# Petition — Gibson v. Federal Trade Commission > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385010_0073%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1983 - **Citation:** 460 U.S. 1068 ## Text preme Court, U.S, Lie 7? D rottice-S 5 * oa © Py a " No. DEC 10 1982 NDER L. STEVAS, IN THE —, CLERK Supreme Court of the United States October Term, 1982 H.R. Gibson, Jr., Gerald P. Gibson, Gibsons Inc., and Gibson’s Discount Centers, Inc., Petitioners, V. Federal Trade Commission Respondent. PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT ROBERT E. RADER JR McCARTY, WILSON, RADER & MASH, P.C. 107 South Gaines Street Ennis, Texas 75119 (214) 875-3851 Counsel for Petitioner QUESTIONS PRESENTED FOR REVIEW 1. Where Respondents in an FTC adjudicative pro- ceeding are expressly found not to have violated §2(c) of the Robinson-Patman Act, 15 USC §13(c), and both the Administrative Law Judge ard the Commission agree that such charges should be dismissed, may the Commission nonetheless issue the same order against Respondents as though they had been found guilty, under the Commis- sion’s so-called ‘‘fencing in’’ authority? 2. Does the due process right to an adjudicative hear- ing under 5 USC §554 and 15 USC §45 become a charade, if the Federal Trade Commission may impose the same sanctions against Respondents specifically found not guilty as against those found guilty, under the guise of ‘*fencing in’’? PARTIES TO PROCEEDING IN COURT BELOW The proceeding in the Fifth Circuit Court of Appeals in- volved two cases, Herbert R. Gibson, .Jr., Gerald P. Gib- son, Gibsons, Inc., Gibson’s Discount Centers, Inc., Ideal Travel Agency, Inc., Gibson Warehouse, Inc. and Gibson’s Products Co., Inc. v. Federal Trade Commis- sion, No. 80-1746, on appeal from an order of the Federal Trade Commission, and H.R. Gibson, Sr., et al v. Federal Trade Commission, No. 80-1743 also on appeal from an order of the Federal Trade Commission. The two cases were combined for argument and opinion by the Fifth Cir- cuit. Although named as Respondents in the original FTC complaint, Ideal Travel Agency, Inc. and Gibson Warehouse, Inc. are not parties to this petition for cer- tiorari because the FTC order dismissed the complaint as to those entities. Likewise, Gibson Products Company, Inc. has been dissolved and is not a party to this petition. The Respondent is the Federal Trade Commission. TABLE OF CONTENTS Page SPIO UEUOY Sibi cscs cssccncvcccvsccrees l I GLU G ata eben css s osc cveescce | DMO EEN WHIRLWIND co scc cscs ccccrsescccees | STATEMENT OF THE CASE ................0.. | REASONS THE WRITSHOULD BEGRANTED.. 5 eee E ade nays kee ccdvevececees 9 APPENDIX: Opinion of the Fifth Circuit Court of Appeals, dated August 13, 1982 ........ la Order of the Federal Trade Commission, Ce Aerie 76a Judgment of the Fifth Circuit Court of Appeals, dated August 13, 1982 ........ 180a Order Denying Rehearing by Fifth Circuit Court of Appeals, dated September 13, 1982.............. 182a Section 5(b), (1) of the Federal Trade Commission Act, 15 USC §45(b), (1) .... 183a, 184a Section 2(c) of the Robinson-Patman Amendments to the Clayton Act, RES 184a TABLE OF AUTHORITIES Cases: American News Co. v. FTC, SOD F.2d 1O6 GE Ch. 1966) ova sie cess Country Tweeds, Inc. v. Federal Trade Commission, 326 F 2d 144 (2d Cir. 1964)... Federal Trade Commission v. Colgate-Palm- olive Co., 380 US 374 (1965) ............. Federal Trade Commission v. Mandel Brothers, NG, Far Ore Fee CEO s bes head va cexees Federal Trade Commission v. National Lead Company, 352 US 419 (1957)............. Federal Trade Commission v. Roya! Milling Company, 288 US 212 (1933)............. Federal Trade Commission v. Ruberoid Co., ERE Es Ti +s Rm i ry meg r err nge FTC v. Henry Broch & Co., aS 2 Peewee oer ien cee pre re Serres Grand Union Co, v. FTC, SOG F Oe Fa te Gols So kok s Coes ec ecees Grove Laboratories v. Federal Trade Commission, 418 F 2d 489 (Sth Cir. 1969) .. ITT Continental Baking Company, Inc. v. Federal Trade Commission, oe ee ge Ce Ae, yen ee National Dairy Products Corporation v. Federal Trade Commission, 412 F 2d 605 (7th Cir. 1969) .............. Porter & Dietsch, Inc. v. Federal Trade Commission, 605 F 2d 294 (7th Cir. 1979) .. R.H. Macy & Co. v. Federal Trade Commission, 326 F 2d 445 (2d Cir. 1964)............... Page Pe Statutes: Page SRA GERD ci bce Code sudh coent ene dcenevesss 3 SSI SI oc ipckccsvlevaveaeeeqwceie dessins 3 SER SEE inh hasde ade ta ak amano enrenken 3 iv OPINION BELOW The opinion of the Fifth Circuit Court of Appeals is reported at 682 F 2d 554 (Sth Cir. 1982). The opinion of the Federal Trade Commission is reported at 95 FTC 721 (1980). JURISDICTION The opinion and judgment of the Fifth Circuit Court of Appeals was rendered cn August 13, 1982. On August 25, 1982 these petitioners filed their Petition for Rehearing and such petition was denied on September 13, 1982. Under 15 USC §45(g) no motion for stay of mandate was necessary, and this petition for certiorari is timely filed under 28 USC §2101(c). The jurisdiction of this Court rests on 28 USC §1254 and 15 USC §4S5(c). STATUTES INVOLVED Section 5 of the Federal Trade Commission Act, 15 USC §45(b), governs the FTC’s authority to issue orders prohibiting unfair methods of competition and violations of the antitrust laws. That section also imposes penalties of up to $10,000 per day for violation of FTC orders. The specific antitrust statute upon which the FTC order rests in this case is 15 USC §13(c), commonly referred to as Robinson-Patman 2(c), which prohibits the payment of brokerage by one party in a transaction to the other party. Since the provisions of these statutes are lengthy, their per- tinent text is set forth in the appendix. STATEMENT OF THE CASE Petitioners Herb Gibson, Jr. and Gerald Gibson have been prosecuted for the past seven years by the FTC solely because they happened to be born the sons of H.R. Gib- son, Sr. To understand their predicament, some factual background is necessary. In 1958 Petitioners’ father, H.R. Gibson, Sr., founded the first Gibson Discount center and began to franchise the use of Gibson trademarks and trade names to others who wanted to open retail Gibson Discount Center stores. Around 1963, after Petitioners graduated from college, they too opened their own Gibson Discount Center stores and paid a franchise fee to their father for the use of his trademarks and trade names. Petitioners were indepen- dent businessmen, and their father had no ownership in- terest in or control over their stores. In the late 1960’s, Petitioners saw the drastic changes taking place in discount merchandising, and realized it would be necessary to pool their retailing interests, and to centralize buying and administrative functions for their hitherto autonomously operated stores. In the process of consolidating their own interests, Petitioners approached their father and contracted to buy his trademarks and trade names, as well as various stock interests their father had in corporations operating other Gibson Discount Center stores. Because the legal arrangements and tax aspects were very complex, the sale was not finalized until November 1, 1972. Petitioners consolidated their own retail interests, and the interests and trademarks and trade names purchased from their father, under a new company called Gibsons, Inc. From its formation, Petitioners had ownership and total control of that company. After November 1, 1972, Petitioners moved to set up their own central warehouse and buying staff, and to upgrade, modernize and control the Gibson stores now under the umbrella of Gibsons, Inc. In this process, Peti- tioners hired expert management people from other com- panies such as Sears, Nash Hardware, Alexander Grant & Co., and others. After November i, 1972, Petitioners’ father, H.R. Gib- son, Sr., devoted his energies to building and running a sales organization called The Gibson Trade Show -- in ef- fect, a giant manufacturer’s representative. Petitioners’ father did not participate in or exercise any influence whatsoever over Petitioners’ business operations. Like- wise, Petitioners had no interest in or influence over their father’s business. In 1975 the Federal Trade Commission filed a complaint against H.R. Gibson, Sr. and several of the companies he had previously owned an interest in.' The FTC also included these Petitioners in the complaint, together with their company, Gibsons, inc. The complaint contained three counts: Count I charged that the fees paid by sup- pliers to H.R. Gibson, Sr. in connection with his trade show were in effect discriminatory promotional allowances prohibited by Robinson-Patman §2(d) and §2(e) (15 USC §13(d), (e)). Count II alleged that various Gibson Discount Center stores had boycotted suppliers who did not grant the ‘‘special allowances”’ as set forth in Count I. And Count III charged H.R. Gibson, Sr., as well as these Petitioners, with accepting or receiving illegal brokerage prohibited by Robinson-Patman §2(c) (15 USC §13(c)). 'These companies were Gibson’s Discount Centers, Inc., Ideal Travel Agency, Inc., Gibson Warehouse, Inc., and Gibson Products Company, Inc. These were among the interests purchased by peti- tioners from their father in 1972. At the beginning of the trial it became apparent that FTC complaint counsel had no knowledge of the business set-up of these Petitioners. Indeed, complaint counsel had the mistaken belief that Petitioners’ father, H.R. Gibson, Sr., owned and operated Petitioners retail businesses! After ten months of trial, however, it was clearly estab- lished that H.R. Gibson, Sr. had no connection with Peti- tioners’ business operations. Public auditors, bankers and others confirmed that no monies were passed through from H.R. Gibson, Sr. to Petitioners, and that Petitioners were not controlled or influenced in their business deci- sions by their father -- or vice versa. At the conclusion of the trial the Administrative Law Judge dismissed Counts I and III against these Peti- tioners.? On appeal, the Federal Trade Commission af- firmed the dismissal of both Count I and III, but nonethe- less entered an order against these Petitioners on the Count III charges for ‘‘fencing in purposes’’. (FTC Order, April 30, 1980) Thus, after a costly ten-month trial and an express find- ing of no violation by both the Administrative Law Judge and the Commission, these Petitioners ended up with the same Count III order against them as was entered against those respondents actually found guilty of accepting illegal brokerage. ?The Count II boycott charges were upheld based on activities of certain store corporations before these Petitioners purchased such store corporations from their father. Indeed, the evidence showed, and the Administrative Law Judge recognized, that the stores actually owned by these Petitioners at the time continued to buy from the allegedly boycotted suppliers. (See, /nitial Decision, 209,210) Petitioners therefore appealed to the Fifth Circuit on the grounds that the Commission’s order was overbroad. In its August 13, 1982 opinion, the Fifth Circuit deferred to the Commission’s ‘‘wide discretion in determining what type of order is necessary to remedy the unfair practices found.’’ 682 F 2d at 572. These Petitioners petitioned the Fifth Circuit for rehear- ing, urging, infer alia, that the Commission surely cannot under the guise of its ‘‘wide discretion’’ impose the same sanctions against the innocent as against the guilty, and that an order imposing sanctions under Count III cannot by any stretch of the imagination be reasonably related to the violation if there has been an express finding of no vio- lation. Nevertheless, the petition for rehearing was denied on September 13, 1982 and Herb Gibson, Jr. and Gerald Gibson now petition this Court to grant certiorari. REASONS THE WRIT SHOULD BE GRANTED This Court has noted that it is not possible to generalize as to the proper scope of FTC orders, since ‘‘it depends on the facts of each case’’, Federal Trade Commission vy. Mandel Brothers, Inc., 359 US 385, 392 (1959). However, this Court has established certain basic guidelines for de- termining whether an FTC order is impermissibly broad in scope. First, it is axiomatic that orders of the Federal Trade Commission should ‘‘go no further than is reasonably necessary to correct the evil and preserve the rights of competitors and public.’’ Federal Trade Commission v. Royal Milling Company, 288 US 212, 217 (1933). Second, the scope of the FTC’s order must have a ‘‘reasonable relation to the unlawful practices found to exist.’’ Federal Trade Commission v. National Lead Company, 352 US 419, 445 (1957), Federal Trade Commission v. Ruberoid Co., 343 US 470, 473 (1952), Federal Trade Commission v. Colgate-Palmolive Co., 380 US 374, 394-395 (1965). 5 In previous cases, this Court has upheld broad FTC orders against violators on the theory that ‘‘those caught violating the Act must expect some fencing in.’’ Federal Trade Commission v. National Lead Company, supra, 352 US at 431. In each case where a broad order has been upheld, however, it was against a respondent who had clearly violated the law. In National Lead, for instance, the Court found that respondents ‘‘have plainly disre- garded the law.’’ 352 US at 445. Likewise, in Federal Trade Commission v. Ruberoid Co., the respondent had ‘‘discriminated among customers in the prices charged them for roofing materials’? in a number of specific in- stances. 343 US at 472. In Federal Trade Commission v. Mandel Brothers this Court allowed a broad FTC order to stand where the episodes of misbranding had been exteii- sive and substantial. In that case the Court stated that the proper scope of the FTC’s order required ‘‘a judgement as to the extent to which a particular violator should be fenced in’’. 