Surprise Brassiere Co., Inc.

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

IN THE iatter OF SURPRISE BRASSIERE CO., INC., ET AL.

ORDER , OPI IONS , ETC. , IN REGARD TO THE ALLEGED VIOLATION OF SECTION 2 (d) OF THE CLAYTON ACT Docket 8581,. Cmnplnint, June 1963-Decision, June 1967. Order requiring a New York City manufacturer of brassieres, girdles and corselettes to cease discriminating among its customers in the payment of promotional allowances in violation of Section 2 (d) of the Clayton Act. COMPLAINT The Federal Trade Commission, having reason to believe that the parties respondent named in the caption hereof, and hereinafter more particularly designated and clescribecl, have violated and are now violating the provisions of subsection (d) of Section 2 of the Clayton Act (L. , Title 15, Sec. 13), as amended by the Robinson-Patman Act, appl'veci June 19, 1936 , hereby issues its complaint, stating its charges with respect thereto as follows: PARAGRAPH 1. Respondent Surprise Brassiere Co. , Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of Xew York with its principal offce and place of business located at 102 iaclison Avenue New York City, Xew York.

Samuel Dosik, an individual, is president of the above corporation and Eugene Newman, an individual, is secretary-treasurer of the same corporation. These individuals formulate, direci and control the policies, acts and practices of the above named corporate respondent.

PAH. 2. Respondents are now, and for many years past have been, engaged in the manufacture, sale and distribution of women s brassieres, girdles and corselettes \with an annual gross SURPRISE BRASSIERE CO. , INC. , ET AL. 869 868 Complaint sales volume of approximately $5 000 000. Respondents have factories located in Woodside and Germantown, ,,ew York and in Wharton, Xew Jersey. Respondents also have a warehouse located at Wharton, New Jersey, from which they make all shipments of their products. The respondents sell these products for resale at retail to many customers, such as department stores women s specialty shops and dress shops, with places of business located in various cities throughout the United States. PAR. 3. In the course and conduct of their business, respondents engaged in commerce, as "commerce" is defined in the Clayton Act, as amended, having shipped their products or caused them to be transported from their principal places of business in the States of Xew York and ,,ew Jersey to customers located in the same and in other States of the United States and in the District of Columbia.

PAR. 4. In the course and conduct of their business in commerce, respondents paid, or contracted for the payment of something of value to or for the benefit of some of their customers as compensation or in consideration for services or facilities furnished by or through such customers in connection with the handling, offering for sale or sale of products sold to them by said respondents, and such payments, sometimes -hereinafter referred to as promotional allowances, were not available on proportionally equal terms to al1 other customers competing in the distribution of their products.

P AR. . During 1961 , and for some time prior thereto, respondents offered to their customers a cooperative advertising plan under which they agreed to pay fifty percent of the cost of newspaper advertising which Jeaturec1 their merchandise not to exceed 5% of the customer s total purchases for a year, and the payments were to be made only if the customer conformed to certain conditions specified by respondents. PAR. 6. Payments made by respondents pursuant to the cooperative advertising plan referred to in Paragraph Five were not made on proportionally equal terms to all of their customers competing in the resale and distribution of respondents' products because the terms and conditions of the agreement were such as to preclude some customers from accepting and enjoying the benefits to be derived from the plan.

Furthermore, payments made by respondents were not made on proportionally equal terms to all respondents' customers competing in the resale and distribution of their products because while the payment of advertising allmvances to some customers ................ ,....... . .... ... Initial Decision 71 F.

was made in accordance with the terms of the agreement, other competing customers were provided allowances above and beyond those provided for in the agreement.

PAR. 7. The acts and practices of the respondents, as alleged above, violate subsection (d) of Section 2 of the aforesaid Clayton Act, as amended by the Robinson-Patman Act (U. C., Title , Section 13).

MI'. Austin H. Forkner and MT. Frank':s A. Q' BTien supporting the complaint.

. Maxwell E. Lapin New York, X. , for respondents (Mo' l-loTman II. Gn,drnan. Xew York, N. , associated as trial counsel, and Mr. Herman L . Wasserman New York, N. , on the briefs) .' INITIAL DECISION BY DONALD R. MOORE, HEARING EXAMINER MAY 27 , 1966 COXTF:NTS PRELIMI:-ARY STA'fE!\LENT . 871 IJI\' GS OF FACT:

1. Introduction ......... n O""". .._u -" m.. . 875 II. Respondents and Their Business 876 III. The Challenged Practices 877 IV. Surprise s Cooperative Advertising Program: The Published Plan 878 Advertising Allowances .......... -- ...- 878 Advertising Materials Furnished by Surprise 881 Publication to Customers - .._u.... 882 Special 100 Percent Allowances 88:3 V. The Surprise Program in Operation:

The Actualities of Customer Participation 883 ew Haven, Connecticut 884 Brirlgeport, Connecticut 888 Newark, Ne\v Jersey - 888 Philadelphia, Pennsylvania - 889 Special 100 Percent Allowances - 892 Other' Deviations from Program 894 Limitation on Allowances. 894 Maximum Size of Ads.. -- - 896 VI. Legal Analysis of the Surprise Program: Availability -- -- 898 Notification of Customers . 899 Practical Availability:

1. Introduction 903 lInitir.lly. respondents' counsel was the firm of Lapin & Jacobson, by ).1ilton Jaco1:son, but Mr. Jacobson died in October 1964 (Tr. 849). ...................... ................................ SURPRISE BRASSIERE CO. , INC., ET AL. 871 868 Initial Decision FINDI~GS OF FACT-Continued Page 2. Limitation to Ne\vspaper Advertising.. 904 3. No lVlinirnum-Purchase Requirement - 908 4. Exclusionary Aspects . . H. 910 5. Other Sales Promotion Aids 911 6. Proportionalization -- - - 914 7. Conclusionary Finding ..... 916 Special 100 Percent Allowances - 916 Competition Among Customers - 917 VII. Meeting Competition Defense:

Introduction .... -- .-- 918 Competitive Offers at Department Stores: New Haven, Connecticut 920 Bridgeport, Connecticut 923 Newark, New Jersey -- .. -- 925 Phijadelphia, Pennsylvania -- -- 930 Summary Findings and Conclusions:

Preliminary Statement .. 939 1. Legal Standards ..........-- 940 2. Outline of Defensive Facts. 941 3. Evaluation of Evidence 942 The Actualities of Competition 947 Ex Post Facto Rationalization 947 Competitive Necessity 949 1. The Competition Being Met. 949 2. Threat of Loss or Damage 951 Prior Awareness of Individual Competitive Situations_ 952 Meeting " 01' "Beating" Competition 954 Lawfulness of Competitive Offers 954 Special 100 Percent Allowances - 955 CONCLUSIONS OF LAW !)56 ORDER - 958 PRELIMINARY STATEME The complaint in this proceeding was issued by the Federal Trade Commission on June 28 , 1963 , and \vas duly served on respondents. By answer filed on August 5 , 1963, counsel for respondents noted the death of respondent Samuel Dosik. Pursuant to a stipulation of counsel (Prehearing Conference, December , 1963, Tr. 10-11), the complaint was dismissed as to Samuel Dosik by Hearing Examiner Laughlin in an order filed January , 1964 . Accordingly, unless otherwise indicated, the term "respondents " as used herein, will nvt include respondent Samuel Dosik, now cleceased.

The complaint charges respondents with violation of Section 2(d) of the Clayton Act, as amended by the Robinson-Patman Initial Decision 71 F.

Act, 15 U. C. 13 (d). ' In substance, the complaint alleges that respondents have failed to make advertising allowances available to all competing customers on proportionally equal terms because (1) the terms and conditions of respondents' cooperative advertising plans precluded some customers from receiving allowances and (2) the advertising allowances granted by respondents to some customers were "above and beyond" the terms of these plans.

Respondents filed answer through counsel on August 5, 1963, admitting certain factual allegations of the complaint, oenying any violation of law, and affrmatively alleging (1) that advertising allowances were available to a1l customers on proportionally equal terms and (2) that the challenged practices "were performed in good faith to meet competition , After the prehearing conference on December 12 , 1963 hearings for the reception of testimony and other evidence in support of the complaint were held in Xew York, New York from June 16 to 19, 1964 , and in Philadelphia, Pennsylvania from J un" 22 to 24 , 1964. Because of various exigencies, the hearings were recessed on June 24, 1964. The proceeding remained in suspense for more than a year because of the illness and death of respondents ' original attorney (Mr. Jacobson) ano the ilness of Hearing Examiner Laughlin. By order of the Director, Hearing Examiners, dated October , 1965, the present hearing examiner ,vas designated to C01l1plete the proceeding. A conference in the nature of a further prehearing conference ,vas held in Washington, D. , on November 1 , 1965.

Although respondents conceded, in effect, that the original hearing examiner ,vas "unavailable" within the meaning of Section 5 (c) of the Administrative Procedure Act (5 D. C. 1004 (c)) and Rule 3. 21 (c) of the Commission s Rules of Practice for Adjudicative Proceedings (Tl' 849 51), they orally presented a motion to void and commence the proceedings de no'/' (Tr. 851 58). Respondents filed a written motion to the same effect on Nuvember 5, 1965 , and complaint counsel filed answer in opposition on November 12, 1965. For reasons stated on the lec- Section 2 (d) provides "That it shall be unlawful :for any person engaged in commerce to payor contract for the payment of a!1ything of value to or for the benefit of a customer of such person in the course of such commerce as comjJeL';Cltion 01" in consideration for any Sel'Vil,eS or fHciiities furnishell by 0)" th)'ugll such customer in conJlectioJl with the rnocessing, I1fmdling, sale, or offering for sale of any products or commodities manufactured, sold, or offered for sale by such person, unless such payment or considcJ'ation i ;wailabie on proportionCllly efjuHI terms to al: o her customers completing in the distribu:ion of ouch products or commodities, SCRPRISE BRASSIERE CO. , INC. , ET AL. 873 868 Initial Decision ord on November 18, 1965 (Tr. 1351-68), the examiner denied the motion "without prej udice to the rights of the respondents to request the recall of specific witnesses for such further cross examination or other examination as may be appropriate" (Tr. 1365-66). On December 15, 1965, the respondents withdrew their motion for a trial de n01!O stating that they were "content for the determination of this case to be made by the Hearing Examiner on the basis of the evidence which he has heard before him by ,vitnesses viva voce, as - well as such information or such conclusions as he may derive from an examination of the testimony which was taken before the Hearing Examiner undertook the further processing of this matter" (Tr. 2562). Jfean\vhile, hearings were resumed in New York, New York on Kovember 15 , 1965 , and the case-in-chief in support of the complaint was rested on November 17 , 1965 (Tr. 1155). Defense hearings were then held in New York, New York, ;.ovember 17- , 1965; November 29-December 3 , 1965; December 6- 1965; and on December 15, 1965. Rebuttal hearings followed in Kew York, Xew York, on December 16 , 1965 , and in Philadelphia, Pennsylvania, on December 17 , 1965 , and the record was closed for the reception of evidence.

In support of their case-in-chief, complaint counsel offered the testimony of two offcials of the corporate respondent (Eugene Xewman, vice president and secretary, and Cecile Cohen, director of publicity, public relations, and advertising) and of representatives of 19 of respondents' customers located in ;.ew Haven and Bridgeport, Connecticut; Newark, New J crsey; and Philadelphia, Pennsylvania, encompassing some 1 142 pages of transcript. In addition, complaint counsel offered 969 exhibits principally invoices and advertising claims In their defense, responoents offereo the testimony of five sales representatives or sales offcials, together with the testimony of seven competitors, encompassing some 1 815 pages of transcript (Tr. 1251-2566). In addition, respondents offered 32 documentary exhibits.

In rebuttal, complaint counsel offered the testimony of four of respondents' customers, encompassing some 294 pages of transcript (Tr. 2567-2861). Thus, there were 23 days of hearings resulting in a transcript of 2 861 pages, and approximately 1 000 documentary exhibits.

The holding of hearings in New York and Philadelphia was authorized by Commission oroer dated :Vlal'ch 13 , 1964. At the hearings, testimony and other evioence were oftered in Initial Decision 71 F.

support of and in opposition to the allegations of the complaint. Such testimony and evidence were duly recoroed and filed in the offce of the Commission.

The parties were represented by counsel and were afforded full opportunity to be heard, to examine and cross-examine witnesses and to introduce evidence bearing on the issues. After the presentation of evidence, proposeo findings of fact and conclusions of law and a proposed form of order, accompanied by supporting briefs, were filed by counsel supporting the complaint and counsel for respondents. Replies or exceptions also were filed by counsel for both parties. Proposed findings not adopted, either in the form proposed or in substance, are rejected as not supported by the evidence or as involving immaterial matters.

After carefully review\ving the entire record in this proceeding, together with the proposed findings, conclusions, and onler filed by both parties, as well as their respective replies, the hearing examiner finds that this proceeding is in the interest of the public and, on the basis of such review and his observation of those witnesses who testified after he was assigned to the case, makes tin dings of fact, enters his resulting conclusions, and issues an appropriate order.

By order dated January 4 , 1966 , the Commission extended to April 18 , 1966, the time fel' filing this initial oecision. In essence, that action took account of an extension of time granted the parties, at respondents' request, for filing their Pl'oposec1 findings and related submittals. Initially, tjl' parties were granted until February 17 , 19G6, for filil' g their proposals ano briefs with exceptions or replies due on February 28, 1966. Subsequently, on motion of J'respondents and without objection by complaint counsel, the time for filing proposed findings and supporting briefs was extenoeo to March 3 , 1966, and the time for filing reply briefs to ~iarch 23 , 196G. The ac.oitional time was sought by respondents' counsel because of diffcu1tie occasioned by the transit strike in New York City during January 1966 , "no also personal problems resulting from the illness of his 'wife. Because of the additional time thus granted the parties. the examiner requested, and \Vas granted by Commission order dated April , 1966 , an adoitional extension of time to Nlay 18, 196G, for filing this initial decision. This was later extended to Alay 27 1966.

As requireo by Section 3.21 (b) (J) of the Commission s Rules of Practice, the findings of fact include references to principal pp. . , !\ SURPRISE BRASSIERE CO. , INC. , ET AL. 875 868 Initial Decision supporting items in the record. Such references to testimony and exhibits are thus intended to comply with that Rule and to serve as convenient guides to the principal items of evidence supporting the findings of fact, but those record references do not necessarily represent c01Ylplete summaries of the evidence considered in arriving at such findings. Where reference is made to proposed findings submitted by the parties, such references are intended to incluoe their cit"tions to the record. References to the record are made in parentheses, and certain abbreviations are used:

Memorandum of Law (Brief) filed by Complaint Counsel)! CPF Proposed Findings, etc. , of Complaint Counsel.3 Complaint Counsel's Answer (Reply) to Respondents ' Proposed Findings, etc, CX u u Commission exhibits.

Guides Guides For Advertising Allowances and Other Merchandising Payments and Services (:May 19, 1960) .

page.

pages.

Pal'. Paragraph.

RB u ResJJonrlents ' Brief. RPF Respondents' PrOlJOsed Findings, etc. Respondents ' Reply to Complaint Counsel's Pi' posed Findings, etc.

Respondents ' exhibits.

Tr. Transcript, Counsel supporting the complaint may be variously referred to as complaint counsel, Government counsel, or the Government and witnesses called by Governn1cnt counsel may be referred to as Government witnesses.

FINDINGS OF FACT I. INTRODCCTION Before setting forth the findings regarding Surprise Brassiere Co. , Inc., and its practices, brief reference should be made to the time period involved in this proceeding. 'Reference" to the submittab of ,' omplai:1t CO\1nscl are to jWPC '-lInbe:' f,,' example, CPF 21.

. References to the submittals of es\JOlldents' counsei Rle to page Y1umbers- foJ" eXflmple RPF 21.

:; Somet:mes, references to tecitirnony cite tf;e :ltUne of the wilr. 1:SS ar.d the !lflnsrriPt page number without tht; abb:' eviation 'fr. fo!' example pwm,qr. 16. , , Initial Decision 71 F.

Paragraph Four of the complaint charges generally that Surprise Brassiere Co. , Inc. (usually referred to herein as "Surprise ), failed to make allowances available to all competing customers on proportionally equal terms. Paragraph Five specifically refers to the Surprise cooperative advertising plan in effect during 1961 "and for some time prior thereto " Paragraph Six then challenges the cooperative advertising plan in effect during that perioo.

Counsel for Surprise interpreted thc complaint as oealing only with practices engaged in through 1961 and objected to the reception of evidence relating to any subsequent period (Tr. 101) ; but Hearing Examiner Laughlin overruled the objection (Tr. 102), and received evioence dealing with practices in 1962 and 1963.

Thus, even though, technically, the complaint might have been construed as embracing practices only through 1961, it now is deemed amended to include practices engaged in during 1962 and 1963. (Sec. 3. , Rules of Practice for Adjudicative Proceedings (August 1963) ; see Henry Rosenfeld, Inc. 52 F. C. 1535, 1548 (1956) .

In ruling that occurrences subsequent to 1961 were within the scope of the proceeding, Examiner Laughlin granted a request by respondents that their Answer be deemed amended to deny any violations during 1962 and 1963 (Tr. 102-03). II. RESPONDENTS A~D THEIR BUSI~ESS 6 Respondent Surprise Brassiere Co. , 1nc. , is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Xew York, with its principal offce and place of business at 102 lVadison Avenue, Xcw York, New York. Respondent Samuel Dosik, until his death, was president of 1'Csponoent Surprise Brassiere Co. , Inc. As president, he formulated, directed, and controlled the policies, acts, and practices of Surprise (Cohen 976).

Respondent Eugene Newman was secretary-treasurer of Surprise from at least 1960 to about .June 1963 , when he became vice president and secretary ('11'. 16). His responsibilities have extended only to purchasing and jJoduction (Tr. 788). There is no evidence that he participated in the formulation, direction, or control of cooperati\"€ advertising policies or practices, and C011n 1Iost of the lmsjc facts about respondents Rnd their bU5iT)es are esser. tialiy tJldisputed. Unless otherwi,e indicated, the findings ;n this Section 11 are based on Fldmissions in respondents' Answer SURPRISE BRASSIERE CO. , INC. , ET AL. 877 868 Initial Decision plaint counsel have proposed no finding of indivioual liability on the part of Newman (CPF 4). Accordingly, the complaint against him in his individual capacity is being dismissed but he will be bound in whatever offcial capacity he may act on behalf of Surprise. unless otherwise indicated, the term "respondent" refers hereafter only to Surprise.

Surprise has been, and is now, engaged in the manufacture sale, and distribution of women s brassieres, girdles, and courselets. These products have been, and are, sold, for resale at retail to many customers, such as department stores, women s specialty shops, and dress shops, with places of business located in various states of the United States.

The business of Surprise has been and is substantial, with annual gross sales approximating $4 million (Gold 1256). Surprise owns a factory in Woodsioe, Xew York, and ships merchanoise from that factory and from faclories (not owned hy Surprise) locateo in Germanlown, New York, and Wharton New Jersey, to customers in other States of the United States. In the course and conduct of its business, Surprise has been and is now, engaged in commerce, as "commerce " is defined in the Clayton Act, as amended . It has shipped its prooucts or caused them to be transported from its principal place of business and from factories in the States of New York ano New Jersey to customers located in other States of the United States and in the District of Columbia.

III. THE CHALLENGED PRACTICES In the course and conduct of its business in commerce during the period 1960- , Surprise engaged in cooperative advertising in a manner allegeo to violate Section 2 (0) of the Clayton Act, as amended.

The practices of respondent Surprise are attacked on the following grounds (Complaint; CPF 1 , 3; CB 2-4): 1. Its advertising allowance program 7 has not been Havailable to all competing customers because it has not been made known to all such customers.

2. The progran1 has not been "available " to some customers because its terms and conditions have precluded them from re cciving allowances, and they have not been ofIcred suitable alternatives or substitutes on proportionally equal terms, .. FOl' P1.11' es of thi (:ussjon, it j ronside,' ed that Surprise hHd 'lias c!\liy the same 1110gram from 1060 to 1963 , althou"h tJ-le a,lowC\ncc ate wc\s modified in mid- 1962 (bee Inj,a Pj). 878- 87!1 , 8821 Initial Decision 7I F. 3. Surprise has deviated from its program by granting some customers allowances "above and beyond" its announced terms. Surprise s position (RPF 5 9; RB 10- , 18- 20) is (1) that its program has been "available" to all competing customers; (2) that suitable alternative or substitute promotional assistance has been offereo to customers who did not receive advertising allowances; and (3) that deviations from the program-that is, allowances "above and beyond" its terms-were the result of meeting in good faith the advertising allowance payments and offers of competitors.

The finoings that follow in Section IV outline the Surprise program and its manner of publication. Thej"eafter Section V describes the program in operation, shows the deviations from its terms, and develops the facts respecting alternative promotional assistance. Section VI analyzes the program and its operation jn the light of the applicable law. And, finally, Section VII considers Surprise s "meeting competition " defense. IV. SURPRISE S COOPERATIVE ADVERTISING PROGRAM The Published Plan There is no dispute that under its publisheo cooperative advertising programs in the perioo 1960- , Surprise offered to its customers promotional assistance of two types: s local (1) Payment of a stated percentage of the customer newspaper advertising; and (2) Furnishing of in-store or point-af-sale advertising material, together with statement enclosures or "stufTers" designed primarily for mailing to customers or prospective customers of the store.

Ad'/' ertising Al101uances During the years 1960 , 1961 ano the first half of 1962 , the plan called for Surprise to pay 50 percent of a customer s cost of advertising its products in local newspapers, provided the 8 In addition, Surprise offered to all customers free mats. This constitutes a service that does not clearly fit into tOither of thtO categories set forth above, 1)111 it i basieaily auxiliary to the newspaper advertising allowance. A mat is H cHruboind- like (IJi\pitOr-mache) cast of fin actmd , which is used by newspapers to cast thtO p:flte from which the ad is printed (CohcT! loan 1013). The .. mat could be used by cu time:' s for newspaper adv", t:sing without flny add:tional art or production cost. GentOrH\ly, they were used OYlly by the smuller stortOs which engaged in newspaper advertising. Large stores. with their own ;;,t and production departments ordinarily did not make direct t1 e of the mats. They did. however, frequently use the ffRt proofs for cop,. and layout ideas (Cohen 100 , 1085). It docs not r.appear that the oITer or furnishing of Rdvertising rlHHs is in issue here, but s"e i"/Il, p. 880. . % SURPRISE BRASSIERE CO. , INC. , ET AL. 879 868 Initial Decision total annual payment did not exceed 5 percent of the customer yearly purchases (Respondents' Answer, Pal'. 5; Cohen 94- 97-8; CXs 1 and 2)." (The record establishes, however, that from 1960 to mid- 1962, some customers were granted allowances of 75 percent (infr' p. 883).

The 50 percent plan remained in effect until the middle of 1962, when it was modified to provide for 75 percent allowances with the annual total again limited to 5 percent of the customer yearly purchases (Cohen 99-100; CX 16; Respondents' Answer (Par. 5) dates the change in 1961 , but this evidently was a typographical error).

Since about June 1962 , Surprise has required customers, to be eligible for 75 percent allowances, to execute cooperative advertising agreements that scheduled in aovance the date and size of ads, the newspapers in which they are to appear, and the garments to be aovertised (Cohen 988- , Rubin 1694; for example CXs 7 , 8, 12 , 187 , 188). Despite respondent's denial (RPF 33 RR 3), there is evidence that if a customer ran an unscheouled HO, the 75 percent allowance was not available and the customer was allowed only 50 percent (Velardi 237 , Rubin 1694). As far as the record shows, such a contract requirement did not exist before mid- 1962 (Cohen 988-89) Y In the cooperative aovertising- agreements used subsequently to the mid-1962 change of rate, Surprise agreed to pay " ;- of adual space devoted to SURPRISE garments in accredited newspapers, (based on the store s lowest earned rate), up to an amount not to exceed of annual purchases. The agreement further specified that it is limited to advertising- in accredited newspapers only, (shown in Standard Rate & Data). It docs not cover shopping newspapers, neighborhood publications, souvenir programs, radio, television, circulars, billboards, theatre p1' grams, special ditions, supplements, catalogues or other non-eligible media. (CXs 7, 8 , 12 , 187 , 188.

It appears that the meoia limitation spelled out in such contracts was in effect prior to 1962 (Cohen 988-89). X 0 evidence was adduced concerning the contents of the Stand- U The limitation to 5 percent of annual purchases was not included in the statcmtent lamb- Jished in the 1%0- 61 and )\)61- 62 price lists (CXs 1 and 2) and quoted p. 882 , but there appears to be no dispute that Surprise had such a policy-a policy that was not, however always followerj (p, 884 infra).

10 It Jray be only coincidental that wmc of thte cllstomers who were gl'antcd 75 percent allowances before that became the uniform percentage had scheduled ads in fllyancc P\Jrsuant to agreement (CXs 3- , 9-11, 13 A , 14 A , 15 A , 186). Initial Dccision 71 F.

ard Rate & Data publication referred to in the contracts. It is inferred that it provides information regarding circulation, advertising rates, etc. But the record is silent as to what newspapers are included or excluded.

Surprise did not require ads to be of any minimum size to be eligible for allowances, and the size of the ad depended largely on the amount of money . the customer hao to spend on advertising, as well as the amount of purchases from Surprise. For small retailers who did not have their own art ano proouction departments, Surprise provided ad mats that measured 21 column inches, or approximately 300 lines. (Cohen 96, 994-95; CPF 6. Despite their recognition that the program imposed no minimum size requirement for cooperative advertising (CPF 6), complaint counsel have assumed that it was necessary for smaller customers to utilize the Surprise mats in order to receive payment (CPF 27; CR 17). Since the smallest mat measured 21 inches, complaint counsel contend that Surprise, in effect, imposed a minimum linage requirement (CR 17).

The examiner recognizes that there is testimony subject to that interpretation (Cohen 96- , 994-95). But when read in context, it does not support a finding that Surprise mats had to be used, and it specifically recognizes that the ad size might be smaller than the mat. The fact that one customer did not understand that he could reduce the size of the ad (Katsoff 180- , 200-01) does not prove that Surprise required the mats to be used without reduction.

Agreements used during and since 1962 have purported to limit the size of ads to 600 lines or 42 inches (CXs 3- , 13 A 14 A, 15 A, 186-88; but see infra p. 896) . The aovertising allowances available under the Surprise cooperative advertising plans were not preoieateo upon the purchase of any specific style or line of Surprise products, or upon any minimum order-except to the extent that the limitation of allowances to 5 percent of annual purchases required purchases in such volume as to make advertising money realistically availble.

In the usual case, the customer and the Surprise salesman mutually agreed on those Surprise garments that would be advertiseo (Cohen 1022; see also Velardi 236, Knopp :J63- , Connors 559- , Feir 582, Spitzer 799-800).

Advertising allowance payments have been made by allowing customers to take deductions from merchandise invoices (Cohen 1000) .

SlJRPRISE BRASSIERE CO., I~C. , ET AL. 881 868 Initial Decision Advertising Materials PUI nisherl by Surprise The in-store or point-of-sale materials offered under the Surprise program (Cohen 1007-14) included:

Glossies, or glossy print photographs of garments, about 8% x 11 inches in size, which are intended for display in the windows or fitting rooms of stores.

Window cards, window streamers or banners, and counter cards, which depict Surprise garments and show the style numbers and suggested retail prices.

Bra, girdle, and corselet forms, commonly known as bust forms intended for use in displaying the garments in store windows or in the store itself.n In a somewhat different category are so-called statement enclosures, imprinted with the store name. These enclosures depict the Surprise garments and indicate the size range and prices. Retailers either hand them out or mail them to customers or prospective customers.

The layout and copy ideas referred to in the cooperative advertising plan are proofs of the advertising mats prepared Surprise and may be used by any customer as suggestions for advertising formats and textual material. The record establishes that the in-store or point-of-sale materials were furnished to customers free of charge. The cost to Surprise for these various materials was listed as follows:

Statement enclosures-$5-$6 per thousand; Bust forms-$5 to $20 each, depending on length; and Mats-approximately $2 each. (Cohen 1086, 1088, 1099, 1100. ?\Teither in theory nor in practice, as far as the record shows "vas there any minimum purchase requirement as a prerequisite to the furnishing of display materials, nor was there any Jimitation on the amount of such materials to be furnished to any customer. Although it was indicated that there might be some restrictions on the distribution of bust forms because of their cost (Sanders 1548; cj. Cohen 1089), the record discloses no instance where a customer \vas refused bust forms in any quantity requested.

