competition with interior decorators in certain phases of the interior decorator s work. Mr. Wagner testified:

A. Well, we can do most anything that they can do, and they can t always do anything that we can. We work with them more than we are in competition with them, I would think. (Tr. 959) The price the firm pays for an item is a significant factor in its ability to compete effectively. (Tr. 964) Some of the contracts which Wagner-Henzy-Fisher bid upon were the Bailey Meter job Cuyahoga Savings and Loan Association, and the Cleveland Clinic. In response to the question, how is your firm paid for its professional services? The witness (Tr. 927-73) testified: THE VnTNESS: A lot of the large architects today are asking for bids on a cost plus basis, and a lot of them, they just send out the specifications and ask for your best bid. It really doesn t make too much difference on the final outcome, because as far as we are concerned we only get about the same an. swer.

It costs so much money to do business, and that is what we have to bid it at.

On the design work, as I have said, we have to spend a certain amount of money to get business. If a job comes up and there is more than the average design service, we discuss it with the customer and tell them that there is going to be a fee for it.

He can take the job out and shop at anywhere that he wants to shop, when he pays us that fee, 01' if he decides to give us the business, why that we wil make him some kind of a credit against this design fee, and on that there is no tried and true formula.

Initial Decision 70 F.

:.1r. W. L. Humphrey, vice-president and general manager of Wagner-Henzy-Fisher, testified (Tr. 2823 et seq. to the effect that the firm began to get a 50 percent discount from Knoll about 1958. Prior to that time, it had purchased occasional Knoll pieces at 40 percent when it had a specific need for a particular item. But Wagner-Henzy-Fisher was not carrying Knoll furniture in the regular course of its business because it could not get enough of a discount on the line. Mr. Humphrey testified as to the circumstances under which the 50 percent discount was originally obtained from Knoll in 1958. He stated that Jesse Osetek had been callng on him for a matter of about three years to try to get them to use the Knoll line and insisted that the discount would be raised from 40 to 50 percent. Mr. Humphrey testified that the firm could not "sell the line at a discount like that (40 % J ; it had to be competitive with our other lines. So we just weren t interested. " (Tr. 2826) And, that after many, many conversations Jesse Osetek stated that Knoll was interested "in having a dealer in the City of Cleveland, and they would give us a 50 percent discount so we could sell the line profitably. " (Tr. 2826) I wanted a 50 and 10 percent discount, the same as we had from other manufacturers, and had been fighting with them ever since, but nevel' could get it.

Q. You asked for a 50 and 10 and the best you could get after al1 of this bargaining \vas 50; am I right? A. 50 off, yes.

At 'lr . 2829, Mr. Humphrey testified that Wagner-Henzy- Fisher was ordinarily getting 50 plus 10 from Herman Miller (a Knoll competitor) however:

A. If there was another Herman Miler dealer in town that worked on a job and had the furniture specified, Herman ::Iiner \Vould automatically take Ole 10 percent discount away from any other dealer to give that particular dealer protection. (Tr. 2832) (See ante finding concerning protected bid, p. 366. Knoll' s additional 10 percent discount was not granted to Wagner-Henzy-Fisher in order to meet the equally low, lawful price of a Knoll competitor for an identified item, or items, but as an inducement to Wagner-Henzy-Fisher to become a knoll "dealer in the Cleveland area. Knoll believed that having the firm as a dealer would promote the saJe of Knoll furniture with an appropriate prestige image and would furnish the interior design and , KNOLL ASSOCIATES, INC. 385 311 Initial Decision interior decorating services which Knoll prefers to have as an integral elements in its retail selling technique. New York, New York Knoll sold its furniture to approximately 3 000 accounts in the New York sales area, but granted its additional 10 percent discount to only eleven out of 3 000: B. Altman; Bloomingdale Macy s; Abraham & Straus; Alessi Bros. ; W. & J. Sloane, Inc. Desks, Inc. ; National Hospital Supply; Braun & Rutherford; Itkin Bros. ; and Business Equipment Sales Co. These eleven accounts possess substantial economic power as sellers of Knoll fur" niture. B. Altman, Bloomingdale, Macy, and Abraham & Straus, are multi-unit, large department stores with furniture departments, and use aggressive selling techniques. Alessi Bros. Braun & Rutherford, Itkin Bros., and Business Equipment Sales Co. are retail offce furniturc and equipment firms and they also are aggressive merchandisers. W. & J. Sloane, Inc. is basically a retail furniture store. National Hospital Supply Co. , Inc. , is a contract furniture house and hospital supply house" (Tr. 2087), and Desks, Inc. are dealers, retailers, and jobbers of offce furniinfra.ture" (Tr. 441) with a most impressive Jist of clients common characterjstic which the favored customers possess is their capacity to furnish, in depth, interior design and interior decorating services to their furniture customers. These services increase the cost of selling their furniture. Such additional cost must, as a business necessity, be recouped through higher markups. Ergo, they insist on a 50 percent discount before they will display and stock a furniture line.

Itkin ETas. , 111c. 290 Madison Avenue, New York, New York. Abe Itkin, vice-president and treasurer, testified that during the pertinent period his company handled a line of furniture manufactured by Lehigh, Herman Miler, Founders, Thonet, Alma Desk, Design Craft, Shelbyville Desk Company, Scerbo and that at a dis-all of these companies were pricing their furniture lines count from the list price. Itkin had been sellng Knoll furniture occasionally prior to 1961 and was buying it at a 40 percent discount ". . . before we had the line, yes. " (Tr. 2134-37) Mr. Itkm had several discussions with Charles 'V. Niedringhaus who was in charge of the New York sales district for Knoll Associates, Inc. Mr. Itkin s brother had some of the conversations.

The substance of :Mr. Itkin s testimony is not to the effect that Initial Decision 70 F.

KnoJl granted the 50 percent discount to Itkin in order to meet a 50 percent discount, or more, which Itkin was getting from competitors of KnoJl, but rather that Itkin needed at least a 50 percent discount from the list price in order to have the markup necessary to be a dealer. His testimony (Tr. 2138 through 2140) can be best understood if reproduced in fuJl: THE WITNESS: The gist of the conversation was that unless we got the maximum discount which was the normal discount given to a dealer, we cannot handle the line in any quantity or in any substance. By Mr. Imberman :

Q. Were you talking about a specific amount, when you said the "maximus discount" ? In your conversations did you discuss forty or fifty and ten? A. Fifty.

Q. Fifty? A. Yes.

Q: That was the discussion that you had with the Knob people? A. Yes.

Q. Was there anyone else in addition to Mr. Niedringhaus who was there? A. It might have been Mr. Copeland. I know it was mostly with Mr. Niedringhaus.

Q. Did you, during these conversations, mention to the representatives of Knoll the discounts that you were getting from other manufacturers? A. I must have. I mean, that is common knowledge. It is common knowledge what we get from the other manufacturers. Q. Did you tell them that you wanted at least a fifty percent discount if you were going to handle the line and do anything with it? A. Yes.

Q. As a result of these various negotiations, did there come a time when Knowl reached some conclusion about this matter, the request that you had made? A. Yes. We obtained the line.

Q. They agreed to sell it to you at a fifty-percent discount off list price? A. Yes.

Q. Have you been getting that discount since then? A. Yes.

Q. Would you purchase Knoll furniture, Mr. Itkin, if you could not get a discount of fifty percent off list price? A. "\Vell, I would go back to the old basis. I mean, it is just odds and ends if we needed for a specific purpose. But we would not sell it the way we are selling it now. We wil go back to the original way we did business: odds and ends pieces occasionally.

Q. You mean you .would buy it if someone came in and made a special demand for Knoll furniture? A. Or jf I needed it.

Q. If you needed it to fill a job? A. Yes; otherwise, no.

, KNOLL ASSOCIATES, INC. 387 311 Initial Decision Q. Since you have been getting the fifty percent discount, do you then make an effort to sell Knoll furniture? A. Yes.

Q. I mean, what do you do? A. We specify it on jobs. Our salesmen sell it. Our decorators sell it. We sell it to other'- Q. Do you carry it on your floor? A. Yes, we do carry it on the floor.

Q. Is it true ihat you would not do these various things if you did not get a fiftYhpercent discount? A. No; oh, yes.

Q. It is true? A. It is true.

, in the begin- Q. Of the lines of furniture which you mentioned, Mr. Itkin ning of your testimony, could you ten me in your opinion which are the lines most comparable to Knoll in style and quality? A. Well, the lines that I carry or the lines that I kno\y of? Q. No, the lines that you carry.

A. Rison-I'm sorry; not Risom; Herman Miler and Lehigh. Q. These are hvo lines that you have a discount of fifty and ten? A. Fifty and ten, yes.

Q. Are these two lines also competitive with the Know line in price? I am talking about the line generally.

A. Well, I think they are priced in the same category, the same type of line, yes. I would not say item-for-item, but it's the same broad base, I imagine.

Q. In other words, al1 three lines are well-designed contemporary lines of modern furniture? A. Yes.

Q. Of good quality; am I right? A. Yes, MR. TURIEL: Objection, yOllr Honor.

HEARING EXAMINER GROSS: Overruled. He may answer. What is your answer to that question? THE WITNESS: Yes. As far as I am concerned, yes. HEARING EXAMINER GROSS: Would you want to read that question and answer back to me, please? (Question and answer read.

By Mr. Imberman:

Q. If somebody eame into your store and wanted to buy a good eontempo- 1'ry desk, the desk made by either one of these three manufacturers would do? Am I right? A. Yes.

Knoll has failed to prove by credible, probative, and substantial evidence in this record that it granted a 50 percent discount off its list price to Itkin Bros. , Inc. in good faith to meet an equally low price of a competitor." The evidence does not show that Itkin Initial Decision 70 F.

ever requested Known to meet or match an identifiable price for an identifiable item, or that Knol! did so. R. H. Mcrcy Co. , Inc. Knoll' meeting competition witness from R. H. Macy & Co., Inc., was Philip Cutler, department manager of modern occasio'1al furniture, upholstered and occasional furniture. Macy, Herald Square, New York, New York, is the Largest (department stores in the United States " and need not be described again for this record. The size of its operations is a matter with which most persons are acquainted. Mr. Cutler, testified that he had been buying furniture for that particular department since 1959 and had been with Macy s for two years prior to that. During 1960 to 1962, Macy s was buying modern contemporary furniture from Founders Manufacturing Company at 50 percent off list price; from Thayer Coggin; from Knob Associates Inc. ; and from Herman lIiJer, Inc. Mr. Iatrides, Known salesman calls upon Cutler at :vacy, and Cutler is wel! acquainted with Known' s Charles Niedringhaus. On page 2267, Mr. Cutler refused to testify that he negotiated the 50 percent discount from Known because he was getting a similar discount from Knob' s competitors. .Mr. Cutler testified that it is axiomatic that he must buy furniture at the "best possible price.

Mr. Cutler s testimony concerning the interchangeability of the Knoll line is particularly iJuminating and is produced at length here, commencing at Tr. 2268 :

A. As I stated before, either fifty percent off the list price or the doubling of a cost price is general in the furniture industry. So it' s obvious that that would be the situation in most cases.

In the case of Herman Miler and offhand I don t remember any othersthere might have been one period that r was getting or Macy s was getting a discount of fifty and ten. Does that answer the question? Q. Yes. -:1r. Cutler, would you say that, considered as a line generally, the furniture manufactured by Thayer-Coggins, Miler and Founder s is comparable to Knoll in quality and style and competitive in price? A. There are a group of manufacturers in various price brackets that have furniturc that is distinctively styled. They attempt to have furniture that is uniquc. When I say unique, it's not the same dcsign as other furniture. I think you put it very wen this morning. That was exactly what was going through my head, if I may refer to your statements. As such it is very diffcult to compare onc or two designs. T\vo or three or four chairs might he the same price. But they could each be different in design. These companies that you mentioned do not copy per se, as far as I can tell- Q. I did not mean copy, ::r. Cutler.

KNOLL ASSOCIATES, INC. 389 311 Initial Decision A. No.

Q. I am talking about the line as a whole. A. But they are comparable in terms that each one designs distinctive fur niture. They don t tend to follow any particular trend in the market. They tend to set trends rather than follow. From that point of view they are similar.

In the price bracket there are certain points where they are similar, also. Q. Would you say, for instance, that the Miller line and the Knoll line are directed toward the same kind of customer: A. I would say so, yes.

Q. What? A , Yes, I think so.

Q. Wauld you say the same for Thayer-Coggins, also? A. In certain instances, yes.

HEARING EXAMINER GROSS: He wants to know in addition to Thayer Coggins, Founder, Herman Miler and Knoll, if there were any other lines that you also handled that might have been overlooked. THE Will\ ESS: My first thought that I feel would answer your question properly is that I think that it would fall into our imports. We buy imported furniture that they sell.

Q. Any from domestic manufacturers A. That the moment I can t think of any, sir. Q. Do you buy furniture from a company called Selig? A. I have in the past.

Q. v\Tould you consider that to be generally in the same category as these other manufacturers \vhose names you have mentioned? A. I would say more so in the past years than currently. Q. From 1960 to 1962 A. More toward 1960, I would say, yes.

Q. At that time you say their line of furniture was comparable to the Knoll line A. Well, I would like to repeat again. That' s a very diffcult question for me to answer. Selig was one of those companies that attempted to have an image, if you wil excuse the phrase. In doing so they would have to create things that were not like other things that were exactly being created, that would have a feeling of Selig.

I feel that they were doing that more at that time than they are now. As such they would be comparable from that point of view. HEARING EXAMINER GROSS: Is this S-e- THE WITNESS: S-e- i-g.

Q. Was their furniture in 1960, their line of furniture, directed to the same kind of customer who, from your knowledge, would be interested or would buy Knoll 01' MiJer or Thayer- Coggins? A. Well, I can only answer these questions from the point of view of a department store buyer. I am not familiar with the other phases of it. I put something on my floor with the idea of its sellng. The prices of their chairs were comparable to Thayer-Coggins' chairs. They were comparable to the Initial Decision 70 F.

Bertoia chairs that I get from Knoll, and some of the chairs that at one time that I bought from Herman Miler.

Q. Did you find that the same sort of customer that might be interested say. in the Bertoia chair, would also be interested in the kind of chair that Selig was making or Miler was making? A. I think, to a certain extent, yes.

Q. You bought chairs from Knoll, have you not? A. Yes.

Q. Have you bought chairs from Miler? A. Yes.

Q. Would you say that although they are not exactly alike and I don mean that, but would you say that they are comparable in quality, design and price? A. I think so, yes. (Tr. 2268-73) Knoll evidence fails to establish that the additional 10 percent discount which was and is granted to Macy s was granted for the purpose of meeting the equally Jaw price of a competitor for a specific identified item.

The strongest meeting competition evidence should be found in the testimony of Knoll's own witnesses. Charles W. Niedringhaus who was in charge of Knoll's New York sales region and a Knoll employee for 18 years, testified that between 25 and 30 percent of Knoll' s total business is done in the New York region and that area had "probably about 3 000" accounts. Reproduced below are excerpts from the testimony of Mr. Niedringhaus, concerning the reasons why the Knoll favored customers in the New York area received the 50 percent discount. (Tr. 3779 et seg. Itkin Bros. Inc.

Q. Did you eventually come to a decision with respect to the request of the Itkins? A. Yes.

Q. What was that decision? A. To allow them our fifty-percent discount. Q. Why? A. Because I thought he could sell much more furniture for us, and, also, I wanted to get the sales that we were losing to our competition. Q, Did these manufacturers whom you mentioned, whose furniture you had seen on the Itkin floor, made furniture competitive to Knoll' A. Yes, they did. (Tr. 3779) W. J. Sloane, Inc.

Q. Why did you sell them furniture at 50 percent off the list price if your company has a policy of ordinarily selling furniture at 40 percent off the list price? A. Well, I knew that they were sellng many competitive lines and that KNOLL ASSOCIATES, INC. 391 311 Initial Decision this is the only way we were going to get them to handle and move any of our furniture.

Q. Did you ever have any conversatjons with anybody at Sloane s with respect to discounts? A. I can t remember any. (Tr. 3780) Business Equipment Sales Co., Inc.

Q. Tell us the substance of what he said to you. A. He said he was getting a 50 percent or a 50 percent and 10 discount from other manufacturers who were competing with us, and in order to do a job for us he had to have a better discount. Q. And if he didn t get the better discount? A. Well, he would go on as he had in the past. Maybe he would buy a chair occasionally to fill a job.

Q. How many conversations did you have with Mr. Schmelzer? A. Well, three or four.

Q. When did they occur? A. In 1961 , I believe.

Q. Did you come to a decision with respect to this request of Business Equipment Sales? A. Yes, I did.

Q. What was that decision? A. To allow him 50 percent discount.

Q. Why did you make that decision? A. So we could meet our competition and get orders that we were losing. Q. Have you continued to sell them at that discount since 1961? A. Yes, we have. (Tr. 3784) Braun Rutherford, Inc.

Q. Are you familiar with the firm of Braun & Rutherford? A. Yes.

Q. In 1959, when you took over your present position, were they a customer of Knoll' A. Yes, they were.

Q. At what discount were they buying off the published list price? A. Fifty percent.

Q. Did you have anything to do with establishing that discount? A. No.

Q. Why did you continue to sell them at 50 percent off the published list price if your standard discount was 40? A. Well, because they were selling our competitors' lines. I knew this was the only way we were going to get them to move our equipment. (Tl'. 3784- 85) Desks, Inc.

Q. And were they a customer of Knoll Associates when you became the head of the New York offce? A. Yes, they were.

Initial Decision 70 F.