359 US at 392. Again, in Federal Trade Com- mission v. Colgate-Palmolive Co., the Court allowed a broad order because the respondents had already pro- duced three deceptive commercials and there were indica- tions they intended to use the same deceptive practices in advertising other products. However, this Court has never definitively ru'ed on whether the FTC’s so-called ‘‘fencing in’’ powers allow the Commission to impose the same sanctions on the inno- cent as on the guilty. This Court has never addressed the critical issues presented by the facts in this case: (1) Where an FTC charge is expressly dis- missed, because of no violation, and that dismissal is affirmed by the Com- mission on appeal, may an order still be entered against the respondents on the charge that was dismissed under the guise of ‘‘fencing in’’? (2) If the FTC’s ‘fencing in’’ powers allow it to enter an order against respondents on a charge that has been dismissed, does this vitiate the right to a due pro- cess hearing by rendering the hearing an expensive charade? Although this Court has never definitively ruled on these issues, several of the United States Courts of Ap- peals have done so. And in similar factual situations the Courts of Appeals have generally held that the FTC may not use its ‘‘fencing in’’ power to impose an order against a respondent who has been expressly found not guilty of violating the Act. In J7T Continental Baking Company, Inc., v. Federal Trade Commission, 532 F 2d 207 (2d Cir. 1976) the FTC charged that ITT made twelve nutritional misrepresentations in its advertisements of Wonder Bread and Hostess Snack Cakes. The Commission found that the evidence did not support eleven of the charges and dismissed them. The Commission did find one nutritional misrepresentation, and based on that violation entered a broad cease and desist order. On appeal, the Second Cir- cuit limited the scope of the FTC’s order to the violations for which ITT had been found guilty, stating that ‘**... paragraph l(a), (b) and (c) of the cease and desist order were framed to remedy wrongs which the Commission found not to have been committed.”’ 532 F 2d at 221 (emphasis added) Here, too, the FTC’s order against Petitioners in the present case is framed to remedy wrongs which both the Administrative Law Judge and the Commission found Petitioners did not commit. Such order is therefore not ‘reasonably related’’ to the violation, because there was an express finding of no violation. (THIS PAGE INTENTIONALLY LEFT BLANK] In Country Tweeds, Inc. v. Federal Trade Commission, 326 F 2d 144 (2d Cir. 1964) the FTC found respondents had misrepresented only the quality of their cashmere, but entered an order prohibiting respondents from “misrepresenting in any manner the quality of the cashmere or other fabric in their merchandise."’ 326 F 2d at 148 (emphasis added). The court held that the FTC's order was overbroad and was not reasonably related to the violation proved, and restricted the order to misrepresen- tations concerning cashmere.’ In R.H. Macy & Co, v. Federal Trade Commission, 326 F 2d 445 (2d Cir. 1964) the court confirmed that an FTC order ‘‘should be limited to the particular kind of practice found unlawful.’’ 326 F 2d at 450, Accord: Grand Union Co. v. FTC, 300 F 2d 92, 100 (2d Cir. 1962), American News Co, v. FTC, 300 F 2d 104, 111 (2d Cir. 1962), It follows that since these Petitioners were found in the pre- sent case not to have violated §2(c), no order should be issued against them on that count, Likewise, in National Dairy Products Corporation vy. Federal Trade Commission, 412 F 2d 605 (7th Cir. 1969) the respondent was found guilty of charges of price dis- crimination in violation of Robinson-Patman 2(a) as to its sale of fruit spreads. The Commission's final order, however, was not limited to fruit spreads but also included other food products concerning which the Commission had specifically dismissed a §2(a) charge. There, as here, the Administrative Law Judge had recommended that the order be limited to the violations actually found te have *The Second Circuit took cognizance of the suggestion in FTC vy. Henry Broch & Co., 368 US 360, 367-368, and reiterated in FTC vy, Colgate-Palmolive, supra, 380 US at 392, that the stiff penalty pro- cedures under the 1959 amendments to the Federal Trade Commission Act may well require a more specific and precise order (han would have been necessary prior to the enactment of those penalties. been committed by the respondent. The Seventh Circuit agreed that the Commission's order was overbroad and limited it to price discriminations in connection with fruit spreads. Accord: Grove Laboratories v. Federal Trade Commission, 418 F 2d 489, 497 (Sth Cir. 1969), cf., Porter & Dietsch, Inc. v. Federal Trade Commission, 605 F 2d 294, 309 (7th Cir, 1979). The Fifth Circuit below did not consider /77 Continen- tal Baking Company, Inc, and the other cases supra, that prohibit the FTC from using its ‘fencing in’’ authority to impose orders on respondents that have been found not to have violated the law. Review by this Court is therefore needed for the following reasons: (1) To delineate the scope of the Federal Trade Commission's discretion in issu- ing orders against non-violators; (2) To determine whether the due process right to a hearing may be nullified by the FTC's so-called ‘‘fencing in authority”; (3) To resolve whether the FTC may enter the same order against the innocent as against the guilty. CONCLUSION Although this Court has indicated in the past that the FTC will be allowed some discretion in framing its orders, such discretion must surely be limited where a respondent has been found not to have violated the law, and the charges have been expressly dismissed by the FTC, Guidance is needed from this Court as to the proper scope of FTC orders against non-violators, Only this Court can resolve the current uncertainty as to the ‘‘fencing in” powers of the FTC, Petitioners therefore pray that this Court grant a writ of certiorari to review the judgment of the United States Court of Appeals for the Fifth Circuit, Respectfully submitted, McCARTY, WILSON, RADER & MASH 107 South Gaines Street P.O. Box 429 Ennis, Texas 75119 (214) 875-3851 By: AAbut-E Geder,\). Robert E, Rader, Jr, Attorneys for Pet tioners CERTIFICATE OF SERVICE This is to certify that three copies of the foregoing Petition were mailed to the Solicitor General, US Department of Justice, Washing- ton, D.C., and to the Federal Trade Commis- sion, Washington, D.C, on this /O/day of December, 1982. Robert E, Rader, Jr. ; APPENDIX HERBERT R. GIBSON, JR., GERALD P. GIBSON, GIBSON'S, INC., GIBSON'S DISCOUNT CENTERS, INC., IDEAL TRAVEL AGENCY, INC., GIBSON WAREHOUSE, INC. AND GIBSON'S PRODUCTS CO., INC., Petitioners, V. FEDERAL TRADE COMMISSION, H. R. GIBSON, SR., ET AL, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent, Nos. 80-1743, 80-1746. United States Court of Appeals, Fifth Circuit. Aug. 13, 1982. Petitions were filed to review final order of the Federal Trade Commission. The Court of Appeals, Brown, Circuit Judge, held that: (1) petitioners waived objec- tion to participation of administrative law judge who had previously served as at- torney advisor to the FIC Commissioner; (2) there was substantial evidence to sup- port finding of group boycott; (3) there was sufficient evidence to support finding 2a of violation of the Robinson-Patman Act; and (4) FTC order was not overly broad. Affirmed and enforced. Petitions for Review of a Final Order of the Federal Trade Commission. Before BROWN, COLEMAN and RUBIN, Cir- cuit Judges. As the curtain rises, the Gibsons appear before us once more for what we hope will be the final act in this almost 15 year drama starring the Gibsons, masters of dis- count merchandising, and the Federal Trade Commission (FTC). Unlike the earlier scenes of this Court!, this time we are to arrive at the merits as we review the FTC's final order enjoining the Gibson Petitioners from -- -——_-_ --— eo lIn two prior cases we affirmed enforce- ment of FTC subpoenas, once during the in- vestigative stage, FTC V. Gibson, 460 F.2d (Sth Cir. 1972), and 6ncé Following the sub- sequent issuance of an FTC complaint, FTC v. Gibson Products of San Antonio, Inc., 569° ~~ Fr2d “900 “CSth Cir- 1978). While the parties in these two cases and the instant case are not absolutely identical, the actions all stem from the same FTC investigation. 3a engaging in assorted trade practices. As the curtain falls, we affirm the order and direct enforcement.2 No encores please. Setting the Stage In 1958 H. R. Gibson, Sr. and his wife Belva founded the first Gibson Discount Center in Abilene, Texas. From this begin- ning emerged a chain of over 500 retail discount stores operating in 29 states, and several small corporations providing certain support or related services to the retail stores. The scions of the family, H. R. Gibson, Jr., and Gerald P. Gibson, were actively involved in the family busi- ness, each owning interests in several of the retail stores, and eventually receiving the ownership interest of their parents. 2"To the extent that the order of the Commission is affirmed, the Court shall thereby issue its own order commanding obedience to the terms of such order of the Commission." 15 U.S.C. §845(c). 4a A Family Affair or Who's Minding the Store The Gibson retail discount stores are generally incorporated individually and include not only family owned and operated stores but also stores licensed to use the Gibson name.> In the period 1969 to October 31, 1972, Gibson, Sr., in addition to licensing various franchisees to use Gibson trade names in the operation of re- tail stores, operated a private trade show where manufacturers displayed their products to buyers for both Gibson-owned and fran- chised stores. During this same period, Gibson, Sr. and his wife Belva were majority stockholders in several Gibson retail stores and held a minority interest in certain other 3As of December 31, 1976, 43 retail stores were controlled by individual men- bers of the Gibson family and 614 licensed stores were operated under the Gibson trade name. The licensees pay a monthly fee for the use of the Gibson trade name. Sa retail stores. The store managers of the majority owned stores were hired by Gibson, Sr. who left the day-to-day operations largely to the store managers. During this same period, from 1969 to November 1, 1972, both Gibson sons owned retail stores.4 The Gibson stores, family owned and fran- chised, collectively did approximately $1.6 billion in business in 1971. On November 1, 1972, the Gibson busi- nesses were reorganized so that Gibson, Sr. and wife Belva disposed of their ownership interest in both the franchising and retailing aspects of the family business, 4Gerald Gibson owned Gibson stores in Paris, Texas, Shreveport, Louisiana and Bruton Terrace in Dallas, Texas, as well as minority interest in stores in Pueblo, Colorado, Garland, Texas and Temple, Texas. H. R. Gibson, Jr. owned the majority of stock in stores in Hutchinson, Kansas and San Antonio, Texas, as well owing some stock in stores located in Pueblo, Colorado, and the following cities in Texas: Richardson, Temple, Bruton Road in Dallas, Plano and Fort \Worth. 6a transferring these to their two sons, Gibson, Jr. and Gerald Gibson. Gibson, Sr. sold the Gibson Products Company name to his sons and retained only the trade show business, registered as "The Gibson Trade Show". Gibson's, Inc., wholly owned by Gibson, Jr. and Gerald Gibson, was the corporate entity used to buy Gibson, Sr.'s retail business and continues to hold the stock of the retail stores. Gibson's Discount Centers, Inc., a subsidiary of Gibson's, Inc., actually carries on the retailing and franchise business, Franchisees of the Gibson trade name are charged a monthly franchise fee and are sub- ject to quality control by the franchisor.> —— —-— oe SThe standard licensing contract of Gibson Discount Centers, Inc., the wholly owned subsidiary of Gibson's, Inc., in use since November 1, 1972, provides in part: "9, GIBSONS shall in connection with this Agreement render such assistance to LICENSEE in connection with the operation (footnote continued on next page) 7a Along with the use of the trade name, franchisees receive merchandising advice and most importantly are able to par- ticipate in the Gibson Trade Show. —_———- se eee eo Fe Ee EF ee Fe ee er ee ee Se ee | ee eee eee ee (footnote 5 continued) of his discount business as may be found appropriate by GIBSONS after request by LICENSEE, including advice as to merchan- dising and other business practices so as to enable the LICENSEE to benefit from the knowledge and experience of GIBSONS in the discount business, 10. LICENSEE agrees that GIBSONS retains the absolute, complete and final right of quality control over all products and items sold and over all services rendered by LICENSEE to customers of LICENSEE'S discount business and associated enterprises using the Service Marks and Trade Names licensed hereby to see that the high standards of GIBSONS DISCOUNT CENTERS throughout the United States of America are maintained and to protect the che fal rights of GIBSONS in the Service Marks and Trade Names set forth in Paragraph 1 hereof. The LICENSE further agrees that if GIBSONS notifies LICENSEE that GIBSONS disapproves of the quality of products, items or services sold or rendered in connection with sale of items or products in the discount business of LICENSEE, that LICENSEE will immediately discontinue the sale of such items, products, and/or services, or will immediately improve such services so that ey meet the standards of excellence maintained by GIBSONS." ALJ opinion, p. 27-28 Tricks of the Trade The Gibson Trade Show, an essential element in both the Gibson franchises and in the FTC complaint, is a private trade show produced by Gibson, Sr. The show, held approximately four times a year, is basically restricted to buyers for Gibson- owned and franchised stores. The show is the vehicle through which representatives of various suppliers can exhibit their products and attempt to obtain orders from various Gibson stores. A supplier or rep- resentative allowed booth space in the show in effect has authorization to sell his products to Gibson retailers but no guarantee that the franchisees will buy his products. Gibson, Sr. employs "mer- chandise managers" or "trade show buyers" to operate the show. The trade show buyers recruit manufacturers to participate in the show, discuss product lines, billing 9a terms and prices with suppliers, and nego- tiate with suppliers to get the best possible deal on the products that are to be shown. These buyers basically determine what suppliers are allowed to participate in the show as well as what products can be displayed. An integral part of the trade show operation is the show sheet (an order form and price list) which is filled out by the buyer after negotiations and indicates the price and terms for each product, These sheets, which are the exclusive order form used at the shows, are headlined "Ship to Gibson Products Company," followed by blank lines for the address of e@ particular store, In addition, they contain a notation in- structing manufacturers not to ship at prices higher than those listed or a de- duction will be taken. In return for the privilege of participating in the trade show, suppliers pay for booth rental, 10a related service fees and show fees. Show fees are generally based on a percentage of sales made at the Gibson Trade Show although some suppliers pay a flat fee, Suppliers who refused to pay show fees were generally not permitted to par- ticipate in the trade show, Prologue Although the FTC made a cameo appearance as early as 1967 when it first began investigating the Gibsons, it was not until February 1975 that it obtained star billing by issuing a three-count complaint alleging violations of the Federal Trade Commission Act and the Robinson-Patman Act against several Gibson-owned corporations, Gibson, Sr., his wife, and sons, Herbert and Gerald. Count I charged the petitioners with inducing suppliers to pay promotional allowances in connection with the Gibson Trade Show which were not proportionately available to other customers of the sup- pliers, violating Section 5 of the FTC Act, 15 U.S.C. §45(a). Count II, also alleging violation of Section 5S, concerned the boy- cott of suppliers who did not grant the promotional allowances charged in Count I. This count focused on the experience of three different suppliers, Toastmaster, Tucker Manufacturing Co., and Jeannette Glass Company. Count III alleged the pay- ment of illegal brokerage in violation of Section 2(c) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. §13(c).