Like the advertising mats, the in-store displays were available to all customers-those who advertised and those who did not (Cohen 1008-12; Popkave 1812, 1851; Rubin 1691-92; James 11 Bust forms were not specificaUy mentioned in the publislH;,d program. but might. he considered embraced in the term "displays, " See infr(1 p. 882. Initial Decision 71 F.

2592-93). But the recoro as a whole inoicates that the in-store displays were used primarily by smaner, non-advertising stores and were only minimany used by the oepartment stores (CPF 44-45; d. RPF 8, RR 25-28). Respondent takes a somewhat anomalous position regarding the bust forms, contending that because they were not specifically mentioned in the published program, they constituted true alternatives available to non-advertising customers.

Several customers testified that the display materials and stateffl€nt enclosures \V€l'€ not offered as, and in their opinion did not constitute, substitutes for advertising or alternatives "in lieu of" newspaper advertising. (See, for example, H. Katsoff 158; 1. Katsoff 207-08; Tyson 254-58; Rechtman 569 , 571; Ton 643, 649- 51; Gilbert 677-78.

Publication to Customers The plan in effect from 1960 to mid-1962 was published in price lists as follows:

Cooperative advertising-we pay 5ori!- of retailer s local newspaper advertising and provide stores .with attractive FREE mats, glossies, displays window banners, statement enclosures, layout and copy ideas. That legend appeared on the inside front cover of the price lists for 1960-61 and 1961-62 (CXs 1 and 2).

In the 1962-63 price list (CX 16), the policy ano the statement were mooifieo as fonows:

Cooperative adve7"Using-we pay 75 (A- of retailer s local ne"wspaper advertising (limited to 5% of annual purchases) and provide stol' CS "with attractive FREE mats, glossies, displays, window banners, statcment enclosures layout, and copy ideas.

The price lists in effect ouring 1960-(;3 were maileo or otherwise supplied to all active accounts (Cohen 94 , 983- , 1080-83, 1095 , 1098; Sanders 1374- , 1545-46; Rubin 1606-07, 1615 1619- , 1624, 1687-89; Popkave 1809- , 1847), ano most of the customers who testified did receive them. The recoro contains testimony indicating that two customers did not receive the 1960- 61 price list. (Katsoff 157 , 166, 168, 170, 174 , 186; Toil (;42, 647- 48; see also Paskow 331-32; but cj. Rubin 1606-08; Popkave 1809- , 1847-49.

On the basis of the record as a whole, it is found that receipt by customers of the Surprise price lists did not necessarily result in actual knowledge on their part of the advertising allowance plan published in such price lists. :VIany customers, both SURPRISE BRASSIERE CO. , INC. , ET AL. 883 868 Initial Decision large and small, were not aware that the plan was so published and relied on salesmen for such information. It is further found that Surprise salesmen aggressively promoted the advertising allowance program in dealing ,with department stores. But despite a more casual approach in dealing with proprietors of smaller stores and, perhaps, occasional failure to mention the subject at all, it cannot be said there was any concealment. (CPF 41- 43 and CR 22-26; cf. RPF 8- Spec'ir(lJOO Percent Allowances In addition to the advertising allowances specified in the co- , 2, and 16 , it alsooperative advertising plans published in exs 1 was the practice of Surprise during 1960-63 to grant 100 percent allowances (1) in special promotions featuring garments new to the Surprise line; (2) on request to customers opening a new (3) tostore or a ne\v foundation garment department; and match the participation of others in omnibus advertisements (involving the participation of two or more manufacturers) (Cohen 991-92).

Surprise custon1ers were not advised in writing that such allowances \were available, but respondent contends that customers were apprised of it by salesmen (Cohen 1028-29). The subject of 100 percent allowances is treated in more detail infra pp. 892-894 , 955-956; see also pp. 916-917. V. THE SURPRISE PROGRAM IN OPERATI01\ The Actualiies of Cmtomer Participation It is unoisputeo that during the period 1960 to mio-1962 when Surpdse s announced allo\vance was 50 percent, department store customers received 75 percent while competing customers received only 50 percentY Accordingly, there is no necessity for detailed findings regarding the 75 percent allowances, except to determine whether those discriminations are excused under the mecting competition" defense provioed by Section 2 (b) of the , see infra Clayton Act, as amended. For fmdings on that subject p. 918.

Complaint counsel have shown in t d.Jlar form the allowances actually granted by Surprise during 19fio-6:, tu customers in four cities (CPF 22), Surprise docs not dispute the accuracy of the tal:ulations except to the extent that th.. tabu:ations omit sume d-=1,artm..nl store H1l0Wflt1('es that rfspondent cOlltend, without ndequatc record 'iupport, ,\'ere ,, the 50 percent rate, This contention relat..s to th.. meeting competition defen e 2nd is discussed under that hcading, 1Hfll p. \118. Unless other!'\\ise indicnted, those proposed fiJHiing l!e r.doJJted, but in view of the la(' of any rCfll dispute On the subject, no us..ful jJurJ)ose would be sen' ed by reTJroducingthem here. Ti,e exam iner has s!mpb summal"zed the tabulations Rnd added ('crudn supplcmentary find explnnator:r material.

pp, 884 FEDERAL TRADE CmlMISSION DECISIONS Initial Decision 71 F.

In this section of the decision, therefore, only brief reference is made to the 75 percent allowances.

Emphasis is placed, instead, on the treatment of other customers, so as to provide a factual basis for answers to the following questions:

(1) Was the Surprise program "available" to them in the sense that it was or could have been known by them 'I (2) Did its terms and conditions prec1uoe some customers from receiving allowances (3) If so, were they offered suitable alternatives or substitutes on proportionally equal terms? Findings are here made also as to the existence of competition between favored and non-favored customers. Findings relating to each of four cities follow: New Hn1wn, Connecticut 1. Department Stores In New Haven, Connecticut, two customers consistently received from Surprise advertising allowances of 75 percent beginning in 1960, while three others received only 50 percent-two of them receiving only 50 percent even after Surprise raised the rate to 75 percent in mid- 1962.

The Ed,/). Mallejj Co. One of the favored customers was The Eow. Malley Co., a downtown department store. From March 25, 1960, to :Uay 15, 1963 , it received allowances of 76 percent, with one exception. The exception was for an omnibus ad of .Tune 1 19(10 , of which Surprise paid 50 percent." (CPF 9; CXs 19-32. Slwrtenberg The other favored customer was Shartenberg another dO\vntown department store, '\which went out of business apparently in mid-1962 (CX 166 E) .'J Shartenberg s had receiveo two 70 percent allowances in 1960 and one in 1961 (CPF 10; CXs 34-36) .

2. Other Advertising Customers The Outlet M,:-inery Company-Among the unfavored customeI'S was The Outlet Millinery Company.' It receiveo only 50 13 For discussion of the significanre apparently attached to this exception by Surprise, as well as tbe cl:'irn of flr. other :;0 percent allo""'fI!lce On June 2 , 1961J (HPF 10, RR 4), SHo infra pp, 920-(\21. Malley also repc,ived fl 1(JO percent allowf\!ce ubsequent to :'.Jay 1\163 (see hlfw, 802) H Testimony that ShRl'tenbng s went out of lmsiness in 106:- (Rubin 1632) aPIJflrently is error (see RPF 24), L' For discussion of Surprise s claim of 50 lJcrrent allowances ::1 lD60- 62, se 11;fra 921-16 Outlet had stores in New Haven and Bridgepor, as well as :n Ha:rtfonl ;;nd New Britain The evidence relates only to the ew Haven and Bridgeport stores, SURPRISE BRASSIERE CO. , INC. , ET AL. 885 868 Initial Decision percent until Surprise raised the rate generally to 75 percent (CPF 11; CXs 52, 54, 56, 58, 59; RXs 1-3). Other unfavoreo customers incluoed Vee Bee Corset Shop, a downtown specialty store, which received two 50 percent allowances in 1961 and one 50 percent allowance in 1963 (CPF 10; CXs 39 A-40 B, 213- , 217 A- , 220- , 223) ; and The Hosiery & Lingerie Shop, Inc., a small downtown shop, which received a 50 percent allowance in ~iay 1963 (CPF 10; CX 41). Further finoings as to these last tVi'O customers are as follows: Vee Bee C01'set Shop-There is evidence that Vee Bee Corset Shop receiveo at least one 75 percent allowance after the rate change in 1962 (Velardi 23(\, Rubin 1615- , 1693 , 1713). The fact that Vee Bee received 75 percent in 1962 is significant in determining whether the 50 percent allowance it received in 1963 (after Surprise began offering 75 percent generally) was a further actionable oiscrimination. All of the circumstances (Velardi 235-37; Rubin 1615- , 1693- , 1713-16) suggest that the 1963 allowance of 50 percent was pursuant to the advancearrangements policy (su)Jn p. 879). This requirement of advance scheduling on the basis of a contract was not published and, as far as the record shows, was not uniformly enforced. The existence of such a policy is denied (RR 3-4), leaving Surprise with no explanation of the discriminatory 50 percent payment to Vee Bee in 1963 other than the untenable suggestion that the store electeo to take 50 percent rather than 75 percent. When this discrimination is coupled with similar instances in the case of The Hosiery & Lingerie Shop, Inc. (inf1'Q) , and Harriet' s Corsetry (infra pp. 890-891), the excuse of mistake or misunderstanding does not ring true.

The Hosiery Lingerie Shop, Inc. From 1959 through 1963, the purchases of this store entitled it to aovertising allowances from Surprise ranging between $19 and $48 (CX 163 A-E), but it did not cooperatively aovertise with Surprise until 1963. Until the rate was changed to 75 percent, it never was offered more than 50 percent. And although David Tyson, the coproprietor was sure that he had received the 1962-63 price list (as well as earlier ones) and knew that the cooperative advertising plan was contained in it (Tr. 247-48), he hao accepted without objection a 50 percent payment for an ao run in May 1963 (CX 41; Tr. 249-50; Rubin 1623).

17 Surprise s cODtlOntion (HoPF 32, RR 4) that the allowances of $4(). .'() on September 2 1962 , and October 28 , 1962, shown by ex 165 H were at the 75 percent rate, is not supported by the record.

Initial Decision 71 F.

Tyson had failed to note the rate change to 75 percent in the 1962-63 price list (Tr. 251), and despite the testimony of the salesman Rubin that he told Tyson about it (Tr. 1621), Tyson understood the rate was still 50 percent. He did not recall that the Surprise salesman ever offered more than 50 percent (Tr. 248-50) .

Rubin s explanation that this account got only 50 percent because the volume of purchases did not permit a higher payment (Tr. 1696- , 1734), is unfounded. Whether the 5 percent limitation is applied to 1962 or 1963 purchases, Hosiery & Lingerie was entitled in 1963 to an advertising allowance of $47 or $48 (CX 163 E), which would have covered 75 percent of the ad cost of $59.40 (CX 41).

Tyson did not understand when he was askeo whether Surprise ever offered any alternatives to cooperative advertising; but when he was asked whether substitutes were offered, he stated that the store got statement enclosures on request and also advertising mats, counter cards, glossies, and bust forms (Tr. 254-55; see also Rubin 1622- , 1691).

The witness said that counter cards and glossies were not a substitute for cooperative advertising but that the store wanted them.

The store advertises its major lines, but Surprise has never been a major line (Tr. 25i; 246-47). 3. Non-Advertising Customers Two other New Haven customers, Kay s Corset Shop ano Figure Fashions, received no advertising allowances from Surprise. Their proprietors explained, in substance, that the nature of their operations was such that they could not economically afford to engage in cooperative newspaper advertising (Tr. 157- , H. Katsoff 178 , 180-81; I. Xatsoff 207; see also Rubin 1611 , 1699- 1700) . They testified that they never had been offered an allowance greater than 50 percent (Tr. 182- , 185, 190, 206- , 210, 212). Although both had received the 1962-6:J price list, neither was aware that it specified a 75 percent allowance (Tl'. 184- , 205 210-11), but the Kay s witr.ess knew that the SUl'wise cooperative advertising plan was in the 1961-62 price list (Tr. 162). Other findings concernjng these two accounts follow: Kay s Corset Shop- During 1959- , Kay s purchases from Surprise woulo have entitled it to advertising allowances of $12 or S13. On the basis of 1962 purchases, its 1962 allowance could have been $23 (CX 164 B). The advertising rate of the New - f SURPRISE BRASSIERE CO. , INC., ET AL. 887 868 Initial Decision Haven Register was $3.60 per column inch (Tr. 158). Thus, a small advertisement was not out of the question, particularly with Surprise paying 75 percent of the cost. However, the proprietor Harold Katsoff, commented that an ao so small as to be inconsequential on the page would be a waste of money; if it was under a certain size, it would not pay him to run the ad (Tr. 199), but he failed to specify any minimum size.

Katsoff said he did not use cooperative advertising in New Haven because it \vas "too expensive " even \"with a 50 percent reimbursement (Tr. 158). He could not afford to pay $50 to advertise Surprise brassieres in "ew Haven (Tr. 198). KatsofI assumed that he would have to use the mat furnished by Surprise. Since he could not afford to pay for an ad that size and since he understood from the salesman Rubin that he might not be reimbursed if he cut the mat down, he dio not advertise with Surprise at all (Tr. 180- , 200-01). Rubin denied that he had made such a statement (Tr. 1610).

The salesman Rubin agreed in effect that Kay s was so small that it was not worthwhile for it to run an ad (Tr. 1611). Katsoff said he was never offered anything as an alternative to cooperative advertising in the newspapers (Tr. 158). This exiguous testimony does not necessarily contradict Rubin s testimony that Kay s was offered, and it accepted, bust forms, glossies, window banners, ano possibly stuffers (Tr. 1611- , 1690). Figure Fcwhions-On the basis of purchases in 1959 and 1960 Figure Fashions would have been entitled to advertising allmvances of $10 to $14. When purchases from Surprise dwindled to Jess than $100 for each of the years 1961 and 1962, the entitlement would have been $3 to $5 (CX 162 A-B). The store went out of business in February 1963 (Tr. 203). This account purchased some Surprise prooucts but not the entire line. Its volume with Surprise was not high enough to warrant advertising Surprise products. It might have advertised if a higher percentage than 50 percent had been offered. The store did advertise in the Xew Haven Register weekly, but it was primarily concerned with products stocked to a greater extent than was the Surprise line (Tr. 203, 207). Compared to other lines, the Surprise line was not "enticing" to the proprietor, Irving Katsoff. It "didn t mean too much" to Katsoff (Tr. 215), and he agreed that his volume with Surprise was "inconsequential" (Tr. 220; see also Rubin 1612-16).

18 The testimony of Katsoff and Rubin, however, conflicts on various other points. (Compare Tr. 157, 174 with Tr. 1606-08; Tr. 181 , 184--85 with Tr. 1610-11. 888 FEDERAL TI ADE COMMISSION DECISIONS Initial Decision 71 F.

Irving Katsoff was "never aware of any alternative" io newspaper advertising (Tr. 206-07). I-Ie did get counter cards and glossies from Surprise ('11' 208, 212), hut he did not consioer this an alternative to advertising ('11' 208). 4. Competition Surprise customers in Ne'\Y Haven were in competition with one another (James 141- , 150-51; H. Katsoff 159; 1. Katsoff 207- 08, 212 215; Velardi 239-40; Tyson 255-66; see also CPF 29 34). Bridgeport, Connecticut 1. The Howland Dry Gooos Co. and The Outlet Millinery Company In Bridgeport, Connecticut, The Howlano Dry Goods Co. consistently received advertising aIlmvances of 75 percent from 1960 to 1963 (CPF 12; CXs 42 , 44 , 46-50; T1' 1153),''' while The Outlet Millinery Company received only 50 percent until the latter part of 1962 when it too began receiving 76 percent (CPF 12-13; CXs 52 53, 56, 57, 59; RXs 1 , 2 1).

2. Competition Outlet and Howland were competitors (Knopp :165-68, Ciro 1154; sce also CPF 35) .

lVelC01'k. lVen' J e1'fiey 1. L. Bamberger & Co.

In the l\ ewark e\V Jersey, area, L. Bamberger & Co., a large downtown department store with seven suburban branches, received from Surprise advertising allmvances of 75 percent or 100 percent during 1960-62 (CPF 14-15; CXs 64, 72 , 7:1 81 B). 2. Other Customers During the same period, another department store, Hahne & Co., and the Helcn Hirsh Specialty Shop were offered no more than 50 percent until the poi icy change in mio-1962. Hahne & Co. lt is not clear whether the fact that Hahne & Co. did not engage in cooperative advertising "with Surprise 'vas due to djsintcrest or to a lack of knowledge concerning its availability. The store received all the Surprise price lists, but the Jil S1:rp1";se contends tr. at Howland also rC(' ved SaIDI' 50 percent allowances during this period; seci"fra. pp. 023--024. SURPRISE BRASSIERE CO. , INC. , ET AL. 889 868 Initial Decision foundation garments buyer simply was not aware that the cooperative advertising policy was there set forth (Drury 1119-20). The Surprise salesman Jack Brown testified that he offered the 50 percent arrangement to the store in 1960 and also may have offered statement enclosures (Tr. 1775-77). Evidence respecting Hahne is significant only in establishing that no 75 percent offer was maoe to this account until the general policy change of mid- 1962.

Helen Hi1'sh-The same finoing is made as to Helen Hirsh (Tr. 331 , 342, :356), despite complaint counsel's apparent reliance (CPF 41-43) on the testimony of its proprietor, Allen Paskow, to establish that the Surprise cooperative advertising plan was not available to this store. Paskow, who took over the business in June 1961 , had received at least the 1962-63 price Jist but was not sure about the 1961-62 price list (Tr . :331-32). l.until contacted as a witness, he had not been aware that the cooperative advertising plan was contained in the price Jist (Tr. 333). Paskow further suggested that the Surprise salesman had failed to offer cooperative advertising. The fact is, however, that the store had cooperatively advertised with Surprise in 1960 and 1961, receiving 50 percent (CXs 8:3-85 R; CPF 15), ano it had received 75 percent for a Surprise ad in 1963 (Tr. 342- , 354- 55; CX 181 H). The salesman, Jack Brown, testified that the Hirsh Shop also was furnished mats, bust forms, streamers, and window cards (Tr. 1775, 1778).

3. Competition Hirsh and Hahne both competed in the resale of Surprise proofucts with Bamherger s (Paskow :330, 333; Drury 1119, 1123; see also CPF 30, 36).

Philadelphia, Pennsyl"r",ia 1. Department Stores In Philadelphia, Pennsylvania, Surprise granted four department stores aovertising allowances of at least 75 percent and sometimes 100 percent. These customers are: Lit Brothers (CXs 86- , 95- , :358 B) ; Gimbels (CXs 100- , 115-18) ;

Strawbridge & Clothier (CXs 119-22; Tr. 459 , 462 , '165- 491) ; and Snellenburgs (CXs 13- , 17-18; RX 25 A-H). (See generally CPF 1(i-20.

Initial Decision 71 F.

2. Other Customers During the same period that these department stores were receiving advertising allowances of 75 percent or better from Surprise, other competing customers in Philadelphia received or \were offered advertising allowances of only 50 percent. These customers included:

Jean Spitzer Corsetiere, 3 ads in 1960; 1 in 1961 (CXs 125-28) ; Besser s Corset Shop, 2 ads in 1960 (CX 133) ; Harriet' s Corsetry, 2 ads in 1962 (CXs 134 135 C) ; 20 Jean Rose Corset Shop, 1 ad in 1960 (CX 136) ; Goodman s Corset Shop, 1 ad in 1960; 3 in 1961; 2 in 1962 (CXs 137- , 182 A-H; Tr. 726- , 732-38) ; " and Mary Anne Corset Shop, 4 aos in 1960; 2 in 1961; 1 in 1962 at 50 percent; and 3 in 1962 at 75 percent (CXs 144-52 B; RXs 5 C). (See generally CPF 20-22.

For lack of adequate evidentiary basis, the examiner has disregarded transactions with Madam Rosalie Shop (CX 175 A- CPF 25, 30-31; RPF 116) 23 and the Ort Shoppe (CX 177 Acompare CPF 25, 30-31 with Tr. 761 , 763-72; see RPF 117-18). Three other Philadelphia accounts require further findings, as follows:

Harriet' Course try- This account, also known as Harriet' Hosiery, is cited by complaint counsel in support of the allegation that some customers \were not offered advertising allowances or \were not informed of modifications in the Surprise advertising plan (CPF 26, 32). But the proprietor, ~irs. Harriet A. Gilbert received the price lists announcing the cooperative advertising allowance plans in effect ouring 1960-63. Shc simply failed to take note of them. She relied on the salesman, but he made no offers in 1960 or 1961 (Tr. 668-71). According to the salesman Popkave, he offered :Ylrs. Gilbert cooperative advertising in 1961 (Tr. 1856).

:lioreover, despite Mrs. Gilbert' s initial statement that she didn know the advertising plan was contained in the price lists (Tr. 669-70), cross-examination developed that she may have read the cooperative advertising statement at least by 1961 (Tr. 701-05), i/ One ad was dated ov('mber SO, 1962 , but the allowance WHS only 50 percent (k rJjt(' the change in rate to 7, percent Zl Apparently the Goodman shop received at irast one 75 percpnt allowance in 1963 (Goodman 745-48).

J ResIJondent doubted that ex 133 . r,"lating to B,"sser . and ex 136. rel\tinj! to Jpan Hme were in evidence (RPF 119), but see Tr. 773. Except with regard to the u percent limitation; see infra, p. 896. SURPRISE BRASSIERE CO. , INC. , ET AL. 891 868 Imtial Dccision and that she had knowledge of Surprise advertising allowances from conversations with a salesman prior to 1960 (Tr. 709-10). Nevertheless, there is no doubt that this shop was discriminated against, since it received only 50 percent allowances while its department store competitors received 75 percent. Oodly enough this was true even after Surprise began offering 75 percent generally to its customers. For an ao published in Novemher 1962 Harriet' s asked and received only 50 percent (CX 134 A-B; Tr. 671 , 675 , 705-06). When she oiscovered she was entitled to 75 percent in the fall of 1963 , she then deducted the additional 25 percent from an invoice (Tr. 671-74), and there has been no question raiseo concerning the deduction (Tr. 680 , 712). The salesman Popkave had only a hazy memory of this incident, but dismissed it as a mistake or oversight involving some question about the submittal of tear sheets of the ad (Tr. 1825- , 1856- , 1864-65).

Mrs. Gilbert said that Surprise salesmen never offereo her any alternatives or substitutes for cooperative aovertising but did furnish display material ('11' 677). This material was never offered "in lieu of" cooperative advertising (Tr. 678). She always found Surprise very cooperative in all sorts of displays (Tr. 718). Francine s Foundations- This account did no cooperative advertising with Surprise in 1959-61 (CX 183 A-D; Tr. 641-42), but oio receive $66 in 1962 , representing 75 percent of the cost of two aos in the ,Jewish Exponent (CX 183 A-E; Tr. 646-47). The Surprise purchases of this shop in 1959-6J entitled it to advertising allowances ranging from S2Ei to 837 (CX 183 E). 1H1'8. Ada A. Toll, owner of Francine, received Surprise price lists for 1961-62 and 1962- , but she could not remember whether she received the J960-61 price list (T1' 612, 617-48). It is evident from her testimony, however, that she \vas on notice concerning the availability of cooperative advertising from Surprise, ano a 50 percent offer was made to her in 1961 ('11' (55). She was not interested in cooperative advertising in 1960 but oecided to take advantage of it in 1962 (Tr. 648). She said she believes in advertising " If you have enough money " and " you 00 it enough" (Tr. 652).

Although Mrs. Toll first saio that the Surprise salesmen did not offer her anything as an alternative to cooperative newspaper advertising (Tr. 642) J she indicated on cross-examination some confusion as to what the question had meant (Tr. (46). She then acknowleoged that the Surprise salesman discussed with her throwaways, bust forms, glossies, window di.splays, and possibly Initial Decision 71 F.

streamers and inserts (Tr. 649-51; see also Popkave 1818-21, 1855-56). But Mrs. Toll indicated that the oisplay materials were not represented to her by the salesman as alternatives to newspaper advertising (Tr. 657).

Gertrude Rechtman--Miss Rechtman who operates a Philadelphia store selling foundation garments, including the Surprise line, "vas not sure whether she had been offered cooperative advertising by Surprise. K 0 inquiry was made concerning her receipt of price Jists. She does no cooperative advertising and hence pays no attention to it (Tr. 568-69; see also Popkave 1816, 1853- 54). Although she first said that Surprise had never offered her anything as an alternative to cooperative advertising in newspapers (Tr. 569), further questioning developed that she meant Surprise had never offered her money for other types of advertising, such as the direct mail advertising in which she engages. Surprise never offered to participate in the cost of her direct mailing, and she never asked them to (Tr. 571-72). She knew that Surprise had advertising inserts for letters, but she did not want them because she sends cards, not letters. She had been offered streamers, counter cards, and bust forms, but she was doubtful that they constituted advertising (1'1'. 572; see also Popkave 1810- , 1853-54).

l\11is8 Rechtman s purchases from Surprise increased steadily f1'm 1959 to 1962, so that her aovertising allowance entitlement ranged from $43 in 1959 to $114 in 1962 (CX 176 A-F). Thus, it is obvious that she could have engaged in some newspaper advertising had she desired to do so. It also is true that she could have useo the advertising allowance money for her direct mail advertising.

3. Competition The customers of Surprise in the Philadelphia area were in competition with one another in the resale of Surprise prooucts (Bierman 476, 499; Connors 557-58; Rechtman 570; Feir 608-09; Toll 644; Gilbert 680- , 713- , 717-18; Goodman 744-45; Spitzer 804-07; Carr 820; see also CPF 32- , 37) . Special 100 Percent Allowances Concerning 100 percent allowances (supr' (1. p. 883), the record demonstrates that the only recipients 'ivere department stores: ~lalley, Xew Haven (James 138-. , 2594 , 2596-97; Rubin 1603) .

SURPRISE BRASSIERE CO. , INC. , ET AL. 893 868 Initial Decision Bamberger s, Xewark (CXs 64 , 68, 71, 78; George 427-29; Brown 1764- , 1787-88) .

Gimbels, Philadelphia (CXs 101 , 110, 116; Feir 584- , 597-98, 605 , 635, 2814, 2817).

Lit Brothers, Philadelphia (CXs 88 A-C, 98 A-B; Connors 557). Snellenburgs, Philadelphia (CX 17 B-C; RX 25 A-H). (See generally CPF 14- , 38-11; RPF 6-7; RR 18-22. These 100 percent allowances were primarily for the promotion of new merchandise, but some involved the opening of new stores or new departments, and also omnibus ads. Despite testimony that these 100 percent allowances were offered uniformly to all accounts (Cohen 992 , 1028-.29; Sanoers 1424-26, 1511-43; see also Rubin 1603 , 1682- , 1711-12), there is no evidence that Surprise paid such an allowance to any customers other than the five department stores listed. Except for ~Ialley s buyer, there was no testimony by any retailer-witness in New Haven specifically relating to 100 percent allowances, but there is basis for an inference that no such offers were made to the stores competing with l\1alley s. The testimony of the salesman, Rubin, regaroing such offers (Tr. 1682- , 1711- , 1730-31) is not convincing, and it does not establish that such offers were made on proportionally equal terms. In Newark, neither Hirsh nor Hahne received any 100 percent allowances, and the record contains no evidence that they ,were ever ofiered such an allowance (cf. Brown 1775-77, 1792- 1797-99) .

Similarly, in Philadelphia, not a single customer competing with Gimbels, Lit Brothers and Snellen burgs received any 100 percent allo\vances, and a11 indications point to a failure on the part of Surprise to make such an after.

Francjne s Foundations, for example, moved in :.lay 1960, but it received no 100 percent allowance for a ne,v store opening or for any other promotional purpose (Toll 638-39). Moreover, there is specific testimony that Surprise never offered 100 percent allowances to Harriet' s Corsetry (Gilhert 675- , 688, 700-0l) or to .Jean Spitzer (Spitzer 804).