Q. At what discount off the published list price were they buying? A. Fifty percent.

Q. Did you continue to sell them at a discount or 50 percent off the publisted list price from 1959 to the end of 1962? A. Yes I did.

Q. Why did you do that jf your regular discount was 40 percent? A. I had to sell them at this discount to meet our ompetition that they were handling, the other lines they were handling. Q. Do you know what other lines they were handling from 1960 through 1962? A. They were handling Miler, Risom, Lehigh and many other lines. Q. Specifically with respect to Desks, Inc., how did you know that you had to continue to sell them at a 50 percent discount or lose the business? How did you know that? How was it communicated to you? A. I knew that all the other lines they had, they were getting at least a 50 percent discount.

Q. How did you know that? A. From just knowing some of the lines that they handled and from what my sales people told me. (Tr. 3790, 3792) Abraham Straus Q. During the time that you were running the New York sales offce, was Abraham & Straus a customer of Knoll Associates? A. Yes, they were.

Q. At what discount were they being sold in 1959, when you got there? A. At 50 percent.

Q. And did you continue to sell them furniture at 50 off the published list price? A. Yes.

Q. Why, if your standard discount is 40? A. Because I was sure this was the only way they were going to buy it. Q. What made you so sure? A. Just through conversations and just knowing what they have on their floor, the type of merchandise they sell. Q. Conversations with whom? A. With :Jr. Aranoff.

Q. What was Mr. Aranoff's position? A. He was buyer of contemporary furniture. Q. I think before the recess you said that you had had conversations. with Mr. Aranaft. Were these at the store? A. No, they were telephone conversations and in our showroom. Q. Can you tell me why you continued to sell to A&S at fifty percent, off the pubJjshed list price if the standard discount was forty? A. "' ell, I know that it is department store policy not to buy unless they can buy at fifty percent off list.

Q. You mean this department store, A&S, right? A. Yes. (Tr. 3792- , 3795) KNOLL ASSOCIATES, INC. 393 311 Initial Decision Bloomingdale Bros., Inc.

Q. Let's take Bloomingdale s. Were they a customer of Knoll's when you started to head up the New York offce? A. Yes, they were.

Q. At what discount off the published list price were they buying? A. Fifty percent.

Q. Did you continue to sell them at that discount? A. Yes, I did.

Q. Why? A. Because it was their policy not to buy unless they could buy at fifty percent off list.

Q. How do you know that? A. Just from the reports that I had from our sales people who called on different buyers there. (Tr. 3796) R. H. Macy Co., Inc.

Q. Was Macy s a customer of the firm when you came there in 1959 as sales manager? A. Yes, they were.

Q. At what discount were they buying? A. Fifty percent.

Q. Did you continue to sell them at fifty percent? A. Yes.

Q. Why did you continue to scll them at fifty percent if the standard discount was forty? A. Well, I know that Macy s has a policy of buying at fifty percent off list. r knew that was the only way I was going to sell them. (Tr. 3801) National Hospital Supply Co, Inc.

Q. Is the name National Hospital Supply Company familar to you? A. Yes, it is.

Q. \Vhat business are they in? A. They are hospital suppliers.

Q. Do they also sell furniture? A. Yes, they do.

Q. And were they a customer of Knoll Associates in 1959, when you headed up the New York regional offce? A. Yes, they were.

Q. At what discount \were they buying? A. At fifty percent.

Q. Did you continue to sell them at fifty percent discount? A. Ye Q. Why did you selJ them at a fifty percent discount if your standard discount was forty? A. I knew that they only bought at fifty percent off list. (Tr. 3802) Alessi Bros., Inc.

Q. Do you kno.w the firm of Alessi Brothers, Inc. A. Yes.

Initial Decision 70 F.

Q. What business are they in? A. They are furniture dealers.

Q. Where are they located? A. Way downtown. I don t know the exact address. I have never been in their showrooms.

HEARING EXAMINER GROSS: Would 17 South Wiliam Street sound right to you? THE WlTNESS: That sounds right, yes.

Q. During the period 1960 to 1962, did you sell them offce furniture? A. Yes, we did.

Q. At what discount? A. At fifty percent.

Q. Were they buying at fifty percent in 1959, Mr. Niedringhaus? A. Yes, they were.

Q. \Vhy did you continue to sell them at fifty percent off the list price if your standard discount was forty? A. Well, because they were buying from competing manufacturers at at least fifty percent, sometimes fifty and ten. (Tr. 3803-04) B. Altman Co.

Q. Was B. Altman a customer of Knoll Associates when you come there in 19591 A. Yes.

Q. That is, as the head of the New York offce? A. Yes they were.

Q. At what discount off the published list price were they buying? A. At fifty percent.

Q. Did you continue to sell them at a discount of fifty percent off the published list price? A. Yes, I did.

Q. Why did you sell them at fifty off the published list price when your regular discount was forty? A. Well, I knew it was their policy to buy at only fifty percent off list. (Tr. 3805) The testimony of Charles Niedringhaus falls far short of proving that Knoll's extra 10 percent discount to its favored customers in N ew York "was made in good faith to meet an equally low price of a competitor('sJ" product which has been identified either as to item or price.

Desks, Inc. Ralph D. Sens, (Tr, 441 et seg. and Tr. 1904 et seg. secretary treasurer of Desks, Inc. , 71 Fifth Avenue, New York City, testified as a witness in support of the complaint, and also testified as a Knoll witness, that "we are dealers, retailers and jobbers of offce furniture. We show some lamps and ash trays. " The furniture part of the business is confined primarily to commercial desks and chairs. The business was incorporated in KNOLL ASSOCIATES, INC. 395 3II Initial Decision New York State in 1936. The firm can buy "any furniture product" from Knoll at a 50 percent discount. (Tr. 458) Mr. Sens stated:

(WJe call ourselves retailers and jobbers, retailers in the sense that our show room is open to anybody who walks off the street. We maintain salesmen on the floor to accomodate these people and jobbers in the sense that we do sell-the primary source of our business is large corporations, one of which is .Western Electric, which actually buys on a jobbing basis. They sign a contract and they buy for their various affliates, and other corporate accounts.

Our corporate accounts principally, besides The Bell System, would be Metropolitan Life Insurance, Prudential Life Insurance, Mutual Benefit Life Insurance, Standard Oil of New Jersey, Olin-Mathieson Chemical, to name a few. (Tr. 443-44) At Tr. 1918 et seq., Mr. Sens testified: Web, let me just give you a little background. We, of course, have a reputation for many years of being" a quality house and a reputable organization in New York When we look on a new product to show, just like any retailer does, there must be certain specifications that they meet in order to fit our pattern 01' fit our company and our firm. One, of course, is that the product must be a product that is of quality and, since we guarantee the workmanship on everything, it must be something compatible with those things. It must also be a product that has a market or is readily salable. Third, and not the least important, of course, is that not only ourselves as a firm but our salesmen can sell it competitively and make a profit, make a profit or a living. Vole felt back in the middle fifties or around that time, when we were first approached by Knoll, to take the line on. We refused them for the very reason that they would not give us a discount within which we thought we could sell it and make a profit. Through many months of negotiation and talking with the young salesman whom they had on the account who was very interested in having us, who thought that we could do a job with Knoll, in talking to him and eventually to the principals of the company, we finally reached an understanding where they would give us the fifty off jf \ye would try to do a job for them. This was, as I say, some place in the middle fifties and probably took at least six months negotiation.

As to Wiliam Jordan, the Knob salesman who first approached Desks, Inc., in the middle 1950' , Mr. Sens testimony was: Q. Did Mr. Jordan approach Desks, Incorporated to try to get that company to sell more Knoll furniture? A. That's right.

Q. Is it true that at that time you were occasionally sellng some Knoll furniture? A. We were occasionally, as accommodation sales, where we had to. Initial Decision 70 F. T. Q. Did Mr. Jordan come to you and ask you to try to sell more Knoll furniture? A. Yes. As I said, that was Mr. Jordan s job with Knoll, to try to promote sales with the dealers.

Q. At what discount were you at that time buying Knoll furniture? A. Forty percent.

Q. When Mr. Jordan asked you to buy more Knoll furniture from him what ..vas your answer? A. Well, we told him that we could not market it at a forty off discount. (Tr. 1922) Again, to tell you how you work on something like this, I said that we are very careful on what lines we take. In our business nearly evcry day of the year you have somebody come in who is trying to ask you to market their product. We are very careful. Al1 the principals in the firm are very careful to look over everything as to how it is made and so forth. This is done not by one man alone but done through our management committee and through a series of negotiations between one or more of the principals ,vjth the representative.

'\Then Mr. Jordan first approached us with the Knoll line, we frankly did not give him much time. \Ve told him that we liked it and we thought that it would fit well into our selling pattern but there was no sense in talking to him because we just could not buy it at that price and sell it in our markets. Bil was persistent and came back many more times over a period of time. And he eventually brought some of the principals of his firm in to talk. In these negotiations with several of the principals, we finally reached the discount of fifty off which they agreed to give us, and we agreed to do a job selling his line.

HEARING EXAMINER GROSS: Do you remember the name of any of those principals? THE \VITXESS: :\r. Copeland was one.

HEARING EXAMINER GROSS: Do you recall where these conversations chiefly took place? THE \VITNESS: In our showroom, generally; in our offces. HEARING EXA:-HNER GROSS: Is that the same address that you pl' esently are at? THE WITNESS, Yes.

Q. Do you recall anyone else in addition to Mr. Copeland who joined in these conversations? A. I don t recall. I know ),1'. Niedringhaus has been down more recently in the more recent attempts to get a better discount. But I don t recall back in 195,') myself meeting anybody else. (Tr. HJ2G- 28) Q. Prior to your getting the 50 percent discount from Knoll, you were buying furniture at a 40 percent discount, is that correct? A. Yes. If we ever had the occasion to have bought it, I guess we bought at 40 percent off.

Q. Did you induce Knoll to give you the 50 percent discount? KNOLL ASSOCIATES, INC. 397 311 Initial Decision Did you initiate it, Mr. Sens? THE WITNESS: Did I personally? No.

Q. Did your firm, to your knowledge, initiate negotiations for the 50 percent discount1 A. Did we? No it was a matter of Knon' s representative originally coming to us and wanting us to sell his product at a 40 off basis which- Q. V'/ere you buying- MR. IMBERMAN: Just a minute. Let him finish his answer. HEARING GROSS: Let him finish his answer. THE WITNESS: \Ve were not buying Knoll as a product that we sell and market, no, prior to this time.

Q. But you were buying Knoll at 40 off for resale, were you not? A. On occasion we did, yes.

Q. You were permitted to buy or it was available to you at a 40 percent discount, was it not, that is, the Knoll line? A. If we had an occasion to sell it, it was available to us at 40 off. Q. And then someone from Knoll came in and said "Let' s increase the volume" is that correct? A. I think you have let me explain it a little bit. Knoll came to us and asked us to do a selling job. The idea of getting a dealer to sell your product is to increase your distribution in a given market. Knoll themselves only can hire and can control so many salesmen in this vast market of New York. One of the means of expanding their ability to cover the market is by getting a reputable dealer who has a highly trained sales force to go out and market their line.

They came to us and wanted us to do it. By I'marketing" I mean by our n.rm actively training the salesmen in the product, showing the product f:tocking the product, advertising in trade magazines that we have this product to sell and doing a real active job in selling. When we bought this product at 40 off, it is true that we may have bought an occasional piece here and there. But this was only bought and it was sold at little or no profit as an accomodation in some particular job. Q. You say at little or no profit? A. That's right.

Q. \'-hat do you mean by Ulittle or no profit" A. I mean that in an offce where we would naturally try to sell the product of, say, Standard Furniture Company, if the customer had happened to have seen or Jiked the design of a Knoll chair, in this case we would buy this at 40 off and sell it at whatever markup we arc sellng the product. But obviously the items that we were buying at 50 and ten we were getting substantial-enough-h money on that to make a profit. But at Knoll, when you buy at 40 off, you have to pay the freight from the factory. You have to pay the delivery charges in New York and the warehousing costs. So I think last time I said that the average markup that we need, or that we feel we need to be profitable, is someplace around 40, 42 percent. So obviously, on a product that we bought at 40 off, we would not be able to sell and make our normal 40, 42 percent gross mark up on it.

That' s \vhat I mean by being non-profitable. Actually we put some markup on it. (Tr. 1945-49) Initial Decision 70 F.

Washington, D.

M. Burton & Son-Almon Burton, the owner of this retail store at 911 E Street, N.W., in downtown Washington, stated that his is a small business, his floor space is very Jimited, and he does not Jike to carry Jines of furniture unless he can display samples upon the floor. He testified:

We run a small operation. We have a small display area. The profit in our business is very small. It is impossible for us to run a line of furniture and show the pieces on the floor, that we don t get a 50% discount on. The purpose in my writing Knoll, and being persistent with Knoll, to secure this 50% discount, is that we like their line of furniture. Our custo. mers wanted it but we could not afford to sell it at 400/ discount. We have this very limited space and as I say, we could not show anything that we did not get at least 50% discount on it in our display space. I was anxious to get this discount from Knoll so that we could show these pieces on the floor and could sell them. (Tr. 3010-11) Now, all companies are competing for space on our floor. We have had some that made an offer to even put the pieces there on consignment but we have to decide what we can make the best use of the space of. (Tr. 3010-11) During the relevant period Burton s principal purchases from Knoll involved "the Bertoia chairs and the Saarinen, No. 70 series of chairs, and occasional purchases of the Saarinen pedestal chairs. . . the 150 series. " (Tr. 3026) The witness, in substance testified that ". . . these items are unique and none of the other companies from which Burtons purchases furniture, manufacture or sell similar items. " (Tr. 3036) It is true that these things are unique-beautiful. That is just one of the parts of doing business. We like to have unique things. Some of these other large lounge chairs, and smaller chairs, that we have, we think are unique. In fact, some of the customers come in and say, "Do people really buy this stuff?" (Tr. 3038) . . . They don t think anybody really buys it (the Saarinen No. 70 chair) and puts it in their home. (Tr. 3038) In comparing a so-called competitor (Founders line) with Knoll, Mr. Burton stated:

I can say no, it was not the same. In the early 50's, contemporary was just getting started. As a matter of fact, the bulk of the companies that we did business with, say, in the early 50's, are out of business. Their products served their purpose. It was a developing thing. They sold for maybe two three, or four years; then there was no demand for it. These people just went out of business. They were not able to come out with new products, to meet the public s demand.

, KNOLL ASSOCIATES, INC. 399 311 Initial Decision HEARING EXAMINER GROSS: Would new products, as you used it Mr. Burton, refer more to styling? THE WITNESS: Yes, sir. The styling. (Tr. 3042) At Transcript 3052- , Mr. Burton testified: HEARING EXAMINER GROSS: '" '" '" Now, as you sit there under oath sir, we would like to know whether Knoll Associates or any person representing them, stipulated that in order for you to know whether Knoll Associates or any person representing them, stipulated that in order for you to get a 500/ discount at the time that you first got the 50% discount, it was necesM sary that you buy a minimum amount of furniture from them? THE WITNESS: No sir, It was never presented to me in that manner. As I said, I had been attempting for some little while to get a better disM count from Knoll so that I could show some of their pieces on my floor. There were several other stores in Washington in the same Hne of business that I was in, that had these pieces on their floor, and I knew they were getting a 50% discount because I was told so. When the Knoll sa.les11wn came into my show 1'oom, he was impressed with the show room. He said You should have the 50% discount." That was it. (Emphasis supplied.

We sat down. We talked it over, and being to familar with the Hne, or with contemporary furniture, I asked his advice about what he would suggest that we show-the colors to put them in. He worked it out for me and I agreed; the pieces he selected, I Jiked. I liked the colors he picked out. That is what we ordered. As to whether they had some minimum that they require people to buy, it was never discussed with me. (Tr. 3052-53) Mr. Burton further testified:

Q. . . . Now didn t you state, Mr. Burton, that Knoll was not asked to meet the prices or the discounts of other manufacturers or distributors of furni. ture? \Vas that not your statement, Mr. Burton? A. We don t ask any company to meet anybody else s prices. (Emphasis supplied.

Q. All right.

A. As I explained to you, if we don t get the maximum discount we do not sho this furniture on the floor.

If the company wants us to show it, they have to give us the maximum discount for us to show it.

Q. That is what you were seeking from Know-the maximum discount? A. Yes.

Q. And as a matter of fact, you also indicated that the Knoll items that you purchased are so different from those of other companies, that comparison cannot be made? Those were your own words, were they not, Mr. Burton? A. Not on specific items, no.

Q. May I be sure that I understand your answer, sir? HEARING EXA INER GROSS: Where I am confused, I guess, Mr. Burton, is whether you meant that, no, a comparison may not be made, or no comparison may be made.

Initial Decision 70 F.

THE WITNESS: Well, sir, I would have to go back- HEARING EXAMINER GROSS: Wed, you go ahead and explain it. THE WITNESS: And say about the only way I can explain that is this: If you take it item for item, it is very diffcult to compare most any manufacturcr- HEARING EXAMINER GROSS: You are talking about the contemporary furniture, I take it? THE WITNESS: Yes, sir. As I said several times before, we have a small area for showing furniture. \Ve try to show on the floor, what wil sell, and what we can make a profit on. (Tr. 3034-35) Kn01ls granting of the extra 10 percent discount to R.C. Burton & Son was not made in good faith to meet an equally low lawful price of a Knoll competitor for an identified item of merchandise.