® The focus of Count III was on 6Section 2(c) provides: "(c) Payment or acceptance of com- mission, brokerage or other compen- sation. It shall be unlawful for any person engaged in commerce, in the course of such commerce, to pay or grant, or to receive or accept anything of value as a commission, brokerage, or other compensation, or any allowance or discount in lieu thereof, except for services rendered in connection with (footnote continued on next page) 12a brokerage paid to Gibson, Sr. by two brokers, Barshell, Inc. and Al Cohen Asso- ciates, Inc., which successively repre- sented Ray-0-Vac in sales to the Gibson stores.’ After extensive pretrial pro- ceedings and a ten-month trial, the ALJ issued a 235 page opinion, accompanied by a two and one-half page order. The ALJ dismissed Count [. Under Count II, the boycott of suppliers, the ALJ issued an —— «¢ eee = Fes § eee eee ee ee he + ee Set eee ee ee Se eee ee eee ee (footnote 6 continued) the sale or purchase of goods, wares, or merchandise, either to the other party to such transaction or to an agent, gp | Ad eager dob ony or other inter- mediary therein where such intermediary is acting in fact for or in behalf, or is subject to the direct or indirect control of any party to such trans- action other than the person by whom such compensation is so granted or paid," 7Barshell, Inc., originally charged in the FTC Sg greed negotiated a consent settlement in 1976. Al Cohen Associates, Inc., rio ty solely in Count III, was dismissed by the ALJ after trial for failure by the FTC to prove the allegations of the complaint. 13a order against all respondents except Gibson's, Inc. Under Count III, the ALJ issued an order only against Gibson, Sr. Both parties appealed the ALJ's decision to the Commission, The Commission affirmed the dismissal of Count I. It extended the order as to Count II to include Gibson's, Inc., finding that the boycott continued after November 1, 1972 under the manage- ment of Gibson's, Inc. and that it was proper and necessary to include Gibson's, Inc. in the order as the successor to the operations of a corporation found to be guilty of unfair trade practices. As to Count III, the Commission extended the provisions of the order concerning illegal brokerage to all Gibson family and cor- porate respondents on the basis of their complete interdependence and common control during the period of violations. The Com- mission's decision and accompanying order l4a issued on April 30, 1980. The petitioners filed motions for reconsideration in mid- June 1980, challenging certain aspects of the order. In addition, the respondents argued that certain actions taken by the Commission during periods of allegedly lapsed appropriations violated the Anti- deficiency Act, 31 U.S.C. §665(a), and thus required dismissal or remand of the case, The third ground for reconsideration, and the only one pursued beyond the Commission, is based on the alleged disqualification of the ALJ, von Brand, based on his earlier service as an attorney-adviser to former Commissioner MacIntyre. The petitioners allege that in light of the opinion of the Ninth Circuit in Grolier, Inc. v. FIC, 615 F.2d 1215 (9th Cir. 1980), von Brand should have been disqualified from serving as an ALJ and thus dismissal or remand of the case was necessary. The Commission Sa issued a further opinion and order denying the majority of relief sought. Another Opening, Another Show In seeking to have the FTC order set aside the Gibsons raise several challenges, not only in their case, but to the general administrative system developed by the FTC. in addition, they contend there is insuf- ficient evidence on both the Count II boycott charge and the Count [II Robinson- Patman charge. Although the arguments in both cases, that against Gibson, Sr. and his wife and that against the Gibson sons and Gibson corporations, are, like their briefs, almost identical, the Gibson sons and corporations also maintain that there is no evidence to connect them, as opposed to Gibson, Sr., with the allegations. For openers, the Gibsons lead with their weakest argument, contending the FTC system of prosecution-adjudication deprives i6a them of their right to a fair trial and due process. Specifically, the Gibsons challenge the role of the Commission in investigating, adjudicating and reviewing complaints. "The Commission not only votes the complaint, but it determines by its adjudicatory powers what constitutes ‘unfair' practices under Section 5." The Gibsons also challenge the role of the FTC attorney who coordinated the investigation in the pre-complaint period and then later served as "complaint counsel". The ALJ, a former attorney-advisor to Commissioner MacIntyre, also figures in to the "can't win'"' system of the FTC. Continuing their attack, the Gibsons assert that they have been before the FTC for 13 years, "awaiting this opportunity for a meaningful review by a fair and unbiased tribunal, a Court of Law."" Finally, totally removed from any context, the Gibsons present a tirade 17a against the use of consent orders in general, relying on the testimony before a Congressional subcommittee of Fredric Scherer, a Director of the Bureau of Economics of the Federal Trade Commission, {1-3} The FTC, however, clearly holds the trump in this hand, relying first on the Commission's organic legislation pro- viding for the Commission to issue adminis- trative complaints and subsequently sit as an adjudicative body. Federal Trade Com- mission Act §5(b), 15 U.S.C. 845(b). The combination of investigative and judicial functions within an agency has been upheld against due process challenges, both in the context of the FTC and other agencies. FITC v. Cinderella Career And Finishing Schools, Inc., 404 F.2d 1308, 1315 (D.C. Cir. 1968); Pangburn v. CAB, 311 F.2d 349, 356 (1st Cir. 1962); FIC v. Cement Insti- tute, 333 U.S. 683, 700-03, 68 S.Ct. 793, 18a 803-04, 92 L.HI. LOL), 1935 (1948); Withrow -“——s-o— V. y. Larkin, 121 U.S. 335, 51-56, 95 S.Ct. 1456, 1466-59, 43 L.Ad.2d 7i2, 726-28 (1975). Further, the participation of the staff attorney in both investigation and subsequent prosecution of a case is clearly allowed under 5 U.S.C. §554(d). Nor is there any merit to the Gibsons' contention that they were denied due process by the 13-year delay. First, although the initial decision to investigate the Gibsons occurred in 1967, the administrative com- plaint was not issued until 1975. Second, as the FTC points out, the delay must be credited in part to the Gibsons themselves. See, FIC v. Gibson Products of San Antonio, — — | ee ee ee eee ee eee eee ee ee ee Inc., 569 F.2d 900 (Sth Cir. 1978); FIC v. Gibson, 460 F.2d 605 (Sth Cir. 1972). As to the argument that consent decrees are used for coercion, we Find this point irrelevant since the Gibsons are not here 19a seeking to be relieved of a consent order and have failed to indicate how this argu- ment has any connection with the merits of their own case. Forcing the Gibsons to choose between consenting to an order or incurring the burdens and expenses of a defense is inherent in the adversary pro- cess and is basically "part of the social burden of living under government." FTC v. Standard Oil Co., 449 U.S. 232, 244, —— ee ee ee ee ee 101 S.Ct. 488, 495, 66 L.Ed.2d 416, 427 (1980), quoting Petroleum Exploration, Inc. _—s-——e ee eee v. Public Service Commission, 304 U.S. 209, 222, 58 S.Ct. 834, 841, 82 L.Ed. 1294 (1938). Changing Roles -- From Understudy to Lead With FTC taking the first trick, the Gibsons next present their strongest and longest argument, that concerning the qualification of the ALJ in light of his 20a prior service as attorney-advisor to an FTC Commissioner. The Gibsons' chief argument as to the administrative process concerns Theodor von Brand's metamorphosis from attorney- advisor to administrative law judge. Von Brand had served previously from 1963 through January 1971 as an attorney-advisor to Former Commissioner Everett MacIntyre. In February 1977, at a prehearing con- ference, von Brand apprised counsel for Gibsons of his prior service with Con- missioner MacIntyre. In a discussion off the record, as to which there is no real difference of view, von Brand indicated he had no recollection of anything coming across his desk while serving as attorney- advisor concerning the Gibsons and deter- mined that the Gibsons had no objection to his continuing to serve as the ALJ in this case. Then, to avoid any future problen, 2la von Brand specifically put the following in the record, Judge von Brand: "All right. The first thing I want to raise is something that I have raised off the record. I have informed counsel that in the period 1963 to 1970 I was legal advisor to Commissioner MacIntyre. Now, it is my understanding that none of the respondents in this proceeding would raise an objection to my con- tinuing in this case on that ground, Is that correct, Mr. Odom [attorney for Gibson, Sr. and Belva Gibson]}?" Mr. Odom: “That's correct as far as I'm concerned, yes, sir." * *& Mr. Raider {attorney for Gibson sons and corporations}: "That's correct, Your Honor." 22a Subsequently, von Brand presided over the ten-month trial, during which no objection was raised concerning von Brand's qualifi- cation. On February 26, 1979, von Brand issued his initial decision and order. This decision was appealed to the Commis- sion which issued a decision and order on April 30, 1980. Not until June 12, 1980 did the Gibsons seek von Brand's disquali- fication, in a petition for reconsideration of the Commission's order. The Commission, in an order of August 8, 1980, refused this relief. The basis for the Commission's decision was threefold: (1) failure by the Gibsons to file a disqualification motion and supporting affidavits as required by the Commission's rule §3.42(g)(2), 16 C.F.R. §3.42(¢)(2); (2) failure to file a timely objection; (3) no demonstra- tion or assertion of prejudice. In its opinion the Commission devoted substantial 23a attention to the Ninth Circuit opinion in Grolier, Inc.. v. FTC, 615 F.2d 1215 (9th — |e ee eee —— ne ee Cir. 1980), discussed in more detail below. The Gibsons' primary argument is that Section 5 of the Administrative Procedure Act (MPA), 5 U.S.C. $554(d),8 by prohibit- ing an "employee or agent" from performing re re eet Se Feet et et et eet ee eee 8section 554(d) provides: "(d) The employee who presides at the reception of evidence pursuant to sec- tion 556 of this title {5 USCS 8556} shall make the recommended decision or initial decision required by section 557 of this title {5 USCS 8557}, unless he becomes unavailable to the agency. Except to the extent required for the disposition of ex parte matters as authorized by law, such an employee may not -- (1) consult a person or party ona fact in issue, unless on notice and opportunity for all parties to participate; or (2) be responsible to or subject to the supervision or direction of an employee or agent engaged in the performance of investigative or pro- secuting functions for an agency. An peenotee or agent engaged in the per- ForMancé “SF Tivéestigative or proce (f£odtHote “Continued si Aext “pagey~- ~~~ i 24a “investigative or prosecuting Functions" and also participating or advising in the decision, places on the adjudicative pro- cess limitations which are essentially jurisdictional, and in addition, cannot be waived. The Gibsons contend that an attorney-advisor as opposed to a Comnis- sioner, is not exempt From the disqualifi- cation by 5 U.S.C. 8554(d)(2)(C). To the Gibsons, the basic concern of §8554(d) is SS et et EF ee ee eet te eee = = ate © (footnote 8 continued) functions for an agency in a case may not, in that of a facially rélated ~ case, participate or advise In fhe déETsion, Féconmmendéd” décrsisi, “oF reat “fevTéw-pursiant €5-Sééfion-557 is title [5 USCS 85577, except as Witness Or CounSeI in public pro=-~~ ~~ ceedings.” THis subsection dogs “fot apply -- eek) in determining applications for initial Licenses; (B) to proceedings involving the validity or application of rates, facilities, or practices of public utilities or carriers; or (C) to the agency or a member or members GE the body “comprising “Che agency." ae ee ei. eae te eee (emphasrs “added). 