Significantly, the Surprise saiesman who called on the small 2' In o ojectjng o the p oposed fir. dings of complain'. counsel, respondent e:-piain6 a 100 percent allowance to Bamberger in IIay 1862 (CX IS) a l'onn d(,d wi h the oper.ing uf a new store (RR 2:), Altho'-gh the :-h;bi: l", r.'i an unidentified har, dwritten notat:on " new store and the Surprise sfllesman Brown relied on that nutatio" in so testifying (Tr. 17 7: bur see Tr, 1765), the bu,,'ee' for Bamberger s specific:lly testified that the payment e:-empli(,('d by ex 78 was not for a new sto,e opening IGeorge 428-20), The r'Ocunl leaves unexplained why Surprise paid only 7 peJ'cent for anotr. e:' Ham uerg('" ad (in R d fferent new pr,pe,' ) advertising the same item on the same day (eX Rl A), .

894 FEDERAL TRADE COMMISSIO~ DECISIONS Initial Decision 71 F. T. stores in Philadelphia testified that although some of his customers purchased the same styles on which Gimbels and Lit Brothers received 100 percent allowances for ads, he did not offer the small stores 100 percent allowances (Popkave 1843-44; cf. Popkave 1861-62; Sanders 1540-41; Brown 1788 , 1792). In oefending its practices regaroing 100 percent allowances in the Philadelphia area, Surprise relies (RPF 114) on an ad published at its expense on :-ovember 17, 1963 (RX 7) which listed the names of various stores carrying the Surprise line (Popkave 1828-42). But this ad-apparently the only one of its kind (Tr. 1844)-is hardly equivalent to the department store ads for which Surprise paid 100 percent. In fact, the Surpxjse salesman said it was not "on a cooperative basis " (Popkave 1817). There is no showing of proportional equality.

Small stores listed in the ad include Francine, Gertrude Rechtman, Mary Anne Corset Shop, and Jean Spitzer Corsetiere. Harriet' s Corsetry was not included.

Participation in the ad was contingent on the purchase of a minimum quantity of merchandise, the exact extent of which was not established (Popkave 1837-42; Rubin 1683). Surprise s explanation that the stores which did not receive 100 percent allmvances were unwilling to promote new items in return for such allowances (RR 18- , 22), is not supported by the record.

Other De'uintions fnnn P'1o,gTfun Lirrl.:tution on Allmounces The record shows that Surprise purported to have a policy of limiting advertising granted in any calendar year to an amount not exceeoing 5 percent of purchases (Cohen 995-1000). It was not until the price list of 1962-63 (CX 16), which was issued in mid- 1962, that this limitation was published to the trade; but it appears that such a limitation may have been generally known (Cohen 95 , 995; Gilbert 702) . , In any event, both parties agree that the allowances granted by Surprise are properly measured against such a limitation.

x; Certain of Surprise s contract forms for cooperative advuLsing sugg-est some flexibility with respect to the percent limitation . Thus. the so-called " Two-Ad Agre:cm.;nt" exemplified by ex 3 states that " We reserve the right to limit OUr sni!re of th" exppnditure under this agreement to 5% uf purchases within the calendar year " The wotui"" suggests that such a limitation may nut have been uniformly applied The limitation was more firmly surted in the 196 - 63 jJrice Lst (CX 161. whkh offered payment of " 7.'i% of rt:ailer s :local newspaper advertising (limited to .S% of annual purchases) , and in the " Cooperative Advertising- Agreement " form (CX 7) pjJ;'rently Pllt into use in mid- . which specified payments of 75 percent " up to ar. amount not to ('."fceed 5% annual pUTchaaes.

SURPRISE BRASSIERE CO. , INC. , ET AL. 895 868 Initial Decision There is vigorous disagreement, however, concerning (1) the allowances properly included in the annual total and (2) the proper measure of annual purchases to be used as a base for the application of the 5 percent limitation (CPF 28- , 33-37; CR 14-17; RPF 6-1 and 10- 117, passim; RR 7-11). The examiner rejects the contention of Surprise (RPF 6that 100 percent allmvances for new store openings, promotion of new prooucts, and omnibus aos should not be included in the total advertising- allowances for a given year (see, for example RPF 68a-c). All the allowances granted are properly subject to the statutory test. The reasoning advanceo to support Surprise contrary thesis is so fallacions as to require no extended comment (see CR 14-15). In addition to deleting numerous 100 percent advertising allowances g-ranted department store customers on its erroneous exclusionary theory, Surprise, in its Proposed Findings, has deleted numerous other allowances in violation of the principle it purports to espouse (see CR 14-17). As for the base year to be used in computing the limitation there is no real dispute that unti mid- 1962, Surprise s policy was to measure its advertising allo\vances in a given year against 5 percent of the customer s purchases during the l"ior yea!' (Cohen 996) .

Beginning in 1962, Surprise started figuring the 5 percent limitation on a different basis. Since mid-1962, the maximum allowance for the first six months of the calendar year has been computed on the basis of one-half of total purchases ouring the previous calendar year J and the allowance for the second six months has been figured on the basis of the purchases during the first six months (Cohen 996-1000).

Whichever system Surprise used, it is apparent that the intent was to limit its advertising allowances to 5 percent of current \1ilith sales during a preceding period used Hanly asannual sales a g-auge or guide" (RR 8). A Surprise offcial testified that if the 5 percent maximum \vas exceeded, an adj ustment was made in the succeeding year (Cohen 1081-85), but the record is barren of any showing of such adjustments (see CR 13-14). A tabulation by complaint counsel (CPF 23-25) shows the percentage of advertising allowances measured against sales during the previous calcndar year. This tabulation demonstrates that some custon received allo'vances in excess of S percent. Surprise complains that the comparison is improper and that the percent COmlJutation should be 1nDde on the basis of sales during the year contemporaneous with the allowances (RR 7-10). But ..... . , ; ; :? ) Initial Decision 71 F.

when all the allowances are included, a shift jn the base year does not change the overall net result. It does, of course, raise the percentage in some instances and lower it in others. The important fact is that under either system of computation, some customers rec;eived allowances greater than 5 percent. A sampling of the alternate tabulations, shelving instances in which one system 01' the other yieJrls an allowance exceeding 5 percent, follows:

i Perce:ltof"OiJllow-flnc s meEsurel! against JJul"chas,, Place Clistomcr I All nce i JJ1j H : sa ;ear I - XC\\ Haven, Conn. The Ech-; I\1 lle RridgepOlt, Conn. , The Howland Dry Goods Co, 1962 5 i Newark, N.J. .. - Helen Hirsh -- 1!J60 Philadelphia, Pa. Strawbridge & Clothier I9Gl 19GO 13.7 i 9.4 19G1 . 10. 0 i I Gimbel" 1962 I Lit Brothers 19G2 i SnellenbDl' 1961 I 7 I 1962 I 7 : 11.3 ::vradam Hosalic 1962 1 I 10. Francine s Foundations J 962 I 0 i Harriet' s Corsetry 1962 8 ! (See CPF 23-25 an\. exhibit.s thc,' e cited: cf. NFl' 10 3, 6,j 67-fiik. , !I , 10; 2 113- 16; HR 7-11.

Thus, it is beyond dispute that Surprise faileo to adhere to its O\vn tern1S and rliscriminatccl among- competing customers in applying or disregarding the 5 percent limitation on annual allo\vances. It may be noted in passing that this discrimination favorect not only department store customers, but also some of Surprise smaller cllstomers.

Ivlax'inwn Size of Ads The publisher1 program (CXs 1 , 2, 16) imposed no limitation on the size of advertisements, but contract forms specified a maximum size of 600 lines or .12 inches (CXs 3- , 13 A, 14 A. 15 A 186-88) .

In the face of the contract limitation, the record shows that the maximum was exceeded on several occasions: ...._ SURPRISE BRASSIERE CO. , INC. , ET AL. 897 868 Initial Decision Store l\Ialley s .-- 7f; 52" "0 CX 20 A- Ho\vland' s - 4/2/62 48" ---- CX 48 Gimbels 4/28/60 1000 lines CX 102 A 0/13/60 , 620 lines CX 103 A . 5/2/61 620 lines CX 109 A 10/30/61 620 lines CX 110 4/29/62 675 lines CX 113 12/7/62 , 620 lines CX 115 Strawbridg & Clothier 3/23/60 620 lines CX 119 A 9/20/61 620 lines - u CX 121A 4/9/63 I 615 lines. CX 122 A Snellen burgs 4/25/62 654 lines. u CX 18A No evidence was adduced concerning any customer who was denied an opportunity to exceeo the maximum " and such a deviation probably is of litte or no consequence to small-volume customers (see RR 16). Xevertheiess, allowances for advertisements larger than the maximum specified in the contracts are covered squarely by the allegation in the complaint (Par. Six) that "while the payment of advertising allowances to some customers was made jn accordance with the terms of the agreement other competing customers were provided allowances above and beyond those provided for in the agreement." In defending these deviations, Surprise, in effect, sets up a plea of de ?n1:nirnis (RR 14-17). But the examiner rejects the contention that such deviations \were "isolated instances " and that the excess linage was insubstantial (RR 14-15). If all the deviations had amounted to only an inch or two (14 to 28 lines), they might have been disregarded as de ?ninirnis but in addition to several ads exceeding the maximum by only that amount, there are others that cannot bf so dismissed, Surprise mistakenly argues that the linage limitation was not part of its plan before the summer of 1962 (RR 14-15). The fact is that contracts used both before and after that time contained the limitation. And although Surprise correctly notes that the advertisements cited by complaint counsel were published before the summer of 1962, the record reflects at least two instances in \which the maximum was exceeded subsequent to that time-December 7 1962 (Gimbels, CX 115) and April 9, 196:; (Strawbridge & Clothicr, CX 122 A). (It must be conceded, of course, that those :J The ad originally was schedul d to be 784 IiYJes 01' 6 in hes (CX :86). 21 ).eithrr complaint counsel nor counsel for Surpr:se itc any testimony on the subject, and the examiner has found none.

Initial Decision 71 F.

two instances, standing alone, might be disregarded as de 1ninimis.

The argument that the cost of the j, OOO-line ad run by Gimhels in a tabloio on April 28, 1960 (CX 102 A) was less than the cost of a 600-line ao run in other newspapers (RR 15-16) is ingenious but is beside the point.

Finally, the contention that in that instance Surprise was meeting a specific competitive situation (RR 16) is not supported by the record.

VI. LEGAL Al\T AL YSIS OF TI-IE SURPRISE PROGRAM A-uailability Even if Surprise had adhered to its published program, without the deviations described in the preceoing section of this initial decision, complaint counsel would stil condemn its advertising allowance practices as violative of law. As outlined previously (supm pp. 877-878), two questions that must be resolved are stated by complaint counsel (CB 1) as follows: Has respondent made advertising aJlowancfCs " available " to all of its competing customers in the sense that allowances \were otJeTcd to all competing customers? Has respondent made advertising allowances "available " to all of its competing customers in the sense that allowances were attainable by fill of its competing customers? To the extent that the second question is answered in the negative, a further question arises: Were customers who found the advertising allowances unattainable offereo substitutes or alternatives on proportionally equal terms? Each of these questions will be considered in turn. First, however, it must be determined whether the first question-regarding notice-was properly put in issue. The thrust of the complaint is that the payments made by Surprise to some customers jj \were not available on proportionally equo., terms " to competing customers (Par. 4; emphasis added). The complaint does not allege that the allowances were not available to some customers on any terms.

The general charging paragraph of the complaint (Par. 4) is followed by a description of the Surprise plan in effect during 1961 ano previously (Par. R). Thereafter, Paragraph Six challenges that plan on two grounds;

1. That its terms and conditions "were such as to preclude some SURPRISE BRASSIERE CO. INC. , E'r AL. 899 868 Initial Decision customers from accepting and enj oying the benefits to be derived from the plan; and 2. That "while the payment of advertising allowances to some customers was made in accordance with the terms of the (planJ, other competing customers were provided allo\vances above and beyond those provided for in the (planJ. The complaint thus does not specifically charge a failure to offer allowances to some customers at all, and complaint counsel do not mention such a charge in their summary (CPF 1). X evertheless, the examiner has disregarded this technicality and has determined this question on its merits. He has done this because (J) obj ection was not raised by respondents on such a ground; (2) the general language of Paragraph Four of the complaint may be liberally construed to embrace the charge; (3) Section 3. (a) (2) of the Commission s Rules of Practice may be construed as curing whatever defect there may be in the complaint; and (4) the disposition being maoe of the matter by the examiner makes the question academic, at least at this stage. NotificrLtion of Custom",' Regarding the question whether the Surprise cooperative advertising plan was available in thc sense that it was offered to all competing customers, the examiner s answer is yes. He thus rejects complaint counsel's contention that publication of the plan in the Surprise price lists was not adequate notification. Complaint counsel virtually concede that there was general oistribution of the price list to all customers (CPF 43; but see CR 22). Certainly this was Surprise s intent, and nothing in the record suggests that Surprise did not make an honest effort to place its price lists in the hands of all customers. Obviously, it was to the interest of Surprise and its salesmen to furnish price lists to all customers.

At most, the record shows only two isolated instances indicating a possible failure to furnish customers with particular price lists (Kay s Corset Shop, ",'pm Pl'. 886-887; Francine s Founoations supra p. 891). Xo customer testifieo to any consistent failure by Surprise to furnish price lists.

Complaint counsel dismiss as s elf-serving the positive testimony of Surprise s sales employees concerning the policy of distributing jJrice lists to all customers, and they complain of the lack of any "conclusive evidence " that price lists were, in fact mailed to all customers. They suggest that Surprise should have introduced in evidence its customer mailing lists or other corrobo- .

900 FEDERAL TRADE COMMISSIO:- DECISIONS InibaJ Dccision 71 F.

rative evidence to substantiate the testimony concerning the distribution of price lists (CR 22).

But on this subject, no basis exists for shifting to Surprise either the buroen of proof or the buroen of going forward, even under the doctrines expounded in State Wholes"le Grants v. The G?' eat Atlantic I'lLci.fc Tel Co. 258 F. u 881 , 837-88 (7th Cir. 27" and 1958) , Vanity Fai?' Paper l'dills, Inc. v. Federal Tmde Commission 311 F. 2d 480, 486 (2d Cir. 1962). Even though it is hereby found that the notice of availability of aJlmvances ivas delivered to customers by means of the price lists there remains the further question whether this was adequate to inform customers regal' doing the program (CPF 41-43 ; CR 19-26). The examiner finds that publication of the cooperative advertising plan in the price lists was an adequate method of notifying customers concerning the plan. It is true that the record shows that several customers, both ),uge aml small, failed to take notice of the cooperative advertising statement. But the statement was not hidden; it was not in "fine print" (ef. CPF 43) ; and the record does not support the suggestion of complaint counsel (CPF 43, n. 60a; CR 23) that it was likely to be covered by supplemental price sheets.

The mere fact that some customers ignoreo the published statements or relied, instead, on oral communications from SUl'pl'ise salesmen, does not warrant a condemnation of Surprise for failure to make a reasonable en'ort to communicate its oirel's, :\T either the statute law nor the case law requires that notification be given in any particular form, Publication of the plan in the price lists was reasonably c:alculatcd to apprise customers of the existence of the pJ8.n. The fact that Surprise salesmen were zealous in lilldel'taJ\:ing to arrange cooperative advertising with department store customers while only casually mentioning it, or perhaps not mentioning it at al1 in their calls on smaller cllstomers, does not detract from the basic finding of 3appropriate publication. Failure of cllstomers to read and remember the published cooperative advertising plan does not create any culpability on the part of Surprise. Ii was not bound to 111ake personalized offers or engage in :1ctive solicitation. It had no duty to urge the customer to act on its published offers.

The requirement of availability is satisfied by reasonable notice by the supplier, an opportundu fo); an' areneS8 by the customer. ,o Cert. denied 358 U. S. Hi (1959).

SURPRISE BRASSIERE CO. , INC. , ET AL. 901 868 Initial Decision Here, as in the Lever Brothels case, 50 F. C. 49. , 507-08 (1953), Every customer knew or could hwve easily learned what payments were being offered and what he must do to get any of them. (Emphasis added. ) There was no "concealment" of Surprise cooperative advertising program. Kay lVindsoF Frocks, Inc. C. 89 , 95 (1951) ; see Vanity Fair Paper Mills hie. v. Federal Tnlde Commission 311 F. 2d 480, 485-86 (2d Cil' 1962) ; Genelal Electric Co., Docket 8487, Initial Decision, March 1 , 1963 , pp. 19- 22 (dismissed on other grounds February 28, 196'1). The distinctions between the Gene)' al Electric practices and those in the instant case (CR 21-22) are matters of ,legTee, not of substance. Constructive notice is a doctrine long familial' to the law, and there is no reason "why it should not be applied here. If, for example, citizens are presumed to have notice of any Federal Government edict published in the Federal Register, whether or not they ever see it, or even know about such a publication, 44 l:. C. 307, it is not unreasonable to hold in this case that customers supplied with the Surprise price list had constructive notice or the cooperative advertising plan. The doctrine is particularly applicable in the industry involved here, where the furnishing of advertising allowances is a widespread-almost universal--practice.

The examiner is impelled to tino that Surprise openly ano "etually made known the availability or benefits under its cooperative advertising plan.

The literal language or the recent Ii oust' of L(nd' case, DocJ;:ct 8631 (January 18, 1966) r69 F. C. 44J, inoicating a duty on tlw seller to insure act?wl knolcledyc on the part of customers, and thus suggesting a contrary result, must be read in the context or the special facts of that case. In discussing " availability, " the majority opinion states thatthe crucial ractor i" not the lJalticular formalities by which fthe customer' acquiJ'cs it, but the information (lcLually Poss(!.'sed by thc customer- particillarly his July\\-ledge of the seller willi'iiljufs. 'J to grant him thc allowance(;. (First e.n1phasis added.

It refers to "the seller s duty to nw.ke SUFe the competing customers know about the-: allowances, know of their right to obtain them and are familiar with the terms (proportionally equal) on which they can be obtaineo. (Honse of Lord' , Inc. Majority Opinion p. 75, n. 6; emphasis addecl.) :Jloreover. commenting on testimOll)' by a customer that the offer "could have" been made, and ruling that "This is not enough Initial Decision 71 F.

the Commission referred to the holding in Vanity Fait Paper Mills, Inc. v. Federal Trade Commission 311 F. 2d 480, 487 (2d Cir. 1962), that "* * * a seller who has paid a special promotional allowance to some customers and not to others does not avoid the proscription of S 2 (d) merely because payment might have been available on proportionally equal terms to all other customers competing in the distribution of such products or commodities he avoids it only if such payment ' ' available. " The opinion then adds:

And it " " available to a customer *' ,. " only if the custO'ne1' knows auout it. (House of Lo?" s Inc., Majority Opinion, p. 77; emp '!sjs added. )29 These pronouncements must be read in the factual setting of the House of Lord' case. In House of Lord' there was no written or printed notice of the cooperative advertising program, which \vas made known only through oral offers of the sales staff, and the Commission could find no credible evidence that the non-favored customers were offered promotional allowances of any kind. In the instant case, it has been established that the program was pubiished to customers by means of price lists, and the evidence supports a finding: that, with rare exceptions, a11 customers received copies of the price lists, so that for practical purposes, the offer was made to all customers. Although there were some customers who oio not actually know about the Surprise program because they oid not see it in the price Jists, this was not the result of any breach of duty on the part of Surprise. In Ho,,"c of Lord' the Commission simply oisbelieved the testimony of respondent' s offcials and employees that they had informed customers concerning the prug'ram. Here, Surprise has documenteo the steps it look to inform its customers; co, the program had been "reduced to writing and openly distributed, (House of Lord' s, Majority Opinion, p. 80, n. 31.) Finally, as far as notice is concerned, the order in House of Lord' simply requires that customers be "informed, in \writing of the promotional program. That requirement already has been met by Surprise.

25 Th;", seeming requirement of tual knowled!f iR followed by a quotatiun from Fred Meyer, lng. Dockt' 7492 (March 1%3) f63 F. C. J , 26J. which speaks of a supplier failure to inform " w ich " is tantamount to concealment 2U Spc 8, Guides for Advertising Allowances and Other )lerchandising Services (May 19 1960) .

, , :

SURPRISE BRASSIERE CO. INC. , ET AL. 903 868 Initial Decision PmcticnZ A vniZnbiZity 1. Introduction The next question-whether the allowances were available in the sense that they were aUainable by all competing customers (sometimes referred to in this discussion as "practical availability presents more diffculty.

As previously outlined, the Surprise program involved an offer published to all customers (1) to pa. a uniform percentage of each customer s newspaper advertising featuring Surprise garments up to 5 percent of annual purchases and (2) to furnish without charge promotional material for in-store display and for direct mail advertising.

As far as the basic requirement of the statute is concerned, it is clear that under the published program, Surprise offered to al1 its customers advertising allowance payments on proportionally equal terms by providing a uniform percentage of reimbursement for ne\vspaper advertising and "by basing the payments * * * on the dollar volume * '" ':' of goods purchased during a specified time. (Guides for Advertisl:ng Allmu(Lnces May 19 1960, Par. 7. As a matter of fact, the first example of the application of the proportionalization provision of the Guides (Par. 7) outlines a program virtually identical to that offered by Surprise during 1960-62.

In addition, as part of its comprehensive program, Surprise made available to all customers, including non-advertising customers other kinds of promotional activity and benefits Sunbewm Corpomtion Docket 7409 (Opinion accompanying Final Order, January 11 1965, p. 5) (67 F. C. 20, 57J. The Surprise program, both in theory ano in operation, meets the "minimum standard of fairness " specified in House of Lord' Docket 8631 , January 18 , 1966 (Majority Opinion, p. 18) (69 C. 83J, by establishing a promotional plan that has "at least one feature that can be used by each" customer. The published program of Surprise may be fairly described as a comprehensive nondiscriminatory program containing 1'ea8011- ,W The example is as follow A seller may properly ofter to pay a speeified part (say 50%) of the cost of local newspaper advertising up to an amount t' qual to fj set percentage (such as 5%) of the dollar volume of purchast's nuring a sjJecified time. " And see Advisory Opinion nige t r-'o. 26 (April R , lfJfB) in which tr.e Cummis ion approved a promotional plan proposing to pay for " Jocal adve:.tisements " allowances " whirh amount to 5% of the customer annual dollar volume " The Digcst conlained no cavent concerninp, (,u tomel8 whose dollar volume of purchases might not make availaole any realis:ic advertising allowance. See also Advisory Opinion Digests Nu. 38 (April ?G , 196Ei) r6!J F. C. 1218 1 allll .'o. 3fo (April . 1066); cj. o. 10 (December 9 , 1965) E68 F. C. 1271). 31 See Guides Par. 6 \c); Par, 9.

904 FEDERAL TRADE COMMISSIO~ DECISIOI-S Initial Decision 71 F.

able alternatives for those small retailers unable to participate in cooperative ne'\vspaper advertising, xquisite F'o?'Tn BrCLssiere Docket 6966 (Opinion accompanying Final Order, January 20, 1964 , 64 F. C. 271 , 294).;c Although, technically, there are no alternatives stated as such in the plan, the promotional assistance is j'uniformly offered in its entirety to all competing retail customers," The program does not "favor the large retailer " and it does "provide for the small retailer some sort of financial aid in methods of advertising economically available to him. The "vice " the Commission found in the Exquisite Form planpronounced favoritislTI of larger retailers and its affrmative exclusion of smaller ones (id. p. 290) -is wholly lacking in the Surprise plan. It cannot be said that the Surprise plan is "weighted in favor of the larger retailers and operates affrmatively to exclude from its benefits small retailers (id. p. 291). The Surprise program is in no way comparable to the Exquisite Form plan which the examiner found "was not designed or intended for use of (itsJ smaller accounts (id. p. 283). Thus, on its face, the Surprise plan appears to accord with the law, as explicated in controlling precedents and in the Guides. However, complaint counsel have questioned the validity of the Surprise program on the grouno, in substance, that the advertising allowance feature is not "suitable and usable under reasonable terms by all competing customers" and that the plan operates to eliminate some competing customers, " (See Guides Par. 9. 2. Lin it((tion to .N eW8jJaper Ad'IN?1'ising Complaint counsel object that the Surprise program imposes a restriction on the media for ,which advertising allowances arc available. Admittedly, the payment offereo by Surprise was for local newspaper advertising" (CXs 1 , 2, and 16) ,,,;1 l\1moreover, it appears that in practice the term "1local newspaper advertising was interpreted to embrace only I'accredited newspapers those shown in Standard Rate & Data Service (CX 7; Cohen 989, 994). The limitation was designed to exclude Ha fly-by-night ne\vspaper and to incluoe only newspapers with verifiable circulations (Cohen 989). Actually, Surprise customers useo a variety of newspapers, some with limited circulations and low advertising rates. There is no evidence that any customer ,vas denied an opportunity to ad- "JA v,rmed 360 F. 2d 492 (D.C, Cil" 1%5). '3 Under the S\ltp1'se cooperative advertising contract form, exemplified by ex 7 , it is made dear that local new paper adverlisir; does not i;-Jclude " shoplJinr; new.sp8jWrS, TI1OighooJ'hoou publications, souvenir programs, radiu, te,evision, circulars, bi;rboards, theatr10 programs, special editions, supplements, catalogues or other non-el:gible media. SURPRISE BRASSIERE CO. , INC. , ET AL. 905 868 Initial Decision vertise in a newspaper because of any arbitrary standards imposed by Surprise.

Complaint counsel take the position that Surprise s Jimitation on the media that may be used, when coupleo with its Jimitation on allowances for advertising (5 percent of annual purchases), deprives small-volume purchasers of the opportunity to receive any advertising al1owanees. They c:contend that "some customers, although offered allowances by respondent, were not able to avail themselves of such allowances" (CPF 26) : that " cooperative advertising allowances were not functionally available to some of respondent' s customers in that, (a) some customers could not afford to advertise in newspapers, the only media for which allowances were granted, (b) some customers 'were not interested in cooperative ne\Yspaper advertising, and (c) some customers' purchases were not large enough to earn enough allowances for newspaper advertising" (CR 17; footnote omitted). These contentions are literally true. But neither the quantity nor the quality of the evidence cited to support them Ivarrants a finding that the allowances offered by Surprise were not available to all competing purchasers on proportionally equal terms within the intent of the law.

In the four trading areas covered by the evioence, complaint counsel can cite only two customers who inoicated that they were unable to take advantage of Surprise s advertising allowances- Kay s Corset Shop and Figure Fashions, both of New Haven. The record affords no basis for finding that these customers were typical. As a matter of fact, Figure Fashions evidently was a dying business, with ils purchases from Surprise dwind1ing, and its proprietor obviously had no desire to advertise Surprise products, although he oio advertise regularly (SUT)?'!( p. 887). As for Kay, the sometimes confused and confusing testimony of Harold Katsoff ooes not clearly establish that cooperative advertising actually was beyond his capabilities (supr(( pp. 886-888). Ot.her non-recipients of Surprise s advertising allo\vances- Hahne & Co. in :-ewark (SU1JTU p. 888) and Gertrude Rechtman in Philadelphia (supm p. 892)-had suffcient purchase volume to qualify for usable udvertising allowances, but for reasons of their own they rejected not to engage in newspaper advertising. Aside from those four specific instances, the record does establish generally, and Surprise concedes, that some customers were either unable or un'\villing to engage in newspaper advertising (RPF 7-8; RB 12-13), but we are left to speculate as to the number or percentage of customers in those categories. The record Initial Decision 71 F.

affords no basis for calculating the number or percentage of customers whose volume of purchases was such that the 5 percent limitation precluded them from allowances suffcient to finance 50 percent or 75 percent of suitable newspaper advertising. The average dollar volume of purchases from Surprise by the small stores in Philadelphia varied from $300 to S6 000 a year (Popkave 1810), but without a further breakdown, these figures are not meaningful. Although testimony by Surprise salesmen suggests that there may have been numerous small-volume customers who did not engage in cooperative newspaper advertising with Surprise (Popkave 1814, 1821- , 1852-53; " Rubin 1699-1700, 1715-16; Sanders 1378, 1550; and see Cohen 1010- 1085), the record does not establish with any certitude the reasons for such nonparticipation. The salesman servicing small stores in Philadelphia referred to a feeling on the part of his customers that advertising rates were "too high" for them (Popkave 1852-53). Similarly, the New England salesman referred to I' comparatively high" advertising rates which are "too excessive" for small-volume accounts (Rubin 1699-1700 , 1715-16).