Ur8ell' , Inc. Erich Ursell and his wife operate a retail store at 3243 Q Street, N. , Washington, D. , and have operated it for a little over 15 years. They sell furniture, basically of contemporary design, to people who are purchasing for residential use, (Tr. 3153) The store furnishes design service as part of its business (Tr. 3207-08) and a decorating service (Tr. 3209). The store sells Accessories, china, stainless steel, gifts, ties, everything in the contemporary range, jewelry, upstairs furniture, fabrics and lamps. " (Tr. 3207) In 1956, in conversation with Taylor Simmons of the Knoll organization, Mr. Ursell told Mr. Simmons that he wanted his Knoll discount increased from 40 percent to 50 percent. (Tr. 3157) Mr. Ursell and his wife were interviewed by complaint counsel prior to testifying. Complaint counsel reduced the substance of the conversation to writing, submitted it to Mr Ursell and his wife for corrections, and ultimately for signature. A copy of the signed statement was furnished to Mr Ursell and his wife. N evertheless, in spite of the extreme care taken by Commission counsel in obtaining the statement, the witness Ursell repudiated it on the witness stand and the examiner rejected the statement (CX 1912- E rejected) on the grounds that the witness was not on trial and that, being present on the witness stand, he could testify without the restraint of the signed statement. Mr. Ursell's testimony included the following:

Q. '\' ould you have purchased Knoll furniture, and carried it in your store, in the regular course of your business, the way you have just described it since 1956, if yvu had not received the discount of 50 percent off the list price? KNOLL ASSOCIATES, INC. 401 311 Initial Decision MR. TURIEL: I must object to the question. HEARING EXAMINER GROSS: Overruled. He may answer. THE WITNESS: I would not have bought it. I would not have bought it in the regular course of my business. I might have used it in decorating, if I ever needed it, but I would not have displayed it. By Mr. Imberman:

Q. Are you t€ling you would have bought, if you had a partkulal' need for it? A. In our decorating.

Q. Or if a customer came in and asked for a piece of Knoll furniture by name, or by number? A. That is right.

Q. But you wouldn t have carried it in the regular course of your business, and tried to promote the sale? A. I would not have stocked it.

Q. And you would not have displayed it. Am I right? A. That is right. (Tr. 3167-68) In substance the witness testified Ursell's would not have stocked or displayed Knoll furniture without the extra 10 percent discount being allowed. It is a fair inference that stocking and a floor display were Knoll's prerequisites for granting its extra 10 percent to Ursell's type of operation and that Knoll was not under compulsion to meet the lower, lawful price of a competitor for an identified item.

HEARING EXAMINER GROSS: Mr. Ursell I think in fairness to you, to the best of your recollection, just taking the years 1960 , 1961 , and 1962 would you be able to recall, as you sit there now, what, generically, what class of furniture you were buying from Knob? Do you understand what I mean? THE WITNESS: Yes. I know what you mean, but I don t know the details as much; for instance the orders do not come through my hands, if it pertains to furniture. Mostly they were Bertoia pieces and Saarinen pieces and all I remember is when I was more active there were quite a few Knoll sofas \ve sold. NO\v whether they fell into '60 and ' 62 I can not remember. (Tr. 3181-82) Q. The basis for receiving the 50 percent discount from Knoll was the amount of furniture to be displayed and also the amount of promotion that would be given to the Knoll products and not what other manufacturers were doing, price-wise, isn t that correct? THE WITNESS: That is only one aspect of it. I know thjs is what you wrote in your note, which I only got the other day. We discussed other things at the time which you didn t write down. I am not a lawyer. And I probably should have, should know more about law, but that was one aspect of it. The fact was that I was getting 50 percent before we opened upstairs, from other manufacturers. (Tr. 3184) Q. Were you required to purchase approximately or to order approximately Initial Decision 70 F.

000 to $2 000 worth of furniture from Knoll in order to qualify for the 50 percent discount? THE WITNESS: can t remember whether we were required a certain amount. I know we did buy it and in order for use to sell it, we had to display it. And $1 000 to $2 000 isn t very much to display. I can t remember whether we were required or not. (Tr. 3185) Q. :\l'. Ursell, but it was common knowledge that dealers who displayed and stocked merchandise would get the fifty percent discount from Knoll, was it not'? You were aware of that?"

THE \VITNESS: As I said, I didn t study law. It was common knowledge of the industry. I assumed of Knoll, too, I assumed that if stores would stock (I,nd .Chow Knoll furniture, they would get fifty percent. (Emphasis supplied. By Mr. Tudel:

Q. And that was the basis of your getting the fifty percent, to your knowledge, was it not? MR. IMBERMAN: object to the form of that question. THE WITNESS: don t know what. the basis, I really don t know what the basis of us getting the fifty percent. I don t know what came first. I don know-as I said, it is how many years ago. I don t know what the bftsis is. We had 'a contemporary furniture store and we were expanding and that was the basis of it, and I guess Knoll wanted to be in it. (Tr. 3191-92) The above excerpts from Mr. Ursell' s testimony and his testimony as a whole do not establish that Knoll' s additional 10 percent discriminatory discount to Ursell's was granted by Knoll in good faith to meet the equally low, lawful price of a Knoll competitor for a specific identified item; and the examiner so finds. Decor Associates Inc. Wiliam L. Wilkoff, a former student at Ohio State University and graduate of the Pratt Institute of Design in New York, (Tr. 1661 , et seq. formerly owned and operated Decor Associates, Inc., 3131 M Street, N. , Washington , which ceased doing business at the beginning of 1963. It sold, at retail, modern contemporary furniture, accessories, and interior decorating services. Mr. Wilkoff, at the time of his appearance, was working for another store, Chase Furniture of Silver Spring, Maryland, but Chase Furniture is not involved in this proceeding. Mr. Wilkoff liquidated Decor Associates, Inc., because he was not making any profit. The store was not large enough for a big volume operation and was not small enough for him to conduct his business at a minimal overhead. His competitors at the retail level included R.C.M. Burton & Son, Ursell' , Inc. , and Modern Design across the District line-Wisconsin Circle. (Tr. 1665) In addition to himself, Mr. Wilkoff employed two other in- KJoOLL ASSOCIATES, INC. 403 311 Initial Decision terior designers. (Tr. 1664) Mr. Wilkoff testified, .. I assumed I was in competition with any furniture store in Washington. " (Tr. 1667) At Tr. 1673 Mr. Wilkoff was asked:

To the best of your knowledge or recollection were you offered the 50 per cent by Knoll or did you ask for it?" * * to which he replied:

I wil be honest with you, I don t know which came first. I really don know.

I know I have enj eyed it since I have been handling the line, but I can t tell you whether I asked for the 50 percent or whether they said if I stocked it I would get 50 per cent. (Tr. 1674) Did you ever tell Knoll that you would not handle or purchase any items in their line if you did not get a 50 per cent discount? I don t recall that any mention ,vas ever made at that point, because I never enjoyed anything else but the 50 per cent discount. (Tr. 1674) A Knoll dealer, to my understanding, enjoyed a 50 per cent discount as a displaying and retail dealer.

In other words, we stocked a certain amount of it to enjoy the 50 per cent privilege. (Tr. 1671) :'othing in :vr. Wilkoff's testimony gives the slightest support to Knoll's contention that the additional 10 percent discount it granted to Decor Associates, Inc., was made in good faith to meet the equally low, lawful price of Knoll competitor for an identified item or items.

Revere Furniture Equ1:pment Co. William Baiardo, president of Revere Furniture & Equipment Co. 950 Upshur Street, , Washington D. C., testified. (Tr. 2910 et seq. He discussed his firm s discount with Taylor Simmons, the Knoll salesman. Did you tell him that you would buy-that you want to buy Knoll, if you could get it at fifty off the list price? I guess so, yes. (Tr. 2919) At Transcript 2922 Mr. Baiardo testified that he did not ask Knoll Associates or Mr. Simmons to match the discount of any other manufacturer from whom Revere Furniture was purchasing. Revere is run as a "contract business. " (Tr. 2927) It renders a design service as part of its contract business; develops layouts of space. The business employs "about 110 people" (Tr. 2929) and has 40 000 square feet of space. Most of the Knoll furniture purchased by Revere is for commerical use in offces and institutions. (Tr. 2937) Initial Decision 70 F. T. Revere s primary interest in purchasing items from Knoll is to buy at the lowest net prices available. (Tr. 2940) Revere would not object to buying furniture from a manufacturer at less discount than 50 percent if it were being granted the maximum discount available (Tr. 2941-42), provided it is "competitive " with other manufacturers. (Tr. 2943) During 1958-1962, Revere did not ask Knoll to meet or match the price of any other specific product manufactured by anyone of Knoll's competitors. (Tr. 2945) Knoll' s granting of its 50 percent discount to Revere Furniture & Equipment Co., was not made to meet the equally low, lawful price of a Knoll competitor for an identified item or product. Capitol Offce Supply Co., Inc. Robert F. Allen (Tr. 2955) formerly manager of the offce furniture department of Capitol Offce Supply Company (from February 1958 until the early part of 1962) testified Capitol, a combination offce stationery and offce furniture house sells offce furniture at retail in the Washington area. (Tr. 2957). Mr. Allen was responsible for purchasing offce furniture when he was at Capitol. He negotiated Capitol's 50 percent discount with Ben Short of Knoll over a period of six months. Capitol's annual volume of sales of offce furniture while Allen was with them was about $225 000.

In connection with Allen s purchase of particular Knoll products for Capitol Offce Supply Company he did not ask Knoll to meet or match the price of any other specific product manufactured by anyone of Knoll' s competitors. (Tr. 2972) Mr. Allen testified during the period of time he was with Capitol the desks and seating which he purchased from Knoll .competitors could be sold interchangeably with the desks and seating which he purchased from Knoll. (Tr. 2985) If this is a fact, KnoJls meeting competition evidence, in order to conform to the criteria established in recognized decisional authority, should have established that the discriminatory prices at which Knoll sold its desks and seating to Capitol were granted to meet the lawful lower price of a competitor for an identified item which was, at that time, interchangeable with the Knoll item. Knoll' s evidence fails far short of such proof.

The hearing examiner finds that Knoll has completely failed establish by reliable, credible and preponderent evidence in this record that the discriminatory discounts which it granted to its favored customers during the relevant time and in the relevant cities were granted "in good faith to meet an equally low price of KNOLL ASSOCIATES, INC. 405 311 Initial Decision a competitor " for an identified or identifiable item. Knoll had and has the burden of going forward and the burden of proof as to this, its meeting competition, defense. It has failed to sustain its burden of proof.

Knoll produced no evidence that it discriminated in the price for a specific item in its furniture line to meet a competitor lower price for the same or a similar item. Knoll gave its extra discount across the board on al1 items in its line. There is no evidence that anyone of the hundreds of items in the Knoll line vied for the retail dollar on an "eyebal1-to-eyebal1" basis with the same or a similar item in a competing line. The record contains some generalizations, and comparisons of Knoll chairs with competing chairs. It is possible (although the record is silent) that most of the other items in the Knoll line (aside from seating) sold at the extra 10 percent discount did, or did not, have any competition-utilitywise, designwise, stylewise, or pricewise from any competitor s products.

Knoll seeks absolution in this proceeding for price discriminations covering tens and possibly hundreds of different items on a blank check" basis. The most extreme of the meeting competition defenses which have heretofore been asserted in such proceedings have not sought such unrestricted exculpation. Knoll' s pricing practices permit a few of Knoll's customers, selected to suit Knoll' s purposes, to buy for $100 items for which most of its customers must pay $120. This is not being done by Knoll "in good faith to meet the equally low price of a competitor.

CONCLUSIONS OF LAW 1. Respondent Knoll Associates, Inc., a !\ew York corporation a manufacturer of modern contemporary furniture and furniture products during the years pertinent to this proceeding sold and is now selling its poducts in "commerce " within the meaning of Section 2 (a) of the Clayton Act, as amended. 2. In the course and conduct of its business in commerce Knoll has discriminated in price between purchasers of Knoll products of like grade and quality.

3. Knoll's favored customers compete with its unfavored customers for sales of Knoll products to the consumers-the ultimate users.

4. The effect of Knoll' s price discriminations has been, and wil continue to be, to lessen competition substantially, or to injure Appendix 70 F. T.

destroy, or prevent competition between Knob' s favored and unfavored customers.

5. Knobs price discriminations were not made in good faith to meet the equally low lawful price of a Knob competitor. 6. Although Knob originally pleaded a cost justification defense under Section 2 (a) it has not offered any evidence of cost justification of its price discriminations, and such cost justification defense is found to have been abandoned. 7. Knoll's price discriminations did and do violate Section 2 (a) of the Clayton Act, as amended, and should be enjoined. 8. The Federal Trade Commission has jurisdiction over the parties to and the subject matter of this proceeding. This proceeding is in the public interest.

ORDER It is o1'de1'ed That respondent, Knob Associates, Inc., a corporation, its offcers, representatives, agents and employees, directly, or through its parent corporation, Art Metal, Inc., or through any corporate or other device in, or in connection with, the sale of furniture and furniture products in commerce, as "commerce" is defined in the amended Clayton Act, do forthwith cease and desist from:

Discriminating, directly or indirectly, in the price of such furniture and furniture products of like grade and quality by selling to any purchaser at net prices higher than the net prices charged any other purchaser who competes with the purchaser paying the higher price.

APPENDIX KNOLL ASSOCIATES, INC. , DOCKET NO. R549 The Unlawful Search and Seizure Issue:

1. The Hearing Examiner s Ruling on Respondent's Motions to Suppress Commission Exhibits CX 1914 A Through ex 1959 B For Identification, dated March 24 1964. 2. Federal Trade Commission s Order Denying Application to File Interlocutory Appeal, issued May 11, 1964. 3. Opinion of Judge Irving Ben Cooper of the United States District Court for the Southern District of New York filed July 14, 1964, in Civil No. 1676.

4. Order by the United States Court of Appeals (second circuit) denying Knobs Motion for a stay of proceedings, dated September 11, 1964.

KNOLL ASSOCIATES, INC. 407 311 Opinion 5. Hearing Examiner s Certification to the Commission, dated November 30, 1964.

6. Federal Trade Commission s Order Ruling on Hearing Examiner s Certification, dated December 15, 1964. 7. Federal Trade Commission s Order Clarifying and Amending (the December 15, 1964) Order Ruling on Hearing Examiner s Certification, dated December 16, 1964. 8. Hearing Examiner s Order for Inspection and Copying of Documents and for Additional Hearings, dated December 16 1964; and Order Amending Hearing Examiner s Order of December 16, 1964, dated December 18, 1964.

9. Hearing Examiner s Order Closing Record After Reopening by Federal Trade Commission, dated January 11 1965. 10. Hearing Examiner s Supplementary Ruling upon Respondent's Motion To Suppress Based Upon Record as Reopened dated February 25, 1965 (page 1739 herein). OPINION OF THE COMMISSION AUGUST 2 1966 By REILLY Commissioner:

Respondent herein has been charged with violation of Section 2 (a) of the amended Clayton Act. The matter is now before us on respondent' s appeal from an initial decision of the hearing examiner, holding that the allegations of the complaint had been sustained by the evidence and ordering respondent to cease and desist from the practices found to be unlawful. The complaint specifically alleges that respondent, a manufacturer of contemporary furniture, has discriminated in price in the sale of products of like grade and quality by arbitrarily granting discounts of 50 percent off list price to some purchasers and discounts of 40 percent off list to others. The complaint further alleges that the favored customers are engaged in competition with purchasers paying the higher price and that such competition may be injured as a result of respondent' s price discriminations. The hearing examiner found that respondent sells its furniture to users, to architects, to interior design firms principally engaged in rendering interior design services, to interior design firms simultaneously engaged in rendering interior design services and in buying and selling furniture to large department stores which carry no Knoll furniture in their inventory, to retail firms engaged almost exclusively in sellng offce equipment and furniture, to retail furniture stores engaged almost exclusively in , Opinion 70 F. T.

sellng only furniture and furnishings to contract houses which specify Knoll furniture in bids submitted in response to written specifications, and to retail outlets that sell Knoll furniture through Knoll catalogs. He further found that there is substantial cross competition between the various classes of respondent' retail sellers, (a) architects vis-a-vis architects, interior designers, and retail stores; (b) interior designers vis-a-vis interior designers, architects and retail stores; and (c) retail stores vis-avis retail furniture stores, architects, and interior designers. The examiner also found that respondent had discriminated in price between competing purchasers of its products and that the amount of the differential was suffcient to have the statutorily prescribed effect on competition. According to the initial decision this finding is based upon testimony of numerous witnesses who testified as to the keenness of competition in the resale of furniture acquired from respondent and as to the significance of the differential insofar as their abilty to compete was concerned. The examiner also held that respondent had failed to establish a meeting competition defense under the Section 2 (b) proviso. During the course of this proceeding, the examiner admitted into evidence over respondent' s strenuous objection certain documents obtained by counsel supporting the complaint from a former employee of respondent' s agent in Detriot, Michigan. Although the examiner expressly stated in his initial decision that he had placed no reliance on this disputed evidence in making his findings of fact, respondent has fied a separate appeal from the ruling which permitted the documents to be placed in the record. This argument wil be considered later in the opinion. We wil deal first with the issues raised by respondent' s appeal from the examiner s findings, conclusions, and the order to cease and desist.