2Sa the public interest in fairness, an interest that may not be waived. The Gibsons assert that their right to insist upon the disqualification of von Brand is "secondary to the public interest." Finally, in response to any criticism of the Gibson's delay in raising this issue, they maintain that the right of disqualification was not apparent until the Ninth Circuit decision in Grolier, supra. Taking a Due from the Ninth The Grolier case, so heavily relied upon by the Gibsons, actually involved the same ALJ. ALJ von Brand has served as an at- torney-advisor to Commissioner MacIntyre during the period when Grolier was inter- mittently investigated and charged by the FTC. Records indicated that Commissioner MacIntyre had attended at least one meeting between Grolier and the representatives of the FTC. Grolier, upon learning of ALJ 26a von Brand's prior service to Commissioner MacIntyre, requested that the ALJ dis- qualify himself from further participation in the proceedings. Von Brand denied the request, stating that he did not recall working on matters involving Grolier while serving as a legal advisor. Grolier then filed a formal motion for disqualification and removal of the ALJ with the FTC and requested that the FTC permit discovery of certain FTC records which might reveal the nature and extent of the ALJ's contact with the Grolier case. Both the requested discovery and the motion for disqualifica- tion were denied by the FTC. In its peti- tion for review in the Ninth Circuit, Grolier argued that the failure to dis- qualify ALJ von Brand violated both 8554(d) of the APA and the Due Process guarantee of the Fifth Amendment. Grolier also alleged 27a error by the FTC in denying the requested discovery. The Ninth Circuit, in an opinion issued January 24, 1980 as amended on denial of rehearing April 17, 1980, determined that the exemption under 5 U.S.C. 8554(d)(2)(C) did not apply to ALJ von Brand once he was no longer an attorney-advisor. The Court specifically rejected the per se disquali- fication argument of Grolier that the ALJ was chargeable with knowledge of all in- vestigative and prosecutorial activities undertaken by the FTC during his tenure as an attorney-advisor. In adopting a test focusing on the activity of the ALJ at the time that he serve as an attorney-advisor, the Ninth Circuit indicated that disquali- fication was necessary only if the ALJ "was sufficiently involved with the case to be apprised of ex parte information,..." Grolier, 615 F.2d at 1221. The Court also 28a placed the burden of showing the ALJ's prior acquaintance with ex parte information on Grolier, the party challenging the qualifi- cation of the ALJ. After determining that the FTC wrongly concluded that attorney- advisors do not perform "investigative or prosecuting functions" within the meaning of §554(d), the Ninth Circuit remanded the case to the FTC for reconsideration of the denial of discovery and in light of the results of that reconsideration, the disqualification motion. The Court very clearly indicated that the FTC did not necessarily have to grant discovery but it could not simply rely on a flat refusal to disclose anything concerning von Brand's involvement, The Court suggested that the FTC might initially respond through affi- davits concerning the extent of von Brand's 29a involvement with the Grolier case while he served as attorney-advisor.? The FTC's primary argument is that the Gibsons expressly waived the claim for disqualification during th pretrial pro- ceedings and did not timely renew any claim. In addition, the FTC distinguishes the Grolier case on facts. In Grolier there was no express waiver of von Brand's continuing to preside. Grolier specifi- cally objected to the ALJ's participation and filed a motion to disqualify the ALJ prior to the Commission's decision. Nor does the FTC believe that the statutory -_ -——_ —a = —— 9The Ninth Circuit specifically did not reach the due process claim of Grolier, indicating that if von Brand is qualified, a more adequate record might be developed for the Court's determination of the due process claim. Upon remand, the Commission denied the motion to disqualify von Brand and sub- sequently reissued its final order with modifications on March 9, 1982. 30a separation of functions requirement cannot be waived. Rather, the FTC contends that the Gibsons' decision not to raise the issue of the ALJ's disqualification in its appeal to the Commission or prior to the issuance of the Commission's opinion was a calculated litigation decision, one which paid off in part since von Brand in his initial decision dismissed the principal charge in the complaint. The rationale supporting the waiver of this technical procedural requirement is analogous to the rule imposed on litigants that points of error will not be considered for the first time on appeal unless manifest injustice will result. To the FTC there is nothing unfair in holding a party to an express, knowing waiver. Prior to the Ninth Circuit opinion in Grolier, the FTC took the position that §554(d) did not apply to former attorney- 3la advisors since they did not perform in- vestigative or prosecutorial functions within the meaning of that section, In reaching such an outcome, the FTC focused upon the Congressional desire to prevent adjudication by those who had developed a "will to win". In re Grolier, Inc., 87 F.T.C. 179 (1976). In reversing the FTC decision, the Ninth Circuit found an "equally important Congressional desire to prevent adjudicative interpretation of ex parte facts." Grolier, 615 F.2d at 1220 n.5. The Ninth Circuit, while rejecting the FTC position that §554(d) was not applicable to the situaion, specifically refused to accept the position here urged by the Gibsons and the ALJ was chargeable with knowledge of all investigative and prosecutorial activities undertaken by the FTC during his tenure as an attorney- advisor. Grolier, 615 F.2d at 1221. It 32a is obvious from the decision that the Ninth Circuit did not view the situation as fundamentally unfair or jurisdictionally void since it refused a per se disqualifi- cation rule, choosing rather to remand the case to determine whether Grolier could meet the burden of showing that von Brand formation. Thus the Ninth Circuit opinion in no way forecloses the possibility of waiver, a concept wholly compatible with placing the burden or establishing prior knowledge on the proponent. Without rejecting the opinion of the Ninth Circuit In the Grolier case, Grolier clearly and vigorously raised the issue of von Brand's participation in a timely manner, both before the ALJ and the FTC. This is a far cry from the Gibsons' express waiver of any objection to von Brand's continuation 33a in the case after the ALJ's candid revela- tion of the facts. The Waive of the Past [4] We may agree, without deciding, that 8554(d) applies to the situation of an attorney-advisor who subsequently serves as an ALJ. We do this because we hold that the Gibsons -- with explicit awareness of the facts or at least of the facts in- dicating the necessity for further factual inquiry open to them under FTC rules -- expressly waived any objection they might have. Not only did the Gibsons clearly indicate that they had no objection to von Brand continuing to preside in their case, they failed to raise at any meaningful point or in any meaningful way the issue of disqualification. Subsequent to the ALJ's opinion, the Gibsons in their appeal to the Commission did not mention the issue of disqualification. Nor did they 34a mention it at oral argument on the appeal or once the case was under advisement by the Commission. Even after the Ninth Circuit issued its opinion in Grolier, the Gibsons failed to direct the Commission's attention to this case or to raise this issue. Only after the Commission had issued its decision, one less favorable to the Gibsons than that of the ALJ, did the Gibsons indicate any objection to the ALJ's participation. If the Gibsons objected to von Brand's participation, at the minimum they should have preserved this objection three years earlier when they were asked specifically by the ALJ if they objected to his continued participation. {5} Nor can we accept the Gibsons' argument that they were under no duty to raise the issue since the FTC had indi- cated in its Grolier decision that dis- qualification was not necessary. Because hal 35a the Gibsons expressly waived any objection, they are in no position to argue that a challenge to the ALJ's participation would have been fruitless. A party in an admin- istrative proceeding, as in litigation in a court, has the duty and responsibility to bring to the attention of the agency an objection so that the agency has the oppor- tunity to reconsider its position. This is no different than our requirement that a party provide the lower court with the opportunity to correct its errors by point- ing out those errors to the District Judge first. It is certainly conceivable that von Brand would have recused himself in the case which had not yet gotten under way or that the FTC, if presented with other arguments, might have reconsidered Nor are we convinced by the Gibsons' argument that they were afraid to raise 36a the issue of von Brand's participation for fear of antagonizing the ALJ. Counsel for Gibson, Sr. would have us believe that his reticence was based on his personal famil- which were also being held in the Dallas FTC offices at the same time. We are not persuaded, Counsel for Grolier obviously harbored no such fear, filing timely an objection to von Brand's participation. Even if we were to acquiesce in this excuse for failing to raise the issue before von Brand, this argument offers no succor for the Gibsons' failure to raise the issue subsequently before the Commis- Sion. Certainly the Gibsons did not hesi- tate to contest the ALJ's opinion in other aspects, objections which called into question prior opinions of the FTC in other areas, Rather we are presented with a situation where, due to the fortuitous 37a intervening decision of the Ninth Circuit in Grolier, the Gibsons are not able to advance, retrospectively, an argument for disqualification of the ALJ. They are, however, unable to convince us of the applicability of Grolier to an express waiver of the kind involved here. The attempted end run around the need for timely objection through the argument of a situation analogous to exhaustion of reme- dies provides no yardage. While the Gibsons rely on Board of Education v. -——o or Harris, 622 F.2d 599 (2d Cir. 1979), cert denied sub nom, Hufstedler v. Board of _-_—_——-e—e——l—/—e ie Or hi, il, ll le lt ee le lt _—_—— = om Education, 449 U.S. 1124, 101 S.Ct. 940, 67 L.Ed.2d 110 (1981), that case specifi- cally distinguishes the issue of exhaustion from waiver of objection. Case law supports the concepts of timely objection with its complementary notion of waiver within the context of 38a disqualification under 8554(d). In Inter- -__——— national Paper Co. v. Federal Trade Com- —_———— ee wm rr ee ee ee ee ee ee mission, 438 F.2d 1349 (2a Cir. }), cert denied 404 U.S. 827, 92 S.Ct. 61, 30 L.Ed.2d 56 (1971), the Second Circuit, in considering alleged violations of due pro- cess and 8554(d) based on the participation of the general counsel and other FPC employees both prosecutorial and decision making functions, found a waiver from the failure of a party to object timely. "Appellant made no timely challenge to this purported practice nor did counsel call it to the attention of the Com- mission at the time the stipulation of facts agreed to had been reviewed and approved by the Assistant General Counsel and General Counsel, before the supposed error was committed. This knowing inaction and calculated lying in wait, taken with the hope of upsetting a future adverse decision of the Commission, constituted a waiver of appellant's rights." 438 F.2d at 1357. The D.C. Circuit in Democrat Printing Co. v. FCC, 202 F.2d 298 (D.C.Cir. 1952) Wa also found a waiver from the failure to raise a timely objection. Aside from these specific interpreta- tions of 8554(d), the requirement for filing of a timely objection finds support in the language of 8556(b) of the APA which provides: "On the filing in good faith of a timely and sufficient affidavit of personal bias or other disqualification of a presiding or participating employee, the agency shall determine the matter as a part of the record and decision in the case." The Ninth Circuit, in considering a motion for disqualification based on bias on the part of the Commissioner, in Safeway Stores, Inc. v. FTC, 366 F.2d 795, 802 “-—-——-—-—-— =e ee eer me ee (9th Cir. 1966), cert denied 386 U.S. 932, 87 S.Ct. 954, 17 L.FEd.2d 805 (1967), found that a motion was not timely where the objecting party had been silent during trial, briefing, and argument to the 40a Commission and had only raised the argu- ment several months after the Commission issued an unfavorable decision. In Marcus Ce ee ee ee ee se tion eieaee, 548 F.2d 1044, 1050-51 (D.C.Cir. 1976), the D.C. Circuit, while indicating that disqualification under $554(d) is mandatory, also stated: "Tne general rule governing disqualifi- cation, normally applicable to the federal judiciary and administrative agencies alike, requires that such a claim be raised as soon as practicable after a party has reasonable cause to believe that grounds for disqualifica- tion exist. It will not do for a claimant to suppress his misgivings while waiting anxiously to see whether the decision goes in his favor. A contrary rule would only countenance and encourage unacceptable inefficiency in the administrative process. The APA-mandated procedures afford every party ample opportunity to enforce and preserve its due process rights." 548 F.2d at 1051 (footnotes omitted). See also Capitol Transportation, Inc. v. —-—--=- -“--—<—- -———se ee eer eee eee Fe ee ee eee 8 ee ee ee United States, 612 F.2d 1312, 1325 (1st Cir. 1979) (claim of bias on part of ALJ 4la first raised on petition for reconsidera- tion after final order of agency.) The Commission, in denying the Gibsons’ motion for reconsideration, indicated that disqualification claims must be raised as soon as practicable and cited several cases in support. In addition, the Commission relied on its Rule of Practice 83.42(g)(2) governing the filing of disqualification motions.10 The motion and supporting et re ee ne ee 10Rule of Practice §3.42(g)(2) as in effect at the time provides: (g) Disqualification of administra- tive law judges x kk (2) Whenever any party shall deem the Administrative Law Judge for any reason to be disqualified to preside, or to continue to preside, in a par- ticular proceeding, such party may file with the Secretary a motion addressed to the Administrative Law Judge to disqualify and remove him, such motion to be supported by affidavits setting forth the alleged grounds for disquali- fication. If the Administrative Law (footnote continued on next page) 42a affidavits must set forth the grounds for disqualification. The ALJ has ten days within which to disqualify himself. Should he not do so, he must certify the motion to the Commission which must determine promptly the validity of the claim. As the Commission indicated in its denial of the Gibsons' motion for reconsideration: "The requirement of affidavits funder Rules of Practice §3.42(g)}, grounded in 5 U.S.C. $556 (1976), is not an empty formality to be cast aside unilaterally by a party to a Commission proceeding. There are many reasons for such a requirement. An affidavit provides an exact, sworn recitation of facts, collected in one place; a disqualifica- tion motion must not be made by a party, nor taken by the Commission, ———— eee ee ee ee - SSL LA NG A ee (footnote 10 continued) Judge does not disqualify himself within ten (10) days, he shall certify the motion to the Commission, together with any statement he may wish to have considered by the Commission. The Commission shall promptly determine the validity of the grounds alleged, either directly or on the report of another Administrative Law Judge appointed to conduct a hearing for the purpose." 