However, the record shows that several CUSlon1ers with annual purchases from Surprise of less than SI OOO dio engage in cooperative advertising (CPF 24-2;'5) .

Although the record reflects newspaper advertising rates paid by Surprise customers (CPF 9-22), it ooes not show the full range of rates actually available to small stores.. ' And it does not demonstrate the impossibility of ne\vspapel' advertising b y any customers, except perhaps a few with a volume of purchases so small that their exclusion from the plan might be oisregaroed as de Tllinirnis. There is no substantial evidence that any appreciable number of viable customers were "too sma1J" or otherwise unable :)nto engage in any kind of ne'\vspaper advertising. Despite the deflci ncies of the record regarding the actualities of customer exclusion from the advertising allowance program there is basis for finding that aovertising allowances were not J-I Complaint counsel rely (CPF 31) on I'opk:lvc s testjmony that " " of h: s C\JSlOrnrrs in Phil:ldc1phia (out of a tolal of 73 or 10n) w('re "non- coope ative adverti ing accounts" ('Ir. IHO , 1811), es,entially ignoring (by citing witho\,t quoting) his later testimo:'Y explaining that he did not mt,an to indicate that " mo,t" of hi, accounts Well' in that. carcgo y but only that " a portion " of them we1"(, non-advertisers it, nnvspapC1S ('fl . 1H5Z). AIJP"llelltly, thn' were "many " such customers ('IT. 1814). , The rail's pn column inch paid by Surprise customers (CPF 22) rangcd from 53.30 to 84. 42 in "'W Haven; S1. )O to 83. 08 in Bri,Jgepo).t; S1.58 to 88.l17 in N work; and 8:,,54 to ':17, 30 in Philadelphia. (See a:so Carr 825-27; CXs 1-4- 152 B; RXs ii A- 6 C. The argument of cumplai:'t counsel Ull this point is funhe ' weakeneri by :neir erroneous assumption that a Surprise ad had to be of a minimum ize of: 1 inch('s to qualify for reimbursement und('r th(' program (se(' SU)Jra p. 880). SURPRISE BRASSIERE CO. , INC. , ET AL. 907 868 Initial Decision attainable by all competing customers and, hence, were not practically available to all competing customers. Nevertheless, this does not inevitably lead to the legal conclusion advocated by complaint counsel that this means Section 2 (d) has been violateo. Even though newspaper advertising was beyond the reach of some customers, does this reflect any unfairness on the part of Surprise? In the examiner s opinion, it does not. The Surprise plan was not tailored to fit the neeos of a favored customer or class. The newspaper advertising plan is suitahle and usable under reasonable terms by all competing customers, except those buying such an insignificant amount of Surprise merchandise that they have no interest in promoting it (sup"" p. 887). Whatever oiscrimination there may be, it is not the result of any unfair act on the part of Surprise-it merely reflects economic realities. Once this is recognized, the apparent problem disappears. l;nder the theory embraceo by complaint counsel, it would be just as logical to say that the plan is discriminatory because one customer is able to advertise only once or bvice a year, whereas his larger competitors advertise once a week. Surprise should not be condemned because of circumstances over which it has no control. Neither in theory nor in practice is the Surprise plan restricted to large-volume accounts. It does not arbitrarily exclude customers with minimal purchasing volume. To the extent that it does exclude some customers, this discrimination is negligible and competitively insignificant, so that the question arises ,vhether this is a matter for the application of the maXilTIUm de rninirnis non curat lex. As to those customers whose purchase volume may have precluded participation, two comments are in order; (1) There is no substantial evidence here of the exclusion of any customer who \\Fished to participate in cooperative advertising. Cf. SunberLm COTpomt!on (Opinion accompanying Final Order January 11 1965, p. 5) (67 F.TC. 20, 57). Neither is there any evidence that any customer, believing it impracticable for him to engage in ne\vspaper advertising, sought and was denied payment for some suitable alternative.

(2) Other promotional assistance was available to nonaovertising customers (see l:nfm pp. 911-914). Realistically, what would be the practical effect of broadening the base so that advertising allowances would include something other than newspaper ads ? Granted that this record does not reflect any explanation by Surprise \vhy it limited its payments to ne\vspaper advertising; it is more significant that the record is virtually silent concerning the use to which customers not engaging Initial Decision 71 F.

in newspaper advertising might put any allowance granted. Neither of the Katsoff brothers (supm pp. 886-888) indicated how they would utilize such an allowance if it were granted. They simply stated that they could not economically advertise Surprise products.

Gertrude Rechtman (supm p. 892) qualified for a suffciently large allowance to permit newspaper advertising, but she chose not to do so. Her direct mail advertising conceivably might have been subject to partial reimbursement by Surprise, but this remains speculabve.

In House of LOTd' (Majority Opinion, p. 12, n. 30) (69 C. 79J, the principal alternative form of advertising that the Commission said might have been paio for, was direct mailenvelope stufIers, " Here, Surprise offered "stuffers " to all customers. And there is no indication whatever that the "handbils mentioned in the Guides (Par. 9) are suitable or usable in this industry, 8. l\o 1Uinimurn-Pu'ichnse RequiTen ent Since a minimum-purchase requirement for participation in cooperative advertising is not per se unla\vful Sunbearn Co"rpoTation Docket 7409 (Opinion accompanying Final Order, January 11 1965, p. 5) (67 F. C. 57J ; Atlantic PToducts Corpomtion Docket 8513 (Opinion accompanying Order, December 13 , 1963 , p. 2) (63 F. C. 2237J, it hardly seems reasonable to conoemn a plan involving no minimum-purchase requirement at all-- except insofar as annual purchases had to be of suffcient magnitude to translate a Surprise contribution of 5 percent of annual purchases into an amount suffcient to pay 50 percent or 75 percent of a newspaper advertisement.

The Surprise arrangement is clearly distinguishable from a number of cases in which the Commission prohibited minimumpurchase requirements as unfairly excluding some competing customers. In Atlemt.!c Products for example, 85 to 90 percent of the seller s customers did not purchase in suffcient amounts ($1 500 in a six-month period) to qualify for the allowance. The hearing examiner in that case found that "the plan was tailored to the advantage of customers that could indulge in substantial advertising, " and was so characterized by respondents (Atlantic Initial Decision, p. 5) (67 F. C. 84, 89J. Other cases in which the minimun1 purchase requirement was set so high as to freeze out small-volume customers include: SURPRISE BRASSIEItE CO. , INC. , ET AL. 909 868 Initial Decision Shrevep01' t Macaroni Manufactu.Ting Co. 60 F. C. 196 , 199 (1962), 321 F. 2d 404 (5th Cir. 1963), ced. denied 375 CS. 971 (1964)-An advertising allowance was offered to customers purchasing 9,000 cases or more annually, a requirement met by only one chain store.

WnTd Bnking Co. 55 F. C. 1142 (1959)- Consent Order based on complaint challenging a 5 percent promotional allo\vance to customers whose purchases were more than S50 weekly. Jnntzen, I-c. 55 F. C. 1065 (1959)- Consent Order based on complaint involving advertising allowances that were limited to those customers who placed an initial order of $5 000 or more. BuloviL Watch Co. 48 F. C. 971 (1952) 000 customers received no advertising allo\vances because of a minimum-purchase requirement of 1 0 000.

Elgin Nedionril Wntch Co. 48 F. C. 990 (1952)-lVinimumpurchase requirement of 81 500 pel' year was condemned. See also Lambert Phannacci Co. 31 F. C. 7:4 (1940). Surprise imposed no minimum111-purchase requirement. A minimum-purchase requirement imposed by economic realities does not make the Surprise plan vulnerable under Section 2(d). Support for this view can be found in Sunbecun where the Commission dismissed a complaint that challenged a plan whereby dealers were reimbursed up to 14 pE:recent of purchases, for newspaper, radio, television, or catalog advertising, provided they bought $440 worth of merchandise in a single purchase. Retailers who purchased less than $440 worth of merchanoise were offered their choice of point-of-sale display material or direct mail adverUsing material.

The Sunbeam plan differer) from the Surprise plan in that Sunbeam assigned a price to each item of promotional material, based on cost, and the retailer \Yi:S permitted to select as much of this material as he wished within the 14 percent limit. The purchaser of an order larger than $440 could choose to receive the promotional materials instead of the cooperative advertising credit, but he coulo select only one or the other.

In SunbeCln (Opinion, pp. 5-6) C67 F. C. 57-58J, the Commission specifically recognized that "inevitably there will be smne retailers whose nature or scale of operation precludes their participation in cooperative advertising," and that "Such retailers will prefcr other kinds of promotional activity and benefits. " It concluded:

To hold every such pla11 inherently di ('imiJlatory dnd unlawful merely because not every retailer carl or "- ants to take advantage of the plan would , Initial Decision 71 F. destroy cooperative advertising and thereby seriously harm the very class small independent retailers, which Section 2 (d) was enacted to protect. Similarly, although important differences are apparent between Surprise s plan and the cooperative advertising program approved in Lever Brothers 50 F. C. 491, 510, 512 (1953), the Commission recognized in that case also that some customers woulo "not find newspaper advertising practical " and that store displays might constitute a reasonable substitute. It emphasized that the law does not " require that a comprehensive plan must be so tailored that every feature of it will be usable or suitable for every customer. " And it rejected any interpretation that would "restrict the payments to some type of service that every Single customer could furnish. " It identified proportionality as the statutory goal, not uniformity.

4. Exclusionary Aspects Despite the considerations tending to absolve the Surprise plan from any discriminatory taint, the examiner recognizes that there is authority for complaint counsel's condemnation of the plan because it is not "suitable and usable" by all competing customers and thus " eliminate(sJ" some competing customers (Gu ides, Par. 9) .

In the recent House of Lord' case, Docket 8631 (January 18, 1966) (69 F. C. 44J, for example, the Commission found that by providing payments only for newspaper or magazine advertising, the seller excluded 'Ismaller customers who had to use more modest forms of promotion. " (Majority Opinion, p. 11 (69 F. 79J. ) Taking into account the seller s business reasons for such an arrangement, the Commission held that, regardless of "the commercial expediencies of such an exclusionary policy, jt is clearly at odds with Section 2 (d) of the amended Clayton Act." The opinion explains:

A seller s "offer" to pay 50% of a customer newspaper lineage cost, when the customer is "too small" or otherwise unable to engage in any kind of newspaper advertising, is in fact and in law not an offer at all. (:Majority Opinion, p. 12 (6B F. C. iBJ; footnotes omitted; see also p. 18 (69 F. 83).

The Commission quoted approvingly from State Wholesale Grocers v. The Greed Atlantic p(wific Tea Co. 258 F. 2d 831 839 (7th Cir. 1958), cert. denied 358 U. S. 947 (J 959): In determining the proportionally equal terms upon which a seller shall make available any payment or consideration referred to in (d), the Act .

SURPRISE BRASSIERE CO. , INC. , ET AL. 911 868 Initial Decision requires a frank recognition of the business limitations of each buyer. An offer to m ake a service available to one, the economic status of whose business renders him unable to accept the offer, is tantamount to no offer to him. But these pronouncements were made against the backdrop of a factual settng far different from that existing- here. When they are placed in the context of the circumstances that led to findings of 2 (d) violations, their applicability to the instant case is blunted. In State Wholesale Grocers suppliers had paid for advertisements in a store-owned magazine, a facility obviously beyond the capabilities of all small stores. The distinction between that situation and the inability of some Surprise customers to engage in newspaper advertising may be one of oegree, not of substance, but it is nevertheless a distinction of some significance. The House of LOTd' decision was predicated on findings that oral "offers of promotional payments were in fact limited to a few selected customers, * * *" (Majority Opinion, p. 15) (69 C. 81J, with no form of participation available to those who could not or did not advertise in newspapers or magazines. The facts in the instant case are clearly distinguishable. Other Sales-P?' omotion Aids In the instant case, there was an offer published to all. And those Surprise customers Ivho found newspaper advertising economically impracticable or Ivho otherwise were not interested in newspaper advertising had available to them, along with all other customers, various other sales-promotion aids. Surprise, in its proposed findings and brief, refers to these other services and facilities as alternatives to or substitutes for the advertising allowance. Strictly speaking, this description is inaccurate. Under the terms of Surprise s published program, advertising allowances and the other promotional aids were available to all customers." However, it appears that, in general, the large department stores availed themselves of the aovertising allo\Vances but did not use the so-called in-store displays. The record establishes that some of the smaller stores not only engaged in cooperative newspaper advertising with Surprise but also put to use the 37 Rrspondent undertakes to put bust fonns in r\ 5p"c,..1 catego)' y O PF H: RH 25-2H). Ii emphasizes thirt they were not specifically listed in the IJublished Ino,: Rrn. On th s basis. it argues that, since!; they were not ofiered gene"iJl1y and since they were not uSt'd by the d!;part. rnent stores, they constituted an rJtrrnat ve or sullstitute !;sjJf'c'ially 1'01" nun- advertising cus. tumer' s. Although there is som basis for thi)' claim, a major fJiJw is testimony thilt bust forms were 110t 1'ese ved excl\1siveiy for small non-fld\'ertis ng accounts (Rub:n 1\1(;1; Cohen 1010- 1087; POIil,an 1812-13, 1851; Sanders L'i 7: James 2502-931. At Rny rale. despite the failure of the pll\n to Uff2\" bust forms. the evidence does inr'.cate thl\t they were freeiy Rnd grn' l'l\lly nvailable to and used hy Bmaller customers, including who did iJdvrrtisr. , , Initial Decision 71 F.

various display materials. With rare exceptions, those customers who did not engage in cooperative newspaper aovertising with Surprise did use, in varying- degrees, the other forms of advertisingand promotional assistance.

The testimony of Surprise s offcials and employees demonstrates that the so-called, in-store sales aids were not actually offereo by them as alternatives or substitutes for cooperative newspaper advertising (Sanders 1377- , 1546; Popkave 1811 1850- , but see 1821-24; cf. Rubin 1612) ,3K and most customers did not so consider them. Neither of these facts is controlling if, in actuality and in legal contemplation, such materials did constitute alternatives or substitutes in lieu of advertising allowances. Although not specifically raised by complaint counsel, there is a threshold question, whether the statutory stanoard of proportionalization permits the interchang-eabiIity of payments for promotional services in a comprehensive plan-that is, whether a seller s program may grant monetary allowances to reimburse some customers for their advertising expenditures and alternatively furnish promotional services or facilities to other customers who do not avail themselves of cooperative advertising allowances. Although the Elizabeth Arden case (156 F. 2d 132 (2d Cir. 1946)), may be interpreted as requiring a negative answer, the propriety of such an arrangement no,,\, seems to be established: ,S'unbewJn Corporation Docket 7409 (Final Order January 11 , 1965) (67 C. 20J; Lever Brothe?'s Co. 50 F. C. 494 (1953); Guides Par. 9 (Example 2) ; Trade Practice Rules for the Cosmetic and Toilet Preparation Industry (1951); see also Vanity Fair' Paper Mills, Inc. v. Pedeml Tmde Commission 311 F. 2d 480, 486 (2d Cir. 1962). But cf. Exquisite FO?'n Brassiere, Inc. 57 F. C. 1036 (1960) Teversed and r-manded 801 F. 2d 499 (1961), cert. denied 369 U. S. 888 (1962), in which the hearing examiner expressly ruled that promotional senices could not serve as an alternative to promotional paym,ents and the Commjssion, affrming on other grounds, left the question open, 57 F. , at 1042- , 1050 1059; '" House of Lo'ed' Docket 8631 (January 18 , 1966) (69 C. 44J, in which the order requires that the respondent, in establishing a program of payments for advertising or for promotional services or facilities, must take care of those customers for "It is not remarkable that Surprise aJrsmen did not refc!- to the display mat('rial as alternative or substitutes " jn lieu of" newspaper:r adverti lnl!. Any law or edict requiring salesmen to talk like Robinson-Patman lawye would be clearly uncon titutional u See l\l o the same ca e aft"r remanel, :Final Onl!?r, January 20 , 1%4 (64 P. C. 271 I: 301 2d 489 (D. C. Cil' . 19G5), 1965 Trade Cases 491. SURPRISE BRASSIERE CO. , INC. , ET AL. 913 868 Initial Decision whom it is not economically feasible to furnish such services or facilities, by designating alternative services or facilities that those customers can furnish and can be paid for on proportionally equal terms.

In any event, complaint counsel object to the Surprise plan on the ground that since the display materials and related materials were offered to all customers-those who advertised and those who did not--the furnishing of such promotional aids was not an alternative that a customer could choose instead of the advertising allowance. See Exquisite Form. Brassiere, Inc. Docket 6966 (Opinion accompanying Final Order, January 20, 1964, p. 3) (64 F. at 283J, 301 F. 2d 499 (D. C. Cir. 1965), 1965 Trade Cases 71,491.

It is true that Surprise does not tell its customers it wil either share in the cost of their newspaper advertising 01' provide instore displays and other material. Surprise says in its published plan that it will do both. X evertheless, the customer is still given a choice. He may elect to engage in cooperative newspaper advertising; 01' he may reject that offer and accept only the in-store promotional displays (some or all) ; or he may accept the offer of both; or he may reject the entire program. It is not clear what worthwhile objective would be accomplished if Surprise were required to establish its in-store promotional aids as an alternative to, rather than an addition to, cooperative newspaper aovertising. Now, a customer may have either or both; whereas, under the theory espoused by complaint counsel, he would have to choose one or the other.

Thus, just as there was no room for "fine semantic shadings in the interpretation of the 2 (b) defense in Exquisite Form Brassiere, Inc. v. Federal Trade Commission 301 F. 2d 499, 502 (1961), cert. denied 369 U.S. 888 (1962), so here, the legality of a cooperative advertising program should not depend on the niceties of conjunctive or disjunctive phrasing of the offer of various types of aovertising and promotional assistance. The distinction between Exquisite Form and Surprise is that in b'xquis-ite Form the advertising allowance plan was tailored to exclude some customers 40 so that it was not available to all whereas the furnishing of display materials was offereo, not as an alternative available to only those excluded from the advertising allowance program, but as a service and facility available to .0 In Exr;uisUe Form, reimbursement was offered only for advertisements of at least 400 lines (about 29 inches) , !'iearly beyond the reach of small customers. In Surprise there is no evidence of any minimum si7.e requirement as to auvertisements (see S"UlnCL p. 880), 914 FEDERAL TRADE COMMISSIO~ DECISIONS Initiai Dp.cision 71 F. all. In Surprise, the advertising allowance plan is not tailored to exclude any customers, even though, realistically, some cust01ners do not find it economically practicable to engage in newspaper advertising. In addition, Surprise offers to furnish to all customers, whether they advertise or not, certain promotional aids. Although not specifically denominated as alternatives, these aids have been so used in practice. Moreover, the published plan gives customers a choice in the manner in which they will participate in promoting the sale of Surprise products. Even if the Surprise plan were to be view,red na1'1'mv1y as comparable to the Exquisite Form arrangement, there is respectable authority for a good faith Htailoring of services and facjlities to meet the different needs of two classes of customers " even though customers may not be given a choice Federal Trade Cornm?-ss-ion Simplicity Pattern Co., Inc. 360 U. S. 55 , 61 , n. 4 (1959). In this dicturn the Court spoke approving;ly of the Commission s willingness to give a "relatively broao scope to the standard of proportional equality " In this connection, it cited the standard laid down by the Commission in the Leuer Brothers case. 6. Proportionalization Another deficiency that complaint counsel find in the Surprise plan is its failure to provide any basis of proportionalization for furnishing in-store displays and other promotional aids. As has been shown, the allowance for newspaper advertising is limited to a stated percentage of the advertising cost and is subject to a further limitation that total allowances may not exceed a stated percentage of the customer s purchases of merchandise from Surprise. On the other hand, the published plan ooes not place any limits on the amount of display ano related materials furnished by Surprise. Such materials are available to whatever extent they can be used by the customer. Without undertaking to determine whether, in the absence of a charge of violating Section 2 (e) , " such an objection is properly raised here, the examiner simply notes that on this record, the n Likewise, the Vanity Fair decision (VanitJj Fair Paper Mills Federal Trade Comtnis- SiOH 311 F. 2d 480, 4S6 (2d Cir. 1962)) endorse(l a I:beral ddinit:on of propo)"tion: CI1URlity unconfined by technical limitations .JSertion 2(1') uf the Clayton Art, as ame1'ded by the Robir. C)n-PR(man Act, 15 D. 13 (e) reads as follows: " That it shall he unlawful for any )Jerson to discrimir.ate ;1' favor of one purchaser against anuther IJurch"' e)' or rJUl"chsers of a commodity bous:ht for resale. with or without processing, by contn\ctins: to fm' nish 01" furnishing. or by contributing to the furni hiIlg of. any services or facilities c01'Tlected with the !Hocessing, handling, sale, or offering for sale of uch commodity so purcha ed upon terms no:, accorded to 1':1 IJurchasers on proportionally equal terms.

SURPRISE BRASSIERE CO. , INC., ET AL. 915 868 Initial Decision objection seems more theoretical than real. In the absence of any evidence that any customer was denied these promotional aios in any reasonable amount usable by him, it seems to the examiner that no useful purpose would be served if Surprise were required to put a dollar value on each of these services and facilities and then to relate this dollar value to the customer s purchases-that , to provide that services and facilities wil be furnished up to a dollar value equivalent to a stated percentage (such as 5 percent) of the customer s purchase volume.'" This, in effect, might result in a ceiling possibly detrimental to the smaller customers. The record indicates the monetary cost to Surprise of some of its promotional aids (see supm p. 881), but neither in theory nor in practice was the monetary value related, by percentage or otherwise, to the monetary allowances available for newspaper advertising. The record suggests that salesmen used discretion in furnishing customers with hust forms because of the expense of those items (Sanders 1548; Popkave 1814- , 1854-55), but there is no evioence that any customer was denied bust forms or, for that matter, any other promotional device listed in the plan, in whatever amount desired.

Unooubtedly, Surprise could compute the monetary value of its various promotional aids and then put a ceiling on its offerings which would be related proportionally to the limitations on cooperative advertising allowances, so that it might show that its furnishing of promotional material is the dollar equivalent of payments made for newspaper advertising, Sunbeam C01'por-ation Docket 7409 (Opinion accompanying Final Order, January 11, 1965, p. 5) (67 F. C. 57J ; cf. Foster Pum ,hin!! Co. , Inc., Docket 7698 (Initial Decision, .January 24, 1963, pp. 10-11; vacated and complaint dismissed without assignment of reasons, January 7, 1964) (64 F. C. IJ.

The Surprise plan is suffciently similar to that approved in Sunbearn to warrant its approval as well. All things considered, the examiner declines to condemn as unlawful the services and facilities section of the Surprise plan because of the absence of any mechanical limitation on the amount to he furnished. The examiner recognizes that, in theory, such an open-eno arrangement may be subject to abuse and may be used as a vehicle of discrimination. However, it will be time enough 43 Such a formullt applied to the furnishing of servire or facilities in the instant cast' might well be subject tu criticism directed at the rooperltUve advertising program. That is, a smallvolume customer, for example, might be entitled to only half a bust form, or to It bust form suitable only for the display of a brassiere when he would prefer to have a larger and mort' expensive form suitable for displaying R girdle or corselet. 916 FEDERAL TRADE COMMISSION DECISIO~S Initial Decision 71 F. to consider that problem if it arises. Ko such proof is found in this record; and there is no showing that the present plan is not fair to all customers who compete.

7. Conclusionary Findinq Vie'\ving the published program of Surprise as a comprehensive plan, the examiner cannot find that it unlawfully excludes any customer competing with a customer who has been granted benefits; or that it oisproportionately favors large-volume customers over small-volmne' custoll1ers.

On balance, the examiner concludes that the published program of Surprise is " honest in its purpose lnd (if adhered to) "fair and reasonable in its application Lwuer BTothe1' Co. 50 F. 494, 512 (1953).

The Surprise plan, as published, does not involve the arbitrary selection of customers to receive payments; or the restriction of payments to certain classes of customers, such as large-volume purchasers; or the tailoring of a promotional plan to suit the needs of large customers only.

The Surprise plan appears to involve ordinary advertising activities which are not calculated to bring about the disguised discrjminator r favoritism that Congress intended to condemn. Special 100 Percent A llo1urtnccs The examiner rejects the generalized and indefinite testimony of Surprise offcials ano salesmen (SUPTa pp. 892-94) that 100 percent advertising allo\vances were offered to small accounts as \vell as large. Such testimony must be discounted because of the following factors:

(1) The failure to jJublish the older as part of the advertising allowance program, coupled with the failure to establish that such allowances were standard in the industry (infm pp. 955-56). (2) The vagueness ano Jack of specificity in the testimony of the salesmen;

(8) The lack of any corroboration by small eustomel' plus their denial in some c.3ses- that such offers \were made to them; and (4) The lack of any evidence that an:v such customer ever accepted such an offer.

This last point is perhaps the most convincing refutation of respondent' s claim that such allowances were olIered to all customers. It seems reasonable-and the record confirms-that a small-volume customer \Vould welcome an advertisement that SURPRISE BRASSIERE CO. INC. , ET AL. 917 868 Initial Decision woulo cost him nothing, yet, aside from RX 7 (supra p. 894), Surprise dio not cite one example of any such advertising. It is conceivable, of course, that a small store, for some reason might not accept a Surprise offer to pay the entire cost of an ad (Gilbert 710), but it is beyond belief that such an offer woulo be uniformly rejected.

It is accordingly found that 100 percent allowances were not available to all competing customers on proportionally equal terms.

C01npetition A1I1Ong Cust01ne'i'S Surprise s contention that the record fails to establish the existence of competition between favored and non-favored customers (RB 13-14; RR 12) is without substance. In each of four trading areas, the evidence (see sup')a pp. 888, 889, 892) shows that:

1. Favored and non-favored customers were located in close geographical proximity;

2. The non-favored customers considered the favored customers to be retail competitors, and the converse \vas shown in many instances; and 3. Xon-favoreo customers purchased Surprise products at or about the same time the same or similar products were purchased and advertised by the favored customers. Thus, the necessary competitive frame\\'ork was established, Federal Trade Commission v. Simplicity P!ltte1'n Company, 360 S. 55, 62-63 (1959) ; Ace Books, Inc. Docket 8557, Opinion accompanying Final Order, June 18 , 1965 , pp. 14-15) (67 F. IOn 1126-27J ; Liggett My en To/weco Co. 66 F. C. 221 , 248 (1959). The cases cited by respondent (RB 13) are largely inapposite. (The case of Johnny Maddox Motor Co. v. Ford Motor Co. (RB 13 , CR 11) is mis-cited; the reference should he to 202 F. Supp. 103 (W.D. Texas, 1961).

Even without the affrmative evidence contained in this record regarding the existence of competition among Surprise s customers in each of the foul' cities, complaint counsel met their burden under the doctrine of SunlJeam Corporation Docket 7109 (Opinion accompanying Final Oroer, January 11 , 1966 , p. 8) (67 F. C. 66J. The rule of that case is that once it is shown that favored and non-favored customers " \were located in the same local trade area " respondent must earry the burden H of producing evidence that such customers were not, in fact, competing : :

918 FEDERAL TRADE COMMISSIOI' DECISIONS Initial Decision 71 F.TC. Respondent produceo no evioence whatever to indicate that favored and non-favored customers in geographic proximity were not competing in the distribution of the prooucts on which The record thusrespondent granted advertising allo\vances.4supports the findings of discrimination among competing customers.

VII. MEETING COMPETITION DEFENSE Introduction Surprise s principal defense to the admitted discriminations is that "* * '" the acts and practices alleged in. the complaint were performeo in good faith to meet competition " (Respondents Answer, Par. 6; RPF 9 , 121-23; RB 15-23; RR 29-46. Surprise contends (1) that the 75 percent allowances granteo to department store customers were lllade in good faith to meet equally high or higher aJlowanees paid or offered to those eustomers by competitors ano (2) that IOn percent allowances for new store openings, new product promotions, and omnibus ads ,,,ere paid to such customers in good faith in response to general industry-wide pl'flctices.

Surprise has faileo to meet its buroen of proof as to both contentions. In addition, its contention relating to 100 percent allo\vances must also fail as a matter of law. The record establishes that in each of foll!' trade areas, during 1960 , 1961 , and the first half of 1962, responoent consistently favored its larger department store customers with 75 percent and 100 percent allmvances, while at the same time it granted competing customers 50 percent allowances or no allownnces at all.