We note at the outset that respondent does not contest the examiner s holding that it had discriminated in price between competing purchasers and that certain of these discriminations would have the requisite adverse effects on competition. As to such price discriminations, respondent apparently agrees that an order should issue unless the discriminations were shown to be justified under the Section 2 (b) proviso.' Respondent argues on this 1 Respondent states in its brief that it has no quarrel with the conclll ion that evidence relied on by the examiner" demon trate cOmlJetition among retailers, and in that position of the brief in which it discusses the issue of probable competitive injury it states "VI' emphasize here that we are not now discussing the question of prohable r.ompetitive injury to retailer of furniture, furniture 5stores, department stores, or furniture dealers generally. KNOLL ASSOCIATES, INC. 409 3lr Opinion phase of its appeal, however, that the examiner erred in finding competition between designers and retailers in the resale of Knoll furniture and in finding injury to such competition as a result of the price discriminations.' It is respondent's contention that designers and retailers are engaged in entirely different types of business operations and consequently "do not operate in the same arena of the market place. " In making this argument respondent relies upon evidence to the effect that designers render services which are ordinarily not performed by dealers. Such services include preparation of space plans, designing buil-in cabinets and furniture, obtaining cost estimates from contractors, selection of colors, selection of floor and wall coverings, and selection of furniture and furnishings. Respondent also points to evidence that many designers, unlike retailers, receive compensation for their services which is not measured by a percentage of the cost of the furniture specified and some others, whose compensation is based on the cost of the furniture or furnishing specified, receive this fee regardless of whether their services are used to procure the furniture. There is also testimony cited by respondent that some designers act merely as purchasing agents for their clients and that others are not engaged in the purchasing and sellng of furniture. On the other hand, according to respondent, dealers who purchase Knoll furniture perform the classic function of the retailer; they purchase furniture at wholesale, maintaining a stock and inventory in a warehouse, display the merchandise in their stores for sale, advertise it for sale, and sen it at retail. Respondent contends therefore that the record conclusively establishes that the functions performed by a dealer differ so widely from those performed by a designer that there can be no meaningful competition between these two types of businesses. In determining whether respondent's discriminations between designers and dealers may result in injury cognizable under Section 2 (a), we must consider whether the favored and non-favored customers are in fact engaged in competition and not whether they normally operate at different functional levels or whether , asthey may be classified as different types of business entities respondent seems to contend. As one commentator has stated . . . the actualities of competition in the resale of the supplier 2 Respondent also contends that the examiner erred in finding that architects sen furniture when enr;ap;ed in the normal pradice of their profession. Vole agree that the evidence docs not support this finding-. Respondent concedes, however, that an architect may in addition to his professional practice also engage in the business of selling furniture as a completely separate endea.vor.

, Opinion 70 F. T.

products rise superior to nominal customer categorizations. The fact that a seller s favored and non-favored customers normally do not perform the same redistribution function, for example, does not preclude a finding of competition or injury to such competition within the meaning of Section 2 (a) if there is an area of competitive contact between them Federal Trade Commission v. Ruberoid Co. 343 U. S. 470 , or between the favored purchaser and a customer of the non-favored purchaser Federal Trade Commission v. M01'ton Salt 334 U.S. 37. And it ha.s been held that competition exists between persons on the same level of distribution even though there is great dissimilarity in the manner in which they conduct their businesses General Foods Car' 1Joration 52 F. C. 798 (1956), Mllelle1' Co. 60 F. C. 120 (1962), aff' 323 F. 2d 44 (1963) or in their reason or motivation for selling a particular product. Federal T1'ade Commission v. Simplicity Puttern Co., Inc. 360 U. S. 55. In the latter case, which is closely analogous to this matter, the favored customer sold the product for profit and the non-favored customer handled the product at no profit or at a loss as an accommodation to its customers and for the purpose of stimulating the sales of other products. Although this case was brought under Section 2 (d), the Court, in finding competition, stated While the giving of discriminatory concessions to a variety store on anyone isolated item might cause no injury to competition with a fabric store in its overall operation, that fact does not render non-existent the actual competition between them in patterns. It remains, and, because of the discriminatory concessions, causes further losses to the fabric store. As this Court stated in Federal Trade Commission v. Mar.ton Sult Co. 334 U. S. 37, 49 (1948), There are many articles in a grocery store that, considered separate, are comparatively small parts of a merchant's stock. Congress intended to protect the merchant from competitive injury attributable to discriminatory prices on any or all goods sold in interstate commerce, whether the particular goods constituted a major or minor portion of his stock. Since a grocery store consists of many comparatively small articles, there is no possible way effectively to protect a grocer from discriminatory prices except by applying the prohibitions of the act to each individual article in the store. While the evidence relied upon by respondent in the matter now before us demonstrates a dissimilarity in certain of the functions ordinarily performed by interior designers and retail dealers and indicates an absence of competitive contact between them JRowl' trice Discrimination ur1der the Robinson-Patman Act (1962). KNOLL ASSOCIATES, INC. 411 311 Opinion in certain aspects of their operations, it does not in any manner nullify or rebut the clear showing in the record that there is an extensive area in which designers and dealers compete by offering the same products and services to the same general class of customers. The hearing examiner so found, and his finding is supported by such overwhelming evidence that we see no necessity for reiterating it in detail here. Stated briefly, the testimony of manufacturers and designers establishes that many designers buy and sell furniture, including Knoll furniture. The record also contains uncontradicted evidence that there are dealers located in each of the relevant market areas who offer design services in connection with the sale of furniture and that these services are virtually identical to those performed by designers.' There is also considerable testimony by both designers and dealers that they are engaged in competition with one another. Respondent's argument that there is no competitive nexus between them is wholly without merit.

Respondent further contends that even if there is competition between designers and dealers, there is a failure of proof that its price discriminations may cause substantial injury to such competition since, according to respondent, it makes no difference to designers whether they buy at a 40 percent or a 50 percent discount. The record does not support this contention, however. Designer LiJian MiJer, for example, testified that her firm, S. J. MiJer & Associates, competes with retail establishments such as W. & J. Sloane, Inc., Itkin Bros. , Inc. , and Braun & Rutherford, Inc. Her testimony with respect to the competitive significance of a low purchase price is as follows:

Q. In the purchase of furniture and furniture products from Knoll, as well as other furniture products that you buy, is it necessary or essential to purchase them at the lowest available price? A. Yes, it is necessary in order to remain competitive, for one thing. Secondly, we are usually given a budget by a client, and within this budget we try to produce the most fully well-designed offce that we can. (Tr. 391) Similar testimony was given by representatives of design firms Architectural Interiors, Inc., and Emily Malino Associates, Inc. . The difference between a designer selling furniture in connection with its sale of design services und a dealer providing- design services in connection ,with the sale of furniture seems in some instances to be non-existent. For example, respondent classified Adler. Schnee Associates Inc., of Detroit, Michigan, as a design firm on its invoices but argues in its brief that it is a retail furniture establishment , Opinion 70 F. T.

The record further shows that an important area of competition between designers and dealers is in the field of contract or bid business. This relatively new concept of merchandising involves the sale on a bid basis of a combination of design planning and furniture to institutions and large companies. The significance of the differential between 40 percent off list and 50 percent off list to firms competing for this type of business is reflected in the testimony of representatives of design firms, contract houses and department stores. Mr. Thorn of Ideas, Inc. , testified as follows in answer to an inquiry as to the importance of the 50 percent discount in competing for bid work: A. Bid work, it is ridiculous to try and bid against people who do get a fifty percent. We have already a twenty percent differential, at a forty percent discount.

Q. What do you mean by a twenty percent differential? A. Well, if you buy something for fifty off, it is twenty percent less than if you buy it for forty off, so if you already have twenty percent difference you can t add much to it and be competitive. There is no use being in business to broke. You are in business to make a profit. (Tr. 1259) Mr. Demant of Walter Herz Interiors, Incorporated, testified that he had practically quit bidding Knoll furniture because "contract bids in this town go possibly for less than ten percent over cost, and when we have to pay twenty percent above cost, it is very obvious that it doesn t pay to bid. " (Tr. 1350) Mr. Beitel of Benon Products Co. a favored purchaser, gave the following testimony: Q. If the purchaser is getting a forty percent discount, you do not consider him a competitor? A. No, I do not.

Q. Why is that? A. How can he compete when I am buying at a twenty percent edge? (Tr. J029) Respondent also makes the argument (IJ f interior designers can procure furniture for their clients at 50 percent off list price and if the designers' percentage fee of anywhere from 1 to 15 percent is then considered a 'markup,' no retailer operating on an " 5 It is re-equal price basis could compete or remain in business. spondent' s position that the retailer s cost of doing business is sub- In making thi argument, respondent loses sight of the fact that it is asking the Commission to hold that designers do not compete with dealers. It also overlooks completely the undisputed evidence that it sells to some designers at a lower price than it sells to competing dealers. Thus, if we accept respondent's assertion at face value, we have ample reason for not doing that which respondent specifically requests, issue an order which would pennit respondent to discriminate in price between designers and dealers. KNOLL ASSOCIATES, INC. 413 311 Opinion stantially higher than that of the designer and that a retailer therefore needs a price advantage in order to compete on equal terms. Similar arguments have been rejected by the Commission in prior decisions. In the Mattet of Mueller Co., supra, PUTolator PToducts, Inc. Docket 7850 (1964) (65 F. C. 8). In passing the Robinson-Patman Act "Congress intended to insure, to the extent reasonably practicable, that businessmen at the same functional level would start on equal competitive footing so far as price concerned. (Emphasis added. ) , Having rejected to sell through different types or classes of purchasers, a seller may not penalize one by price discriminations intended to underwrite the other cost of doing business. The competition which the Act protects at the secondary level is that which exists when there is equality of price treatment; not the competition which the seller may wish to create by engaging in discriminatory pricing practices. We find nothing in the Act or in its legislative history which indicates that Congress intended to permit sellers to regulate competition among buyers by discriminating in price. Such arbitrary interference by the seller may certainly injure the normal competitive rivalry among its customers. As stated by the Supreme Court in Sun Oil We discern in 2 neither a purpose to insulate retailers from lawful and normal competitive pressures generated by other retailers, nor an intent to authorize suppliers, in response to such pressures created solely at the retail level, to protect, discriminatorily, sales to one customer at the expense of other customers. For all of the foregoing reasons we agree with the hearing examiner s conclusion that there is a competitive nexus between designers and retailers and that in that area in which these businesses compete there is a reasonable possibilty that respondent' price discriminations wil substantially injure, destroy, or prevent competition with the customer receiving the benefit of such discriminations.

Respondent next contends that the hearing examiner erred in holding that it had failed to establish that its lower prices to some customers were granted in good faith to meet the equally low prices of its competitors. The principal basis for this holding, as we read the initial decision, is that respondent did not prove that it was in fact responding to competitors' lower prices when it sold to some customers at a 50 percent discount. The examiner specifically held in this connection that "When Knoll felt it would Federal Trade C07nmis8hJ'1' V. 81m oa Company, 3i1 U.s. 505. Federal Trade Com"mission v. S1ln Oil Coml)any, supra, at 523. Opinion 70 F. T.

promote the distribution and sale of its furniture, it gave its highest discount (50 percent) to Knoll customers who demanded it as a condition precedent for marketing Know furniture aggressively-with floor displays and minimum purchases. Customarily, Knoll' s customers, so favored, usually were receiving, coincidentary, the highest discounts granted by Knoll's competitors. In C. v. A. E. Staley Mfg. Co. 324 U. S. 746, the Supreme Court held that " Section 2 (b) does not require the seHer to justify price discriminations by showing that in fact they met a competitive price. But it does place on the seller the burden of showing that the price was made in good faith to meet a competitor And we have defined the standard of good faith as "simply the standard of the pur dent businessman responding fairly to what he reasonably believes is a situation of competitive necessity. the Matter of Continental Baking Company, Docket 7630 (December 31 1963) (63 F. C. 2071J.

In any case in which the meeting competition defense is plead- , we think it incumbent upon the seHer to prove that he was responding or reacting to a competitive situation; that he discriminated in price because the lower price of a competitor made it necessary for him to do so. "Section 2 (b) presupposes a Jower price responsive to rivals' competitive prices " (Rowe Price Discrimination Under The Robinson.Patman Act). And as we said in Forster Mfg. Co. Docket 7207 (January 3, 1963) (62 F. C. 852 909J, Section 2 (b) does not sanction the fortuitous meeting of a competitor s price nor is there a good faith meeting of competition when price concessions are "granted as a matter of course irrespective of w;,at other sellers were offering. " Consequently, in any case in which a seller ciaims justification under the 2(b) proviso, if it appears from the evidence that he would have sold to favored purchasers at the lower discriminatory price regard- Jess of the price at which his rival sold, it cannot be said that he was meeting a competitor s price in good faith even though it can later be established that his competitor was also selling at the lower price. In other words, the seller must show not only that the favored customer received a lower price from a competing seller but that its price reduction to that customer was made to meet in good faith the competitor s equally low price. e "See Standard Oil Co. v. 340 U. S. 231 , 244, wherein the Court stated that the discussion of the 2 (b) defense in Staley " proceeds upon the assumption, applicabie here, that if a competitor s 'lower price' is a lawful individual price offered to any of the seller s customers, then the seller is protected, under 2, in making a counter offer provided thfl eeller proves that its counter offer is made to meet in good faith its competitor s equally low prke. (Emphasis added.

, KNOLL ASSOCIATES, INC. 415 311 Opinion We are in full agreement with the examiner s finding that respondent extended its maximum discount to favored customers not in a good faith response to competitors' equally low prices but to compensate them for displaying and promoting Knoll furniture, buying in larger quantities, or simply because the customer demanded a lower price. Although respondent' s favored customers usually were receiving the maximum discounts granted by respondent's competitors, respondent failed to demonstrate that there was a causal connection between its own lower prices and those of its competitors.

Respondent' s reasons for granting the greater discount are clearly revealed in the testimony of its customers, as well as in the statements of its own offcials.' In some instances, respondent voluntarily granted the maximum discount. Mr. Burton, owner of RCM Burton & Son, Washington, D. , testified: When the Knoll Salesman carne into my show room, he was impressed "\",jth the show room. He said, I'you should have the 50% discount." That was it. (Tr. 3053) He also testified:

Q. Now, didn t you state, Mr. Burton, that Knoll was not asked to meet the prices or the discounts of other manufacturers or distributors of furniture? Was that not your statement, Mr. Burton? A. We don t ask any company to meet anybody else s prices. (Tr. 3034) Other customers were able to obtain the 50 percent discount only after extended negotiations with respondent' s representatives. Mr. Sens, secretary-treasurer of Desks Inc., New York City, testified Through many months of negotiation and talking with the young salesman whom they had on the account who was very interested in having us, who thought that we could do a job with Knoll, in talking to him and eventually to the principals of the company, we finally reached an understanding where they would give us the fifty off if we would try to do a job for them. " (Tr. 1919) Some customers couldn t remember how they obtained the maximum discount. Mr. Schnee of Adler-Schnee Associates, Inc. Detroit, Michigan, gave the following testimony: A. ,"Ven, in substance the pricing policy of Knoll at that time was 40 percent to anyone in the trade with a 50 percent discount to peopJe who were particularly active or who showed some of the furniture on .the floor, on the sales floor, and we felt we had furniture of theirs on the floor and were active with Knoll Associates, and we thought " See infra pages 443-446.

Opinion 70 F. T.

we were entitled to a better discount than an architect who had no showroom or anything. (Tr. 2659) Q. 'When you came back to Detroit, had you achieved your purpose? A. Yes. We were on a 50 percent discount form that point. Q. SO that really is the upshot of the thing, am I right? A. How we achieved it, I don t honestly recall, but we did get a 50 percent discount from Knoll. (Tr. 2661) In some instances, respondent reduced the discount from 50 percent to 40 percent. Mr. Bass of Gregory, Mayer & Thorn, Detroit Michigan, testified:

Q. Now, there was an occasion when the discount to Gregory, Mayer and Thorn was reduced from 50 percent to 40 percent; isn t that correct? A. That's when 1- Q. Discuss prices? A. -discussed it, yes.