43a lightly ..... Accordingly, the affida- vit requirement serves not only to focus the facts underlying the charge, but to foster an atmosphere of solem- nity commensurate with the gravity of the claim. Respondents' failure to submit affidavits is thus an indepen- dently sufficient basis to deny their petitions in this respect." {6} This Court has implied a timeli- ness requirement within the context of disqualification claims in an analogous situation, that concerning judicial disqualification under 28 U.S.C. 8455.11 llsection 455 provides: $455. Disqualification of justice, judge, or magistrate ta) Any justice, judge, or magistrate of the United States shall disqualify himself in any proceeding in which his impartiality might reason- ably be questioned. (b) He shall also disqualify him- self in the following circumstances: (1) Where he has a personal bias or prejudice concerning a party, or personal knowledge of disputed evidentiary facts concerning the proceeding; (2) Where in private practice he served as lawyer in the matter in controversy, or a lawyer with whom he previously practiced law, served (footnote continued on next page) 44a In Delesdernier v. Porterie, 666 F.2d 116 —————— oe Fe ee ern ree ree ee (Sth Cir. 1982), we found that a motion to — -— —— ee ee er we ene eee One eon eer ee er ee em (footnote 11 continued) during such association as a lawyer concerning the matter, or the judge or such lawyer has been a material witness concerning it; (3) Where he has served in govern- mental employment and in such capacity participated as counsel, adviser or material witness concerning the pro- ceeding or expressed an opinion con- cerning the merits of the particular case in controversy; (4) He knows that he, individually or as a fiduciary, or his spouse or minor child residing in his house- hold, has a financial interest in the subject matter in controversy or in a party to the proceeding, or any other interest that could be sub- stantially affected by the outcome of the proceeding; (5) He or his spouse or a person within the third degree of relation- ship to either of them, or the ouse of such a person: (h) Is a party to the proceeding, or an officer, director, or trustee of a party; (ii) Is acting as a lawyer in the roceeding; titi) Is known by the judge to have an interest that could be substan- tially affected by the outcome of the proceeding; (iv) Is to the judge's knowledge likely to be a material witness in the proceeding. 45a disqualify raised for the first time on appeal after two full trials on the merits was too tardy to consider. Looking to the policies underlying the disqualification of judges statute, we stated: "{f disqualification may be raised at any time, a lawyer is then encouraged to delay making a $455(a) motion as long as possible if he believes that there is any chance that he will win at trial. If he loses, he can always claim the judge was disqualified and get a new trial. This result would not comport well with the purposes behind §455(a) .... Lack of a timeliness requirement encourages speculation and converts the serious and laudatory business of ensuring judicial fairness into a mere litigation stratagem," 666 F.2d at 121 See also In re International Business “-—- ——-— «= ——"<« = enw ee eee ee eee ee ee ee ee ent a --— 2 eee em ee U.S. 1012, 101 S.Ct. 568, 66 L.Ed.2d 470 (1980); Marcus, supra, and cases cited therein at n.21; Duffield v. Charleston -—— + een ee ee oe ee ee 46a Area Medical Center, Inc., 503 F.2d 512, 515-16 (4th Cir. 1974). the same policies supporting timely objection or motions to disqualify judges are equally applicable to administrative law judges. A party should not be able to manipulate the rules by the use of an express waiver only to attempt later to avoid the effects of this waiver. Granted, as the Gibsons assert, "f{w)hat is as stake here is not so much the right of an individual FTC Respondent .+- but the public interest, the confidence of the public in the fairness of the adju- dicative system of the FTC, and the entire administrative action of the FTC," we must emphasize that the public has an interest as well in conserving judicial and quasi- judicial resources and in ensuring the integrity of adjudicative process. Allow- ing a party to waive expressly an objection and then later seek to avoid it undermines 47a the integrity and and finality of admin- istrative procedures. {7} Finally, there is simply no indi- cation of any manifest injustice or preju- dice to the Gibsons from the participation of ALJ von Brand. The Commission, in denying the Gibsons' motion for recon- sideration, also indicated that the Gibsons had not demonstrated or even asserted any prejudice, stating: "fOJur review of the record convinces us that Judge von Brand was impartial in every respect, that his decision was thoroughly researched, and that his meticulous findings and conclusions were firmly and exclusively based on the record evidence. Of course, to the extent respondents challenged Judge von Brand's findings, conclusions, and pro- osed order, we undertook an exhaustive, independent review. In that review, we did not find that issues of demeanor or discretion were especially important in the determination of the case; thus, even if it were to be determined that Judge von Brand was disqualified, our decision of April 30, 1980 would not be void, as respondents have neither demonstrated nor suggested actual pre- judice from his presiding, and we perceive none." 48a The lack of prejudice seems clear from the fact that the transactions forming the basis for liability challenged here occurred after 1971 when von Brand left the service of Commissioner MacIntyre. The only charge that could possibly rely on ex parte information, that in Count I, was dismissed by the ALJ. Nor have the Gibsons provided or even suggested the existence of any evidence that von Brand either possessed or relied on ex parte infor- mation. Unlike Grolier, the Gibsons did not even request discovery of what infor- mation ALJ von Brand would have had avail- able to him, choosing instead to rely on the unsupported position that "It is accepted that the attorney-advisor ... is fully chargeable with whatever knowledge the Commissioner ... had of the Gibson pre-complaint matters before the Commission."" The only support for this 49a position is a quote from former FTC Chairman Engman in which he stated: "I generally would charge an attorney-advisor with the same insider knowledge chargeable to his Commissioner." Even the Ninth Circuit in Grolier would not adopt such a broad position. ufficien Act II opens with the Gibsons contending that there is insufficient evidence to support Count II, that of the boycott. Specifically, the Gibsons assert that there was no evidence to connect the Gibson sons and companies with the invita- tion to boycott letter, and no proof that a boycott actually existed. The Commis- sion's finding that the Gibsons engaged in a group boycott, a per se violation of the antitrust laws, relies on the evidence of three companies who refused to meet the price terms demanded for participation in 50a the Gibson Trade Show, the Toastmaster Division of McGraw Edison Co. (Toastmaster), Tucker Manufacturing Co., and Jeanette Glass Co. Toastmaster participated in the Gibson Trade Show from 1966 to 1970. At a meeting on June 22, 1970, Toastmaster's represen- tative was asked for a payment of three percent of its sales volume to Gibson stores, which the representative refused. Toastmaster was informed that it was not "cooperating" and as a result of this lack of cooperation, it was unable to exhibit at the Gibson Trade Show from August 1970 through 1973. On January 22, 1971, the following letter on Gibson Products Company stationery was addressed to "All Stores" concerning Toastmaster. "The above company will not sell to us at a price we would recommend as being profitable and beneficial for your operation. We, therefore, no Sla longer recommend or authorize line, and suggest that you discontinue the same, Please give this your attention, and we appreciate your continued cooperation." Although Toastmaster continued its attempts to sell to the Gibsons stores, sales volume dropped sharply, from over $950,000 in 1970 to $297,000 in 1971. Toastmaster representatives were told on at least two occasions by franchised stores that they were declining to buy from Toastmaster because of the "All Stores" letter. In 1974, Toastmaster agreed to the terms for participation imposed by Gibson, Sr. and once again participated in the trade show. At this point, Toastmaster's sales to the Gibson stores increased. Tucker and Jeannette had similar expe- riences. When negotiating for an exhibit at the February 1971 Trade Show, Tucker's representative refused to pay a two per- cent volume rebate and was excluded from 52a the Trade Show. On March 11, 1971, a substantially identical "All Stores" letter was sent by Gibson Products Company concerning Tucker. When Tucker represen- tatives subsequently agreed to pay the rebate, the company was readmitted to the August 1971 Trade Show. Jeannette, directly and through its brokers, was asked for a five percent rebate, to be paid to Gibson, Sr. and not to individual stores. After it refused to make such a rebate, an "All Stores" letter was sent on March 30, 1971. Jeannette was refused readmittance to the shows without the five percent payment and was unsuccessful in attempting to sell to the family-owned stores, though it was able to make some sales to franchised stores. The ALJ found the Gibsons liable on the Count II boycott charge. The Commission amended the ALJ's order to include Gibson's, 53a Inc., finding that the boycott continued after the November 1, 1972 change in management, The Gibsons contend that there was no boycott and that the Commission failed to prove that the All Stores letter caused the decline in Toastmaster sales. The Gibsons offered several justifications for the All Stores letter in the Toastmaster case, including Toastmaster shipping poli- cies during the Christmas season and dissatisfaction with the Toastmaster warranty program, No R.S.V.P, Necessary (8, 9} The All Stores letter concerning Toastmaster is, at the minimum, an invita- tion to boycott, specifically requesting that the stores refrain from dealing with Toastmaster, The letter is certainly stronger than that found sufficient in Eastern States Retail Lumber Dealers' S4a Association v. United States, 234 U.S. 600, 34 S.Ct. 951, 58 L.Ed. 1490 (1914). Nor is it necessary for a group boycott that there be an express mutual agreement to refuse to deal. The contemplation and invitation for concerted action along with acquiescence is sufficient. From the evi- dence presented, the Commission found that a substantial number of stores had acqui- esced in the request by Gibson Products Company. Although some of this evidence was in the form of hearsay testimony, the Commission Rules of Practice permit the introduction of hearsay evidence, provided that it meets the standards of materiality, reliability and relevance, See 16 C.F.R. §3.43(b); Resort Car Rental System, Inc., v. FTC, 518 F.2d 962, 963 (9th Cir.), cert denied 423 U.S. 827, 96 S.Ct. 41, 46 L.Ed.2d 42 (1975). The evidence that Toastmaster representatives were told by 55a Gibson franchisees that there was a boy- cott, along with the actual letter and the substantial drop in sales by Toastmaster to the Gibson stores, amply support the Commission's findings of a group boycott. Nor was the Commission bound to accept the Gibsons' alternate explanations for the drop in sales: dissatisfaction with Toastmaster products, preference of Toast- master's sales representatives to sell to distributors instead of directly to retailers, and Toastmaster's lack of access to Gibson retailers, because of its non-participation in the Gibson Trade Show. The evidence concerning dissatisfaction with Toastmaster's warranty program related to the mid-sixties, several years prior to the boycott. The contention that Toast- master preferred to sell to distributors is undercut by the testimony of Toast- master's representative that he continued 56a his attempts to sell to individual Gibson stores even after the boycott began. As to the explanation that the drop in sales was due to non-participation in the Gibson Trade Show, this is merely a “which came first, the chicken or the egg" argument. The only reason Toastmaster did not par- ticipate in the Trade Show was its refusal to pay the requested rebate. The Commis- sion failed to establish a legitimate busi- ness reason for the drop in Toastmaster's sales is also supported by the existence of two other All Stores letters, those concerning Jeannette and Tucker, which utilize substantially identical language. Each of the three suppliers refused at some point to pay the required rebate for participation in the Trade Show; each of the three letters is identical in purpose and effect, 57a £10} The Gibson sons and companies also contend that there is no evidence to connect them with the invitation to boy- cott. The All Stores letters, written on Gibson Products Co. stationery, clearly connect the Gibson sons with the action since Gibson, Jr. was president of that company and Gerald Gibson was executive vice-president. Given the overlapping ownership of the corporations and the essential purpose of the Gibson Trade Show to service Gibson stores, there was suf- ficient evidence that an order including all petitioners was necessary for effec- tive relief. In addition, the Commission in amending the ALJ's order to include Gibson's, Inc., determined that the boy- cott continued under the management of Gibson's, Inc., a corporation wholly owned by the Gibson sons and used to buy Gibson, Sr.'s retail business. 