The findings that follo\\ wil deal with Surprise s contention (RPF 9) that "every deviation" from its published program was a 'good faith' response, required to meet .specific competition * * *" and that Surprise " had prior knowleog-e of the advertising allowances then being offered by :I * ". competitors, The competitors involved are listed below, together with theh' abbreviated names used in the interest of brevity: H TIespondent 8 somewhat ob cu, ,' complaint regc.nling " scrambling " ()f the facts J'ts)H,ctir. the purchases mad nnd the adve,.:i ing aLowance n"cc:ved by the PhiiRdeiph:H uepal.t.ment StOHS ire 1.1; RPF 67- 8. Ri, 1(2) does not detract from ' he basic showing made. \V)-Ullcver the facts mry lJP l"eg-a'diTq:'; shipmen: of s::me SU1'IJri e merchRJlLse '.0 suburban branches of the Philadelphia dC)1Hrtment starts. thc competitive picturp J'cma:ns clear. Thc recol.d sr. ows that the advertising allowances SUr)JJise granted to the PhilRde:phia Gfpartment stole were used to ndvc,.t:se SUI'Jrise garments in the major Philauelphic. Ilcwspapers, fill of which circulated throughout the en:i!' e mctJ'opolitan area. ........................ ............. .. SURPRISE BRASSIERE CO. INC. , ET AL. 919 888 Initial Decision Bali Brassiere Co., Ine . Bali Bicn J oue, Ine - m..._ Bien J olie Carnival Creations, Ine . Carnival Contessa di Rama, Ine . Contessa Garde de Parie Corde Exquisite Form Brassiere, Ine Exquisite Form Formaid Co., Ine . Formaid Formfit Co -- -- Formfit The H. W. Gossard Co. Ine Gossard Lady Marlene Brassiere Corp Lady Marlene Lily of France, Ine - Lily of France Lilyette Brassiere Co - Lilyette ::aidenfol' m, Ine ..... Maidenform Peter Pan Foundations, Ine . Peter Pan Poirette Corsets, Inc - Poirette Sarong, Inc. Sarong 1'1'eo Co. , Ine .... - 1'1'eo Wonder Bra Co., Inc .-u Wonder Bra Youth craft Creations, Inc Youth craft However, Surprise basically relies on eight competitors as providing allowances that necessitated its 75 percent offers. It presented evidence concerning their advertising allowance programs during 1960-63 in substance as follows:

Coniess" di Romn- (1) 75 percent allowances for space cost plus production; (2) 100 percent allowances during special merchandising and advertising campaigns; and (3) beginning in 1961 , Contessa provided a special package merchandising program which included 100 percent allowances for cooperative advertising, a consumer prize of a trip to Rome, parties for sales girls, furnishing stylists, and the payment of "push money (Steiner 2040- , 2075-77). The special package program was designed as an introductory offer, and 100 percent allowances were "isolated rare " and "infrequent" during 1960-63 (Steiner 2080, 2175-77; but cf. Gold 1252-1347, 1432-1500 pa.'8im). COTde de PaTie-As to this company, the record contains only generalized statements by Gold that it made 100 percent offers in 19 59 (e. Tr. 1279).

Pormaid Co. , Inc. 75 percent allowances for major department stores and 50 percent for small stores (Braff 2513- 2587-39) .

The H. W. Goss((Td Co. , Inc. 50 percent allowances between July 1959 and Fehruary 1963; 75 percent thereafter (CXs 968 969; Wells 2329-30).

Lady lv""Zene Bmss-ieTe COTp. 75 percent allowances, including production costs (Fox 1915- , 1921 , 1944; Jaffe 2480, 2491). Initial Decision 71 F.

Lilyette Bmssie1'e Co. 50 percent or 66% percent allowances until February 15, 1962; and 75 percent after February 15, 1962 (Kaufman 2221-23, 2413-14).

PoiTette COTsets, Inc. 50 percent or 75 percent allowances plus production costs, the rate depending on the products or combination of products advertised (RX 27; Gros 2253). TTeo Co., Inc. (I) 50 percent allowances for space cost, plus production cost allowances, for separate advertisements of either the Treo or the Cheers line; (2) 66% percent allowances for space cost, plus production cost allowances, for combination ads (RXs 8 A- , 9; Poulson 1879).

Competitive Offen at Depa?'hnent Stores "T ew H wuen, Connecticut 1. The Edw. Malley Co.

, in- The testimony of :Ylalley s buyer, Mrs. Jean Swan James dicated that she underslood from the salesman, Howard Ruhin that the Surprise program provided for payments of 75 percent of advertising costs (Tr. 135-36). Although she had received 1960 untithe Surprise price Jists, she was unaware that from mid-1962, the published program hao provided for payment of only 50 percent allowances (Tr. 136-38). Mrs. James s testimony is basically inconsistent with Rubin testimony that in 1960 he initially offered 50 percent but raised it to 75 percent when she told him she was being offered more by competitors (Tr. 1592) and that she rejected his subsequent offers of 50 percent (Tr. 1662-64), inoicating that Surprise business with Malley s might suffer unless she received a better rate (Tr. 1678):15 But she was not specifically asked about Rubin s testing1ony, so there ,vas no occasion for her to deny it or confirm it.

The suggestion that payment of a 50 percent allowance for the s testi- omnibus ao of June 1 , 1960 (CX 21 A-B), confirms Rubin mony is untenable (James 146 , 100, 2582- , 2599-2600 , Rubin 1604; see CR :34, n. 42) .

", Rubin s vivid recollection of the details 01 his conversation with Mrs. James contl'P.st, sharply 'with his memOl"Y RS to oth r u-ansRction, some much more recent. "For cxp-mple, although Rubin said he H'rncmbered "quite vividly " (Tr. 1712) the 100 percent promotion of the Sp;uklette bandeaux in 1963 , he was not even sure of the date ('1)' , 1(81.- 83). 4il Respondent s claim (RPF 10; RR 3) of another fio percent ad on June Z . 1960 . is not burne out by the rceord. ex 161 e shows a credit of S7. 48 for an advertisement apparently dated .June 2, 1960, but then is nu record 11asis for (ldnmining the percentage of ('ost represented by that figure. The tCiilimony cited (Cohen 12-131 refers only; 0 the advertisement of June 1 , 1860 (see tdso Rubin 160,;). Respondent has cited nu other recoJ'd basis for its contention. In any event . it would make no significant chf\nge in the basic picture ::

SURPRISE BRASSIERE CO. , I:-C. , ET AL. 9:21 868 Initial Decision Actually, the transaction suggests that Lilyette was paying only '10 percent at the time, since it participated in the ad (CX 21 B), and the record inoicates that the percentage contribution of participants in omnibus aos is uniform (James 2599). If Lilyette were paying more than 50 percent, lvII's. James, under respondent' s theory, presumably would have insisted that Surprisc match the higher rate.

Accoroing to Rubin, when Mrs. ,hmes told him she was being offered more hy others, he inoicaled to her that he knew that allowances of 75 percent or IOn percent were being offereo by Youth craft, Formaid, Lilyette, and Contessa; she "more or less acquiesced * ; and he accordingly offered 75 percent (Tr. 1592). He knew that the foul companies mentioned were offering more than 50 percent on the basis of conversations with other salesmen, but he was hazy as to the source of his information regarding the Youthcraft offer (Tr. 1665-67). Rubin knew that lVIalley s \vas not carrying the Contessa line but took thc position that Con tessa s 100 percent offer created a competitive situation (Tr. 1668, 1737). Malley s oid engage in cooperative advertising with Lilyette in 1960- , but there is no specific evidence of the percentage of contribution on the part of Lilyetle. The indications are that the allowance was 50 percent, possibly 66 /; percent. (Kaufman 2222- , 2229, 2232, 2364- , 2413- , 2422-24. ) Formaid also dealt with Malley s and offered it 7fi percent allowances during 1960-63 (Braff 2513- , 2522, 2fi39-40). However, 1lalley s did not stock either the Lilyettc line or the Formaio line until late in 1960, possibly in September 1960 (James 2586, 2603-04; cf. Rubin 1669). lVI's. James testified that neither Formaio nor Lilyette offered 100 percent allowances (Tr. 2fi94 , 26(6). Gold unsuccessfully solicited Malley s in 1958-59 for Corde (Golo 1333- , 1:)39, 1484-87; James 2574-75), but the company was not mentioned by Rubin in connection with Malley The record contains no corroboration of Rubin s testimony regarding Y outhcraft.

2. Shnrtenberg Although the only documentary evidence in the recoro (CXs 34-36) shows that Shartenberg s got 75 percent from Surprise t7 Mrs. James did not recall the advertising a:lo\\ance offer made by Contessa; she wasn even sure she was sol:cited. At any rate, her comment that she "wouldn t huy advertising as such" (1'1" 2 78- i8) nega (s the competitivf' impo.c'. rdeIT(d to by Rubin . Actl.Rlly, ther( is considerablc doubt that Rny ;00 '\erCe!lt offer was made by Contes 2. in 1960, 0:" that Gold solicited Malley s (compare Gold 1:'34-:'5, 1339 with Steiner 203i- , 2052- , 20it, 2(78) ;).

Initial Decision 71 F.

beginning in March 1960, the salesman, Rubin, testifieo that Surprise allowed this account 50 percent in early 1960 but that he got permission to raise the allowance to 75 percent after the buyer told him she was getting larger allo\vances from competitors. He believed she mentioned Bali and Formaid, and he already knew that they were giving more than 50 percent. He did not recall whether she mentioned any other competitors. (Yr. 1627-28.

According to Rubin, he was able to revert to the 50 percent policy between May 1961 and February 1962 because the buyer didn t put any pressure on him (Tr. 1629 , 1703 , 1717). There is no documentary corroboration of any such 50 percent payments, nor of the earlier 50 percent allowance he mentioned. However, Surprise contends (RPF 24; RR 4) that payments for ads of February 3, 1960, August 16, 1961, and February 28 1962, were at the 50 percent rate. This contention is based on Surprise records (CX 166 A, E) that show the allowances granted for such ads, but they do not reflect the rate of participation. The vague, generalized testimony of Rubin (Tr. 1627-29) is not the best evidence, and the failure of Surprise to document this matter by evidence within its kno',vledge and control does not permit the inference of a 50 percent rate Va.nity Pail' Paper Mills v. Federal Tmde Commission, 311 F. 2d 480, 485- (2d Cir. 1962). (The record contains no explanation by either side why those transactions were not documenteo. Concerning the competitive situation at Shartenberg, Rubin testified that the buyer dio not state specifically what Bali and FOlmaio were offering' , but that he already "knew " that they were giving more than Surprise. He Hknew" that Bali was giving 66% percent, but he quickly explaineo that the 75 percent he offered was "Not to mect the Bali a1l0wancc specifically, " but because of a 100 percent offer from Formaid. He could not state that Shartenberg s was getting such allowances, but he knew " that Bali and Formaid were giving higher allowances generally. Rubin stateo that Shartenberg s was carrying the Bali line, but he did not remember whether FOfmaid was being stocked. (Yr. 1700- , 1710.

Respondent presenteo no further proof regarding the Bali offer, The president of Formaid failed to confirm that it maoe a 100 H BaJi offered only 50 percent alJowl!nce to Strawbridge & Clothie! in Phiimjelphia during 1960 (Bierman 4\14-\1.

SURPRISE BRASSIERE CO. INC. , ET AL. 923 868 Initial Decision percent offer to this account. However, his testimony establishes that Formaid offered 75 percent to Shartenberg s during 1960- , but not that Shartenberg s accepted the offer. During 1960- , Formaid was led to believe that Surprise was paying 75 percent, and Formaid offered 75 percent to meet the competition of all firms, including Surprise. (Braff 251:" 2522- , 2537 2548-49.

Despite Rubin s failure to list Contessa among the competition he Vlas meeting at Shartenberg, there is evidence that Contessa offered its cooperative advertising program to this customer at some unspecified time during 1960- , but did not succeed in making a sale (Steiner 2053).

The buyer from Shartenberg s was not called as a witness. Bridgeport, Connecticut The Howland Dry Goods Co.

As in the case of Shartenberg, Surprise assmnes-and asks the examiner to do o too-that allmvances of 50 percent were granted to Howland' s for certain ads in 1960-63 (RPF 34; RR 6). Again, the purpose is to bolster the contention that Surprise adhered to its 50 percent policy except when it was pressured by buyers to meet competitive offers. But the record (CX 167 A, D , G , J) merely shows payments of advertising allowances for April 11, 1960; March 29 , 1961; June 13 , 1962; and April 5 , 1963, without any clue to the percentage of advertising cost they represent. Since the documentary proof of such facts was within Surprise s knowledge and control, and since it failed to produce it or to explain its absence, the examiner declines to dra'lv the inference requested-that Surprise made some 50 percent payments to this customer- (see supnL pp. 921-922). Aside from a self- serving, atch-all declaration responsive to a leading question (Tr. 1718), the salesman, Rubin, did not even suggest any such variation in the allowances granted to Hmvland' s. As a matter of fact, he testified to a continuing necessity to pay 75 percent (Tr. 1631-32). Beyond that, the stipulated testimony of Howland's buyer is to the effect that Surprise regularly paio 75 percent for cooperative advertising (Ciro 1153): Regarding the 7S percent allowances granted HO\vland's beginning in 2Vlarch 1960, Rubin explained that the buyer told him .9 Respondent s a sumptir.n also leads it into the untenab:e position of having p:odd Howland' only ,,0 !1('llent after tile policy was rhrmg,'d to 75 percent. This comm.cnt i8 basel on the allowance€ shown for June 13. 1962, !lnd April 5 , 1963, Initial Decision 71 F.

she was getting advertising allowances greater than 50 percent from Y outhcraft and Bali, and that she wanted Surprise to do better than 50 percent. He did not remember that she named any other competitors, but he said she led him to believe that he would lose substantial business unless he offered a greater allowance. Rubin added that Surprise continued to grant 75 percent to this account because "it was the same story" every time advertising was planned; the buyer "pressured" him for an allowance higher than 50 percent; and knowing that competitors had continued their policy, " he had to meet that competition (Tr. 1630- , 1641 , 1651).

The reliability of Rubin s testimony is open to question in view of his initial mis-identification of the Howland buyer with whom he dealt in 1960 and his inability to recall which buyer originally pressured him for higher allowances (Tr. 1634- , 1649-51). His specific recollection is questionable on the basis of his own explanation (Tr. 1637- , 1654).

Although Rubin had specifically identified Y outhcraft ano Bali as the competitors named by Howland' s buyer, his memory failed him on cross-examination a few minutes later and he could remember only Bali. Even when he was asked specifically about thatYouthcraft, his ultimate answer was that it was "possible" Youthcraft was the other company (Tr. 1630- , 1641- , 1644). Rubin testified that he knew Bali was giving 66% percent but he quickly denied that it was on the basis of the Bali offer that he offered 75 percent. His 75 percent offer was on the basis of another firm s giving 100 percent. This presumably was the firm (Youth craft) to which he refer'eo in his earlier testimony, but he then identified the offeror of 100 percent as Formaid. The buyer did not tell him that Formaid was offering 100 percent, but he "knew " of Formaid's practices. He first stated definitely that the Formaid line was in the store, but he later retreateo to a statement that that was his "belief" (Tr. 1642- 1653-54) .

The stipulated testimony of Howland' s buyer neither confirms nor denies Rubin s statements regarding pressure for higher allowances on the basis that competitors were offering more than Surprise. But not only does this testimony confirm that Howland regularly was paid 75 percent by Surprise ouring 1961-63; it also makes clear that Rubin was mistaken when he ioentified Vera Ciro as Howland's buyer in 1960 (Tr. 1152). In the course of rebuttal, counsel stipulateo that Howlano' , SURPRISE BRASSIERE CO. , INC. , ET AL. 925 868 Initial Decision buyer woulo testify that there were no Formaid garments in inventory in August 1961 and that no Formaid garments were purchased for Howland' s subsequent to that oate (Tr. 2855-57). The record does not definitely establish that during 1960- Howland' s bought from Formaid or participated with it in cooperative advertising; if it did it was just one ad" during 1960- 63. Any Formaid offer of cooperative advertising to Howland' would have been on the basis of 75 percent (Braff 2528 , 2541 2544-45) .

Surprise offered no corroborating evidence regarding the Youthcraft and Bali offers to Howlano' s about which Rubin testifieo.

Although Rubin did not mention that either Contessa or Corde was among the competitors he \vas meeting at Howland' , there is testimony that both companies unsuccessfully sought to sell to Howland's during 1960 or 1961 , offering 75 percent or perhaps 100 percent (Golo 1333- , 1339; Steiner 2037- 2052) .

lVewark, N e'1I J PTsey Bamberger & Co.

The testimony of the Surprise salesman, Jack Brown, regarding the competitive situation at Bamberger s is not persuasive particularly when it is considered in connection with the document.ary exhibits and weighed against the testimony of the buy- , Mrs. Irene George. Among other things, Brown s emphasis on the Surprise offer of 75 percent in 1960 ('I' 1743- , 1751- , 1758- 59; cj. 1760-61) has a hollow ring in view of the fact that the only Surprise allowance made to Bamberger s in 1960 was in the fall, and the rate was 100 percent (CX 64). Surprise does not even contend that this allowance was granted to meet competition but characterizes it as being in accordance with the company s standard policy of offering 100 percent advertising for new store openings ('II' 1759- , 1789; RPF 45). Yet, accoroing to Brown, the only time that the buyer ioentified competitors who exceeded the Surprise offer was during a discussion in early 1960. At that time, he said, Mrs. George named three or four companies making offers that exceedeo 50 percent. (Tr. 1743- , 1747, 1766 71.)C"

This testimony-that Bamberger s buyer identified for Brown :;Q But see footnote 7. Sli)Jra. p. ll21 51 OW thp inconciistency. however, between Tr. 1767 , 1760 , and 1771 and Tr. 1762 and 1766. 926 FEDERAL TRADE COMMISSIO!\ DECISIONS Initial Decision 71 F.

those competitors who were offering greater allowances than Surprise-was flatly contradicted by Mrs. George ('11'. 438 , 2613- , 2620-25). The weight of Brown s testimony in this regard also must be discounted because of his refusal, on obj ection by Surprise s counsel, to specify the names supposedly furnished by the buyer. The examiner sustained the objection '" but he pointed out to counsel that such a restriction on cross-examination would have to be taken into account in assessing the testimony. (Tr. 1784-86. ) It is interesting to note that, according to Brown, the buyer told him which competitors were offering.a greater percentage than Surprise, but she oeclined to make such a revelation to Surprise s president (Samuel Dosik), who, after all, under the defense theory, was the one who had to make the decision whether to deviate from the announced advertising allowance percentage (Tr. 1753; see also George 2627-28). Brown first stated that aside from the information furnished by the buyer, he had no oirect knowledge-just "an inkJing of the advertising allowance of any specific manufacturer (Tr. 1747-48). But in answer to a leading question, he said that when Surprise offered 75 percent to Bamberger s for the first time he and Surprise were aware that a specific competitor had ofered as much as 75 percent (Tr. 1756). This specific competitor \vas never identified, nol' was the date fixed except in general terms.

Certain other inconsistencies in Brown s testimony like\vise affect its weight. For example, whereas Brown said on direct examination that he never tried to have Bamberger s revert to the 50 percent plan after the initial 75 percent offer in early 1960 (Tr. 1755-56), he stated on cross-examination that when he tried to get the buyer to revert to the 50 percent rate, she shrugged her shoulders" and told him other manufacturers were offering more (Tr. 1769-71).

Brown listed as suppliers to Bamberger s in 1960-63 Formaid, Lilyette, Lady Marlene, Peter Pan, Exquisite Form, Contessa, Corde, Treo, ano Bali (Tr. 1749- , 1762-64), but he later indicated that he oid not know whether Contessa was actually being stocked by Bamberger s at that time (Tr. 1764 1780) . ;' He said that among those companies were competitors offering more than 50 percent (Tr. 1750; see lso Tr. 1755), ""In hindsight, th., examiner confesses enor: but see 1'r . 1563- 66. 1723- G.lt was not (George 2629-30: Steiner 2116). SURPRISE BRASSIERE CO. , INC. , ET AL. 927 868 Initial Decision but he never specified them. He knew from talking to Ralph Gold in early 1959 about the offer being made to Bamherger on behalf of Corde (Tr. 1750-51), but his memory concerning this conversation was not as keen as he first professed it to be (Tr. 1778-80) .

Brown s memory, concerning his dealings with Bamberger so vivid when he was being examined by Surprise counsel (frequently in response to leading questions)-became quite vague on cross-examination. He believed Surprise paid Bamberger s 75 percent in 1960 in connection with perhaps two ads (Tr. 1758- 59), and could make no explanation regarding the lone advertising payment made in that year at 100 percent (CX 64; Tr. 1759-60). Initially, he was at a Joss to explain the 100 percent payments exemplified by CXs 68 , 71 , and 78 (Tr. 1764-66), but later he was able to explain them in the course of redirect examination by Surprise s counsel (Tr. 1787- , 1796-97). The testimony of Mrs. George, Bamberger s buyer, was in direct conflict with the testimony of Brown regarding the whole course of oealing with Surprise.

Her testimony was in substance as follows: Although she had no clear recollection of what Surprise s advertising allowance program was in 1960-61 (Tr. 400- , 2612), she denied that she had been told the rate was 50 percent or that she had told Brown he would have to offer 75 percent. She characterized as "absolutely untrue " Bro\vn s testimony (Tr. 1743) that she told him what allowances other manufacturers were granting. (Tr. 2613-14; see also Tr. 438, 2626, 2656, 2677-78. ) All of the Surprise ads run by Bamberger s were omnibus ads (Tr. 430). There was no st"ndaro percentage rate for p""ticipation in such omnibus ads (Tr. 437- 46; cf. James 2599). Surprise usually approached Mrs. George regarding advertising; she did not take the initiative or pressure Surprise regarding cooperative advertising; Surprise was "making the pitch for the ad. " (Tr. 409 , 418, 2610.

In oetermining whether to stock any given line, the advertising allowance rate is not a material factor ('II' 415-16). The store ooes not buy advertising hut buys merchandise (Tr. 2617- 18) .

She might have taken a 50 percent allo'\vance from Surprise if such an offer had been maoe. Bamberger s had plenty of advertising money; there was no need to pressure for higher rates , 928 FEDERAL TRADE COMMISSIO~ DECISIONS Initial Decision 71 F.T. (Tr. 2612-43). She might have accepted 50 percent even though she had previously been getting 75 percent (Tr. 2643-44). \fl's. George rarely made 'I a pitch for an ad.JJ;;-I There were too many salesmen knocking on her door; everybody wants to do business with Bamberger s. Slle dio not have to go out and look for advertising. (Tr. 418- , 1071 , 2636-37. Various advertising allowance offers were made to Irs. George. Whether she took the best offer or the worst offer depended on the item and the name of the manufacturer. She never told a salesman v\Thy should I take yours; someone else is giving me so much better?" (Tr. 119- , 1071.) Although cooperative advertising is a competitive item among suppliers (Tr. 1071), the percentage of contribution by a manufacturer to the cost of a cooperative ao does not determine what meJ'chanoise Bamberger s advertises. The store has plenty of money for advertising, so "whatever offer is made by the manufacturer-whether 50 percent or 75 percent-is accepted without bargaining or hagghng. :\lrs. George has not pressured salesmen to offer higher rates of payment by telling them of competitors' offers. (Tr. 423- , 2677-78. :YIany pages of the transcript of Mrs. George s testimony as a Government rebuital witness arc taken up with details of her dealings with Rro\vn and Dosik. There are inconsistencies in :\11"8. George s testimony regarding this matter, perhaps because of memory problems occasioned by the lapse of tlme-. possibly because of indignation over Brown s testimony that she had pressureo him. These lapses, however, do not discredit the substance of her testimony.

Surprise would have the examiner ora\\ the inference that Dosik personally handled the advertising allowance negotiations at Bamberger s because it was necessary to deviate from the stanrJard program (RPF 56). But other inferences are just as plausible, particularly in vje'iv of the authority of salesmen other than Brown to go to 75 percent after checking with Dosik by phone. The record affords a basis for a finoing that Dosik dealt with Mrs. George because of the importance of the account to Surprise (George 2636-87; Brown 1715- , 1774), coupled with Bamberger vie'i\' of Surprise (1S "a very fringe resource (George 2635, 2653; see Sanders ).02-0:3); the fact that Surprise s sales to Bamberger s were declining (George 414-15; 5' fn;. Georgia does solicit ar.verlising for new s(ore OIJen:ngs. " Eve)"ylJody " offers 100 percent for these, but ste Ims taken je s on u(,ca jor.. ('11", 2655- 5fj; 42. 26. , SCRPRISE BRASSIERE CO. , INC. , ET AL. 929 868 Initial Decision CX 159 A- 15; see CPF 21) ; the proximity of Newark to Surprise s offce in New York; and a degree of arrogance on the attitude towardpart of Mrs. George, reflected in part by her Brown. For example, Mrs. George explained why Dosik was trying to advertise cooperatively with her store: Well, we are Bamberger s, we are big. You don t sell Bamberger s. You Jersey. Our expansionreally WCle unique. You don t sell the State of New has been fabulous, and our business has been just terrific. Everyone would love to get in on something like this. You can t do business \with everyone. (1'1'.That is why you have buyers and you have to be a little selective. 2636-37.

Regarding Brown, she said:

* ,. Mr. Brown is just a salesman and a counter. He takes inventory counts of stocks in some of my stores. All advertising was handled by Mr. Dosik . (T1'. 2625; see also 1'1'. 2615- , 2644 , 2676. When viewed in this light, the numerous apparent discrepans version ofcies behveen NIl's. George s testimony and Brown their dealings become unimportant, except insofar as they sughis role in view of thegest that Brown, in testifying, inflated evidentiary void left hy Dosik's death.

Regarding the competitors listed by Brown in connection 'with the Bamberger account " the record reflects the following: , he was suc- Conie de Pa?"ie-According to the witness, Gold cessful in selling Corde merchandise to Bamberger s in 1958 and 1959, and he offered 100 percent advertising allowances (Tr. 1308-09). The record contains no corroboration, however, that Bamberger s actually ran Corde advertising for 100 percent 1'eimbursement. (\ Despiie this competition from Corde in 1958-59, Bro\vn said the question of paying more than 50 percent at Bamberger s oid not arise until 1960 (Tr. 1767). s dur- Contessa di R01na-This company solicited Bmnbel'ger ing 1960 and 1961 but was unsuccessful, although it offered aJlowances of 75 percent or bettor (Gold 1302- , 1464-65; George 2629-32; Steiner 2071- , 2078) .

This company sold to Bamberger s during Lady kIm'lene- 1960-63 and offered 75 percent allowances during that period (Fox 1911; .Jaffe 2487).

f.5 The buyer fol' Bambergn s ,"Vl\S not. que6tion\'u about the a !owancl's of suppliers other than ConteosR.

"" Oddly enough. in listing competitive ads postea in the buyer s offce at Bamberger s, Brown testified seeing a Cords' ad in 1901 . hut not. in 1960 (Tr. 1762- (3), By 1961 , Surprise had acqu,red the Corell" trade name (Tr. 1-171-72). 5; There h sorr, e doubt regarding Gold' s offers to Bambe,'"er s (StelI1€" 2072. 2074 , 2078), Initial Decision 71 F.

TTeo-At some time during 1960-63 (dates unspecified), Treo participated on a 100 percent basis in Bamberger s omnibus actvertising (Poulson 1976-79).

LiIJjette-This company cooperatively actvertised with Bamberger s during 1960- , presumably on a 50 percent or 66% percent basis (and sometimes 100 percent) until early 1962 when the rate went up to 75 percent (Kaufman 2229- , 2B51, 2424) .

Fonnaid-This company did business with Bamberger s in 1960 and subsequently and grantee! allowances of 75 percent (Braff 2513- , 2521- , 2538).

There was no independent corroboration of any dealings between Bamberger s and the remaining three companies mentioned by Brown-Peter Pan, Exquisite Form, Hnct Bali-or of their advertising allowance programs.

Brown did not mention Poil'ette or GosSDl'd among Surprise competitors at Ban1berger, but the record shows that both granteo advertising allowances to it during 1960-68. PoireUe s rate may have been 50 percent or 75 percent (RX 27; Gros 2247- 2265- , 2271-72) ; Gossard' s was 50 percent (Wells 2297 , 2308; CXs 968, 969).