Q. Did he tell you why the discount was being reduced from 50 to 40? A. Well, as I recall, his answer to that was that the amount of business that we were doing, we didn t warrant the maximum discount. (Tr. 2778) And Mr. Robinson of Robinson Furniture Company, Detroit, Michigan, gave similar testimony:

Q. Do you know r. Robinson, why the discount was reduced? THE WITNESS: . . . The question of the volume of business was approached and it was brought to my attention that the Knoll Company did not consider the volume of business that the Robinson Furniture Company was producing for them suffcient to warrant the 50 percent discount. Q. And, in turn, they reduced your discount to 40 percent? A. And they told me from that time on that our discount would be 40 percent. (Tr. 2721) The record shows that respondent also discriminated in favor of certain customers that demanded a 50 percent discount. These customers were obviously desirable accounts and other manufacturers sold to them at 50 percent or more off list. But the testimony of respondent' s own offcials clearly reveals that respondent was meeting the demands of these purchasers rather than the lower prices of its competitors who may have been sellng to them at comparable low prices. For example, Mr. Niedringhaus, who was in charge of Knoll's New York sales region, testified as follows as to respondent' s reason for granting a lower price to R. H. Macy and Co. , Inc. :

KNOLL ASSOCIATES, INC. 417 311 Opinion Q. Why did you continue to sell to them at fifty percent if the standard discount was forty? A. Well, I know that Macy s has a policy of buying at fifty percent off list. I knew that was the only way I was going to sell them. (Tr. 3801) And as to B. Altman and Co. :

Q. Why did you sen them at fifty off the p1,blished list price when your regular discount was forty? A. Well, I knew it was their policy to buy at only fifty percent off list. (Tr. 3805) And as to National Hospital Supply Co., Inc. Q. Why did you sell them at a fifty percent discount if your standard discount was forty? A. I knew that they only bought at fifty percent off list. (Tr. 3802) It may be argued that respondent was responding to competitors' prices in these instances on the theory that the customer could not maintain a policy of buying at a 50 percent discount unless some manufacturers sold to them at such a discount. But to hold that under such circumstances a seller s lower discriminatory prices are excused by the 2(b) proviso would be to largely emasculate the prohibitions of Section 2 (a). The basic purpose of the Robinson-Patman Act was to insure that competing purchasers "from a single supplier. . . would not be injured by that supplier s discriminatory practices Sun Oil, supra and this purpose would be effectively frustrated if the seller is permitted to discriminate in favor of certain buyers on the mere showing that these buyers insisted on receiving a lower price. As stated above, it is incumbent upon the seller to establish that its lower prices were made in good faith to meet a competitor Staley, supra. And bearing upon the good faith of the seller claiming this defense is the legality of its competitors' prices. As held by the Supreme Court in Standard Oil" a discrimination made in a genuine defensive response to the "lawful lower price of a competitor" is permitted by Section 2(b). While it has been held that the seller does not " carry the burden of proving the actual legality of the sales of its competitors in order to come within the protection of the proviso" n we are of the opinion that he must show that he had reason to believe that the prices he was meeting were lawful or, at least, that he had no reason to believe they were unlawful. Tri-Valley Packing Association Docket 7225 Standard Oil Co. v. C., 340 U. 3. 231, 242. "Standard oa Co. v. Brown 238 F. 2d 54 , 58 (5th Cir. 1956). Opinion 70 F. T.

remanded on other grounds Tri- Valley Packing Association Federal Trade Commission 329 F. 2d 694 (9th Cir. 1964)." Respondent has not made this showing. As a matter of fact, respondent' s knowledge that a customer received lower prices simply because it was its policy not to pay a higher price should have indicated to respondent that the lower prices of its competitors to that customer may have been discriminatory and probably not justified by savings in cost in dealing with that customer. As we recently held in National Dairy, it was incumbent upon respondent to present evidence showing that under these circumstances it had no reason to believe that the lower prices of these competitors were not lawful.

From our review of al1 the evidence, we agree with the hearing examiner that respondent failed to sustain the burden imposed by 2 (b). Respondent' s appeal from the examiner s ruling rej acting the meeting competition defense is therefore denied. RESPONDENT S CONSTITUTIONAL ISSUES Respondent also urges two constitutional defenses. Initially, it contends that certain documents admitted into evidence were the product of an unreasonable search and seizure in contravention of its rights under the Fourth Amendment. This issue was first raised during complaint counsel's rebuttal to Knoll' s defense. Second, respondent contends that its right to counsel, guaranteed by the Fifth Amendment, has been impaired by the actions of the attorneys supporting the complaint. This argument was first made after the record had been closed.

The search and seizure allegation has been the subject of extensive testimony and voluminous pleadings. The issue of impairment of the right to counsel has been particularly stressed by respondent in its briefs and argument on appeal. Both issues dom- Rowe commcnts as fonows with respect to ecngrcssiona1 concern that the 2(b) proviso might be interpreted to permit the reciprocal meeting of sellers' illegal discriminatory prices: . . where a seller s price reduction produced competitive repercussions on the customer level, as in the typical price discrimination in favor of the individual 'big buyer,' the legality of the competitor s lHief. was a focal concern. Here to permit an ilegal price cut by one supplier to a particular chain store to be justified under the statute by reference to an illegal price discrirninat:on j)rocun d by such R buy..r from another supplier could have legalized the very discriminatory pricing in favor of big buyers which the Robinson-Patman Act was designed to check. As Representative Utterback l)ut it, such a device to exonerate ilegal discriminations to big buyeJ's by une supplier because of comparable ilegal prices by others could ' nullify the act entirely at the very inr,eption of its enforcement.''' Price Discrimination 1tnder the Robinson- Patman Act at 215.

Docket )Jo. 7018 (July, 1966) Iv. 79 hel'einJ. KNOLL ASSOCIATES, INC. 419 311 Opinion inate what, in our experience, is a relatively uncomplicated Robinson-Patman Act proceeding. They levy serious charges against the attorneys supporting the complaint. Accordingly, we treat of the issues in depth.

At the commencement of their rebuttal to respondent' s "meeting competition " defense, complaint counsel moved to introduce in evidence forty-six documents principally pertaining to Knoll's reasons for granting fifty percent discounts. The documents had been supplied to counsel by one Herbert Prosser, a former employee of respondent' s agent for the Detroit-Cleveland area. Knoll responded to complaint counsel's motion by filing an affdavit with the hearing examiner alleging that Prosser had stolen the documents from its files "on or about the same date that he had a telephone conversation with Bernard Turiel, Esq. , counsel supporting the complaint." Much in the way of motions and appeals followed respondent's initial obj ection to use of the forty-six rebuttal documents. A chronology and description of these pleadings is contained in the hearing examiner s decision. For the purposes of our review, the following summary of the pleadings is suffcient:

On the strength of respondent's initial affdavit, the hearing examiner convened a special hearing in Detroit in March of 1964 to inquire into the circumstances surrounding complaint counsel's possession of the documents. Testimony was given by Prosser employer and a number of witnesses who either worked with Prosser or to whom Prosser had made statements concerning the challenged documents. Prosser testified and was examined by respondent as an adverse witness. He readily admitted taking the documents and other papers from his files and those of his employer, and he admitted that he had a number of conversations with complaint counsel. Respondent, however, did not inquire into the circumstances concerning Prosser s possession of the documents nor did it probe the nature of the communications between Prosser and complaint counsel. After his very limited examination of Prosser, respondent's counsel asked the complaint attorneys to testify. Previously, respondent had sent a telegram to the Commission requesting authorization of such testimony. This motion was denied on the ground that it did not afford a suffcient basis to understand the nature of the relief sought by Knoll and its grounds for relief. Accordingly, complaint counsel declined to Opinion 70 F.

testify on the ground that Section 10 of the Federal Trade Commission Act and the Commission s Rules of Practice prohibited such action without Commission authorization. Instead, counsel offered to make a statement for the record, but the offer was rejected upon the objections of Knoll's attorneys. Thereafter, the hearing examiner ruled that the documents supplied by Prosser were properly admissible into evidence. Respondent then petitioned the Commission for permission to file an interlocutory appeal from the hearing examiner s ruling. Its petition stressed, among other things, the refusal of complaint counsel to testify. Noting that the case was ripe for a decision on the merits by the hearing examiner, the Commission, on May 11, 1964, Commissioner Elman dissenting, denied respondent' s motion on the ground that it did not present suffcient grounds to justify an immediate decision as to the correctness of the examiner s ruling.

Upon denial of its petition for appeal, Knoll filed a motion in the United States District Court for the Southern District of New York requesting a stay of the proceedings on the complaint until a further hearing was held at which the attorneys supporting the complaint would be required to testify, and at which respondent would have use of all communications between Prosser and the Federal Trade Commission or its employees. That motion, and a subsequent motion by the respondent to dismiss the instant proceeding, were denied by the court in an opinion fied on July 13 1964." The court found that "not a scintila of evidence" existed to indicate any impropriety in complaint counsel's acceptance of the documents from Prosser. " In reaching its decision, the court emphasized the fact that respondent made no attempt to elicit testimony from Prosser concerning his communications with complaint counsel. Respondent, thereafter, appealed to the Second Circuit. During oral argument on the matter, the court strongly indicated that respondent was entitled to the testimony of the Commission attorneys. Accordingly, the Commission immediately vacated the hearing examiner s ruling on the documents and ordered reopening of thc record for the purpose of receiving complaint counsel's testimony and such other evidence as the examiner deemed pertinent.

HK7W/l Associates v. Dixon 232 F. Supp. 283 (S. , 19(4). Id. at 286.

16 On June 9. 1965, the Second Circuit, pursuant to stipulation of the parties, dismissed respondent' s appeal and vacated the District Court' s judgment without prejudice to respondent' right to raise the same issues in a subsequent proceeding. , KNOLL ASSOCIATES, INC. 425 311 Opinion Gary Beals, the "outside person " and told him that he had called Turiel and offered himself as a witness. Beals asked him why and Prosser replied well, I am just telling you that if I get knifed by Knoll, and they don t make me the kind of offer for employment ) wil make myself available for the Federal Trade Commission. (Tr. 4462) The record reveals that in addition to Dworski's other employees and Beals, Dworski and William Nolan, respondent' vice-president, were aware of Prosser s conversation on the 9th with Turiel.

Turiel could recall having only one conversation with Prosser in December but did not deny that there could have been two. His recollection of his communication with Prosser during the relevant period was that Prosser informed him that he was terminating his employment with Dworski; claimed that he had been un" fairly treated by Knoll; and offered to testify on behalf of the complaint. Prosser also claimed he had some papers that would be of assistance to complaint counsel and offered to mail them to the Commission. Turiel did not inquire about the papers and rejected Prosser s offers. He told Prosser that if complaint counsel wanted to talk to him they would get in touch with him. Prosser acknowledged calling Turiel on December 9 and 10. He admitted offering to testify for the complaint and admitted offering to provide relevant documents. Upon questioning by the hearing examiner, he stated that Turiel expressed a "very indifferent attitude" and told him he had "no interest" in the proffered documents "whatsoever." (Tr. 5521-22) On J an uary 2, Prosser called the Federal Trade Commission offces in Washington and found that Turiel was visiting his parents in New York City. After some diffculties in finding for himself the correct phone number, Prosser called Turiel in New York. He repeated his offer to supply documents relevant to the proceeding. According to Turiel, Prosser stated; (1) that he was no longer scheduled to testify for Knoll, (2) that instead, Dworski and Osetek, a former employee of Dworski, would testify regarding the question of meeting competition, (3) that the offered documents would negate the testimony of these men, (4) that he Prosser, was responsible for maintaining certain files for Dworski and that he had himself authored certain documents in the files, and (5) that the proffered documents were obtained as a result of an instruction he received from Knoll offcials and Knoll' counsel to weed out documents that were damaging and harmful to Knoll's defense. On the basis of these statements and after re- Opinion 70 F. T.

ceiving assurances from Prosser to the effect that the documents were from his own personal files and were not the property of respondent, Turiel agreed to look at the offered material. In doing so, he went against the advice of his immediate superior and that of a senior attorney in his particular trial division. Both men prior to the January 2 offer of assistance by Prosser, had advised Turiel to have nothing to do with Mr. Prosser. Turiel acknowledged this fact but claimed that Prosser s statements on January 2 modified his original distrust of Prosser and convinced him that he had a professional obligation to examine the documents. The testimony of Prosser and another witness establish that he took some of the documents on the morning of December 10 from Dworski' s showroom. Prior to his actions of the day before and until Knoll took over the lease of the premises on January 1 1964, Prosser had, and was permitted to retain, keys to the showroom. Prosser also testified that he took the remainder of the documents from the showroom during the period from December 9 through 19. He said the documents were obtained from his own offce files and those of Dworski.

The testimony of several witnesses shows that Prosser displayed or spoke of the documents to others prior to sending them to complaint counsel. Shortly after December 9, he took documents into the Detroit showroom of Herman Miler, Inc., a competitor of Knoll, and asked help in wrapping them from Mary Stevens, an acquaintance employed in the showroom. Miss Stevens testified that Prosser told her that he had taken the papers from Dworski's showroom and that he intended to mail them to the " government attorney in Washington. " She further testified that Prosser, using his credit card, attempted to call a Commission attorney from her offce but was unable to make the connection. He then called the Federal building in Detroit in order to find out the address of the Federal Trade Commission in Washington to which he could mail the documents. However, he did not mail the documents on that date. On December 13, Prosser informed Jesse Osetek, a former employee of Dworski and a man scheduled to testify for Knoll in January, that he had records at home that would be damaging to Knoll' s position in this proceeding. Finally, on January 4, 1964, Prosser returned to the Herman Miler showroom, wrapped documents before an employee of the Miller company, and stated that he was going to send them to the Federal Trade Commission. The documents were received through the mail by complaint counsel several days later. KNOLL ASSOCIATES, INC. 427 311 Opinion Concurrent with his Initial Decision on the merits of the complaint, the hearing examiner filed a separate opinion affrming the admissibility into evidence of the forty-six challenged documents. He declined consideration of Knoll's claim of impairment of its right to counsel on the ground that this issue was first raised after the record had been closed and without notice to counsel supporting the complaint. With respect to the search and seizure issue, he found that: (a) the record did not demonstrate that the documents were stolen; and (b) respondent, in any event did not own the documents. In conclusion, he characterized respondent' s Fourth Amendment argument as a "red herring" and an "Alice-in-Wonderland fantasy." Although he expressly disclaimed reliance on the challenged evidence in reaching his decision on the complaint, the hearing examiner cautioned that by such action hc did not "wish, even by innuendo, to indicate that there is in this record, the slightest proof that. . . complaint counselor anyone else at the Federal Trade Commission induced their theft; or that Knolls constitutional rights have, in any way, been abridged by the conduct of anyone directly employed by or indirectly associated with the Federal Trade Commission. " H In its appeal, Knoll argues that the forty-six rebuttal documents should be suppressed and the complaint dismissed because the circumstances behind complaint counsel's possession of this evidence compels a finding that Knoll's rights under the Fourth Amendment have been violated. The fact that the documents were not used in finding against Knoll on the complaint is claimed to be unimportant since Knoll alleges that they were used by complaint counsel in trial preparations prior to their introduction into evidence, and thus infected the record to an indeterminable extent. Additionally, respondent contends that its claim of impairment of its right to counsel was timely and must be considered. Initially, we consider respondent' s claim that it has been the victim of an unreasonable search and seizure: The core of the Fourth Amendment is the protection of one privacy against arbitrary intrusion by the police. Wolf v. Colorado 338 U. S. , 27 (1949). Basic to any demand that relevant evidence be excluded from consideration because of a violation of this Amendment is the burden of the petitioner to demonstrate 11 Supplementary Ruling upon Respondent' s Motion to Suppress, p. 27. Opinion 70 F. T.

that his privacy has been invaded by those entrusted with enforcement of the law." Respondent contends that it has carried this burden. Its argument in this respect is both intricate and unique. It may be summarized by the following' six contentions each of which we shall thereafter consider in sequence. (1) Prosser stole the documents from Knoll' s files; (2) Alternatively, Prosser stole the documents from another for the purpose of harming Knoll. Under recent cases, respondent argues, this is suffcient to give Knoll standing to claim that it had been a victim of an unreasonable search and seizure; (3) This case is materially different on its facts from Burdeau v. McDowell,'" wherein the Supreme Court held that courts are not to be precluded from receiving relevant evidence which a private individual has acquired by a tortious act so long as there is no government complicity in the act. The degree of cooperation present here between Prosser and complaint counsel would, according to respondent, have required suppression of the challenged evidence in Bu,.deau;

(4) The proper case to be applied in this matter is Gambino United States. Therein, the Supreme Court held that documents seized without authority for the sole purpose of aiding a federal prosecution are inadmissible. According to respondent, Prosser stole the challenged documents for the sole purpose of assisting complaint counsel;

(5) Upon acceptance of the contested documents, complaint counsel knew or should have known that they were stolen. Therefore, respondent contends, their acceptance of the documents amounted to ratification of an "illegal search and seizure; and (6) The Burdeau holding has been overruled by Elkins United States. Therein, the Supreme Court held that "federal offcials may not use evidence i1legal1ly obtained by others, whatever their purpose or their relationship to federal authorities without compromising the integrity of the federal proceeding. (1) We agree with the hearing examiner that the record does not establish that the disputed documents were stolen from Knoll' s files. For the most part the documents are communica- "See, g.. saVCTman v. United States 365 '(. S. 505 , (1961); Jones v. United States 362 U. 25? (1')60): Wee!. Y. United States. 232 U. S. 383 (1914): Boyd v. United States 116 U. S. 616 (1886), 256 U.S. 465 (1921).

o 275 U. S. 310 (1927).

l 364 U. S. 206 (1960).

KNOLL ASSOCIATES, INC. 429 311 Opinion tions from Jesse C. Osetek, Herbert Prosser and Joseph Dworski to Knoll offcials, and communications from the latter to the same three men. Osetek was an employee of Dworski when he authored or received those of the documents bearing his name. So too was Prosser. The latter admitted that he took some of the documents from his own files within the showroom and the remainder from Dworski' s files. He denied taking any files from Knoll. Dworski who owned the showroom, identified the documents as papers coming from his files. These facts, the nature of the relationship between Dworski and Knoll, and the fact that a number of the documents are responsive to one another convinces us that Knoll maintained copies in its own offces and that the documents in the record were Dworski' s copies.

Respondent, however, points to the testimony of its employee Gary Beals, to the effect that the documents belonged to Knoll. Beals first testified after Dworski's appearance and was not questioned concerning ownership of the documents. After both sides had rested, the hearing examiner indicated to respondent's counsel that there had been no showing of Knoll's possessory interest in the challenged documents. Although counsel on several occasions said he would recall Dworski for testimony, he never did. Instead, Beals, who was present in the hearing room during legal argument concerning ownership of the documents, was asked to testify further. In his second appearance, Beals stated his opinion that the documents belonged to Knoll. However, he also admitted that he had not seen the papers. (2) According to respondent, a finding that the documents were not its property does not preclude it from requesting their exclusion as the product of an unreasonable search and seizure. We agree. Since 1960, federal court decisions have broadened the category of those aggrieved by violations of the Fourth Amendment. In that year, the Supreme Court in Jones v. United States/ rejected sole reliance on "subtle distinctions" drawn from the body of private property law in considering a citizen standing to request invocation of the exclusionary rule. Subsequent decisions since Jones establish that it is suffcient that a citizen demonstrate that an ilegal search and seizure had been directed against him and that the fruits of the search could only be used to his detriment.

l362 u. s. 257 , 266 (1960).