58a {11-14} The findings of the Commission must be accepted if there is substantial evidence on the record considered as a whole to support them. FTC v. Standard S.Ct. 113, 115, 82 L.Ed. 141, 145 (1937); FTC v. Algoma Lumber Co., 291 U.S. 67, 73, 54 S.Ct. 315, 318, 78 L.Ed. 655, 660 (1934). Where there is the possibility of drawing two inconsistent inferences from the evi- dence, the Commission may make the choice, Corn Products Refining Co. v. FTC, 324 U.S. 726, 65 S.Ct. 971, 89 L.Ed. 1338 (1945). In this case, the Commission, based on the All Stores letter and the testimony of Toastmaster's agent drew the inference that the substantial decline in Toast- master's sales was as a result of the boycott, a determination which is sup- ported by substantial evidence. The Com- mission's findings that the boycott of 59a Toastmaster continued until at least 1974 is also supported by substantial evidence. From this finding, the Commission deter- mined that that the “institutional manage- nent" of the boycott, at least in the post-November 1, 1972 period was in the hands of Gibson's, Inc. There is also substantial evidence to support the Commission's determination that there was substantial commonality of interest prior to November 1, 1972 and that the opera- tions of the Gibsons were sufficiently integrated to require an order covering all petitioners. The Commission, as discussed below, has wide discretion in determining the type of order necessary to remedy unfair practices. Assault and Batteries on the FTC Order In Act III, the Gibsons challenge the finding of the Commission of the payment 60a of illegal brokerage in violation of Section 2(c) of the Robinson-Patman Act, 15 U.S.C. $13(c). Count III, the 82(c) charge, concerns the receipt of brokerage fees by Gibson, Sr., from two brokers representing the Ray-0O-Vac Division of ESB, Incorporated (Ray-0-Vac), Barshell, Inc. and Al Cohen and Associates, Inc. The FTC tried the charge on the theory that Gibson, Sr. acted as a principal or buyer who split brokerage fees. The Miller's Tale Jim Miller was a broker employed by Ray-O-Vac to represent its products to the Gibson stores for approximately five years, years, from 1969 to January 1, 1974. Miller also owned all of the stock in Barshell, Inc., a distributor of health and beauty aid products, redistributing such products to various retailers and wholesalers throughout the southwest. 6la Beginning in 1971, Barshell became the sales representative of Ray-O-Vac, repre- senting Ray-0-Vac to the Gibson stores. In this capacity, Barshell was to present Ray-O-Vac sales promotions to Gibson head- quarters, conduct necessary negotiations, and have Ray-0-Vac's products listed. In return for these services, Barshell received a 10% brokerage fee. At the time that Barshell sold to the Gibson accounts, about 80% of Barshell's sales were to the Gibson stores. Ray-0-Vac sent commission state- ments to Barshell recording all of Ray-O- Vac's shipments to the individual Gibson stores and the commission which Barshell had earned on these sales. Miller testi- fied that Gibson, Sr. frequently checked Barshell's commission statements, after which Barshell made payments to Gibson, Sr., termed promotional allowances, on the basis of sales recorded in the commission 62a statements. A Barshell check in the amount of $13,173.43, dated September 23, 1972, was introduced inte evidence and Miller testified that this was a promo- tional allowance. The ALJ found that the check was a transmittal of brokerage fees by Barshell, received by Ray-O-Vac, to Gibson, Sr., when Gibson, Sr. was owner and operator of various retail stores and thus a buyer from Ray-0-Vac. Al Cohen and Associates, Inc. acquired the Ray-O-Vac account effective January l, 1974 to represent Ray-0-Vac to the Gibson stores. Al Cohen was also paid a 10% com- mission. In an oral agreement, Gibson, Sr. was to increase the sales volume of Ray-O-Vac and Cohen to pay Gibson, Sr. 90% of the 10% commission. Cohen made monthly payments beginning in 1974 to Gibson, Sr., which payments continued until at least March 1978. The ALJ, finding that Gibson, 63a Sr. was not a "buyer" at the time of the commission splitting with Al Cohen Asso- ciates, dismissed the complaint against Cohen. The ALJ, while finding a violation of Section 2(c) by Gibson, Sr. as to Barshell, specifically found that the allegations against the Gibson sons had not been sus- tained and that the FTC had failed to tie the sons into the receipt of illegal bro- kerage. Apparently the FTC had intended to show stock ownership by Gibson, Sr., subsequently given to the Gibson sons, in another of Miller's companies. On this basis, the ALJ dismissed the Count III allegations as to the Gibson sons. The Commission, while upholding the Section 2(c) violation against Gibson, Sr., did not address the FTC's position that all of the Gibson respondents were a "single eco- nomic enterprise". Rather, the Commission 64a found that given the interdependence of the Gibson companies, for purposes of relief, there was ample justification to bind all Gibson corporate respondents and family members. The Commission specifi- cally stated that they did not reverse the finding of the ALJ as to the failure by the FTC to tie the Gibson sons into the receipt of illegal brokerage. Rather the Gibson sons were placed under order for "fencing in" purposes. {15} Ever ready to attack the FTC's order, the Gibsons challenge the Section 2(c) violation on several grounds. First, the Gibsons assert that the jurisdictional requirement of "sales in commerce" has not been met. The brokerage payments were allowances upon all Ray-O-Vac sales to Gibson retail stores, both family-owned and franchised, in a 20 state area. Thus the underlying sales were not merely 65a connected with, but directly in, inter- state commerce, Going for Broch {16, 17) The Gibsons' second jurisdic- tional argument is that there was no showing of a discrimination in price. For support, the Gibsons rely on FTC v. Henry Broch §& Co., 363 U.S. 166, 80 S.Ct. 1158, 4 L.Bd.2d 1124 (1960). First, Section 2(c) on its face absolutely prohibits the pay- ment of brokerage except for services rendered and contains no requirement that a price discrimination occur. Second, Broch concerned variable brokerage fees charged for the purpose of creating dis- criminatory price advantages, rather than the situation here of a broker splitting part of his commission with the buyer. In fact, in Broch, the Supreme Court, in reviewing the legislative history of Section 2(c), stated: 66a "One of the favorite means of obtaining an indirect price concession was by setting 3 "dummy" brokers who were employed by the buyer and who, in many cases, rendered no services. The large buyers demanded that the seller pay "brokerage" to these fictitious brokers who then turned it over to their employer. This practice was one of the chief targets of 82(c) of the Act." 363 U.S. at 169, 80 S.Ct at 1160, 4 L.Ed.2d at 1128 (footnote omitted) We agree with the Commission Section 2(c), in light of the language and purpose, requires no price discrimination in a situation of dummy brokerage such as is involved here. {18} The Gibsons also argue that there is no evidence that Gibson, Sr. was con- nected with buying so as to meet the statutory requirement of a "buyer". We find this argument without merit since the ALJ and the Commission found that, at least as to the check in September 1972, Gibson, Sr. was a buyer within the context of his personal ownership and operation of 67a individual retail stores, as well as in his role as head of Gibson Products Company. Beauty Is Only Skin Deep {19} Next the Gibsons maintain that there is no proof to support the Section 2(c) violation. Gibson, Sr. contends that the check issued on September 23, 1972 from Barshell, rather than being illegal brokerage, was an unrelated 3% commission due Gibson, Sr. for sales by the Gibson Trade Show of beauty and health products belonging to Barshell. Miller, Barshell's sole stockholder, identified the check in question as a payment of brokerage fees and also testified that Gibson, Sr. would periodically review Barshell's commission statements to assess a charge as his fee upon this commission. Lynn Lowe, a trade show buyer for Gibson, Sr., provided contrary testimony indicating that the check was in payment for the trade show's sales of Barshell's health and beauty aids. The ALJ and the Commission found Lowe's argument would not wash. There was evi- dence that Miller sold his health and beauty aids not through Barshell, but through his other corporation, Progressive Brokerage. In fact, Miller testified that Barshell was formed specifically to be a housewares distributor and for that reason the Ray-0-Vac account moved through Barshell. The ALJ and the Commission were entitled to draw the inference that had the payments been for the purpose described by Lowe the check would have been made out by Progressive Brokerage, rather than Bar- shell. Although conflicting testimony was presented, there was substantial evidence from which the Commission could find a violation of Section 2(c). Our task is not to reweigh the evidence but only to 69a determine whether there is "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Steadman v. SEC, 450 U.S. 91, 99, 101 S.Ct. 999, 1006, 67 L.Ed.2d 69, 77 (1981), quoting Consolo v. FMC, 383 U.S. 607, 620, 86 S.Ct. 1018, 1026, 16 L.Ed.2d 131, 140 (1966). The Gibsons also claim that the payments in questions here are exempt from Section 2(c), falling within the "for services rendered" exception. We need not here decide whether this exception applies to payments made to a buyer because the Com- mission found, and we agree, that the Gibsons failed to provide adequate evi- dence to substantiate this claim, The Gibsons would have us believe that since they introduced evidence of Gibson, Sr.'s services in selling products of Barshell and since Barshell compensated Gibson, Sr. 70a by check and never asked for a refund, "the presumption then is that the services were reasonably worth the amount paid." This argument, however, fails to consider that the ALJ and the Commission found that the check in question had nothing to do with Gibson's services but rather was a payment for brokerage. {20} The Gibsons' final contention is that there is no evidence to connect Belva Gibson or the Gibson sons with the Section 2(c) violation. The brokerage payments from Barshell to Gibson, Sr. were based on Ray-O-Vac sales to Gibson retail stores at a time when Gibson Products Company was wholly owned by the Gibsons. As the Commission stated: "The Gibson Products Company, through which Gibson, Sr. conducted the fran- chising, trade show and brokerage busi- nesses, and the various corporate entities through which the Gibson-owned retail stores were operated were completely interdependent and under the Tia control of the same few individuals in the Gibson family. For purposes of relief, in this environment, there is ample justification to bind all Gibson corporate respondents, except dissolved corporations, and all Gibson family respondents in order to insure that the order we issue today is not circum- vented," Don't Fence Me In In this final act the Gibsons challenge the FTC order as overly broad. This argu- ment also includes the assertions of lack of evidence to connect the Gibson sons and corporations with the boycott and Section 2(c) violations. They contend that the evidence used pertains only to Gibson, Sr. and that including the other petitioners is merely "guilt by association". The Gibsons also attack the order as arbitrary and overly broad by requiring notice to the FTC of change in employment for a ten year period and prior notification to the FTC of corporate acquisitions, reorganiza- tions, etc. 72a £21, 22} The Commission clearly found that a broad order was necessary for effec- tive enforcement in light of the interre- lationship among the Gibson family members and corporations. "At least since November 1, 1972, there has been an en- hanced potential for Gibson, Sr. to act as agent or intermediary for retail stores owned by other members of the Gibson family. Indeed, he owns no stores out- right at this time, meaning that, leaving aside the possibility of treating all respondents as a ‘single enterprise,' an order limited to Gibson, Sr. as a buyer might have little practical effect." The Commission has wide discretion in deter- mining what type of order is necessary to remedy the unfair practices found. Jacob Siegel Co. v. FTC, 327 U.S. 608, 611, 66 S.Ct. 758, 760, 90 L.Ed. 888, 892 (1946); FTC v. National Lead Co., 352 U.S. 419, -_———eOem nw eee ee eee eee ee 73a 428-29, 77 S.Ct. 502, 508-09, 1 L.Ed.2d 438, 444-45 (1957); Alterman Foods, Inc. v. FTC, 497 F 2d 993, 1001 (Sth Cir. 1974). "¢{T)he courts will not interfere except where the remedy selected has no reasonable relation to the unlawful prac- tices found to exist." National Lead, 352 U.S. at 418, 77 S.Ct. at 508, 1 L.Bd.2d at 444, The use of a broad order within the context of interwoven corporate entities is within the Commission's dis- cretion where the remedy is reasonably related to the violation. See, Sunshine Art Studios, Inc. v. FTC, 481 F.2d 1171 -_-—o oe (1st Cir. 1973); Delaware Watch Co. v. FTC, 332 F.2d 745 (2d Cir. 1964). In this case where there is a substantial interrela- tionship among the Gibson family members and corporations, and where the trade show and franchising aspects overlap, the FTC order, by enjoining the Gibson sons, Belva, 74a and the corporations as well as Gibson, Sr., is reasonably related to the remedies sought, that is to restrain further viola- tions of Section 2(c) and to block possible group boycotts of the type here found. Pro Bono Publico {23, 24] The Gibsons' swan song is that the order is not in the public interest. This chorus appears to rely on the contentions that the FTC failed to prove injury to competition or the exis- tence of a “continuing practice". First, the violations at issue here are per se and thus do not call for extensive analy- sis of anticompetitive effect. The Com- mission has broad discretion in deter- mining whether the public interest requires an order. Cotherman v. FIC, 417 F.2d 587, 594-95 (Sth Cir. 1969). Nor have the Gibsons demonstrated that there is no risk 75a of repeated violations. The Commission specifically responded to the argument that no order was necessary since the practices were isolated. "Respondents cannot and do not contend that the law violations were inadvertent or that these practices were volun- tarily abandoned, even after issuance of the complaint. Given the nature and structure of their business operation, which remains essentially unchanged, and given the absence of any evidence of abandonment, we find that an order is necessary to combat a cognizable danger of recurrence of the violations." We find that the order, while broad, is reasonably related to the practices found to be in violation of the FTC Act and Robinson-Patman Act and that the FTC could conclude that these provisions are necessary to prevent future violations within the con- text of the interrelated corporate and family réspondents, We bring down the curtain on this 15-year proceeding by ordering that the Commission's order be enforced. AFFIRMED AND ENFORCED. 