Philadelphia, PennsJjlrania Surprise s principal witness regarding the competitive situation in Philadelphia was Henry Sanders, its national sales manager since January 1961. Sanders, who had been sales promotion manager from 1959 to 1961 , also had served as a salesman in Philadelphia ouring 1960-61 and had made an investigation of competitive problems there before Surprise raised its advertising allowance rate to 75 percent in mid- 1962. Consequently, the record is far from clear regarding the dates of many of the matten covered by his testimony.

Ralph Gold also testified about his activities in Philadelphia as a salesman for Surprise, Corde, and Contessa. And Gold, directly or indirectly, \\'as one of Sanders ' informants regardingoffers made by Corctc and Contcssa The salient facts relevant to Surprise s defense of meeting competition at the four Philadelphia oepartment stores follows: Z. Lit B'/other Concerning competitiOl in Phi1arlelphia generally, but not with , listed specific reference to Lit Brothers, the salesman, Sanders : , SURPRISE BRASSIERE CO. , INC. , ET AL. 931 868 Initial Decision (Tr. 1407) the following competitors as offering: greater cooperative advertising allowances than Surprise from 1960 to mid-1962:

Bien J olie Lilyette Carnival Peter Pan Contessa Treo Exquisite Form Wonder Bra Formaid Y outhcraft Formfit Sanders said that in 1960 and 1961 he was unable to deal with Lit Brothers on the basis of a 50 percent advertising allowance but founo it necessary to offer 75 percent (Tr. 1417- 19) .

Before 75 percent was granted to Lit Brothers for an ad in May 1960 , Sanders said the buyer, Mrs. Theresa Connors, told him that other companies were offering greater advertising allowances. Specific companies supposedly were mentioned, but S"noers remembered only Contessa. The buyer told him that Contessa was offering 100 percent allowances and other sales promotion aids, :;!) Sanders knev,r that the Contessa offer ,vas not accepted, but, nevertheless, Surprise paid 75 percent "Because of hat she ,vas getting from others " Again, Sanders could not recall who these "others " were (Tr. 1533-36). Hegaroing a 75 percent allowance granted to Lit Brothers for an ad in K ovember 1960, Sanders indicated that he was again reminded about the 75 percent the store was getting from other manufacturers, but he did not recall whether specific competitors wee l'entioneo to him at that time (Tr. 1536-37). The buyer for Lit Brothers, who testified during the course of the Government's case-in-chief, gave no testimony directly relating to Surprise s meeting competition defense. Defense questions on cross-examination relating to dealings with other suppliers were not allowed on the basis that Surprise might recall the witness in the course of defense hearings (Connors 559-61). I-owev€j', the buyer was not recalled either as a defense \vitness or as a rebuttal witness for the Government. r," Lit BrotnCl' S also ;-eceiveu 100 pe,-cent Hllowances for new product promotions (CXs 88 A 08 A; Connors 55"i; Sanders 15,10- ,j2), but SUI'prise mnkcs no clnim of meeting specific competition in tho",' i"St1n,f'S, ''" This testimony is highly sus)Jr t lJecau e Conleo S 100 j)e er,: offers were not de\' eloped until 1061 (Steiner :2075, 7ii), lncidentE!:,' , Snnders was wrong in ident:fying Ml's, Connor tlh buyer n.t this time: she wns then flssistant buyer (Connors 540), 932 FEDERAL TRADE COMMISSIO~ DECISIONS Initial Dccision 7.1 The testimony of Ralph Gold was to the effect that he unsuccessfully solicited Lit Brothers on behalf of both Corde and Contessa and made offers of 100 percent cooperative advertising (Tr. 1328- , 1474-75).

As for Lilyette, its president indicated that his company sold to Lit Brothers in 1962 ano had solicited the store before that time. Lilyette may have sold to Lit Brothers "in a small way in 1960 and 1961 (Kaufman 2422). It was not definitely establisheo that any offers of cooperative advertising were made to Lit Brothers, and it appears that whatever offers may have been made would have been at the rate of 50 percent, or no more than 66% percent. (Kaufman 2228- , 2419- , 2413-14. Formaid did no business with Lit Brothers ouring 1960- , but Formaid' s salesmen were calling on this account and presumably were offering 75 percent allowances (Braff 2545, 2523-25). There was no corroborating evidence regarding offers 01' grants to Lit Brothers by the other competitors that Sanders listed. The only other competitive activity at Lit Brothers shown by the record relateo to Gassaro, and evidence presented by Surprise shows that Gossard made 50 percent advertising allowance payments (Wells 2297, 2:;08-09; CXs 968, 969). 2. SnelienbuTgs Sanders testified (Tr. 1407, 1419-20) that beginning- in 1960 Snellenburgs ,vas unwilling to advertise cooperatively with Surprise on the basis of 50 percent because competitors 'were making better offers. He listed the following companies: Bien Jolie Lilyette Carnival Peter Pan Contessa Treo Exquisite Form Wonoer Bra Formaid Y outhcraft Formfit But the only specific transactions mentioned by Sanders related to the "big promotion" offered by Contessa involving advertising allowance.es of 100 percent plus various other promotional aids, including a trip to Rome as a consun1er prize (Tl'. 1538; see Gold 1228-89).

\Vhen Sanders was questioned on cross-examination about cooperative advertising with Snellenburgs in the spring of 1961 SURPRISE BRASSIERE CO. , INC., ET AL. 933 868 Initial Decision for which Surprise paio 75 percent (CX 13 A-C), he explained that the deviation from 50 percent was necessary because of what the buyer co told him regarding the offers of specific competitors ("some " of those listed Hupra) particularly Contessa. The buyer told Sanders what Contessa was offering and that she had accepted. (Tr. 1538-39. ) Snel1enburgs had not previously carried the Contessa line (Sanders 1538; Gold 1470-71). The record is confuseo regarding the timing of the Contessa offer to Snel1enburgs. Ralph Gold first indicated it was at some unspecified time during 1960-61 (Tr. 1288- , 1313-14), then said it was accepteo in the fall of 1960 (Tr. 1466-67). Contess national sales manager testified, however, that Snellenburgs accepted the offer for the fall season of 1961 (Steiner 2050- 2077) .

But whatever the exact time of the Contessa offer, it provides no explanation for Surprise s 75 percent payment to Snellenburgs in March 1960 (CX 17 A). G1 The record leaves to speculation the reason why the Contessa package deal forced Surprise to raise its rate.

Formaid did not sell to Snellenburgs during 1960-63 but did offer 75 percent cooperative advertising during this period (Braff 2523- , 2545).

To whatever extent Lilyettc was doing business with Snellenburgs during 1960 and 1961 , the recoro fails to inoicate that the rate offereo was any more than the stanoard 50 percent or 66% percent (Kaufman Regarding the other2228,competitors2422).that Sanders listeo (supm p. 932), there is no corroborating testimony or other evidence as to their business \with Snel1enburgs or the advertising allowances they were offering this store.

Although Sanders did not mention Lady Ylarlene among the competitors Surprise was meeting at Snellenburgs, the rec does indicate that this manufacturer cooperatively advertised with Snellenburgs in the spring of 1961 , apparently on a 75. percent basis (RX 19 A-B; Jaffe 2486-88; cf. Fox 1913- , 1938). Halph Gold testified also that he hao successfully solicited Snellenburgs in 1958-59 on behalf of Coroe (Tr. 1313-15), but there is no direct evidence rcgarding cooperative advertising by this store with Corde. In any event, Car de was not on Sanders ' list (J The buyer for Snellenburgs, :\licici Ruth Loughney. waci not called as a witness by either side.

,,:: Gold was not employed by Con:essa un'.il May 1%0 (Gold 1' ; Steir.e!' 2032 , 2073- Initial Decision 71 F.

(supm p. 932), although he knew of Gold's activities on behalf of Corde (Tr. 1412, 1559-60).

To round out the competitive picture at Snellenburgs, the record shows allowances of 50 percent offered by Gossaro (Wells 2297, 2308-09; CXs 968, 969).

3. Stmwbridge Clothier According to Sanders (Tr. 1407, 1416-17), it was necessary to allow Strawbridge & Clothier more than 75 percent because competitors were offering a higher rate. These competitors, reputedly named hy the buyer, ~liss Emma Swartz, incluoeo the following: Bien J olie Lilyette Carnival Peter Pan Con tessa Treo Exquisite Form Wonder Bra Formaid Y outhcraft Formfit Regarding a 75 percent ad in :Ylay 1961 (CX 120 A-B), Sanders could not recall whether Miss Swartz had mentioned at that time the specific competitors who were offering cooperative advertising participation of more than GO percent (Tr. 1531-33). Directly contradicting Sanders' story of raising the rate under pressure, two offcials of Strawbrioge & Clothier testified that Surprise s standard rate for advertising allowances during 1960 and thereafter was 75 percent (Bierman 482- , 2772; Swartz 2689- 2696- 2720-22). As a matter of fact, Miss Swartz, the Strawbridge buyer since August 1959 , recalled a 75 percent payment in late 1959 (Tr. 2693).

l'vTiss Swartz knew there was a reference in the Surprise price list to a 50 percent cooperative advertising program, but she said that Surprise never adhered to it at Strawbridge (Tr. 2719-22). Neither Sanders nor Gold tried to get her to take 50 percent ('11' 2689- , 2696-97, 2728, 2765-66).

Denying Sanders ' statements, :1\1S8 Swartz was emphatic declaring that she dio not mention to him the names of other suppliers or tell him they were offering higher allowances. Such a practice is contrary to the policy of the store ano of ,Hiss Swartz herself (Tr. 2689-92; see Bierman 510, 517-19). 11iss Swartz agreed that cooperative advertising is a competitive matter and that it woulo ue more advantageous to Strawbrioge if a supplier paid for 7 percent of cooperative advertising rather than 50 percent (Tr. 2753). But she insisteo that she did not SURPRISE BRASSIERE CO. INC. , ET AL. 935 868 Initial Decision bargain with suppliers for better rates. She never requesteo any particular percentage; whatever a salesman offered in the way of a cooperative advertising rate was either accepted or rejected without any discussion as to a different rate. (T1' 2687- , 2756 2763-64. ) She explained that the advertising budget for the corset department was such that there was no occasion to try to push suppliers into giving better advertising allowance rates (Tr. 2764- 65).

Miss Swartz pointed out that most of Strawbridge s business is with Warner Brothers, which pays 50 percent. Strawbridge does more cooperative advertising with Warner than with anyone else (Tr. 2764).

Strawbridge buys foundation garments from some 20 to 30 manufacturers, and the store engages in cooperative advertising with most of them. The rates of participation vary from company to company. Between 1960 and 1963, the rates were 50 percent 60 percent, 66% percent, and 75 percent, and Stra\vbridge engaged in cooperative advertising at each of those rates (Tr. 2685- 87) .

In an effort to offset this testimony, Surprise flagrantly distorts the record by portraying the Strawbridge buyer as dictating the advertising allowance rate "on a take it or leave it basis " (compare RPF 106 with Tr. 2690; see CR 9-10). The inferences Surprise then attempts to build (RPF 106-07) on this distortion of the record must, of course, fall for want of a proper foundation. Strawbridge s purchases from Surprise since 1960 have been about $16 000 a year; the account has been fairly stable (1'1' 2695)."' Miss Swartz consioered Surprise a " fringe house " but said it is important "in its own little way" (Tr. 2767). Concerning competitors and their offers to Strawbridge, the record shows the following:

Contessn-Ralph Gold may have offered the Contessa line in 1959-60, but it was turned oown. Miss Swartz did not recall that Gold offereo her the package oeaj or 100 percent aos (Swartz 2698- , 2736-38; cf. Gold 1288- , 1318- , 1473-74). There is testimony that the 100 percent advertising deal and the 1rip to Rome were offered to Strawbridge by Contessa (Gold 1 7g-74; Steiner 2051 , 2071), but Gold's claim that this was in 1960 does not appear to be well-founded (Steiner 2075-77). Exquisite F011n-Paio 75 percent to Strawbridge, but in 1960 or 1961, Strawbridge discontinued carrying the Exquisite line in Purchases from Surprise in 1959 had been nearly S22 OOO (ex 170 A: see Sanders 15.;2; CPF Z4).

Initial Decision 71 F.

the upstairs oepartment and transferreo it to the basement department (Swartz 2728- , 2761-62; Bierman 494-95). Lilyette-Not carried by Strawbridge (Swartz 2703), but solicitations were made (Kaufman 2229, 2419).

Formaid-This company has tried unsuccessfully to sell to Strawbridge (Swartz 2701; Braff 2525-26) .03 Peter Pan-Paid 75 percent, sometimes 100 percent. (Swartz 2702, 2728-29.) Later reouced its participation from 75 percent to 66% percent, probably in 1962. (Swartz 2702, 2728- , 2763; see Bierman 500-01.) TTeo-This company engaged in cooperative advertising with Strawbridge during 1960-63 (Swartz 2703-04; Poulson 1902- 1957- , 1969- , 1980-88). Treo paid 66% percent for Strawbridge ads in :\larch 1960 and March 1963 (RXs 20, 21 , 23). Treo granteo to Strawbridge a 75 percent allowance in :\lay 1963 (RX 10). There also was cooperative aovertising in September 1961 (RX 22), but the percentage of contribution was not shown. There was no corroborating testimony or other evidence relating to the other competitors Sanders listed (supr" p. 934) as having offered allowances higher than Surprise. However, the record contains evidence regarding some competitors who were not listed by Sanders (SUpTC p. 934), as follmvs:

Po irette- Granted to Strawbridge 75 percent allowances in October and Ciovember 1961 , April 1962 , September 1962, and October 1962, with other payments in October 1962 at a rate of 50 percent or less (Gros 2250- , 2267 , 2272-73; RXs 27 , 29 H).

Bali-Offered 50 percent in 1960 (Bierman 493-94). COTde- Strawbridge carried this line until Xovember 1960, but the annual volume was only about $6 000 (Swartz 2700). ~iiss Swartz said the allm:vance was 7 G percent; she did not remember that Ralph Gold offered 100 percent advertising for Corde (Tr. 2730-33), but Gold saio he did ('fr. 1318- 20). Go,m,rd- Paio 50 percent (Wells 2297 2308-09; CXs 968, 969). .i1:rcidenfonn-Paid 66:! percent in 1960 (Biel'TIUU1 194-95), but paid 75 percent for an omnibus ao in September 1961; other participants were Surprise, Fcicr Pan, and La Resista (Bierman 500- 01) .

Sarong--Paid 75 percent, sometimes 100 percent (Swartz 2702 2728-29) .

03 Formaid did seil to U", jc;nior depnrtm(nt, wh:cn was sepa,-ate from the main corset department (Braff .'2.'- 26).

SURPRISE BRASSIERE CO. INC. , ET AL. 937 868 Initial Decision 4. Gimbels Sanders said that he represented Surprise in transactions with Gimbels during 1960-62. lie testified that he first offered 50 percent, but the buyer, Mrs. Annette Feir, made him "aware of what she was getting from other manufacturers- 75 percent and even better." Sanders oid not specifically identify these manufacturers, but said the names mentioned were "among" the following: Bien J olie Lilyette Carnival Peter Pan Con tessa Treo Exquisite Form Wonder Bra Formaicl Y outhcraft Formfit Sanders saio he thus could not sell to Gimbels on the basis of 50 percent advertising allowances. (Tr. 1407, 1414- 16. That was on direct examination. On cross-examination, he said he dealt with Gimbels in 1960 and part of 1961 (Tr. 1513). More important, while he reiterateo that the buyer for Gimbels told him other manufacturers were offering 75 percent or better, he coulo not remember whether she specified any competitors by name (Tr. 1514-15). He did not recall the exact date of his first contact with lVI's. Feir, but he stated the conversation took place prior to March 28, 1960 , when Gimbels ran a Surprise ad on the basis of 75 percent participation (CX 100; Tr. 1515-16). He could not be certain whether she named specific competitors in connection with subsequent advertising arrangements (Tr. 1520-28), except that for an omnibus ao on April 24, 1960 (CX 101), involving a 100 percent payment, she would have told him the other manufacturers participating (Tr. 1517-18).

Finally, when questioned about a 75 percent payment for an ad of October 28, 1960 (CX 105 A-B), Sanders retreated to the statement:

We did know the names of the people. She at one time reviewed these names with me.

But he remained unable to fix the oate other than to say it was probably" about the time of his first visit early in 1960 (Tr. 1529-30) .

The testimony of Mrs. Feir, both in the course of the Government' s case-in-chief and in the course of rebuttal, is in direct conflict with the meeting competition defense of Surprise. According to NIl's. Feir, the allowance that Surprise gave to Gimbels was 938 FEDERAL TRADE COMMISSIOK DECISIONS Initial Decision 71 F.

a straight 75 percent, except when it was 100 percent (Tr. 591 2813 , 2841-43). This has been true ever since she became buyer at Gimbels in January 1959. From the beginning she understood that the allowance rate was 75 percent, the same rate she had enjoyed as corset buyer at Blauner, "another Philadelphia store (Tr. 2787-92). She flatly denied that either Gold or Sanders had offered her 50 percent in 1960 ano 1961 (Tr. 2793- , 279G 2841-43) .

Although familiar with the Surprise price lists for 1960-61 and 1961-62 (CXs 1 and 2), Mrs. Feir was not aware that they called for payment of 50 percent advertising allowances (Tr. 633- 2797). Her further testimony was in substance as follmvs: Even if the Surprise rate hao been 50 percent, she would have continued to buy the Surprise line (Tr. 2794). She dionot attempt to bargain with her suppliers for a higher cooperative advertising rate (Tr. 2812). There were suppJicrs who offered 50 percent 1960- , incluoing Warner and Bali; also Maidenf01'n, which later went to (iO percent ano then to (i6% percent (Tr. 2810-12). She dio not tell Sanoers that competiors of Surprise were payinghigher rates. No supplier was paying more than 75 percent on a regular basis, but a higher rate waoS offered to introduce new merchandise (Tr. 2813).

A manufacturer s cooperative advertising rate did not determine whether merchanoise would be stocked. Jf the merchandise was desirable, it would be stocked ano cooperatively advertised even if the rate of participation was only 50 percent (Tr. 2827 28, 2851-54). As a matter of fact, Gimbels' biggest supplier, \Varner Brothers, grants only a 50 percent participation ('fl'. 2830), Although cooperative advertising is competitive, it is not as competitive as merchandise is competitive, " (Tl'. 2837. Surprise s efforts to discredit the testimony of :Vll's. Feir (RPF 69- , 85) are unavailing. She was one of the most straightforward witnesses heard by the examiner. The interpretations placed on her testimony by Surprise are, in the examiner s opinion unwan' anted.

The record supports the following findings respecting supplier competition at Gimbels:

Corde-Ralph Gold had sold Gimbejs some Coroe mcrchanoise but the store later dropped the line. Corde offered cooperative advertising at 75 percent or more. (Feir 2798-2800 , 2836; Golo 1322- 2:,. ) (Sanoers oic1 not mention Corrie in reference to Gimbels.

Conte88(1-Gimbels made limited jJurchases from Con tessa, and SURPRISE BRASSIERE CO. , INC. , ET AL. 939 868 Initial Decision there is evidence of cooperative aovertising in November 1960 (RX 24; Steiner 2049, 2071- , 2078- , 2117-24; Feir 2803). Contes", offered aovertising at 75 percent or better. The 100 percent offer was for an introductory ad only (Gold 1322-23; Feir 2836-37), and :Vlrs. Feir did not remember the so-called package deal (Tr. 2802-03).

Lady Marlene-This manufacturer was not listed by Sanders among the competitors he encountereo at Gimbels, but the record reflects that Lady Marlene paid allowances of 75 percent, beginning in June 1960, with some indications of the same rate of payment earlier in 1960 (RXs 11 18 D; Feir 2833, 2847; Fox 1913, 1922-26; Jaffe 2480-86).

Other Suppliers- Other suppliers that were paying 75 percent (;I and Exquisite Form (Feir,'r better to Gimbels included Gossard 2833, 2847-48) .

Solicitations- Xeither Formaid nor Lilyette sold to Gimbels during 1960- , but each solicited the store and offered cooperative advertising-Formaid at 75 percent and Lilyette presumably at 50 percent or 66% percent (Braff 2023- , 2545; Kaufman 2228- 2418; Feir 2833) .

There \Vas no corroborating testimony 01' other evidence respecting the activities at Gimbels of the other competitors listed by Sanders.

SU1/;fYWFlJ F-ind-ings and Conclusl:ons P.reli1ninary Statement Although, or course, legal principles must be applied in resolving the issues posed by Surprise s defense, the foregoing fmdings demonstratei:hat the dispute concerning the competitive picture is primarily factual. The parties cue not really at odds regarding the controlling legal principles, but they do diverge sharply in their interpretation of the record ano in their application of these principles thereto.

On the basis of the detailed findings regarding the competitive aspects of Surprise s dealings 'with each of the department store customers (supm pp. 920-39) and in the light of the applicable la,,", the examiner here makes summary findings and conclusions regarding- the meeting competition defense. By way of introduction, however, some reference should be L" The witness from Gossf!I'd testified to 50 percent payments (Wells 2207, 2307-08: CXs 068, D6fJ) lmtil 1%3, when the rate was raised to 75 pen' cnt (Wells 2320- 30). . ..

Initial Decision 71 F.

maoe first to the examiner s evaluation of the evidence beyond that already indicateo by the detailed finoings. 1. Legal Standrinls In undertaking to oetermine whether Surprise was, in fact meeting competition in good faith, the examiner has heeded the admonition of the Commission that the test is "not technical or doctrinaire " but rather "flexible and pragmatic Continental Baking Company, Docket 7630 (Opinion accompanying Final Order, December 31 , 1963, p. 2) C6iJ F. C. 2071, 2163). The examiner has applied the standard laid down in Continental-"the standard of the prudent businessman responding fairly to what he reasonably believes is a situation of competitive necessity, The principles set forth in Continental are circumscribed by thc factual basis which gave rise to them. Their apparent breadth must be measured against the facts that lecl to the oecision that discriminatory prices granted by Continental were justified under 'iCSection 2 (b) of the Clayton Act, as amended. Continental had refused to grant discriminatory discounts for a substanlial period of time although its major competitors had been granting such discounts for man:y years. As a result, Continental' s market position had been impaired and it feared " further drastic loss of business . (ld. p. 2164. Continental also was careful "to ensure the genuineness of the competitive necessity for particular discounts. " The opinion noted: The discount policy adopted by respondent as a result of the competitive situation it facer! was a highly selective one. It )Jennittec! a discount to be gTantec! to a particular customer only where an equal or larger' discount hac! lwen given by a competitor of respondent 011 a competing product line and respondent would not be able to continue selling to the customer in question without granting such a discount. In other ..vorcls, discounts by respondents were available only in actual competitive situations. In every case, customers' claims that they ..VETe receiving discounts from competitors of respondent ..were adequately verifiecl by respondent s 011the-spot sales representatives. In fad, in every i11stance of record in which respondent gTantecl a discollnt, its competitors' c!iscollnt to the cllstomer in ""Section 2(\1) of the Clayton Act, as amended (15 D, C. 13(bj) reflds in j) l"ile1lt 1J irl HS follows Upon proof bei11!; maue th2l there has bee disc iit nation in price or services Dr :acililies furnished, the bunj('n of re "Hling the pr:mfl- fal'; case thus made 11Y ,how;ng :ustification sbilil 'Ul' upon the pe,'son charged and 1jnle5s justifirat:on shall Ol' "tr,, mativeb Rhode1 , the Commi" ion is authorized to jb"U an ordel' termir. Rtin!; the discrimination: Pro- 1.!ded, hOlcevu that nothil'g r,e ('jn contain efi shal: prel'(nt R se ler re:mt1:ng the JHima. facie case thus made hy ,howi))g that his lower price 01' tiw furnishing of st'\"iees O ' facili:ies 10 any l)\. chRSt' " 0" jJu''(haseJ's was mad" in good faith to meet flro e'llJHII ' lo\\" p:' ice of a cornpetitol, O . the services or facilities fU, nish-a d 'uy a. competitor. SURPRISE BRASSIERE CO. INC. , ET AL. 941 868 Initial Decision question was equal to or larger than respondent's, and the latter s net price to the customer' was no lower than its competitors ' net prices. (1d., p. 2164. The opinion, for the most part, dealt with price discriminations but the Commission noted that the same facts and circumstances applied equally to Continental's grant of advertising allowances to meet equivalent advertising allowances granted by competitors. See also BeatTicf Foods Co., Inc. Docket 7599 (Order Dis- C. 286J, and Poncnmissing Complaint (July 29 , 1965)) C68 F. Wholesale Mercantie Cornptmy, Docket 7864 (February 24 1964) C64 F. C. 937J.

Although the defense provided by Section 2 (b) is broadly referred to as the "meeting COll1petition defense" (as reflected in the title of this section of the initial decision), such nomenclature represents an oversimplification and may tend to blur the distinction between the original 2 (b) defense which excused oiscriminations "made in good faith to meet competition " and the amended made in goodversion which limits the defense to discriminations " faith to meet an equally low price of a competitor, or the services or facilities furnished by a competitor," 6C This defense has been extended by court interpretation to include the granting of pay- , Inc.inent.s for services or facilities Exquisite Fonn Bnlssiere Fedeml Tmde Commission 301 F. 2d 499 (D. C. Cir. 1961), ce1't. denied 369 L'. S. 888 (1962).

2. Outline of Defensi'Uc Facis Against that background, we turn to a consideration of the oefensive facts adduced by Surprise.

Through its sales staff, Surprise has undertaken to paint a pidure of its efforts to adhere to its published aovertising allowance program in dealing with the department stores in Xew Haven Bridgeport, Newark, and Philadelphia. The salesmen uniformly testified that the department store buyers rejected their initial offers of 50 percent advertising allowances and threatened, directly or indirectly, that purchases from Surprise would be curtailed unless higher allowances were granted. Defense testimony is to the effect that Surprise s salesmen regularly collected, in a variety of ,vays, information on the allowances and offers of competitors; that this information was carefully checked and passed on to the presioent of Surprise, Samuel Dosik; that Dosik had other sources of information; and that the &1 Compare 38 Stat, 730 with 48 Stat. 1526 (1 c. 13 (b)). Initial Decision 71 F.

subject of competitors' allowances was thoroughly canvassed at periodic sales meetings.

No deviation from the published program was allowed, according to Surprise, until Dosik was satisfied that a higher allowance was required to obtain a cooperative advertising arrangement and thus to insure the exposure of Surprise merchandise to the consuming public, so that such merchandise would enjoy a proper turnover rate and would not remain stagnant on the shelf. But this picture is painted with too broad a brush; it lacks detail and falls short of reflecting reality. 3. Ewt/nation of E1Jidence The defense largely depends on the weight to be accorded the testimony of four of Surprise s current sales employees-Ralph Gold, Henry Sanders, Howaro Rubin, and ,jack Brown-when measured against the testimony of department store buyers that contradicts the salesmen in important respects. Much of this testimony oealt with transactions that took place as long ago as 1960 (or earlier) and that were at the time, strictly routine. It is natural that witnesses testifying to such matters would recall them in a light calculated to oemonstrate the correctness of their actions on behalf of their employers. This comment is applicable to both the salesmen and the buyers. But when it comes to resolving the conflicts between the testimony of the buyers and the testimony of the Surprise salesmen, the circumstances compel the acceptance in major part of the buyers' versions. As far as motivation to misrepresent is concerned, it is obvious that the Surprise salesmen are more vulnerahle than the department store buyers. The buyers were, for the most part, reluctant witnesses who appeared under the compulsion of Government subpoenas. Neither they nor their employers were parties to this "' The ",:-arnine!" is not unmindful of the diffculties faced by S\Jrprise in undertaking to detend ih discriminations, am; , in ,fI1alyzing the ddensive material offered, he h,, not impo on it an impossible burdell.