'3 See V;lano v. United States 310 F. 2d 680 (loth Cir. 1962) ; Harlow v. United States, 301 F. 2d 361 (5th Cir. 1962) ; and Henzel v. United States, 296 F. 2d 650 (5th Cir. 1961). Opinion 70 F.

Respondent argues that even if it has not established that the documents were its property it has standing to request their exclusion under the aforementioned cases. It is no more specific in this claim than mere reiteration of the statement that Knoll was one against whom the search was directed " a statement found in the cited cases each of which involved a direct physical seizure of property by government agents. In view of the fact that respondent does not contend that complaint counsel participated in any seizure herein, and in consideration of Knoll's other arguments we must assume that Knoll claims that Prosser stole Dworski's documents; that this "seizure" was directed against Knoll; and that the government was (through Prosser s communications, his purpose, or complaint counsel's knowledge) suffciently involved with the "seizure" to render it one proscribed by the Fourth Amendment.

The first step in this claim is proof that Prosser took the documents from Dworski without authority. The hearing examiner found, however, that such was not the case. In so holding, he pointed out that Prosser had wide latitude in the use of the documents; that Dworski never directly testified that Prosser s possession and submission of the documents was unauthorized; and that Dworski, though fully aware of Prosser s intention to offer documents and testimony to support the Commission s complaint and Prosser s subsequent action in this regard, never undertook preventive or punitive action against Prosser. Our review of the record, however, convinces us that it is more reasonable to believe that Prosser took the documents from Dworski without authority and that this "seizure" was directed against Knoll. Although he never directly stated that Prosser s taking of the documents was unauthorized, the general tenor of Dworski' s testimony was to this effect. He testified that the documents came from his files; that he considered them valuable business records; and that he was unaware of their disappearance until informed that they were to be used in evidence against Knoll. Moreover, as a willing witness for Knoll's defense who testified, as the documents show, in direct contradiction to his written word, it is extremely unlikely that he would have authorized Prosser s actions. The latter, after his self-publicized offer of assistance to complaint counsel on December 9, 1963, was, for all practical purpose finished as an employee in the Detroit showroom. By his own admission, he took the documents from the showroom during the period from December 9 through 19. While he was authorized to KNOLL ASSOCIATES, INC. 431 311 Opinion take documents home with him in connection with his job, he did not remove the challenged papers for the purpose of assisting Dworski in the sale of Knoll furniture. Instead, his purpose in taking the documents was "to hang Knoll" for what he considered to be unfair treatment. If Prosser s actions were those of the government, Knoll has not only established "standing" to challenge the documents, but has made out a case requiring their exclusion from the record.

(3) Special counsel for the complaint attorneys argues that, in any event, Prosser acted solely upon his own initiative and, therefore, could not have committed an unconstitutional search and seizure under the Supreme Court' s holding in Burdeau v. McDowell. Respondent disputes this claim. It contends that Burdeau distinguishable on its facts; that the proper case to apply in the instant situation is Gambino v. United States; " and that, in any event, the Burdeau holding has been overruled by the Supreme Court.

In Burdeav" the petitioner was discharged by his employer, Cities Service, for alleged fraudulent conduct. His employer then took charge of his offce, blew open safes, forced open desks, and seized, in addition to its own papers, private documents belonging to the petitioner, McDowell. Some three months later, Cities Service, after communication with the Department of Justice, turned over to the government papers belonging to McDowell. The company s communication to the Attorney General stated that McDowel1 had made fraudulent use of the mails in the transmission of various letters; "that some of such letters, or copies of them taken from McDowel1's file, were in the possession of the Cities Service Company; (anda that the Company also had in its possession portions of a diary of McDowel1 . . . and other data which. . . would be useful in the investigation of the matter before the grand jury and subsequent prosecution should an indictment be returned." " When the government filed a criminal information against McDowell based on the papers supplied by the employer, McDowell petitioned for return of the documents on the ground that they were the product of an unreasonable search and seizure in violation of his rights under the Fourth Amendment. The Supreme Court ultimately held against him after finding that no government offcial had anything to do with the theft 4 256 U.S. 465 (1921).

275 U.S. 310 (1927).

26 Burdeau v. McDowell. Itpya at 474. Opinion 70 F.

or any knowledge of the matter until several months after the fact. According to the Court, it was manifest that "there was no invasion of the security afforded by the Fourth Amendment against unreasonable search and seizure, as whatever wrong was done was the act of individuals, taking the property of an- " 27other, Bur'dea" is claimed to be distinguishable in a number of ways. According to respondent, the government attorneys therein unlike their F. C. counterparts herein (1) "did not, before and after the theft, accept the assistance of the private person who illegally obtained the evidence " (2) "They were not in constant communication with him " (3) they knew nothing of the theft of the documents until months thereafter and, (4) they " could properly be said to have nothing to do with the thief or the theft." In sum respondent argues that the evidence would have been excluded in Burdeau if the authorities there "had been acting in cooperation with the private person" as the record shows in this matter. Our reading of BUTdea" convinces us that the evidence would have been excluded in that case if the facts had established complicity between the government and McDowell' s former employer. Here, however, the examiner has made a finding that complaint counsel did not induce or encourage Prosser: s actions. At ODe point in its brief, respondent claims that it was not necessary for the hearing examiner to make such a finding, as government complicity in the taking of the documents is not required for a holding that respondent has been victimized by an unlawful , asearch and seizure. Whatever the merits of this latter claim claim which we consider infra it is clear from respondent' pleadings that a finding concerning the extent of Prosser s "cooperation" with complaint counsel was in order. During the special hearings, the complaint attorneys asked respondent' s counsel on several occasions whether they were being charged with complicity in the alleged theft of the documents. They never received a direct answer, nor did the hearing examiner who made a similar inquiry. Thereafter, respondent' s briefs to the hearing examiner, as its motions resulting in the special hearings, never directly charged complicity but stressed "cooperation" bebveen complaint counsel and Prosser in such a manner that "cooperation" could only be read as "complicity. " Respondent' s briefs on appeal are to the same effect. Its method of distinguishing Burdeau is an example of equating cooperation and 01ld. at 475.

;

KNOLL ASSOCIATES, INC. 433 311 Opinion complicity. Another is the manner in which it indirectly attacks the testimony of complaint counsel by careful1ly placed references to record statements by the hearing examiner expressing dissatisfaction with this testimony. Further, respondent's appeal briefs contain such statements as: "the Hearing Examiner evidently decided to protect complaint counsel at the respondent's expense and wrote a decision whitewashing him completely Prosser switched from the defense team to the Commission team on October 9" ; and " . . . the lengths to which the Examiner has gone in writing his decision to protect Commission counsel at any cost. During oral argument we asked respondent' s counsel on two occasions whether he was charging the complaint attorneys with complicity or subornation of larceny, and stated that if this were so we were ready to hear his arguments. Counsel denied making such charges and instead stressed the contentions that another case controlled the decision herein and that Burdeau had been overruled.

In its appeal brief, respondent refers to the attorneys supporting the complaint as "defendants. " The appellation is an apt one. In any matter wherein the issue of unreasonable search and seizure is raised the category of accused properly includes not only those charged with violation of the law, but also those entrusted with enforcement of the law. Both are, in effect, charged with action contrary to the public interest. The former are clearly entitled to direct accusation instead of innuendo and coloration of fact. It may be debatable whether the latter, because of their profession, are entitled to equal treatment. There can be no question however, that both are entitled to a judgment on a1l charges that have been made against them.

Prosser first offered to aid the government after a violent quarrel with respondent's offcials. He contrived to have this offer overheard by others. A witness produced by respondent testified that she heard Prosser s offer to Turiel. She heard Prosser inform Turiel that he then had documents that were relevant to the complaint against Knoll, not, as respondent has implied, that he could secure such information. n After complaint counsel refused this offer, Prosser told respondent about it. When this failed to invoke the response expected, he took documents from the show- "In the pruceeding before the "United States Circuit Court of Appeals, respondent represented that this witness testified that she had heard Prosser tell Turiel that "he had, or could get \Jussession of, incriminating documents which he would turn over to the Commission . . . Affdavit of Jacob 1mberman, ESQ. Knoll Associates v. Dixon Case No. 29078, Second Circuit, Sept. -3. 1964.

Opinion 70 F.

room. However, he continued to publicize his intention to assist the Commission. He told a woman employee of another furniture company that he had quarreled with respondent's offcials and that he had offered to testify against Knoll. He returned several days later to the same woman s offce with the documents; said that he was going to mail the papers to the Commission; called Washington and could not locate Turiel; and then caUed the Federal Building in Detroit in order to ascertain the address of the Commission. Thereafter, he told Jesse Osetek, a man he knew was scheduled to testify in respondent' s defense, that he had documents at home which he intended to submit to the government. Finally, on January 2, 1964, Prosser caUed Turiel, described the documents for the first time, and again offered them for government consideration.

We find that complaint counsel did not accept the assistance of Prosser prior to the unauthorized removal of the documents from Dworski's showroom. They did accept Prosser s offer after the taking of the documents as did the government attorneys in Burdea". The communications here, five in number and sporadic rather than "constant " were aU initiated by Prosser. The last communication here, in contrast to the initial communication in Burdea" was the government's first intimation of the nature of the proffered evidence.

It is true, as respondent contends, that the hearing examiner occasionaUy expressed dissatisfaction with Turiel's testimony. The record shows that from the outset he adopted a skeptical attitude toward this testimony. From time to time, he urged Turiel to be more specific and responsive in his answers. He was successful in this regard. Unlike both parties, he was not interested in legalistic parrying but was rather outspoken in his demand for the facts. Throughout the special hearings on the documents, he conducted examinations of the witnesses that were, at times, more searching than those conducted by respondent's counsel. After hearing aU the testimony and observing the demeanor of the witnesses, he concluded that there was not the "slightest proof" that complaint counsel participated in or encouraged the taking of the chaUenged evidence. Our review of the record fuUy substantiates this conclusion.

(4) The main thrust of respondent' s argument, however, is that government participation in or inducement of Prosser s action is not a requisite for a finding that its rights under the Fourth Amendment have been violated. In this regard respondent , .

KNOLL ASSOCIATES, INC. 435 311 Opinion relies upon Grnnbino v. United States. In that case, New York State troopers searched petitioners' automobile without probable cause and seized a quantity of Canadian liquor. Upon conviction in a subsequent federal proceeding under the National Prohibition Act, petitioners appealed to the Supreme Court on the ground that the troopers were to be considered federal agents under the terms of the prohibition statute. Although the Court ruled against this contention, it framed the issue before it as follows: "whether, although the state troopers were not agents of the United States, their relation to the federal prosecution was such as to require the exclusion of the evidence wrongfully obtained. ," After finding that the seizure was made solely for the purpose of aiding in a federal proceeding and that the subsequent federal prosecution was a ratification of an improper seizure made on behalf of the United States, the Court excluded the challenged evidence.

In contending that the instant matter comes within Gambino respondent seizes upon certain sentences to the exclusion of the underlying basis of the opinion. It first draws a parallel between the purpose of the state troopers and that of Prosser. Gambino said to be controlling here because Prosser s sole purpose in taking the documents was to assist in a federal prosecution. We cannot agree.

In Gambino the Court pointed out that the New York prohibisei- tion act was repealed several years prior to the challenged zure. Concurrent with his approval of the bil repealing this law, including the Governor of the state ordered all peace offcers, state troopers, to aid in the enforcement of the federal prohibition statute "with as much force and as much vigor as they would enforce any State Jawor local ordinance." '" The only change that was repeal of the state law would bring, the Governor instructed, that thereafter the state offcers were to take offenders to federal state statute, the authorities. Immediately after repeal of the Federal Prohibition Director for New York announced that he police offcer in ar- would seek the aid of every New York state he resting violators of the National Prohibition Act. Thereafter, met with various state peace offcers for the purpose of soliciting such assistance. According to facts judicially noticed by the Court Aid so given was accepted and acted upon by federal g 275 u. s. 310 (1927).

30 ld. at 314.

275 U. S. 310. at 315.

. , Opinion 70 F. T.

offcials. " Following repeal of the state statute arrests for violations of the Volstead Act in Northern New York were commonly made by state troopers. " " The Court further found that immediately after the arrest of the petitioners, they and the seized evidence were turned over to the Federal offcers. Upon these and other facts, the Court concluded that the statement of one of the troopers that no federal offcers were present at the time of the seizure "must be taken to mean merely that the specific arrest and search was not directly participated in by any federal " 34offcer.

In Gatnbino a "working arrangement" existed between state and federal offcials to enforce a federal statute."' It had become a regular practice in which both sides were knowledgeable before the fact. While federal offcers did not directly participate in the challenged seizure, they had encouraged it. The petitioner s privacy had been arbitrarily invaded by the police through the urging of the federal offcials responsible for enforcement of the V 01stead Act.

There was no working arrangement between the party seizing the challenged evidence here and the federal government. There was no encouragement by the government of Prosser s actions. There was no invasion of respondent' s privacy under color of law. In plain fact, rather than being encouraged or directed to assist the public interest in this proceeding, Prosser used the fact that there was such a proceeding to serve his own purposes. In order to ensure his business future, he threatened to help the Commission s case. When this threat did not bring the results desired, he moved to "get back" at Knoll by exposing that which it wished to remain undiscovered.

(5) Respondent further contends that complaint counsel "knew or should have known that they were accepting stolen property when they told Prosser to send the documents. Accordingly, it argues that their subsequent use of the documents was a "ratification" of an unlawful search and seizure. We are persuaded that Turiel, upon acceptance of the documents in January, 1964, was unaware of the fact that Prosser had only reccntly taken possession of them as a result of his quarrel with Knoll' s offcials. He had been led to believe that Prosser had the documents in his possession prior to his initial 32 Ib1 33 Ibid.

Id. at 316.

'5 See \nderSQn v. United States 318 U.S. 350 , 356 (1943). KNOLL ASSOCIATES, INC. 437 311 Opinion offer of assistance in December and that he had obtained them as a result of instructions to destroy papers damaging to Knoll' s defense. Prosser also told Turiel that the documents were not Knoll' s property; that he had authored many of them; and that they came from his files. K otwithstanding this, there appears 1ittle question that when Turiel accepted the documents he had reason to doubt the legal1ity of Prosser s possession . Prosser stated that he was no longer employed by Dworski. He told Turiel that Dworski and Osetek were to testify in his stead for Knoll's defense and that the documents would negate this testimony. He gave Turiel a verbal description of the documents and, as we have already noted, many of the documents were authored or received by Dworski and Osetek. Nevertheless, our review of the law convinces us that Turiel's on-the-spot decision to examine the documents did not convert Prosser s actions into an unreasonable search and seizure.

The most recent federal case following the BurdefLu ruling is United Stfltes v. Goldberg. Therein, the defendant was convicted of income tax evasion in part on the basis of testimony and records submitted by three of his former employees. The latter, all accountants, assisted the defendant in rewriting the cash and sales journals of his company in order to reduce the cash receipts. All three accountants retained the original journals within Goldberg s plant instead of destroying them as ordered by the defendant. The three men subsequently left Goldberg s employ. One Ferrari, shortly after terminating his relationship with the defendant, telephoned the Internal Revenue Service and made an appointment with government agents. Two days later, Ferrari along with another of the accountants, Dombkiewicz, discussed the pending tax evasion case against Goldberg with Internal Revenue offcers. On the next day, both men returned to the government' s offces, filed applications for informers' fees and turned over to the government the original journals they had taken from defendant against his express orders. Rudy, the third accountant had been indicted along with Goldberg. Several years after the other two accountants had delivered the journals to the government, Rudy agreed, in return for a promise of leniency from the United States Attorney, to turn over whatever documentary evidence he had. He delivered the original copies of Goldberg s journals that he had taken without authority. On appeal to the Third Circuit, Goldberg claimed that admission of the journals supplied 0330 F. 2d 30 (3d Cir. 1964). cert. denied, 377 U.S. 953 (1964). 438 FEDERAL TRADE COM MISSION DECISIONS Opinion 70 F.

by the three accountants violated his rights under the Fourth Amendment. The court, however, ruled that in the case of the first two accountants "the Government had no part or knowledge that they were going to take the records they turned over. With respect to Rudy alone, the court pointed out that "neither the United States Attorney no,- the Government agents knew what the docu,ents were, which he had in his possession and which he turned over, until they examined them. Certainly in the case of Ferrari and Dombkiewicz, the Government knew that it was receiving documents taken without authority after it discussed the case with the informers and both men returned to its offces to file for informers fees. At the least, the Government offcials in Goldbe,.g knew or should have known after receipt of the journals from these two men that the documents were taken without authority. The charge was income tax evasion. The submitted documents were originals. The suppliers of the documents were no longer employed by Goldberg. In the case of the journals supplied by Rudy, there can be no doubt that the tax offcials and the U.S. Attorney knew upon examination of the documents that they had been taken without authority. Some three years prior they had accepted similar documents from the other two accountants.