76a UNITED STATES OF AMERICA BEFORE FEDERAL TRADE COMMISSION Filed: April 30, 1982 COMMISSIONERS: Michael Pertschuk Paul Rand Dixon David A. Clanton Robert Pitofsky Patricia P. Bailey In the Matter of ) ) Docket No. 9016 HERBERT R. GIBSON, SR., ) et al. ) FINAL ORDER This matter having been heard by the Commission upon the appeals of complaint counsel and respondents from the initial decision, and upon briefs and oral argu- ment in support thereof and in opposition thereto, and the Commission for the reasons stated in the accompanying Opinion having determined to sustain the initial decision with certain modifications: 77a IT IS ORDERED that the initial deci- sion of the administrative law judge, pages 1-214, as amended, be adopted as the Findings of Fact and Conclusions of Law of the Commission, except to the extent indicated in the accompanying Opinion. Other Findings of Fact and Conclusions of Law of the Commission are contained in the accompanying Opinion, IT IS FURTHER ORDERED that the following Order to Cease and Desist be, and it hereby is, entered: I. IT IS ORDERED that respondents Herbert R. Gibson, Sr., individually doing busi- ness as Gibson Products Company and The Gibson Trade Show, Belva Gibson, Herbert R. Gibson, Jr., Gerald Gibson, indivi- dually and/or as officers of corporate respondents; and corporate respondents 78a Gibson's, Inc., Gibson's Discount Center, Inc., Ideal Travel Agency, Inc., Gibson Warehouse, Inc. and Gibson Products Co., Inc., their successors and assigns, officers, directors, agents, represen- tatives and employees, directly or through any corporation, subsidiary, division or other device in connection with the oper- ation of a trade show, the operation or franchising of any retailing business, or the operation of any business related to retailing in or affecting commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from: "1. Combining, agreeing, engaging in an understanding, or conspiring with any of said other respondents, or any other person, partnership or corporation, to 79a eliminate or boycott any supplier in order to prevent or hinder the supplier's sales to or business dealings with any of the respon- dents or any other person, part- nership, or corporation, provided that nothing herein shall prevent respondents from acting collec- tively to further legitimate business decisionmaking with respect to businesses, including retail stores, which said respon- dents own collectively. 2. Coercing or intimidating any supplier in any manner to prevent such supplier from com- peting for the sale of any pro- ducts to any retailer or any other person, partnership or cor- poration. 80a 3. Representing directly or indirectly or implying to any supplier that the supplier may not compete for the sale of any , products to any other person, partnership or corporation. 4. Taking any individual action to eliminate a supplier or to prevent or hinder the supplier's sales to or business dealings with any other person, partnership or corporation because such supplier does not appear in shows conducted with the Gibson Trade Show, 5S. Recommending, suggesting or advising any retailer or any other person, partnership or corporation not to deal with a supplier because such supplier does not appear in shows con- ducted by the Gibson Trade Show, or because such supplier is unwilling to meet the price, delivery, or billing terms demanded by respondent{s] or by any retailer or any other person, partnership or corporation. II. IT IS FURTHER ORDERED that Herbert R. Gibson, Sr., individually and doing busi- ness as Gibson Products Company and The Gibson Trade Show, Belva Gibson, Herbert R. Gibson, Jr., and Gerald Gibson, Gibson Products Co., Inc., Gibson's, Inc., Gibson's Discount Centers, Inc., their successors and assigns, officers, agents, representatives and employees, directly or through any corporation, subsidiary, 82a division or other device in connection with the purchase of merchandise, in com- merce, as "commerce" is defined in the Clayton Act, as amended, do forthwith cease and desist from: 1. Receiving or accepting, directly or indirectly, as a buyer or acting for or in behalf of or subject to the direct or indirect control of a buyer, from any seller or seller's broker anything of value as a commission, brokerage, or other compensation or any allowance or discount in lieu thereof upon any purchase for the account of any retailer using or licensed to use one of respondents' trade names, in- cluding "Gibson Discount Center." 83a 2. Assuming control of or influencing any seller or seller's broker to induce such seller or seller's broker to pay to respondentf{s]} anything of value as a commission, brokerage, or other compensation or any allowance or discount in lieu thereof upon any purchase for the account of any retailer using or licensed to use one of respon- dents' trade names, including "Gibson Discount Center". Til. IT IS FURTHER ORDERED that Count I of the complaint be, and it hereby is, dismissed. IV. IT IS FURTHER ORDERED that Count III 84a of the complaint be, and it hereby is, dismissed as to respondents Ideal Travel Agency, Inc., Gibson Warehouse, Inc., and Al Cohen Associates, Inc. V. IT IS FURTHER ORDERED that, for a period of 10 years from the date of service of this Order, each individual respondent named herein shall promptly notify the Commission of the discontinu- ance of his or her present business or employment and of each affiliation with a new business or employment. Each such notice shall include the individual respondent's new ousiness address and a statement of the nature of the business or employment in which the respondent is newly engaged as well as a description of respondent's duties and responsibilities in connection with the business or 85a employment. The expiration of the notice provision of this paragraph shall not affect any other obligation arising under this Order. VI. IT IS FURTHER ORDERED that respondents shall notify the Commission at least thirty (30) days prior to any proposed change in the corporate respondents such as dissolution, assignment, or sale resulting in the emergence of a successor corporation, the creation or dissolution of which may affect compliance obliga- tions arising out of the Order. VII. IT IS FURTHER ORDERED that respondents herein shall within sixty (60) days after service upon them of this Order file with the Commission a report in writing setting forth in detail the manner and 86a form in which they have complied with this Order. By the Commission, SEAL /s/Carol M. Thomas Secretary ISSUED: April 30, 1980 87a UNITED STATES OF AMERICA BEFORE FEDERAL TRADE COMMISSION COMMISSIONERS: Michael Pertschuk Paul Rand Dixon David A. Clanton Robert Pitofsky Patricia P. Bailey In the Matter of ) ) Docket No. 9016 HERBERT R. GIBSON, SR., ) et al. ) OPINION OF THE COMMISSION By Clanton, Commissioner: The complaint in this case charges respondents with violations of Section 5 of the Federal Trade Commission Act, 15 U.S.C. 845(a) (1976), and Section 2(c) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. 813(c) (1976), stemming principally from the operation of the "Gibson Trade Show", one part from a network of respondent family enterprises. Individual members of the Gibson family control corporations which own 43 retail discount stores, known as "Gibson Discount Centers"; a family cor- poration also licenses 614 other stores to operate under the Gibson name.! (ID 29). Together, the Gibson-owned and franchised stores combine to buy many of their products from suppliers at a quarterly private fete in Dallas, staged by the Gibson Family, and known as the Gibson Trade Show. (ID 60-61). Count I of the complaint charges respondents with inducing the payment from suppliers of promotional allowances Ithe following abbreviations will be used in this opinion. ID - Initial Decision Finding number ID p. - Initial Decision page number Tr. - Transcript page number CX - Complaint Counsel's exhibit number RAB - Appeal brief of Gibson, Sr. CAB - Complaint Counsel's appeal brief 89a in connection with the Gibson Trade Show, which allowances were not available on a proportionally equal basis to other customers of these suppliers. This alle- gation, while maintained under Section 5 of the FTC Act, is patterned after and draws from Sections 2(d) and 2(e) of the Clayton Act, as amended by the Robinson- Patman Act. Count II alleges that respondents, in violation of Section 5 of the FTC Act, collectively boycotted suppliers who did not grant the promo- tional allowances charged in Count I. Finally, Count III is a distinct allega- tion of the payment of illegal brokerage in violation of Section 2(c) of the Clayton Act. Administrative Law Judge Theodor P. von Brand (the "ALJ") dismissed Count I, issued an order against all respondents 90a except Gibson's, Inc., under Count II, and issued an order only against respon- dent Herbert R. Gibson, Sr. under Count III. Complaint counsel and respondents both appeal. Respondent's Businesses A description of the numerous Gibson corporate entities and the intertwining relationship among them and Gibson family members is set forth at length in the initial decision and will not be repeated here. (ID 1-117). Briefly, the respondents are Herbert R. Gibson, Sr., ("Gibson, Sr."), indivi- dually and doing business as Gibson Products Co. and The Gibson Trade Show; his wife Belva Gibson ("Belva"); two sons, Herbert R. Gibson, Jr. ("Gibson, Jr.") and Gerald Gibson ("Gerald"); and eight corporations, five of which are 9la Gibson family controlled.2 Of the re- maining three corporations, two negoti- ated consent settlements in 1976, and one, Al Cohen Associates, Inc., charged solely in Count III, is still in the case. Gibson, Sr. founded the retail dis- count store chain and, until November l, 1972, directed the franchising and trade show aspects of the family enterprise, doing business as the Gibson Products Company. (ID 3-4) Two other Gibson- controlled corporations, Gibson Ware- house, Inc., and Ideal Travel Agency, were used by Gibson, Sr. as vehicles to store and resell merchandise and to — —_ — oo — — ee oe ae ee ee 2Gibsons, Inc., Gibson Discount Centers, Inc., Ideal Travel) Agency, Inc., Gibson Warehouse, Inc., and Gibson Products Co., Inc. 3Pprogressive Brokerage, Inc. and Barshell, Inc. 92a collect booth and show fees at The Gibson Trade Show. (ID 14-15). As of November 1, 1972, a reorganiza- tion and change in operating control of various aspects of the family business was effected, essentially through a transfer of stock by Gibson, Sr. and his wife to a corporation, Gibson's, Inc., all of whose shares were owned by two of their sons, Herbert R. Gibson, Jr. and Gerald Gibson. This corporation now owns and operates the franchising and retail aspects of the family business. Gibson, Sr. retained the trade show business and, having sold the Gibson Products Company name to Gibson, Jr. (ID 16, 25), he registered the name, "The Gibson Trade Show", on November 1, 1972. (ID 26). The Gibson Trade Show, upon which much of this case turns, is a private trade 93a show where manufacturers display their products to buyers for Gibson owned and franchised stores. (ID 59-61). The show provides the booth space from which the suppliers’ representatives can show their wares and attempt to obtain orders. Gibson, Sr. employs "merchandise managers" or "trade show buyers" to operate the show. These buyers recruit the partic‘pation of manufacturers to sell at the show. (ID 78). Buyers discuss product lines, billing terms and prices with suppliers, negotiating to get the best deal on the products to be shown. Upon the satisfactory conclusion of negotiations, a buyer fills in a "show sheet" with the price and terms for each product. These sheets, which are the exclusive order forms used at the shows (ID 90), are headlined "Ship To Gibson 94a Products Company", followed by blank lines for the address of a particular store. (ID 91). They contain a notation that items are not to be shipped at prices higher than those listed or else a deduction will be taken. (ID 93). The trade show buyers patrol the aisles and booths during the show, talking to suppliers' and retailers' representa- tives.4 41n addition to the provision of booth space, the trade show provides meeting facilities and other services, including the opportunity for placement of "blanket orders," recommendations sent to Gibson — to purchase particular items. (ID 98). Suppliers are also solicited to adver- tise in Gibson tabloids, which are used by Gibson retailers as newspaper supple- ments or which are mailed out or posted in stores (ID 105). Participating stores purchase the “inished tabloids from one of the Gibson family corporations; the tabloids are prepared and “chagris by G&G Advertising, a proprietorship run by (footnote continued on next page) 9Sa Payments made by suppliers, and alle- gedly illegally induced by respondents, in connection with the trade show in- cluded the following, for each year from 1969 through 1972: (1) payment for booth rental, in an amount which was identical for all suppliers; (2) payment for ser- vices in connection with booth rental including, but not limited to electrical contractor services and furnishings; (3) payment for provision of personnel to prepare and attend the booth throughout the time The Gibson Trade Show was open; (4) payment for advertising in a Gibson ee ee me em me re re rm ee ee ree rm re rene ee ree ee ee ee ee ae ee ee ee ee (footnote 4 continued) Gerald Gibson. (ID 107). Also, Gibson, Sr. at times sends letters to suppliers requesting that they advertise in par- ticular tabloids. (ID 113-115). If an item is to be advertised in a tabloid, there is a sign on its suppliers' booth at The Gibson Trade Show which states "Recommended tab item", 96a tabloid; (5) special trade show prices on one or more of the suppliers’ products offered for sale at The Gibson Trade Show; (6) special billing terms on all sales made at the trade show; (7) special allow- ances on sales made at the trade show calculated from a previously negotiated percentage of all such sales (the so- called "show fee"). The principal family business, from at least 1969 to November, 1972, from November, 1972 to the date the complaint issued in 1975, and to the present, was the ownership and operation of Gibson retail discount stores and the fran- chising of those stores. Both before and after the November, 1972 transfer, the franchise agreements promised the fran- chisee the benefit of Gibson volume pur- chasing and the advice on merchandise, but reserved to the franchisor the right 97a to order the discontinuance of an item or service if the quality was disapproved. Participation in the Gibson Trade Show is a standard vehicle for manufacturers wishing to sell to Gibson retail stores. Few other retailers stage private trade shows, however, and accordingly, the complaint charges that the myriad payments made to the Gibson enterprises were not matched by similar payments or terms to the suppliers’ other customers, No additional facts are pertinent to Count I of the complaint; additional information needed to dispose of Counts II and III is set forth infra, Count I Count I of the complaint largely tracks the language of the Clayton Act 98a §§2(d) and 2(e)5, as amended, and alleges that the Gibson family and corporate _—— _—_— -——< —_—— ero nw er SSection 2(d), 15 U.S.C. $13(d) (1976), provides: "That is shall be unlawful for any person engaged in commerce to pay or contract for the payment of anything of value to or for the benefit of a customer of such person in the course of such commerce as compensation or in consideration for any services or facilities furnished by or through such customer in connection with the ag pigs handling, sale or offering or sale of any products or com- modities manufactured, sold, or offered for sale by such person, unless such payment or consideration is available on proportionally equal terms to all other customers competing in the distribution of such products or commodities." Section 2(e), 15 U.S.C. $13(e) (1976), provides: "That it shall be unlawful for any person to discriminate in favor of one "abe or purchasers of a commodity ought for resale, with or without beige iad J by contracting to furnish or furnishing of, any services or facilities connected with the pro- cessing, handling, sale, or offering (footnote continued on next page) 99a respondents knowingly induced and/or received promotional payments and ser- vices in connection with the sale of pro- ducts to Gibson owned and franchised stores in violation of Section 5 of the FTC Act.