First, of course, Surprise labo!' ed U/'UEr an obvious hf\ndicap as f\ result of the death of its prt'sidt'nt just !IS this litigation was instituted, Second, from a business standpoint, cOllsiderf\lde circumspedion had to lJe exer('ised in the rross-ex!lmil'ation and analysis of the testimony of department store buyers wit.h whom Surprisc necds to maintain a satisfactory relationship, Third, there were obvious diff('ulties in undertaking to )JIo\'e ('certain defen ive facu through offeials of Surprise s competit.ors, particularly in im'tances where those competitors mig-ht tht'rTselves be vulnerable to charges of unlawful discrimination, Fin"liy, problems aJ'ose in obtaining documentary cOHoboration regarding f\1!(1wf\nces grant.ed 0)' offered by ('()m\JetitoH during H160- 62, "v,"j,theless, unfOl'tUnatICty for Surprise, it is a truism That the f\bsence of ",videnc cannot suustitute fol' evidence, nor can inf"j' ences f:lvo:' abk 10 Surp!'is" lw (hawn fj' om the absence of evidence relevant to its (kfense, Infe:' enceo based on the aus'Oljee cf evidence Hie Jl(:rmi ible only in special circumstanecs that are not present here SURPRISE BRASSIERE CO. , INC. ET AL. 943 868 Initial Decision proceeding, and they thus had no direct interest in the outcome of the case nor any other cause for bias. These buyers, long-time employees of substantial and reputable department stores, were forthright and direct. Like the Surprise salesmen, the buyers also had memory trouble, but they were more frank in admitting it than the Surprise salesmen. The examiner s conclusion in this connection doubtless has been influenced by his consideration of the testimony of Surprise first witness, Ralph Gold, who furnished the keystone and set the tone of the defense. There is considerable basis for the position of complaint counsel (CPF 52) that Gold's testimony is entitled to Jittle or no weight in resolving the crucial issues involved in this proceeding (see 'infra pp. 945-946). All of the Surprise salesmen insisted that they had tried to adhere to the published policy of their company and that they had granted discriminatory allo\vances only \vhen they \were pressured into doing so hy oepartment store buyers. Such testimony has been uniformly denied by the department store buyers who were directly questioned about it, and it also is basically inconsistent with the testimony of other buyers.

On balance, the examiner has concluded that Surprise and its salesmen, believing that some competitors were offering advertising allowances of 75 percent or better to department stores concluded that it was souno business policy to ofler a comparable rate on a regular basis to their oepmtment store customers. Surprise was meeting what it understood to be the general competitive practices of some competitors. Its 75 percent offers \\'ere not made on an ad hoc basis to meet specific competitive situations. It engaged in systematic discriminations to JDeet the general competition of some of its competitors.

Surprise finds incredible the testimony of several of the buyers that their advertising buoget was so liberal and that there were so many offers of cooperative advertising allowances that there was no occasion for them to bargain with or to pressure any supplier for a rate higher than ils regular published offer. Initially, the examiner was inclineo to be incredulous too. But in the context of the industry practices disclosed by this record, he finds such testimony completely credible.

The examiner is aware that depadment stores and other large retail outlets frequently sponsor special promotional events aJ1d solicit the participation of their suppliers. See . for example, R. H. Mac!! " Inc. 60 r. C. 1249 (1962), aff' d as m.odified 326 F. 2d 445 (2d Cir. 196 ), and Max Factor and Company. Docket 7717 (Opinion accompaI\ying Final Order, July 22 , 1964 , IJ. 2) (66 F. C. 184 , 2491. But, in the main, Surprise has not demonstrated any such situation regarding its 75 percent allowances. 944 FEDERAL TRADE COMMISSIO DECISIONS Initial Decision 71 By the same token, the examiner rej acts the contention of Surprise that the department store buyers testified as they did concerning the jack of any pressure on their part for higher advertising allowances because of the existence of the criminal section of the Robinson-Patman Act."

There is no substantial basis for inferring that the testimony of any buyer was improperly influenced by virtue of this statutory provision and this is reflected in the hesitant, tentative manner in which Surprise advances such a theory. Furthermore, the contention is a two-edged sword. For it appears that the department stores woulo be vulnerable under Section 3 only if they improperly induced Surprise to discriminate by misrepresenting, for example, the competitive offers being made to them. Surprise s defense is predicated not only on the information supposedly furnished to Surprise by these buyers, but also on the accuracy of such information. Surprise cannot have it both ways, Actually, the testimony of these buyers that they did not undertake to obtain higher allowances that might have been available may be construed as an admission against interest and, therefore especially worthy of credence. This is on the theory that management-or at least the cost control hranch--might well look with jaundiced eye on the failure of buyers to obtain the maximum subsidization of advertising expenses.

The fact that since 1960 (ano earlier, in some instances), Surjwise s payments to each of the eight favored department store customers were, with one exception 71 75 percent, not 50 percent constitutes the most convincing refutation of the salesmen s testimony that they varied from the terms of Sm'prise s published plan in individual instances to meet specific competitive offers, \which were thrown in their faces by the buyers. Despite abortive efforts to show the payment of 50 percent allowances in a few instances (supra pp. 920-24), Surprise faileo to prove (with the exception noted) that it ever paid allowances to any of the oepartment stores at the 50 percent rate.

€O Section 3: 4 Stat. 1528, 15 S.C. a. This sedion of the Act, in pertinent part, makes it unlawful for any person engaged in cornmeree "to be a p:1rty to, or flssist in, any transac- .. which discriminates tu h;s knowl.odge against competitors of the purchflser, in that.tion flny discuunt, rebate, allowflnce, or advertising service char,;e is gr:\n\cd to the purchflser over and above any discount, rebate, allowance, or advertising service "h:\J' :\vailable " said competitors in respect of a sale of goods of like grade, quality, and quantity cO Surprise s discovery of Section 3 is somewhat bdated. Instead of' now citing it as an afterthought, Surprise, under its theory of the case, should hiive cited it to the (myers, ,: This exception was l'm omnibus ad with Mfllley s on June 1. 1960 , when Surprise paid 50 percent (CX 21 A--B; .Tiimcs 2582- R3; see S1l1JI" p, 920), ) :! SURPRISE BRASSIERE CO. , INC., ET AL. 945 868 Initial Dccision This strongly tends to corroborate the uniform testimony of the department store buyers who were questioned on the subject that during 1960-62 Surprise s cooperative advertising offer to them was 75 percent.

The scarcity of any substantial documentary corroboration of the salesmen s testimony is another factor to be taken into account.

The examiner finds it strange, for example, that, so far as the record shows, neither Dosik nor any other Surprise offcial reduced to writing the stringent holo-the-line policy testified to. Likewise, the absence from this record of any contemporaneous salesmen s reports is a factor to be considered in evaluating the oral testimony (see Sanders 1530).

The question is not without diffculty, but, all things considered including his observation of the witnesses, the examiner finds the testimony of these buyers on the disputed matters more worthy of belief than the testimony of the Surprise salesmen. The salesman Gold testified in it dual capacity: (1) as an ex- Surprise salesman, 1958- , who solicited Surprise s customers on behalf of competitors, and (2) as a Surprise salesman from August 1961 to date.

Gold, at the time he testified, was eastern sales manager for Surprise, a position he had held since August 1961. In Xovember 1958 he had left Surprise to operate successively as sales manager for Corde (November 1958-December 1909), as the West Coast salesman for Lilyette (December 1959-April or NIay 1960), and as the sales manager for Contessa (May 1960-August 1961). (Golo 1260- 1439- 1447 1462-63; CX 966 A- . Surprise lays considerable stress on Gold's testimony that during his employment by Corde, Lilyette, and Contessa during 1958he kept Dosik regularly informed about the activities of these companies in offering allowances higher than Surprise s (RPF 72). The purpose of this testimony was to establish that Dosik-and thus, Surprise-was acting in good faith when the company granted the higher allowances to the eight department stores. ;2 Gold also referred to hj pre-l0,l8 activities as a Surprise salesman 7" Although its substantive impact on the ase is negligible, Gold's mjs-stat ment regarding the time he was employed b ' Lilyette mUHt be taken into a""oun1 in we ghing his testimony. In an Hffdavit filed with the Commission (CX 96(j A-F). Gold r,vcrred that he had been employed as \Vest Coast saiesmRn for Lilydte for a period of alJproximately one and une-quarter ars. Howeve)' , the h aring- nconl shows that, il, fad, Guld was employed by Lilyette for only a few months (Gold 1-17, 1462: Kaufman 2884), Obviously, such a mis-statement may be inadvertently made, but, nevertheless, Gold's careless rJiregRnJ for the truth in a sworn statement cannot be ig-l\ored, l'"urthermOlf' , hi aliegations rf'gRl'ding activities by Lilyette must be discoullted in view of evidence of a oasis for animosity on his part toward Lilyettc (Kaufman 2391 2303- 2453-55) , Initial Decision 71 F.

Despite the family relationship- Gold ano Dosik were cousins by marriage (Tr. 1453)-the examiner is unable to give full credence to Gold's account of such duplicitous activity on his part." As noted during the course of hearing (Tr. 1599-1601), the examiner believes it was propel', in fai rness to Surprise, to receive testimony concerning the knowledge of Dosik as to the practices of competitors, but testimony concerning conversations with a person \vho has since died must be cautiously considered in view of the lack of opportunity for verification of the conversations in question.

Whatever Gold may have reporteo to Dosik, his vivid memory of such conversations, five to eight years previously, is to be contrasted with his memory failure on other subjects. 1moreover, in its reliance on Gold's t.testimony, Surprise again has wielded a two-edged sword. First, Gold's testimony deals almost entirely with offers that were not accepted, and secono Gold' s testimony, together with his affdavit (CX 966 A-F), puts Surprise in the position of having reason to believe, if not actual knowledge, that the competition it supposedly was meeting was unlawful (CPF 82-84; see infm p. 954). Moreover, even if Golo's account of his offers on behalf of his former employers and of his reports to Dosik concerning them were to be accepted at face value, the examiner must consider other flaws. Aside from Gold' s testimony, the rccoro contains no information covering the standing of Corde in the industry other than the fact that Surprise purchased the Corrie trade name and patent in 1960 (Tr. 1444- , 1471).

Contessa was a new company in 1960 (Steiner 2026- , 2069- 70), and in view of its Jimiteo activities (Steiner 2072, 2076-78), Surprise cannot vnlidly claim that it was responding to Contessa offers in early 1960, because Surprise alreaoy had furnisheo 75 percent allowances to most of the eight favored department stores. :. In any event. such beh!\viur is ? factor !O be considered in assessing Go!d's c!edibi:ity. The weight of God' s testimony must HI50 be discounled foi' a \"!Jict, of uther "H\sons, In addition to ueing subject 10 biHs favoring his employer Surprise, Gold's performance as a witness was marked by glibness, inconsister,cies, contradirtions, and i! ('ojl\'enient memor . Other factors to be taken into account are the !a,'k or any do(' urnenta)' v 0)' testimunial corroboration of much of his testimony, plus f.at denials on thp pa,t of witness, s ca!:ed b:v cumpiaint counsel Hnri h Surprise. The examiner does not IJropo8e tu i' esol"e ddinitively the collateral 'luescions po by the conflict b1'ween Guid'8 affdavit (CX 966 A- F) and the testimony of re)J!" "ntatjv,' s of companies referred to in thrt affdavit (Kaufman :c:J77- , 2:JkO ; Steincl' 110- H; BrHff 2;';32- 34; \Vells 2329-30). But the ex stencc of surh a con i('t l' ,cnnot be ignol . On the \Jasj" of all these factors, as \Ie,1 as the obscrvation \J)' the hel\rir* examine:' of the demeanor of the witness on the stand, the examine, bas accorded God' s te timony little oj' no weight Gold tes:ified, for example, that while he was with Surprise before 1955 , h" offered Annette Feir of Gimb"'!t; O jJercent advertising al!owHnces (Tr, n;22). ::1rs, Fpi was not even emIJloyed by Gimbels until 1959 (TJ', 577: see also Tl' . 2787 790). SURPRISE BRASSIERE CO. INC. , ET AL. 947 868 Initial Decision The salesmen, Sanders, Rubin, and Brown are in a category different from Gold. Nevertheless, their testimony was marked by inconsistencies, by faulty memory, and by some oegree of evasion. They were contraoicted on substantive matters, not only by the department store buyers calleo by the Government in rebuttal, but also by witnesses j1lesented by Surprise-albeit, in fairness, it must be noted that such witnesses were competitors of Surprise. The findings regaroing the competitive picture at each of the eight department stores demonstrate shortcomings in the testimony of these three salesmen and need not be repeated. However some reference should be made here to Rubin s testimony regarding the elaborate formula by which he said he couJo determine that competitors were granting excessive advertising allowances (Tr. 1597-98). His theory was discredited when put to the test cross-examination (Tr. 1670-77). (See also Brown 1749. The Actualities of CornjJet.ition Complaint counsel raise a threshold question concerning the existence of actual competition between Surprise and five of the manufacturers whose cooperative advertising offers Surprise contends that it was meeting (CPF 86-88). They cite testimony indicating that Treo, Lady 2Vlarlene, Poirette, Lilyette, and Contessa sold products that either did not compete or only minimally competed with the Surprise line. This testimony deals in the main with differences in the figure-types for which the various garments were intenoed ano with differences in thc price ranges of the various lines.

For purposes of this decision, hmvever, a definitive resolution of this dispute is unnecessary. The examiner has assumed t.hat each of the companies was in competition with Surprise during the relevant time period.

Such factors as those listed by complaint counsel have been considered, however, in assessing whether Surprise was acting in good faith when it made discriminatory allowances to department stores reputedly in response to offers of cooperative aovertising allowances made by these manufacturers.

Ex Post Facto Rationnlization Surprise s meeting competition defense is essentially an ex post facto rationalization of its discriminations. This is demonstrated by comparing its applications for subpoenas witJl the evidence it ultimately presented. The sequence of events, coupled with the testimony of its salesmen, lends credence to complaint counsel' Initial Decision 71 F.

suggestion (CPF 53-56) that Surprise undertook a "fishing expedition" designed to locate, on an ex post facto basis, specific competitors which might have offered or granted comparable allowances to the eight department store customers about the same time that Surprise granted 75 percent allowances to those customers.

Initially, Surprise listed 21 brassiere manufacturers as the competition it was attempting to meet when it granted the discriminatory allowances that formed the basis for the complaint. For various reasons, those subpoenas were quashed. (See orders quashing subpoenas filed by Examiner Laughlin on August 12, 1965. Thereafter, by a letter dateo September 2, 1965 (treated as a motion), Surprise renewed its application for subpoenas and listed one additional manufacturer, for a total of 22 companies whose competition it allegedly was attempting to meet. Of the 22 competitors listeo, Surprise actually caused subpoenas to be issued for 14. (See Order Postponing Return Dates of Subpoenas, November 22, 1965. ) 76 Of these 14 companies, only seven (Contessa Formaid, Gossard, Lady Marlene, Lilyette, Poirette, and Treo) were represented by "witnesses at the hearings, while an eighth competitor, Corde, was representeo through the testimony of Ralph Golo.

Of these eight competitors, the record fails to show that any of them actually made sales ouring 1960-63 to Shartenberg s in Xew Iaven OJ' to Howlano' s in Bridgeport. Regarding the other six department stores, the evidence is scant as to the nature, extent and timing of their oealings with these competitors. Another flay\' in the defense evidence is that even in instances \Vhe1'8 one or more of these eight eompetitors were doing business at a particular store, the testimony of the salesmen failed to indicate any knowledge of their competitive activities contemporaneous with the granting of the challenged allowances by Surprise Kat one of the discriminatory 75 percent allowances \vas shown to bear any real relationship to a specific offer, paymenl, or advertisement of an identified competitor. 7" Thl' orde)' lists only 12 companies beCflUse when it was issued, Form id nd Goss rd hRd not been s !'''ed with subnoenas, Service wag Ir, tel" effected, ilnd an offce:' horn each company testified.

., As a matter of fact. th salesman, Rubin, iisted only" few of the eight, but arirkd two horn the or;g:nal list-Hr.li r.nd Youthcraft (Sij!"(l, I)P. 8 (i2 ). Brown and S ers wel' morl' cautio\l: ,,,while they omitted sever l of the eight, thn' added others, su that Brown listed nim; and S nders ieven (. li)Jrfl, pp. (126, 830, !J31. 9:'\2 '!4 . 9 7), Bm in naming- competitors t supposedly were out-bidding SuqJl'i"e on i\1vertis:ng al:o\\illJces, n,ey were UI:abie, on an individual sto e basi, to point to pecific compctitn, having- granted or oITel'ed specific allowr.ncc that Surprise was undertaking to men t any specific time, SURPRISE BRASSIERE CO. INC. , ET AL. 949 868 Initial Decision Com1Jetiti e I'.l ecessdy The question whether "competitive necessity" justified Surprise s 75 percent allowances must receive a negative answer because, according to the evioence, (1) the nature of the competition posed no competitive threat to Surprise and (2) the continued acceptance of Surprise merchandise in the department stores was not dependent on its advertising allmvance rate. The bases for these two findings may be outlined as follows: 1. The Competiion Being Met When the detailed findings regarding each of the eight department stores (supra pp. 920-939) are summarized, the conclusion is inescapable that Surprise has failed to show any substantial competitive threat on the part of the manufacturers which made offers during 1960-62 that exceeded Surprise s published rate of 50 percent: 7B BfLli--About all that the recoro discloses regarding Bali is that it oiTered 662, percent to Shartenberg s and Howland's; that it sold to Bamberger s; and that it of Ie red 50 percent to Gimbels. ContessfL-Although Contessa made 75 percent or 100 percent offers to all eight stores, it made sales to only two of them--Snellcnburgs ano Gimbels. The scope ano timing of Contessa s transactions with these stores fail to justify Surprise s reaction. Moreover, Contessa had not been organized until late 1959, and Surprise had made 75 percent payments before Contessa really got underway.

Corde-Corde s 100 percent offers were specifically mentioned only in connection with Hmvland' , Bamberger, Snellenburgs, ano Gimhels but such 100 percent offers were for initial ads only. Therefore, Surprise can hardly point to such offers in 1958-59 as prompting its continual payments of 75 percent allowances to the eight favored department stores throughout 1960-62. Furthermore, Corde ceased to be a viable competitor of Surprise in 1960 when Surprise purchased its trade !lame ano patent. Exquisite Fornl-All that the record shows concerning this company is that at some unspecified time during 1960- , it offered 75 percent allowances to Bamberger, Strawbridg-e, and Gimbels. F01'nwid- Formaicl was universally mentioned by the Surprise salesmen as having made offers higher than Surprise s. The Formaid prog-ram involved 75 percent offers to oepartment stores, but '8 For pur))o es of this summary, the te timony of the Surprise 6alesman regarding competitive offers has been accepted, even though thcrc may be some question as to its accu acy. Initial Decision 71 F.

Formaid made sales only to two--Malley s and Bamberger Moreover, the recoro indicates that Formaid, in offering 75 percent to department stores, may have been responding to Surprise alreaoy existing program.

Lady Marlene- Lady Marlene s cooperative advertising with Gimbels in 1960 is the only instance in which Surprise has come close to showing 75 percent payments by competitors more or less contemporaneously with its early 75 percent payments. Lady Marlene also paid allowances of 75 percent to Snellenburgs in 1961. Ironically, however, the Surprise salesman did not list Lady ~jarlene among the manufacturers whose competition Surprise was meeting at those stores. The record also con ins passing reference to activities of this company at Bamberger Lilyette- The record indicates allowances or offers of either 50 percent or 66% percent (and possibly 100 percent on occasion) during 1960-62 at Malley, Bamberger s, Lit Brothers, SnelJenburgs, and Gimbels, but no cause-and-eflect relationship was established. Lilyette raised its advertising allowance rate to 75 percent in February 1962.

Peter Prm- The recoro indicates only that Peter Pan offered 75 percent allowances to Bamberger s and Snellenburgs. Poirette- The recoro indicates Poirette may have paid allowances of 50 percent or 75 percent to Bamberger s. This firm, however, \vas not mentioned by the salesman as a manufacturer whose competition Surprise ,vas meeting.

Treo-There is evidence of the granting of 100 percent allowances by this company to Bamberger s and the payment of a 75 percent allowance to Snellenburg-s in 196:3. outhcmft- Y outhcraft reportedly offered 100 percent allowances to Malley s ano Shartenberg, but the record is otherwise silent regarding competition by this company. The evidence presented by Surprise concerning the competition that it ,vas purportedly meeting is comparable to the "vague offer of a promotional allowance for an "unknown sales volume, fol' an unknown time, by an unknown competitor, for unknown services that the Commission rejected in Curpel Frosted Foods, hie. , 48 C. 581 , 597 (1951).

Inconsistent Rationale- Before leaving- this aspect of the matter, it may be noted that the rationale of Surprise s defense, in large measure, is inconsistent. Although Surprise has presented '0 Fot. maid soid to Malley s several months after SUI"_1li,e had paid 75 percent allowances to this store. The scope and timing of Formajd.s transactions with Bambergcr s arc speculativc. SURPRISE BRASSIERE CO. , INC. , ET AL. 951 868 Initial Decision evidence purporting to show that it was meeting the specific competition of competitors of substantially the same size as itself, it also has emphasized that its major competitive problem comes from the large manufacturers in the foundation garment industry which are able to afford large-scale, national advertising, thereby pre-selling" their merchandise to the consumer (RB 2-5; RPF 74 , 106). This position was epitomized in the testimony of Sur- 11lise s national sales manager:

It is a very highly competitive industry, wherein the b111k of the business is clone by a small percentage of the manufacturers. The giants in our industry have tremendous national advertising programs in all the magazines, television, institutional ads on the local level. Theil' merchandise is pre-sold to the customers before the consumer even reaches the store. We (:an t fight that. \Ve are small, compared to them. Actually, they spend more on their advertising than the total amount of business that .we do.

T.therefore, jf -,..'e cannot expose our merchandise to the consumer, our merchandise is stagnant in the store. Therefore, cooperative advertising- with the store is vital for us to remain alive. (Sanders 1379-80. Despite this kind of competition 'from the so-called giants of the industry, Surprise has not, in the main, alleged that those companies were offering higher cooperative advertising allowances that it hao to meet.

Regardless of the sympathy that may be evoked by the competitive problems faced by Surprise, the fad remains that in undertaking to meet them, Surprise discriminated in the granting of advertising allowances, and the circumstances do not afford those discriminations any shelter under the meeting competition de feTIe of Section 2 (b).

2. Thyeat of Loss 01' D"mll.Qe The major premise of Surprise s defense is that the 75 percent allowances had to be given to the eight oepartment stores in order to retain their business and to insure their continued participation in cooperative advertising. But Surprise failed to prove this contention by a fair preponderance of the reliable evioence. Surprise s argument is that if its merchandise was not advertiseo hy the department stores while its competitors' merchandise was, the turnover of competitive products would exceed the turnover of Surprise s merchandise, and Surprise would become a fringe line. " (Sanders 1402-03.

As shown by the detailed findings, several of the department store buyers testified that they cooperatively advertised with \ .

Initial Decision 71 F.

oifferent suppliers at varying rates of participation; that their advertising budgets were such that there was no occasion for them to pressure suppliers or to bargain with them for higher cooperative advertising rates; and that jf the merchandise was suitable, they promoted it in their advertisements regardless of the supplier s allowance. As a matter of fact, three of the buyers testified that if Surprise had, in fact, offered them 50 percent advertising allowances during 1960- , they, nevertheless, \vauld have continued to purchase and cooperatively advertise Surprise products.

The record further demonstrates that an offer made by one supplier of a higher rate for cooperative advertising participation than is being paid by anolher supplier, ooes not materially influence a store s decision to purchase. A prime example is ContessH which, despite its extravagant offers, was successful in selling only two of the eight department stores. Although advertising allowance programs are competitive, they are minor factors in a store consideration of continued business with a particular supplier or of its participation in the supplier s cooperative advertising program.

Despite some generalized, unconvincing, and uncorroborated testimony as to loss of business, actual or threatened, there is no basis in this record for finding that Surprise had substantial rea S011 for believing that it would lose any of the department store aeeounts or that it would be injured in .its business unless it granted to them the discriminating higher allmyances to match the offers of some competitors.

Prior) wni' eness of Indi7)idua! Cmnpetit-'/'e Sihwtions The evidence does not establish prior a\"areness by Surprise of the allowance (01' allowances) that it purportedly was meeting in inc1ividual competitive situations " as required by Federal Trade Commission A. E. 5tole1l Mfg. Co. 324 U. S. 746, 753 , 758-60 (1945) .

Although Surprise might have had an awareness that some competitors were offering advertising allowances on more favorable terms than it was, it is questionable whether it knew any facts reasonably leading it to believe that a response was necessary or that the allowance it granted would, in fact, meet the allowance of any specific competitor to any specific customer at any specific time.

The facts developed in the trial show that some competitors were, in fact, offering and granting al1ovi' ances of 75 percent or , , p.

SURPRISE BRASSIERE CO. , INC. , ET AL. 953 868 Initial Decision 100 percent, but aside, perhaps, from Corde, Con tessa, and Formaid, there is little or no basis for finding that Surprise, its president, or Hs salesmen had foreknowledge of who was doing what. N either does the record afforo a satisfactory basis for finoing that Surprise, through its salesmen or otherwise, showed due diligence in verifying and evaluating reported competitive offers or payments before taking what is now called defensive action. In the Staley case, the Supreme Court held that discriminations Vlere not justified, if "made in response to verbal inforn1ation received from salesmen, brokers or intending purchasers, without supporting evidence, to the effect that in each case one or more competitors had granted or oftered to grant like discrin1inations, (324 U. S. 746, at 758. ) The Court did not consider it "an impossible burden upon sellers " to require evidence of more substantiation than that (id. at 759-60). So here, it must be held that Surprise failed to present aoequate proof of prior awareness.

The examiner finds that although Surprise has failed to demonstrate that its discriminatory 75 percent offers were made in response to individual competitive situations, it had reason to believe that some of its competitors had advertising allowance programs involving more generous allowances and terms than its own.

On the basis of such knowledge, Surprise paid 75 percent allowances to the eight department stores but it lacked specific knowledge as to the timing or competitive effect of any such offer or allowance at any specific store.

In effect, Surprise established (as did Formaid) a two-level advertising allowance program, under which 75 percent allowances were furnished to department stores as a matter of course while other customers received or were offered only 50 percent. Both the 75 percent payments and the 100 percent payments were made \vithout reference to any specific competitive situation at any specific store.

0" On the subject of prior awareness, Surpti\;e finds i elf in an unhappy dilemmfl. If the defense evidence demonstrates awarene s at a:J, it is with respu.'t to three compet:tm's whose name Sl10W up in the teHimony regluc!ir,g almost every dCIJa!.tmf'nt store-Corde, Contes and Fo!' maid. But the claim of awarCJles of the a:lowanccs of those firms cal",ic wit), it tdSfl 1h,. acknowledgment that Surprise at least hac! reason to believe that the offers of these com- \Jetito!"s were unlawful. (See :"jra )54, In Similarl, in Beatrice Foods Co.. Inc. Docket 7588 (Opinion accompanying Ordel' Dismissing Complaint July 2 , 1865 , 11. a) f68 F. C. , 3.';0). the respondent " made every effort to verify the bona fides of the competitive offer gnd concluded that unless it lowered its prices " it would lose its largest customer " Surprise s )'eliance on the Beat,ice case is misplaced.

Initial Dccision 71 F.

Surprise failed to establish that it "was genuinely respondingto some particular action on the part of a competitor. " Its defense thus lacks this "integral aspect * * ; of good faith responsiveness. See Exquisite Form ETassieTe, Inc. Docket 6966 (Opinion accompanying Final Oroer, January 20 , 1964 , p. 6) (64 F. C. 271 285J, uff" , Exquisite Fonn Brassiere, Inc. v. Federal Trade Commission 301 F. 2d 499 (D.C. Cir. 1965), 1965 Trade Cases 71,491. The evidence indicates, instead, that Surprise s discl'in1inatory allowances ,were part of an over-all plan devised by it to combat the plans of competitors (Exquisite Form Opinion, pp. 11-16) (64 C. 271 , 289-293j. The Staley " rationale--that the use of a plan 01' system to meet or combat a plan or system of a competitor cannot be justified under Section 2 (b)- is just as applicable here as it was in Exquisite Fonn.

1\leeting 01' Beatl-f1.Q" C01npetition The evidence presented supports a fmding that in two important respects, Surprise \vas "beating, " not "meeting" competition: (1) Its 75 percent allowances exceeded the cooperative advertising offers of some of the competitors it purportedly was undertaking to meet; and (2) even as to competitors who were offering 75 percent 01' better, Surprise s 75 percent allowances precenerl them in point of time 01' continued after their termination. (See up'1a pp. 919-939; CPF 88-92; CR 29-33.