In BU?-deau the U. S. Attorney who received the documents attacked by petitioner McDowel1 "admitted at the hearing that as the representative of the United States. . . he had papers which he assumed were taken from the offce of McDowel1."" Indeed the communication between the employer and the Department of Justice that led to the latter s acceptance of the contested papers informed the government that some of the papers had been taken from petitioner s files. Moreover, the same communication offered the government portions of a private diary of the petitioner. When the agents in Burdenu accepted the proffered documents they, at least, had reason to believe that the petitioner did not agree to the disclosure of the papers. In summary, therefore, the knowledge " mentioned in Burdeau and Goldberg means knowledge on the part of the government that the documents, prior to the fact, were to be taken without authority. There was no such knowledge here. Furthermore, there was here not even the inducement offered the suppliers of the documents in Goldberg. United State, v. Goldberg, supra at 3.5 BBIbid.

256 U. S. 465 , at 474.

KNOLL ASSOCIATES, INC. 489 811 Opinion Prosser testified that he was never promised anything by complaint counsel. "No one, to my knowledge, has ever suggested that I do anything. I did everything on my own volition at the time because of my highly agitated state about my future with Knoll Associates and Mr. Dworski." (Tr. 5406, 5521 , 5523. (6) Finally, respondent urges that whether or not Prosser cooperated with complaint counsel, and whether or not he took the documents for the sole purpose of assisting a government proceeding, we stil must avoid consideration of the challenged evidence. In this respect, Knoll argues that Burdeau has been overruled by Elkins v. United States wherein the Supreme Court held, according to respondent, that the "imperative of judicial integrity" required the suppression of all iIegally obtained evidence. In other words, the fact that Prosser took the documents without authority is suffcient to require operation of the exclusionary rule.

We see nothing in the Elkins decision that indicates a departure from the law of the Burdeau case. Assuredly, the Court listed as one of the reasons for invoking the exclusionary rule the imperative of judicial integrity. " At the conclusion of its opinion, it stated that federal courts should not "be accomplices in the willul disobedience of a Constitution they are sworn to uphold." n However, the Constitutional disobedience to which the Court had reference was not that of a private individual but that of state police offcers. In Elkins the Court re-examined the so-called "silver platter" doctrine and found that it could no longer be accepted. It held that evidence obtained as the result of an unreasonable search and seizure by state offcers, without involvement of federal offcers, was excludable on timely objection by the defendant. Writing for the majority, Justice Stewart observed that the basis for the "silver platter" doctrine was the belief that the Fourth Amendment was not directed to the misconduct of state offcials. This underpinning was removed in 1949, Justice Stewart stated, when in Wolf v. Colorado" it was unequivocally determined by a unanimous Court that the Federal Constitution, by virtue of the Fourteenth Amendment, prohibits unreasonable searches and seizures by state offcers."" Accordingly, the Court stated that "no distinction can logically be drawn between evidence obtained in violation of the Fourth Amendment 01364 U. S. 206 (1960).

ld. at 223.

42338 U. S. 25 (1949).

4J Elkins v. United States. supra at 213. , Opinion 70 F, and that obtained in violation of the Fourteenth. The Constitution is flouted equally in either case. To the victim it matters not whether his constitutional right has been invaded by a federal " 44agent or a state offcer, Instead of overruling its holding in Burdeau the Court, in Elkins reinforced this holding. It recognized the practical demands of effective law enforcement and cautioned that "it must always be remembered that what the Constitution forbids is not all searches and seizures, but unreasonable searches and seizures " 45 and, according to the Court, a seizure was unreasonable when it amounted to arbitrary police intrusion, be it by federal or state offcers.

In arguing that a tortious act by an individual is by itself suffceint cause for invocation of the exclusionary rule, respondent ignores the reason for the rule and fails to consider the effect of its contention upon practical law enforcement. In effect, respondent likens the exclusionary rule to an absolute evidentiary privilege irrevocably barring otherwise admissible evidence solely because a tort was committed against a third party doing business with respondent. The rule is not of such a nature. Rather, it is one of judicial discretion imposed only upon the basis of considerations which outweigh the general need for untrammeled disclosure of competent and relevant evidence in a court of justice."46 As Justice Frankfurter pointed out in the introduction to his dissent in Elkins (an introduction which would certainly receive the approval of the entire Court), the history of the rule and its application is one of a continuing evaluation of what is best for the general good. " Society s need for every man s evidence and its interest in the effcient administration of its laws represent the general principles involved in such an evaluation. Limitations are placed upon the operations of these principles only when they serve a transcendent public good, Thus, evidence obtained through improper police procedure, though relevant and competent, is excluded from consideration in order to promote observance of the Constitution not to repair violations of the Constitution. The rule is invoked for a transcendent public interest-the observance of our Constitution-and it is invoked only because reason dictates that this interest can be protected only by removing the incentive for its non-observance. Effcient administration of the law, howld. at 215.

45364 U. S. at 2:2.

4e ld. at 216.

'7Id. at 234.

KNOLL ASSOCIATES, INC. 441 311 Opinion Ever, is not injured in the process. Government offcers are not fettered in their service but, correctly, are reminded of the proper limits of their service.

Applying the exclusionary rule to relevant evidence obtained through the tortious action of an individual, without a demonstration of government inducement of the theft, would, at the most, serve to deter a miniscule number of torts and larcenies. It would not promote the observance of the Constitution, for to steal from one s neighbor is not to violate his constitutional rights. Instead, it would merely blunt the possible purpose of the tortfeasor at the expense of preventing the underlying aim of judicial inquiry-the ascertainment of truth-and at the expense of penalizing effcient administration of the law. To obtain evidence of law violations, government agencies are equipped with various forms of compulsory process. This agency is no exception; its subpocna powers are generally conceded to be more extensive than most. However, compulsory process only lies for information known to exist or reasonably believed to exist. Frequently, the government is directed to the existence of evidence of law violation through the efforts of individuals, such as Prosser, who are motivated to assist for reasons varying from interest in law observance to interest in righting some real or supposed personal wrong. From early times, law enforcement authorities have needed to rely on such assistance. This need is recognized by the law through the observance of the privilege against disclosure of the informers' identity. Further encouragement is given to the citizen to perform his obligation of reporting law violations through statutes containing provisions for awarding the informer a share of subsequently recovered fines. The broad application of the exclusionary rule urged by respondent would seriously impair government's reliance on the assistance of the individual citizen. Doubtlessly, informers would continue to offer assistance. The question, however, would be whether the government could accept their offers. Documents and information would continue to be offered to Jaw enforcement offcials and assurances would be demanded by the latter that authority existed for disclosure of such information. However under respondent's view of the exclusionary rule, what government offcer would be willing to accept assurance in such cases? Upon examining the documents, he might find that they had been 18 See 21 U. C. 183 (1964) (narcotics): 26 V. C. 7623 (1964) (taxes); 31 U. 232 (fraudulent claims against the government). 442 FEDERAL TRADE COM MISSION DECISIONS Opinion 70 F.

submitted without the approval of the owner. The acceptance of the documents, therefore, would forever foreclose this evidence from the public s notice and open any pending or contemplated proceeding to the claim that it had been tainted with knowledge gained through an unreasonable search and seizure. Were the officer to reject the proffered evidence upon examination only to subpoena its production by the same individual or its owner would not the same result follow? It is the logical extension of respondent' s reasoning that a subsequent subpoena would not prevent exclusion of the evidence in a subsequent proceeding. In appeal before the Commission respondent has so argued. Further it is also the logical extension of respondent' s contention that an employee, former employee or private individual could prevent the government from using or ordering the production of relevant information simply by orally disclosing it without respondent' authority. How then can the government protect itself against entrapment into an "unreasonable" search and seizure that will prevent public scrutiny of relevant evidence and the adjudication of matters worthy to be heard, and, at the same time, continue to rely on informers? Consider a situation wherein the government is proceeding against a corporation for alleged violation of the law. In the corporation s files and those of its agent are documents damaging to the corporation s defense against the government's charges. These documents have been properly demanded by the government, but have been represented by the corporation as not being in existence. A third party, on his own initiative and in a bid to ensure his future employment, takes the documents and threatens the corporation with their disclosure to the government. This threat offers certain alternatives. The corporation could succumb to blackmail. It could inform the government of the threat and face a full inquiry. It could ignore the threat or even encourage the individual to follow through on his contemplated action. L'nder respondent' s view of the exclusionary rule, would it not be more beneficial, and therefore more tempting, for the corporation to choose the last alternative? If the government accepted the documents, the corporation could have them excluded from consideration not only in the pending proceeding but in any further proceeding. Additionally, the pending proceeding would be subject to dismissal on a charge of being infected with the fruits of an unreasonable seizure. If the government rejected the documents only to request them anew from the corporation, the latter , KNOLL ASSOCIATES, INC. 443 311 Opinion could claim that the documents were illegally seized from its files and were, therefore, not capable of being produced, and, in any event, were forever barred from judicial consideration. In conclusion, we find that BU1' deau v. McDowell is controlling here. We do not believe that a third party, through commission of a tort of his own undertaking, can prejudice the public s interest in the ascertainment of truth. Nor do we believe that the government should, in the interest of preventing private controversies reject relevant evidence or provide a tempting escape route for those whose actions the public has determined to be deserving of judicial review. As one court has recently stated The interests of justice wi1 not be promoted by the announcement by the courts of new exclusions, since the process of investigating the truth in courts of justice is an indispensable function of society and since judicial rules of evidence were never meant to be used as an indirect method of punishment' of trespassers and other lawless in- " 19 truders, The challenged documents were properly received in evidence. We find that they clearly rebut the testimony of Knoll offcials that 50 percent discounts were granted to meet competition. The following example wi1 suffce:

Early in the trial, respondent's Vice President, Wiliam J. Nolan, testified that competition was the only factor taken into consideration when his company determined that a dealer quaJifled for a fifty percent discount. (Tr. 635) Later, in the defense presentation, Joseph Dworski testified that fity percent discounts were granted to seven particular dealers because they had been offered the same discounts or better by other manufacturers and would not buy KnoJl products unless they received Knoll's maximum discount. (Tr. 3906) However, correspondence between Nolan and Dworski tell a different story than their authors' testimony. On January 23 , 1961, Nolan informed Dworski that Federal Trade Commission investigators had been reviewing discounts granted to certain KnoJl dealers within Dworski's area. (CX 1915 A-B) He asked Dworski to forward information on the dealers, including the reasons for granting them 50 percent discounts. The specified dealers were the same customers about whom Dworski later testified. On January 26, 1961, Dworski replied to Nolan. (CX 1916 A-D) This reply shows that the dis- SncklcT v. SacklcT 255 N. S. 2d 83 , 85, 203 N. E. 2d 481 (Ct. App. 1964), Opinion 70 F. T.

criminatory discounts were m no way occasioned by the need to meet competition.

Not only do the documents rebut respondent' s meeting competition defense, but they also, when examined in connection with the testimony and other facts of record, disturbingly indicate that this defense was fabricated. Paul Copeland, respondent's national sales manager testified that in each instance where there was a change in the discount classification of a customer, the person recommending the change was required to submit a form to the head offce giving the reasons for his recommendation. (Tr. 5377-78) Certainly these forms would be the best evidence of respondent' affrmative defense, for the appropriate reasons for upgrading a dealer to the 50 percent bracket would be the fact that the dealer was being offered the same discounts from competing manufacturers and would not purchase from Knoll unless it extended the same discount. These forms, however, were not offered into evidence by respondent. In fact, their existence was denied until after the forty-six documents supplied by Prosser were received into evidence. Respondent' s reluctance in using these forms to establish its defense is understandable from a reading of the Prosser documents, many of which establish that the fifty percent discounts were based on services to Knoll and were not given to meet competition, several of which are dealer classification requests giving reasons for recommended discounts other than those reasons appropriate for the defense, and one of which is a memorandum from Mr. Copeland calling for the altering of dealer classification requests and the insertion of appropriate reasons for the granting of the discounts:

I am returning to Gary the requests for change in account classification fol Trefzger, Lewis, Cincinnati Offce Outfitters, \Vuebbold' , and Interior Design. \Ve cannot under any circumstances use as reason for dropping the discount a "poor sales record." These request forms will have to be re-done omitting sales record as a determining factor. This is in direct violation of FTC regulations. Please have them re- submitted to me in duplicate. Lack of promotional effort, poor design service, inadequate sales coverage, unsatisfac tory floor displays, are all good reasons for reverting a dealer to 4Qr;-;. When we change an account from 4Qf'!c to SOO/ it 1:S a requirement of our attorneys that we also be ?:nfo?'med of the new dealer s other lines of fu?''"witu?' and the discounts he receives j?'om them. A statement by our regional mana.ge?' should also Indicate that wnless we offet ow' ?naxinnon d? scollnt to that deale?' he u.'m not jJU1'hase from us, (CX 19.51 , A , emphasis supplied, There is also the fact that even if we disregard Prosser s statements to Turiel, his written statements show that he was aware that respondent's 50 percent discounts in the Detroit area in 1962 , KNOLL ASSOCIATES , INC. 445 311 Opinion were not given to meet the competition of other furniture manufactUl' ers. On October 5, 1962, D. R. Jomo, Knoll's Treasurer, requested Dworski to forward information on certain accounts in the Detroit area. (CX 1917) Among other things, Jomo wanted to know the reasons for granting 50 percent discounts to any of the specified dealers. Among the dealers specified were six whose discounts Dworski had explained to respondent's Vice President Nolan, on anuary 26, 1961 , and about whose discounts Dworski had testified in respondent' s defense. Prosser answered J omo s request on October 16, 1962. In his reply he stated that the discounts were granted or reduced on the basis of the dealer s sales and service aid to Knoll. (CX 1918 A-G) Approximately two months after the initial hearings on respondent's search and seizure claim and the hearing examiner s initial ruling against this claim, respondent's counsel delivered to the examiner an affdavit signed by J omo on May 21, 1962. This document swears to the fact that Kolan wrote his January, 1961, memo to Dworski, and Jomo wrote his October, 1962, memo to Dworski in order to obtain information for Knoll' s counsel in preparation Hfor litigation which seemed about to ensue." On the strength of this affdavit respondent' s counsel moved to strike the Nolan and J omo memoranda and Dworski' s and Prosser s replies thereto on the ground that they were subject to the attorney-client privilege or the work-product doctrine. " (Tr. 4678-96) According to counsel we told the client J\ ow, get this information together for us. This is precisely what we want to have.' That is why these documents were written " (Tr. 4695). The hearing examiner denied the motion to strike and respondent has not since pressed the point.

It is, thus, apparent from the record that Prosser knew that Knoll' s 50 percent discounts in the Detroit area were not granted to meet the competition of competing furniture manufacturers. Knoll offcials, who had to approve a1l discounts granted by Prosser and Dworski, were aware of this fact. Prosser s answer to Jomo s October, 1962, memorandum refreshed their memory. Respondent' s attorneys apparently knew of Prosser s answer to JOlla s memorandum. Yet, Prosser, prior to termination of his employment with Dworski, was being prepared by respondent to testify in connection with its defense of mecting competition. A letter from respondent' s counsel, dated October 25, 1963, and addressed to Prosser and Gary Beals, contains the following: " will, of course, need Herb's testimony with respect to the fact , Opinion 70 F.

that a 50 % dealer would not purchase Knoll furniture except at this discount and that it was necessay for us to meet the competition of the manufacturer. . . . " (RX 223 A- ) When questioned about his understanding of this Jetter, Prosser testified my understanding . . . is that Knoll's attorney, Mr. Imberman, desired that I would testify in a favorable fashion as he so desired and directed, or elicited from me. " (Tr. 5485) Finally, we agree with the hearing examiner that the forty-six documents could have been secured by subpoena under the auit isthority of the Federal Trade Commission Act. In this regard, significant that complaint counsel, during the prehearing conferences, expressed an intention to subpoena certain information from respondent. However, the hearing examiner suggested that respondent would voluntarily supply any relevant material. Respondent agreed to this procedure. Accordingly, in lieu of a subpoena, complaint counsel requested Knoll to provide various papers pertaining to its pricing operations. By this request, counsel sought, among other things, to arrive at the reasons why Knoll classified some customers as 50 percent dealers while others were only granted 40 percent discounts. It was complaint counsel's theory that the requested documents would show that Knoll' s discriminations were the result of a "systematic and well-planned method of pricing" that had been "continuously and perpetually carried on by this respondent." (Tr. 160-61) The forty-six documents conclusively demonstrate the validity of counsel's theory. The hearing examiner noted that "these documents appear to be of such a nature that they should have been turned over to Commission counsel before the hearings began. Instead, they were concealed from complaint counsel contrary to outstanding requests from Commission counsel and direct order " 50 of the hearing examiner, Our review of the record reveals that a number of the documents did not come within the technical wording of the request and a modification subsequently negotiated by respondent's counse1. A number of the papers pertaining to Knoll' s reasons for classifying dealers in one or the other discount brackets are written on form-Jetter stationery carrying headings such as "Inter- Offce Communication" or "Inter-Offce Memo." Nolan and Jomo requests, alluded to above, carry such headings. While respondent's counsel knew of the existence of these documents, they were not required to produce them as a result of their negotiaro SUPIJ)ementary Ruling upon Respondent' s Motion to Suppress, p. 27, n. 5. KNOLL ASSOCIATES, INC. 447 311 Opinion tions with complaint counsel. The discovery request called for aJl . . . inter-offce memoranda. . . relating to prices, discounts rebates and allowances utilzed by KnoJl " but after respondent' counsel argued that the production of such memoranda would be extremely onerous and burdensome " complaint counsel agreed to strike that portion of his request. (Tr. 66-69) Nevertheless, we find that certain of the documents should have been produced, and that aJl of the documents came within the spirit and purpose of the discovery motion and the examiner order.

RESPONDENT S CLAIM OF IMPAIRMENT OF ITS RIGHT TO COUNSEL After two lengthy hearings on the nature of complaint counsel' s communications with Herbert Prosser; after voluminous motions and appeals and proceedings in the U.S. District Court for the Southern District of N ew York and the Second Circuit Court of Appeals; and after respondent declined an offer by the hearing examiner to hold the record open for further evidence, KnoJl, one month after the record was closed, first raised the issue that its right to counsel guaranteed by the Fifth Amendment had been impaired by complaint counsel's "improper communications" with Mr. Prosser. In affdavits signed by its counsel, Jacob Imberman and Samuel Greenberg, and filed concurrently with its proposed findings on its search and seizure claim, Know aUeged that complaint counsel had intruded upon attorney-client communications and upon trial preparations "supposedly open only to the most loyal." The affdavits include the fonowing averments: (1) From the summer of 1963 until December of the same year, respondent's counsel accepted the aid and suggestions of Herbert Prosser in their defense of this proceeding; (2) Respondent's counsel explained to Herbert Prosser the issues involved in this proceeding;

(3) Respondent's counsel made Herbert Prosser privy to aU their "thoughts, plans, ideas and strategy concerning the defense of this case" ; and (4) Respondent's counsel up to termination of the association in December of 1963, always considered Herbert Prosser their client and a "member of the defense 'team. The hearing examiner declined to review respondent's "due process" issue, holding: "If such argument could have been made .

Opinion 70 F. T.

Knoll' s lawyers have waived it by intentionally withholding until it was too late for opposing counsel to deal with properly. Knoll' s lawyers would deny complaint counsel the same due process they advocate, too late. " Respondent, however, argues that its claim of impairment of the right to counsel was timely as it first learned of the extent of complaint counsel's communications with Prosser during the second special hearings on the search and seizure issue in December, 1965. It apparently means to explain its failure to raise the issue during those hearings by referring to the fact that transcripts of the testimony were not received until more than two weeks after the hearings concluded. The record reveals that respondent knew, prior to the initial hearings on the documents, that Prosser had been in communication with complaint counsel. The testimony shows that respondent knew of Prosser s initial offer of assistance to complaint counsel the day it was made. During the initial special hearings on the documents, respondent's counsel were not concerned with informing the hearing examiner that Prosser was privy to their defense plans and was their "client." Instead, they chose to describe him as a "thier' and a " former employee " and were interested not in probing the nature of his contact with the government, but rather only in establishing that he had such contact. They also established that Prosser marked portions of the contested documents prior to submitting them to complaint counsel. Employing this fact, they represented to the hearing examiner that Prosser could only know what was relevant to a meeting competition defense in a Robinson-Patman proceeding through instruction received from complaint counsel. (Tr. 4525) Thereafter, in arguing for a stay of proceedings upon the complaint pending Knoll's appeal from the District Court decision against its request for dismissal of the complaint, respondent's counsel, Mr. Imberman, stated to Judge Hays, representing the United States Court of Appeals for the Second Circuit, that Prosser was a former employee of ours" who had stolen documents and marked them up for the benefit of the Federal Trade Commission and how a layman would know what portions of a document to mark so they would be relevant in a Robinson-Patman proceed- 51 SUjJplementary Rulin p. 28.

KNOLL ASSOCIATES , INC. 449 311 Opinion ing is not quite clear." " Subsequently, in its brief to the Second Circuit, respondent maintained:

. . . an uninstructed layman could not be expected to make an intelligent selection of documents for use in a complex Robinson-Patman Act case. The selection of documents by Prosser "muld have provided a basis for determining whether Prosser had been informed by Turiel of the nature of the issues involved in the prir.e discrimination proceedings in order that he could select documents from the files or provide other assistance to the Commission. During the second set of hearings on the documents, respondent' s counsel were again not concerned with informing the hearing examiner that Prosser was privy to their every thought Knows defense and was their "client." During these hearings Prosser admitted to special counsel for the complaint attorneys that he had frequent contact with respondent's counsel during 1963. The special counsel, Mr. Dias, then asked Mr. Prosser: Q. Did Mr. Imberman and/or Mr. Greenberg explain the proceeding to you? Mr. Irnberman. :Mr. Gross, I'm going to object to this line of questioning. It seems to me that we re getting very foggy on the purpose of this hearing, which is a search and seizure.

Hearing Examiner Gross. 'What's the purpose of this line of questioning, Mr. Dias? Mr. Dias. The purpose is that this Respondent has made a representation that because of the number of meetings and telephone conversations this witness had with ::fr. Turiel and with Mr. Brod, and because he s a layman, Turiel and Brod must have told him al1 about this case, and that he could only get such information from :Mr. Turiel and :\1' Brad. And, I'm trying to establish- Hearing Examiner Gross. Your objection is overruled. Proceed, Mr. Dias. ::1'. Imberman. I object. This is now beyond the search and seizure issue. Hearing Examiner Gross. Your objection is noted. However, I wil say that we can all accept as a certain amount of common sense that the firm representing Knoll Associates contacted Mr. Prosser, one way or another, the way any reputable and diligent law firm would, and as long as- Mr, Imberman. r certainly don t deny that, Of course, we discussed this matter with Mr. Prosser.

Hearing Examiner Gross. As long as that statement is in the record, why don t you go to another hne of questioning, Mr. Dias. Mr. Dias. Yes, I will. (Tr. 5501-02) We agree with the hearing examiner that respondent's claim that its right to counsel has been impaired is an afterthought. Nevertheless, we have considered the charge and have found it to be without merit.

Appellant s Ar Q,'ument, Motion For Stay Pending App€BJ , p. 9, Knoll Alisociates v. Dixon Case No. 29078 , Second Circuit (Sept. 9, 1964). 53 Brief ior Appellant, 1). 13 Knoll Associates v. Dixon, Case No. 29078, Second Circuit (Sept. 1964).

, Opinion 70 F.

The Fifth Amendment guarantees that no citizen may be deprived of life, liberty or property without due process of law. Such due process includes the right of one accused of crime to have the effective and substantial aid of counsel."" An accused does not enj oy the effective aid of counsel, if, through government intrusion, he is denied the right of private consultation with his attorney. " Prejudice resulting from the government's denial of this basic right need not be demonstrated by the petitioner. "The right to have the assistance of counsel is too fundamental and absolute to allow courts to indulge in nice calculations as to the denial1." Glasser v. Unitedamounts of prejudice arising from its States 315 U.S. 60, 76 (1942).

The cases cited by respondent concern charges of deliberate and secretive intrusion by the government into consultations between defendants and their lawyers. In Coplon the intrusion took the form of FBI wiretapping of telephone conversations between the defendant and her attorney prior to and during her trial on charges of aiding a foreign power. In Caldwell v. United States the Department of Justice hired an individual named Bradley to obtain information concerning the defendant's principals. While so employed, Bradley accepted employment from the defendant in the preparation of the latter s defense. The testimony showed that for some months prior to the trial and up to the morning of the trial, Bradley reported to the Assistant United States Attorney conversations by him with the defendant, his co-defendants v. Dennoand defendant's attorney. Id. at 881. In United States defendants charged unsuccessfully, that the government assigned a Yiddish speaking police offcer to sit close enough to their counsel table so that he could overhear their private conversations in Fusco v. Moses the only case weYiddish with their counsel. In are aware of that held the Fifth Amendment's guarantee of effective counsel applicable to non-criminal proceedings, an informer attended private deliberations between the defendants and their counsel under instructions given by a responsible agent of the prosecuting New York State government.

According to respondent, Prosser terminated, for all intent and purpose, whatever relationship he had with Knoll on December 9 1963. This was the day that he first offered to testify on behalf of 11 Coplon v. United StateB, 191 F.2d 749, 757 (D. C. Cir. 1951). Ibid.

r.20f: F. 2d 879 (D. C. Cir, 1953).

221 F. 2d 626 (2d Cir. 1955).

r.S04 N.Y. 424 (1952).

KNOLL ASSOCIATES , INC. 451 311 Opinion the complaint and made his offer well known to certain Knoll officials. Prior to this time, he had two conversations with the government in the person of complaint counsel. Both conversations he initiated. He never offered to cooperate with complaint counsel and complaint counsel never asked him for assistance. At no time during these two conversations, did Prosser mention anything that he discussed with respondent's counsel. The only reference he made to the defense was to inquire about Turiel' s opinion of it. In a phone conversation of apparently less than a minute s duration, Turiel told Prosser that he thought the defense was "worthless" and then hung up, Prosser also testified that he took the action he did "on my own volition" and that at no time was he offered anything by the government. Further, the record shows that Prosser, only after a violent argument with respondent came forth to make his charges and offer assistance to the government. These facts do not place respondent within the cases it cites to establish its claim that complaint counsel's communications with Prosser constituted impairment of its right to counsel. After his initial offer of assistance on December 9, 1963, Proser had a number of other conversations with complaint counsel. Respondent makes general reference to these communications in its briefs. Surely, however, it cannot urge that these communications establish a violation of respondent' s right to due process? If Prosser was ever a member of respondent's fldefense team" prior to his actions in December, he certainly was in a different position thereafter. Whatever his motives for providing information to the government, he was in the position of a citizen who was making allegations to the government that documents previousiy denied to exist did in fact exist; that he had been ordered by respondent and its counsel to get rid of these documents; and that he was scheduled to testify in behalf of the defense but that documents he and others had authored showed the defense to be a lie. These are the things Prosser and complaint counsel talked about after he terminated his association with Mr. Dworski. We have considered the other arguments advanced by respondents and are of the opinion that they are also without merit. Respondent' s appeal is denied and the initial decision, as modified by this opinion, is adopted as the decision of the Commission. Commissioner Elman dissented and has filed a dissenting opinion.

Dissenting Opinion 70 F. T. DISSENTING OPINION AUGUST 2 1966 By Elman Comrnissioner:

I do not think the Commission should enter an order here. The Prosser incident has cast too large a cloud on the record of these proceedings. The atmosphere created by this unfortunate incident has not been' one in which findings of violation of law should be made and an order issued. As a result of the unsatisfactory way in which the matter was handled by complaint counsel, the hearing examiner, and the Commission, there has been engendered too much acrimony, too much heat and emotion, and too many accusations and cross-accusations of wrongdoing and bad faith on the part of a1l concerned. Adjudication should be made in a climate of cold detachment-and such a climate never existed in this case after the Prosser incident.

Let me state at once that, like the other members of the Commission, I find no evidence in the record that complaint counsel induced, or otherwise aided or abetted, Prosser in his unauthorized "taking" , of the disputed documents. ;\or do I believe that the questions raised by the incident are of constitutional dimensions. The lengthy exposition of "constitutional law" in the majority opinion seems to me to be wholly beside the point. In my view, the Commission s disposition of this case should be governed by a fundamental consideration: its obligation to maintain public confidence in the fairness and integrity of the agency processes and personnel. That confidence may be as much undermined by acts of apparent impropriety as actual impropriety. Government offcials must look at themselves through the eyes of those on the outside; and the public s range of vision is necessarily limited. An offcial, in his dealings with the public, may not in fact transgress the bounds of fairness and propriety; but the public knows only what it sees, and it must be convinced of the fairness and propriety of the offcial's actions by what it sees. The standards of conduct appropriate for government offcials must therefore be designed to prevent not only evil but the appearance of evil; and oflcials must remember at a1l times that the appearance of things will be the basis on which they are judged by the public.

In this case, unfortunately, complaint counsel were not as sensi- 1 I am deliberately using; the most neutral verb that comes to mind. KNOLL ASSOCIATES. INC. 453 311 Dissenting Opinion tive as they should have been to these basic considerations. They naively assumed that because they were in fact guilty of no misconduct, everyone else would have no doubt about it. What they should have realized was that their backroom dealings with Prosser would inevitably give rise to the suspicions and accusations of wrongdoing that have so beclouded and entangled these proceedings.

Consider the circumstances: In the middle of a fiercely contested lawsuit, Prosser-who to a1l appearances was an active member of respondent' s defense team-secretly came to complaint counsel with an offer to switch sides. Prosser was an employee of respondent' s Detroit agency. He was scheduled to testify as a witness for respondent. 7hen he was introdueed to complaint counsel on the first day of the Detroit hearings, they understood him to be respondent's local sales representative. Naturally, when Prosser approached complaint counsel late at night in their hotel room, they were suspicious and hesitant. They did not know what might be concealed by his professed offer of cooperation and assistance. They suspected that he might still be working the other side of the street. They nevertheless engaged in private conversations with Prosser over a period of several months. Respondent was aware that these conversations were taking place but did not know the details. It was during this period that Prosser unauthorizedly " took" the disputed documents and turned them over to complaint counsel, who considered it to be their professional obligation" to accept the documents. It seems obvious in retrospect that what complaint counsel should have done, on hearing from Prosser that he had "a lot of incriminating evidence" and "enough 1)papers to hang" respondent was to bring the matter to the immediate and urgent attention of the hearing examiner and respondent's counsel. Had this been done, the whole matter would have been brought out into the open, and the cloud of impropriety and misconduct hanging over these proceedings would not have been raised. Whatever Prosser motives in deciding to cross sides in the middle of the case, it was absolutely essential-in order not to compromise the integrity of the proceedings-that complaint counsel not act in any way that might give the impression, rightly or wrongly, that they induced or othenvise aided and abetted Prosser in an improper "taking of the disputed documents.

It must be emphasized again that complaint counsel should have been governed by the appearance of things. When Prosser Dissenting Opinion 70 F.

approached complaint counsel, their suspicions and fears that he was secretly working for the other side were justified by the appearances. In fact, however, these suspicions and fears were not well-founded. Prosser was actually on his own. On the other hand, the suspicions and fears of respondent's counsel that complaint counsel may have been improperly involved in Prosser taking" of the documents were likewise justified by the appearances. From their vantage point, and because they did not know what was actually going on between complaint counsel and Prosser, respondent's counsel could well suspect some degree of complicity between them. In fact, however, these suspicions and fears of respondent's counsel were not well-founded. Actually, complaint counsel-as the record now shows-were dealing with Prosser at arm s length. The point is, however, that neither side knew these facts at the time, and each justifiably had misgivings and doubts about the other s actions. We know all the facts now two and one-half years later, but only after a lengthy and extensive inquiry into every detail of the incident. These proceedings would not have become so fouled up by the Prosser incident if complaint counsel had perceived the unwisdom of their covert dealings with Prosser. As soon as he approached them, complaint counsel should have recognized that it was their professional obligation" not merely to obtain the evidence he was offering but to make sure that it was obtained in a completely open and aboveboard fashion. It was their duty to keep the Commission s skirts absolutely spotless. Their prime concern should have been to preserve the integrity of the proceedings, and to make certain that their actions would appear to give no basis whatsoever for any fears or suspicions that they were in cahoots with Prosser. This could easily have been accomplished by laying the whole thing out in the open, and on the record, before the hearing examiner, who had ample authority to issue subpoenas or to take such other action as was necessary to secure relevant evidence. Regrettably, this was not done. And regrettably, too, the Commission s disposition of this case-which may appear to outsiders to apply a thin coat of whitewash on the whole incident putting all the blame on respondent's counsel-wil do little to prevent similar mishaps from occurring again in other cases. While I would not reach the meri ts, the Commission has done so and it is necessary to comment on the aspect of its decision KNOLL ASSOCIATES, INC. 455 311 Dissenting Opinion which precludes a manufacturer from granting legitimate functional discounts as compensation for the performance of distribution functions valuable to him. The Commission assesses the competitive effect of such functional discounts by uncritically applying the narrow and limited standards used in conventional Morton Salt-type second-line injury" cases. I disagree, however, with the Commission s doctrinaire and unrealistic approach to this problem.

The Commission mechanically applies the dogma that retailers and interior decorators must buy at the same price because there is an area of competitive contact between them" (p. 410). It wholly ignores the fact that retailers perform valuable and necessary distribution functions for the manufacturer which interior decorators do not. Retailers, unlike interior decorators, maintain an inventory of furniture, provide showrooms and floor space for its display in their stores, advertise the furniture for sale, and perform a large variety of other functions which may be essential to the manufacturer. Interior decorators perform none of these functions.

I find nothing in the Robinson-Patman Act which indicates that it was intended to prevent a manufacturer from obtaining distribution through as many functionally distinct channels as his business needs require. A legitimate functional price discount is the incentive which a manufacturer offers his distributors to induce them to render distribution services which he may regard as necessary to increase effciency, lower costs, or expand consumer demand for his products. If, as the Commission holds, a manufacturer may not grant a functional discount to distributors who render such services unless he also grants the same discount to other "competing" distributors who do not render such services the result may be that neither wil perform these functions for the manufacturer.

If a manufacturer offers functional price discounts on a nondiscriminatory basis to all of his distributors who are able and wiling to earn them by performing the distribution functions he requires, how is competition injured? To be sure, a functional discount should be bona fide and not a sham or disguised price discrimination. But the Robinson-Patman Act should not be construed to prohibit a manufacturer from granting functional discounts that genuinely compensate for the performance of distribution functions that may be essential to the effcient and economical conduct of his business and do not injure competition. Complaint 70 F.

FINAL ORDER This matter having been heard by the Commission upon respondent' s appeal from the initial decision; and the Commission for the reasons stated in the accompanying opinion, having denied the appeal, and having modified the initial decision in part: It is Q1'dered That the initial decision of the hearing examiner as so modified, be, and it hereby is, adopted as the decision of the Commission.

It is further ordered That respondent shall, within sixty (60) days after service upon it of this order, fiJe 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. Commissioner Elman dissented and has filed a dissenting opinion.