Lawfulness of Comprtitiu" Oflers To whatever extent Surprise s niscriminatol'Y allowances may have been responsive to the offers or payments made by such companies as Corde, Contessa, 01' Formaid, Surprise has failed to show that there ,vas no reason to believe that such allowances or offers were unlawful; therefore, the "good faith" requisite is accordingly, lacking in those tl'ansnctions Standard Oil COm'PQl1lj v. Federal Trade Commission 340 1.S. 231 , 238-46 (19iil), 355 S. 396 (1958); Tri- Valley PtLckillQ Association Dockets 7225, 7496 (:Vlay 10 , 1962), reuei'sed and ' emrrnded 329 F. 2d 694 (9th Cir. 1964); American Oil Company, Docket 8183 (.June 27, 1962), 'C'versed on other IJ1ounds 325 F. 2d 101 (7th Cir. 1963). Actually, the foregoing finding respecting Surprise s good faith is an understatement, since Surprise not only han reason to believe but possesseo actual knowledge that the cooperative advertising of 5' Federal Trade COllJI11s. IOn \' . E. Staley llla1l rart1jrin!J CQmpCH' CI, 3:04 U. S. 746 , 753 5- (1945).

SURPRISE BRASSIERE CO. , INC., ET AL. 955 868 Initial Decision those three companies hao the indicia of unlawfulness. (See, as to Corde, CX 966 A-F; Gold 1450-52; as to Contessa, CX 966 A- Gold 1469- , 1473 (see also Steiner 2100-08) ; as to Formaid CX 966 D; Braff 2513- , 2538-40; see also CX 967 A-C). Special 1 00 Percent Allowances An additional comment is desirable concerning Surprise s 100 perceni allowances for new store and departn1ent openings, new product promotions, and omnibus adveriisements. In referring to these allo\vances as having been offered pursuant to its standard policy and practice" and in accordance with "the general custom in the trade " (RPF 6-7), Surprise disqualifieo itself from defending its discriminatory 100 percent allowances under the meeting competition defense of Section 2 (b) of the Clayton Act (supra 954).

Since the examiner has found, contrary to Surprise s contentions, that the 100 percent allowances were not offereo to all competing customers, he must further find that Surprise s discriminations in granting them cannot be excused under the 2 (b) defense as having been occasioned by individual competitive situations. Under Surprise s own characterization, the discriminatory 100 percent allowances were offered to meet a general system of competition, and the 2 (b) oefcnse is not applicable (see supra. p. 954).

Surprise failed to demonstrate- and except in the most general terms, does not even claim--that its 100 percent offers \were responsive to contemporaneous offers b:y specific competitors at R:jspecific stores.

Even it it were to be held that the 2 (b) defense is somehow applicable here, Surprise has taileo to lay the necessary factual predicate for the existence of the industry custom on which it relies.

Although, according to the testimony in this record, the practice of paying advertising allowances of 100 percent is widespread in the industry, there is no uniformity concerning the purposes for which they may be granted, Representatives of only two companies-Forn1aid and Treotestified that their 100 percent oflers were comparable to Surlwise, in accordance with industry custom (Braff 2553-56; Poulson 1899-1901 , 2007 1976-78; but cj. Swartz 2703-04). Other companies showed variations:

1'1 Since thc 100 pc!"' pnt Offc1S fo)' !1ew-\Jruduct promo ion RIT nu('ssri' ily o1irinf1ted 1))- the selle!', they NIl) hardly Le d8 sified a resjJonsive to s\JeciJic lohr\Jl,titivr, offen (Cohen r'(I Initial Decision 71 F.

Contessa for example, offered 100 percent for special promotional campaigns and in opening new sales areas, but not for nel'' store openings (Steiner 2040- , 2075-77). Lilyette offered greater allowances (not necessarily 100 percent) in new trade territories and for new store openings. (Kaufman 2342- 2425-27. ) Its president indicated a "historical" basis for 100 percent ads for store openings (ibid). Lady Marlene nov\' pays 100 percent for store openings and for new product promotions, but its vice-president hao no knowledge of previous practices (Fox 1917, 1950).

The department store buyers rlid not altogether agree on their experiences whh 100 percent allowances. :\11'8. Irene George Bamberger s said " Everybody" offers 100 percent for new store openings (Tr. 425- , 2655) , , but Mrs. Annette Feir of Gimbels reported that some suppliers did and some did not (Tr. 617). Mrs. Feir also acknowledged that suppliers other than Surprise paid 100 percent for new product promotions (Tr. 2813), but her testimony falls far short of showing an industry custom. lVore specifically, lViss Emma Swartz of Strawbridge & Clothier testified that the majority of her suppliers do not make 100 percent offers for promotion of new styles. She could recall only three besides Surprise-Peter Pan, Sarong, and Lily of France (Tr. 2702- 03) .

Similarly, Mrs. Jean Swan James of Malley s testified that " is not common " for manufacturers to pay 100 percent cooperative adveriising when a new style is introduced. " It is not the usual thing" (Tr. 2594 , 2598, 2606).

Neither does the record establish any uniform pattern of 100 percent payments for omnibus ads. For example, although lvII's. J ames said that in omnibus ad\'ertising all suppliers contributed the same amount (Tr. 2599), the example cited (CX 21 Ashows that each supplier, incluoing Surprise, had contributeo 50 percent rather than 100 percent (Tr. 2582- , 2599-2600). A lack of any uniformity respecting omnibus ads was reflected in the testimony of ~irs. Feir (Tr. 2817-18, 2841) ano Mrs. George (Tr. 437-46). (Cf, Cohen 1029-30. Thus, the conelusion must be that Surprise has faileo to prove any uniform industry custom respecting 100 percent allowances. CO~CLUSIONS OF LAW 1. The Federal Trade Commission has jurisoiction of the sub- S'But see Cohen 992 , 109:-93; Go:d 1326- 27 (cf, Jines 14-21 I\t Tl' . 13261, SUI;PRISE BRASSIERE CO. , INC., ET AL. 957 868 Initial Decision ject matter of this proceeding- and of responoents Surprise Brassiere Co. , Inc., and Eugene News1an.

2. The complaint herein states a cause of action, and this proceeding is in the public interest.

3. In the course and conduct of its business in commerce, respondent Surprise, for many years, and particularly during the years 1960-63, has paid, or contracted for the payment of, something of value to or for the benefit of some of its customers as compensabon or in consideration for services or facilties furnished by or through such customers in connection with the han- ,1!ng, offering for sale, or sale of products sold to them by Surprise. But respondent Surprise failed to make such payment or consideration available on proportionally equal terms to all of its customers competing in the oistribution of such products. Specifically, Surprise granted cooperative advertising allowances of 75 percent and 100 percent to some customers while it paid or ofrered to pay allo'\vances of only 50 percent to customers competing with those customers who were paid the higher allowances. In addition, Surprise granted to some customers allowances above and beyond those granted to competing customers by makingpayments in excess of its stated limitation of 5 percent of annual purchases and by permitting devi ltioJls from stated space limitations on individual advertisements.

4. Respondent Surprise has faileo to rebut the prima facie case thus made by showing that its discriminations were made in good faith to meet the advertising allowance payments 01' offers of C0l11petitors in individual competitive situations. 5. The evidence fails to support the allegations of the complaint that Surprise s published advertising allowance plan 1uhen adhered violates the requirements of Section 2 (d) of the Clayton Act, as amended. The benefits offered under such plan ,were "available to all competing customers within the meaning of the statute. 6. The acts and practices of respondent Surprise, as found herein, constitute violations of Section 2 (0) of the Clayton Act, as amended (15 U. C. S 13 (d)).

7. This proceeding has abated as to respondent Samuel Dosik by reason of his oeath.

8. In view of the abandonment, by counsel supporting the complaint, of the allegations respecting respondent Eugene K ewman (CPF 4), and because of the failure of proof as to his responsibility for the challcngeo practices, the complaint against him in his indivioual capacity must be dismissed. 958 FEDERAL TRADE CO IMISSION DECISIONS Opinion 71 P.

ORDER It 'is ordered That respondent Surprise Brassiere Co., Inc.. a corporation, and its offcers, representatives, agents, and employees, directly or through any corporate or other device, in connection \vjth the manufacture, sah, or distribution of women wearing apparel, such as brassieres, girdles, corselets, and other related products, in commerce, as "commerce " is defined in the Clayton Act, as amended, do forthwith cease and desist from: Paying or contracting for the payment of anything of value to, or for the benefit of, any customer of respondent as compensation for or in consideration for any services 01' facilities ft1rnished by 01' through sl1 ' customer in connection with the handling, offering for sale, sale, or distribution of such products, unless such payment or considerabon is available on proportionally equal terms to all other customers competing in the distribution 01- sale of such products. It is lnrthel' ordered That the complaint be, and it hereby is dismissed as to Eugene Newman, individually, except to the extent that he is bound by the oroer against respondent Surprise as an offcer, representative, agent, or employee; and, confirming and adopting the order fied January 29 , 1964, b;./ Hearing Examiner Loren II. Laughlin It is further ordered That the complaint be, and it hereby is dismissed as to respondent Samuel Dosik, now deceased, OPINION OF THB COM MISSION BY HEILL Y COrrl1nission(;)':

This matter is before the Commission on appeal from the heal' ing examiner s initial decision. Oral argument was waived at the request of the corporate respondent.

Surprise Brassiere Co. , Inc. , a manufacturer of brassieres girdles and corselettes, and two of its offcers were charged in a complaint, issued .June 28 , 1963, with violating Section 2(d) of the Clayton Act. The complaint specilicalJy alleged that payments lllade pursuant to a cooperative advertising plan under which 'respondents agreed to pay 50 percent of the cost of newspaper advertising (not to exceed 5 percent of the customer s total annual purchases) were not available to competing customers on propor- 0., Except fo!' the exrlusiol1 of the imjividuRI respondents and a few minor editorial changes, the order rOlTesponds to that which the Comrniss:on said, in the Notice RpJlended to the romplaiJlt, it had reason to be:ieve should issue if the facts were found to 1)( :'s :'alleged in the complaint.

, SURPRISE BRASSIERE CO. , INC. , ET AL. 959 868 Opinion tionally equal terms because the terms and conditions of the plan \were such as io preclude some cust.omers from receiving the payments. The complaint further alleged that responoents also vio- Jateo Section 2(d) by deviating from the plan 01' program by granting some customers al1mvances "above and beyond" those provided for in the plan.

The hearing examiner found, and this finding is undisputed, that respondents' plan provided for payment of 50 percent of the custon1er s cost of advertising in local newspapers, with the total payment not to exceed 5 percent of the customer s yearly purchases. The plan also provioed for the furnishing of in- store 01' point-ai-sale advertising material, together with statement enclosures or "stuffers" designed primarily for mailing to customers or prospective customers of the store. This Pl'01llotional 01' advertising material was not furnished as an alternative to the allowance for ne\vspaper advertising but was granted in addition to such allowance. The hearing examiner also found that respondents plan \vas offered to all competing customers. This finding is also undisputed.

With respect to the issue of whether all customers could use the allowance for newspaper advertising, the examiner helel that although there was some evidence that a few customers could not cngage in cooperative newspaper advertising with respondents counsel supporting the complaint had failed to prove the allegation that allowances for this form of advertising were not functionally available to certain of respondents' customers, He specifically founo in this connection that the record1 "does not demonstrate the impossibility of newspaper advertising by any customers, except perhaps a few with a volume of purchases so small that their, , exclusion from the plan might be oisregarded as de mJni'i is. There is no substantial evidence that any appreciable number of viable competitors Vi/ere 'too sn1all' or other\vise unable to engage in any kind of newspaper advertising." He also concluded that "Neither in theory 1101' in practice is the Surprise plan restricted to large-volume accounts. It does not arbitrarily exclude customers with minimal purchasing volun1e. To the extent that it does exclude S011e customers, this discrimination is negligible and competitively insignificant * * " The examiner further held with respect to the legality of the basic advertising plan offered by respondents that even if the allowance for newspaper advertising was not available to all competing customers there would1 be no violation of Section 2(d) since the in-store promotional material offered by respondents was Opinion 71 F.

usable by all customers and such materials constituted an alternative or substitute in lieu of the allowance. Although holding that there was no violation of Section 2 (d) in the operation of the basic plan, the hearing examiner found that respondents had oeviated from the plan by offering large depart- 1118nt store customers allowances of 75 percent and 100 percent of the cost of newspaper advertising. He further founo that respondents granted to some customers allowances above and beyond those granted to competing custOlners by making payments in excess of the stated limitation of 5 percent of annual purchases and by permitting deviations from stated space limitations on individual advertisements. He helo that these oeviations from the basic plan constituted a prim" facie violation of Section 2 (d) and rejected respondents ' contentions (J) that the 75 percent allowances granted to department store customers were lnade in good faith to meet equally high or hig-her allowances paid or offered to those customers by competitors and (2) that 100 percent allowances which were granted 1'01' new store openings, new product promotions, and omnibus ads were paid to such customers in good faith in response to general industry-wide practices. The examiner dismisseo the complaint in its entirety as to one of the persons named therein (now deceased) and dismissed it as to the other person in his capacity as an individual. Only Surprise Brassiere Co., Inc. (hereinafter sometimes referred to as Surprise 01' as respondent), is named in the hearing examiner s order to cease and desist.

In its appeal from the initial decision Surprise does not contest the finding that its cooperative advertising allowances were not granted to competing customers on proportionally equal terms. It defends these discriminations, however, as good faith attempts to meet competition md the only arguments lllade in its appeal relate to the examiner s rejection of its Section 2 (b) oefense. Counsel supporting the complaint did not file an appeal from the initial decision but in their ans'\vering brief have taken exception (1) to the examiner s finding concerning the practical availability of respondent's allowance for newspaper advertising and (2) to the examiner s conclusion that it was unnecessary for respondent to offer point-of-sale pron10tiona1 material as an alternative to the allowance for newspaper advertising. \Ve will consider first respondent' s appeal.

In presenting its Section 2 (h) defense respondent nttempted to establish throug-h the testimony of its salesmen that it had granted discriminatory allmvances only as a dcfensive measure in individp,. . . SURPRISE BRASSIERE CO. , INC. ET AL. 961 868 Opinion ual competitive situations. \Ve note in this connection that respondent requested the examiner to find that "Each and every deviation from the said cooperative advertising plans used by Surprise * * * without exception, was a 'good faith' response, required to meet specific competition and came within the defense provided by Section 2 (b) of the Clayton Act, ,', " *" and " With respect to each and every such deviation, Surprise was in direct competition with manufacturers of merchandise of like grade and quality, and had prior knowledge of the advertising allowances then being offered by such competitors." , Respondent also stated that "With respect to each and every deviation, Surprise had been confronted and had verified the cxistence of immediate, specific competitors which hao sold or were offering for sale to its customers merchandise of like grade and quality and the deviation was made necessary and was in direct response to such competition. " 2 vVe further note that respondent has acknowledged that to sustain the 2 (b) defense a seller "should attempt to verify the action of his competitor before reacting to it" ano that. "the 'good faith' response should be to such individual competitive situation, ":1 The examiner found that the evidence failed to support respondent' s proposed finoings and held insteao that respondent' deviations from the basic plan were not made on an ad hoc basis to meet specific competitive situations but were systematic discriminations made to meet the general competition of other brassiere manufacturers. ln rejecting the testimony prescnteo by respondent in support of its meeting competition defense the hearing examiner made the following comment: The fact that since 1960 (and earlier, in some instances), SU1'prise s payments to each of the right favored department store customers were, with one exception, 75 percent, not 50 percent, constitutes the most convincing refutation of the salesmen s testimony that they val.ied from the terms of Surprise published plan in individual instances to meet specific competitive offers "\which were thrown in their faces by the buyer.s. Despite abortive efforts to show the payment of 50 percent allowances in a few instances . ' Surprise failed to prove (with the exception noted) that it ever paid allowances to any of the department stores at the 50 percent rate, (Initial Decision, page 944. Respondent now contends, contrary to its earlier argument, that the examiner erred as a matter of law in imposing upon it the burden of establishing that its disproportionately higher allo\\- 1 Respondents opposed Findings uf :Fad, Conclusions of La\\ , and Order SUppo!,ting Hespondents " Eighth p'. opposed Finding. "Id. fit page 122.

3Brid fo\" Respondents, filed Mareh 1 , l\i(;6, pages 16 and 17. ., 962 FEDERAL TRADE COMMISSIO~ DECISIONS Opinion 71 F.

ances to favored department store customers were granted in response to allowances granted by other sellers in specific competitive situations and not for the purpose of 111ceting competition generally. \Ve find no error in the examiner s ruling. It is in accord with the position taken by the Commission in Exquisite Fonn Bmssiere. Inc. Dkt. 6966 alj" rJ 360 F. 2d 492 (D. C. Cir.) and more recently 111 the 1'nter of RabinC/' JOlllon" Inc Dkt. 8629. Section 2 (b) " speaks only of the seller s ' lower' price and of that only to the extent that it is maoe ' in gooo faith to meet an e(jually low price of a competitor.' The Act thus places emphasis on individual competitive situations, rather than upon a general systen1 of competition. Fedend Trade CmnmissioJ) Y. A. E. Staley Iv!wnufactwi1lD Co. 324 U. S. 746, 753.

The argument is also made throughout respondent' s brief that the examiner crred in placing on respondent the burden of proving that it actu8.l1y met competitors' allowances. For example, respondent contends on page 22 of its brief that the burden of proof required by the hearing exan1iner is insurmountable in that "Responrlent would have to know both his competitor s cooperative allowance terms, published and unpublished, and the terms of the individual transactions between coi11petitors and retail eustomel's, At page 34 it contenos that "1t is an unfair ano impossible buroen to require the Respondent to show that its allowances equalled each ano evel'Y allowance of a competitor " and that "The Examiner would require the Respondent to demonstrate the pr01110tional allowance program granted by each and every competitor it knew about."

It is diffcult to come to grips 'with this argument since it misconstrues the initial decision. Had thc examiner made the above rulings he would have been in error since Sed ion :2 (b) does not require a seller to justify a discrimination by showing that in fad it met a competitive offer, As the Supreme Court held in Staley, Su.jji' the statute requires a seller "to shmv the existence of facts 'which ',"auld lead a reasonable and prudent person to believe that a granting of a lower price would meet the equally low price of a competitor." \Ve have reviewed the initial decision however, and have failed to find any indication that the examiner made the rulings ascribed to him, nor do we find in respondent's brief any indication where these rulings appeal' in the initial decision. \Vhile the examiner held that respondent must prove that its di::criminatory allowances were responsive to offers by other sellers in specific competitive situations and that it had reason to believe it was meeting such offers, he did not hold that SURPRISE BRASSIERE CO., I!\C. , ET AL. 963 868 Opinion it was incumbent upon respondent to show that it knew the exact amount or terms of competitor s offers or that it in fact met such offers. His specific finding on this point is as follows: The evidence does not establish prior awareness by Surprise of the allowance (01' allowances) that it purportedly ,vas meeting in " individual competitive situations " as rcquil' ed by Fedcntl tnlde Crnnmission v. A. E. Stnley Mfr;. Co, 324 U. S. 746, 753, 758-60 (1945). Although SU1')rise might have had an awareness that some competitors were offering" advertising allowances on more favorable terms than it was, it is questionable whether it knew any facts reasonably leading it to believe that a response was necessary or that the allowance it granted would, in fact, meet the allowance of any specific competitor to any specific customer at any specific time. (Emphasis added.

vVe agree with the hearing examiner that respondent not only failed to establish an awareness of competitive offers but that it failed to show the competitive necessity for its discriminations. The arguments made in support of its appeal are rejected. Although the hearing examiner held that the evidence failed to sustain the principal allegation of the complaint the charge that the payments under respondent's basic advertising plan were not available to competing customers on proportionally equal terms, counsel supporting the complaint, for reasons best known to themselves, did not appeal from the initial decision but chose instead to take exception to the examiner s finding in their answering brief. Respondent contends that because complaint counsel did not file a notice of intention to appeal as requireo hy 22 (a) of the Rules of Practice the Commission is without authority to rule on the subject matter of complaint counsel's appeal. We do not agree. Section 3. 24 of the Commission s Rules of Practice specifically provides that in renoering its decision on appeal or review the Commission will consider such parts of the record as arc cited or fJS may be necessary to resolve the issues presented and that "in addition will, to the extent necessary or desirable, exercise all the powers which it could have exercised if it had made the initial decision.

Counsel supporting complaint argue first of all that the hearing examiner cited in holoing that the recoro faileo to establish that any appreciable number of respondent s customers were actually excluded from participation in respondent' s cooperative newspaper advertising plan. This argument consists primarily of a review of evidence considered at great Jength by the examiner and found to be inadequate for the following reason: . Initial Decision, p"ge Opinion 71 F.

In the four trading areas covered by the evidence, complaint counsel can cite only t\VO customers who indicated that they "were unable to take advantage of Surprise s advertising allowances-Kay s Corset Shop and Figure Fashions both of )Jew Haven.

The record affords no basis for finding that these customers were typical. As a matter of fact, Figure Fashions evidently was a dying business, with its purchases from Surprise dwindling, and its propl. ,)r obviously had 110 desire to advertise Surprise products, although he did advertise regularly. :. .. " As for Kay, the sometimes confused and confusing testimony of Harold Katsoff does not clearly establish that cooperative advertising actually was beyond his capabilities ,. ,. ,.

We find nothing in complaint counsel' s brief to indicate that the above conclusion is erroneous. Their argument is therefore rejected.

Complaint counsel's other exception to the initial decision relates to a ruling- by the examiner that a service or facility granted in addition to a promotional allOiyancc may be an alternative or substitute for the allowance even though it is ofiered to customers who can use the allowance as well as to those who cannot. The following comments were made by the examiner in explanation of this holoing:

The testimony of Surprise s offcials and employees demonstrates that the so-called, in-store sales aids were not actually offered by them as alternatives 01' substitutes for cooperative newspaper advertising "' , . ':. and most customers did not so consiclel' them, Xeither of these facts is controlling if, in actuality and in legal contemplation, such material did constitute alternatives ai' substitutcs in lieu of advertising allowances. It is true that Surprise does not tell its customers it win either share in the cost of the newspaper advertising ()F jjj' ovide in-store displays and other material. Surprise says in its published plan that it will do both, Nevertheless the customer is still given a choice. He may elect to cngag' e in cooperative ncwspaper advertising; 01' he may reject that offer and accept only thc instore promotional displays (some or all); ()';' he may accept the offer of both; OF he may reject the entire program, It is 110t clear what \vol'thwhiJe objective would be accomplished if Surprise were refJuired to establish its in-store promotional aids as an alternative to, rather than an addition to, cooperative newspaper advertising, , a customer may have either or both; whel' cas, under the theory espoused by complaint counsel, he would have to choose one or the other, It seems obvious from the examiner s reasoning that the clisputed holding is predicated upon the belief that all competing customers could use the allowance for newspaper advertising. Certainl:)' , if a customer "may have either 01' both" no worthwhile objective would be accoml1lished by requiring respondent to offer , lr,i; if\! D cision . page fJO.

L; Initial Decision, pages 91 \n3, SURPRISE BRASSIERE CO. , INC. , ET AL. 965 868 Dissenting Opinion promoUonal aids as an alternative to the advertising allowance. , however, the allowance could not be used by some customers entitled to participate in the advertising program it is equally clear that the promotional materials, if available to all customers could not be considereo an alternative to the allowance within the contemplation of S 2 (d). This section has been construed as permitting a seller to offer an alternative service or allowance for the purpose of permitting all competing customers to participate in a promotional plan.' But the section requires that all competing customers be granted promotional benefits on proportionally equal terms. It is for this reason that we have helo that the alternative offered in lieu of an allowance or service usable by some but not by all competing customers must be of equivalent value to such allowance or service. It is therefore apparent that any advertising program whkh in practical effect provides one customer with both an allowance and an alternative fold1 of promotion and gives only the latter to his competitor woulo not meet the standard of proportional equality required by the statute. In summary, therefore, we agree with the hearing examiner that the allegation that respondent's basic advertising plan violated Section 2 (d) must be oismisseo for failure of proof. Complaint counsel did not establish that respondent' s allowance for nelvspaper aovertising was not functionally available to all competing customers. \Ve disagree with the examiner s holding, however, that respondent' s plan would meet the requirements of Section 2 (d) even if the allowance could not be used by some customers entitled to participate in the plan. His holding that services offereo in addition to an allowance and not as an alternative thereto would be alternative services under Section 2 (d) is fundamental error and will be set aside.

Respondent s appeal is denied. The initial decision will be modified to conform with this opinion and, as so modified, will be adopted as the decision of the Commission. Commissioner Elman dissented and has filed a dissenting statement.

DISSENTING OPINION BY EL;.1AN Commissi one?':

I do not agree with the Commission s excessively literal application of the meeting competition defense. As the Supreme Court 7 :oee 8. Guides for Advertising AilowHnces "I:d Other ::r rdlandi jng Pa;.'ments and Serve5: Complian e with Sections Z(dJ and 2(e) of the Clayton Act. as amended by the Hob:nson- Patman Ac, adopted 11a)' HI 1960.

&:

966 FEDERAL TRADE COMMISSIOK DECISIOKS Final Order 71 F.

hns pointed out, Section 2 (b) "does not place an impossible burden upon sellers. Federal Tmrlc Commission v. A. Staley Mfu. Co. 324 U. S. 746 , 759. The meeting competition defense shoulo be given a common-sense, Dexible interpretation enabling sellers to act promptly in response to the neeos of competition. Sensitivity to the realities of everyday commercial life, not rigid standards imposing unrealistic and impossible duties of inquiry and ljl"ediction on businessmen, is essential if the defense is to have any substance. Pragmatism, not strict logic, must be the keynote to interpretation. As was stated in Contincnt(d Ralcinu Co. Docket No. 7630 (December 31 , 1963), the stanoarc1 of "gooo faith" is simply the standard of the pmdent businessTnnn responding fairly to what he believes is a situation of competitive necessity. At least two courts of appeals have already rejected the Commission s unrealistic approach to the meeting competition defense. Forst!?)' lldfg. Go. v. Federal Trade C01rLlnission 335 F. 2d 47, 55- 56 (1st Cir. 1964) ; Callcuca)j Mills Co. v. Federal Trade Commission 362 F. 2d 435 (5th Cir. 1966). My views on this subject have been spelled out in greater detail elsewhere, and need not be repeated here. See dissenting opinions in Tri- Valley Pac Icing Association 60 F. C. 1134 , 1171i (1962); Jd. Docl,et Xo. 7226, July 1966 PO F. C. 223 , 290J ; National J)oinJ Prod"c!s Company, Docket Xo. 7018, July 28 1966 (70 F. C. 79 , 215J; Collam,y Mills Co. Docket No. 7634 , February 10 , 1964 (64 F. C. 732 , 743J; Rubine;' JentOlu Docket No. 8629 , September 19 , 1966 (70 C. 638 , 690J: " The Robinson-Patman Act and Antitrust Policy: A Time for Reappraisal " 42 Univ. of \Vash. Law Review 16-21 (1966).

FINAL OIWER This matter having been heard the Commission upon the appeal of respondent Surprise Brassiere Co., Inc. from the hearing examiner s initial decision, and upon briefs in support thereof and in opposition thereto; and the Comn"!issiol1 having rendered its decision denying the appeal and directing modification of the initial decision:

It is oTdfred That the initial decision be modified by sh'iJdng therefrom the last five paragraphs of Sedion 1 under the heading "Practical Availability, beginning on page 903 with the words I' The Surprise Program " and ending on page 904 with the words " (See Guides Par. 9).

It i8 further ordered That the initial oecision be IYooitieo by striking therefrom Sections 4 through '7 under the heading " Prae- HENDERSON TOBACCO MARKET BOARD OF TRADE , INC., ET AI,. 967 868 Complaint tical Availability, beginning on page 910 with the words Exclusionary Aspects" and ending on page 916 with the words intended to condemn, It is further ordered That the initial decision as modified hereby be, and it hereby is, adopted as the decision of the Commission.

It is further ordered That respondent Surprise Brassiere Co. , Inc. , shall, within sixty (60) days after service upon it of this order, file with the Commission a report, in writing, setwhich it has com-ting forth in detail the manner and form in piied with the order to cease and desist. Commissioner EJman dissenting.