© The seven types of allegedly illegal allowances are those set forth supra. The ALJ found that the variety of fees and special terms given by manufacturers to respondents were not within the purview ——_—— ee ee ee ee ee ee ee ee re ee ee (footnote 5 continued) for sale of such commodity so purchased upon terms not accorded to all purchasers on proportionally equal terms." 6Although buyer misconduct is not a violation of Sections 2(d) and 2(e), this omission appears to be only a matter of congressional inadvertence. See Grand Union Co. v. FTC, 300 F.2d 92, 96 (2d Cir. 1962). Nevertheless, such miscon- duct is cognizable under Section 5 of the FTC Act. R. H. Macy §& Co. v. FTC, 326 F.2d 445 (2d Cir. 1964). 100a of Sections 2(d) and 2(e), because they were in connection with original sale of a product, rather than in connection with its resale.’ In his view, the allega- tions of Count I should have been brought under Section 2(a) for price discrimina- tion. Complaint counsel, relying prin- —_——— ee a ew eee -—-—_---- 1974), which was distinguished by the ALJ, appeal.8 7The ALJ found that the solicitation of fees for tabloid advertising was within the purview of Section 2(d). (ID 184). However, he held that complaint counsel had not sustained their burden of showing contemporaneous sales with respect to the items promoted in the tabloids (ID 189), and complaint counsel did not appeal from this holding. 8complaint counsel have appealed from other holdings of the ALJ on this count of the complaint, but in light of our disposition of this threshold question, we do not reach these other issues. 10la Two features differentiate Sections 2(d) and 2(e) from the provisions of Section 2(a). The first is that the seller must either provide "services or facilities" or make payment in consider- ation of "services or facilities fur- nished by or through {the} customer." It has been held that the service or payment at issue must be promotional in nature, such as for advertising. See, P. Loril- lard Co. v. FIC, 267 F.2d 439, 443 (3d Cir.), cert. denied, 361 U.S. 923 (1959). The second is that the payment made or service rendered must be in connection with the "processing, handling, sale, or offering for sale" of a product by the customer, i.e., it must bear a nexus to the resale or preparation for resale by the retailer. See, Rutledge v, Electric Hose & Rubber Co., 511 F.2d 668, 678 102a (9th Cir. 1975). If these conditions can be met, the plaintiff may take advantage of Sections 2(d) and 2(e), which carry an easier standard of proof than does Section 2(a). Under Section 2(a), price discrimination is lawful, unless it may susbstantially lessen or injure com- petition and, inter alia, it is neither cost- justified, nor undertaken to meet competition. Sections 2(d) and 2(e) require no showing of competitive effect, nor do they allow resort to Section 2(a) statutory defenses, save perhaps the "meeting competition" defense. See E. Kintner, A Robinson-Patman Primer 270-72 (2d ed. 1979); Exquisite Form Brassiere, Inc., v. FTC, 301 F.2d 499 (D.C. Cir. 1961), cert. denied, 369 U.S. 888 (1962); but see Henry Rosenfeld, Inc., 52 F.T.C. 1535 (1956). Thus, Sections 2(d) and 103a 2(e) "create a legal premium for the FTC or other plaintiffs to ease their evi- dentiary burdens." F. Rowe, Price Discrimination Under the Robinson-Patman Act 372 (1964). The traditional use of Sections 2(d) and 2(e) has been in the realm of cooper- ative promotional arrangements. See, FTC _v. Fred Meyer, Inc., 390.U.S. 341 (1968). In the classic Section 2(d) and 2(e) case, a manufacturer has compensated a high volume retailer via a discrimina- tory plan, sometimes in an amount far in excess of that retailer's actual promo- tional costs, and in so doing has utilized a scheme not realistically available to small retailers. In addition, the manu- facturer often rebates a "promotional allowance" to a retailer in an amount tied to the number of units resold by the 104a retailer to the public, but not linked to the retailer's actual promotional expen- ditures. Plainly, such a transaction is in connection with a resale and within the ambit of Sections 2(d) and 2(e). Similarly, making employees available or arranging with a third party to furnish personnel for purposes of performing work for a customer would also come within Sections 2(d) and 2(e). FTC Guides for Advertising Allowances and Other Merchan- dising Payments and Services, 16 C.F.R. §240.7, example 6 (1980). Because of the easier threshold of proof carved out for Sections 2(d) and 2(e), the Commission and the courts have an obligation to ensure that the juris- dictional prerequisites of those sections are reasonably, and not expansively, con- strued. Accordingly, we will generally 105a find that Sections 2(d) and 2(e) apply to cooperative promotional arrangements. See Rowe, supra at 381 ("{TJhe legal cri- teria of Sections 2(d) and 2(e), unless confined to the sphere of cooperative promotional arrangements, would cut across and confound the legal requirements of the separate price and brokerage provi- sions of the Act.") The legislative history of Sections 2(d) and 2(e) evidences the relatively narrow scope that Congress intended these specific provisions to have. For example, Representative Utterback, Chairman of the Senate-House Conferees, stated that: "The existing evil at which this part of the bill is aimed is, of course, the grant of discrimina- tions under the guise of payments for advertising and promotional services which, whether or not the services are actually rendered as agreed, results in an advantage to 106a the customer so favored as com- ared with others who have to ear the cost of such services themselves."" 80 Cong. Rec. 9418 (1936). And the Senate and House Judiciary Com- mittee Reports also focus on "special allowances in purported payment of adver- tising and other sales promotional ser- vices, which the customer agrees to render with reference to the seller's products, or sometimes with reference to his busi- ness generally." S. Rep. No. 1502, 74th Cong., 2d Sess. 7 (1936); H.R. Rep. No. 2287, 74th Cong., 2d Sess. 15-16 (1936). In keeping with this narrow scope courts have not hesitated to reject claims under Sections 2(d) and 2(e) which more properly should be brought under Section 2(a). Variations in credit terms 107a have consistently been held to present only a Section 2(a) issue, and courts have refused to allow such claims to be maintained under Sections 2(d) and 2(e). See, e.g., Robbins Flooring, Inc. Vv. Federal Floors, Inc,., 445 F Sup. 4, 8 (B.D. Pa. 1977); Glowacki v. Borden, Inc., 429 F. Supp. 348, 353 (N.D. Ill. 1976). Likewise, discriminatory freight allowances have been held to be in connection with delivery on the original sale and as such within Section 2(a) rather than Sections 2(d) or 2(e), see Chigaco Spring Products F.2d 428 (7th Cir. 1966), and other so- called delivery allowances have been held not to be in connection with resale and so to state a Section 2(a) rather than a Section 2(d) claim, Glowacki, supra at 358-59. 108a Furthermore, courts have recognized that the purpose of Sections 2(d) and 2(e) is to strengthen Section 2(a) by pro- hibiting outright hard-to-detect, dis- guised discrimination in the form of promotional allowances, thus forcing most discrimination into the open area of price allowances or discounts, where it can be measured and adjudicated under Section 2(a). FTC _v. Simplicity Pattern light of its salutary, but narrow, statu- tory purpose, the courts have, albeit not unanimously, resisted expanding the "scope of Sections 2(d) and 2(e) beyond the limited area of applicability intended by v. General Motors Corp., 380 F. Supp. 109a Corp., 233 F.2d 762 (Sth Cir. 1956); New Amsterdam Cheese Corp. v. Kraftco Corp., 363 F. Supp. 135 (S.D.N.Y. 1973); David R. McGeorge Car Co., Inc. v. Leyland Motor Sales, Inc., 504 F.2d 52 (4th Cir. 1974), cert. denied, 420 U.S. 992 (1975). There is some authority, however, for expanding the scope of Section 2(e). Centex-Winston Corp. v. Edward Hines Lumber Co., 447 F.2d 585 (7th Cir. 1971), cert. denied, 405 U.S. 921 (1972), cited by complaint counsel, held that preferen- tial differences in the timeliness of delivery were within the purview of Section 2(e) because consistently faster deliveries would ultimately promote and facilitate resale. The very limited acceptance of this decision, see Glowacki v. Borden, supra at 356; Harlem River Consumers Cooperative, Inc. v. Associated 110a Grocers of Harlem, Inc., 371 F Supp. 701, Cir. 1974) (dicta); Palmer News, Inc. v. ARA Services, Inc., 476 F. Supp. 1176, 1183 (D. Kan. 1979) (dicta), is outweighed by the strenuous criticism of its expan- sive view, see Rowe, Pricing and the Robinson-Patman Act, 41 Antitrust L.J. 98, 108-09 (1972); Cecil Corley Motor Co., Inc., supra at 851-852, and other courts have either rejected, id.; Buchannan v. Cas. (CCH) 61,245 at 70,728-29 (D. Ore. 1976), or distinguished the decision, David R. McGeorge Car Co., supra at 55; Purdy Mobile Homes, Inc. v. Champion Home Builders Co., 594 F.2d 1313, 1317-18 (9th Cir. 1979). Indeed, it is not entirely clear whether the Seventh Circuit continues to hold firmly to its Centex-Winston Corp., £1980} 5 Trade Reg. Rep. (CCH) 63,229 at 78,126-27 (7th Cir. March 17, In Kirby, which dealt with advertising allowances, the court reaffirmed the accepted distinction between payments and services in connection with the original sale, which are challengeable only under Section 2(a), and those with a connection to the resale, which are cognizable under Sections 2(d) or 2(e). The court then concluded: "In view of the strict standards of 88 2(d) and 2(e), which focus on resale, it appears quite clear that Congress carefully con- sidered the deficiency in the original law proscribing price 112a discrimination in the supplier- customer sale and drafted 882(d) and 2(e) to apply exclusively to promotional discriminations like those alleged in this case." 489 F.2d at 910-11 Whatever vitality remains in the Centex- ~_-_——-— Soo Winston decision, it does not contravene the general standards which we bring to bear upon the facts of this case, Against this legal background, we approach our earlier decision in Alterman Foods, Inc., supra. Unlike the ALJ, we are unable to discern a principled basis upon which to distinguish that case from the one at bar. In a factual setting quite similar to the instant case, Alter- man held that discriminatory payments to a private trade show were, in fact, unlawful promotional allowances under Sections 2(d) and 2(e) of the Clayton Act. In finding that the Alterman food ll3a show had induced suppliers to violate Sections 2(d) and 2(e), the Commission relied upon two kinds of benefits which had accrued to the Alterman retail opera- tion. These benefits were described as "Cdjirect in the sense that profits from booth rentals enhanced the financial position of the respondent, and indirect in the sense that the suppliers' booths, displays and demonstrations at the food show were intended to aid in and promote the product's resale to the consuming public." 82 F.T.C. at 343. After careful reexamination of our decision in Alterman, we conclude that its reasoning is flawed and, henceforth, we decline to follow it. Specifically, we do not judge the "benefits" recited in Alterman, which are relied upon by com- plaint counsel, to be sufficiently related ll4a to the promotional allowance and resale requirements of Sections 2(d) and 2(e) to trigger application of those provisions. Undoubtedly, the products purchased by Gibson retail buyers from manufacturers at the trade show were intended for resale to the ultimate consumer. But this fact standing alone is insufficient to trans- form what is plainly the original sale into one that is in connection with resale. To the extent that Gibson enti- ties received booth rentals and Gibson buyers received price concessions not available to the competing customers, an action may lie under Section 2(a). But to focus on the translation of these "direct benefits" down to the next level of competition, i.e., to rely on finan- cial strength of the company, enabling Gibson retailers to undercut competitors 15a on subsequent resales, is to misapply the statute.9 "Benefits" of this sort are inherent in any transaction in which goods are ultimately destined for resale, and opening up Sections 2(d) and 2(e) to practices that Congress intended to be challenged solely under Section 2(a).10 90f course, an examination of such direct benefits ab initio may be neces- sary to determine whether there has been discrimination among competing customers. See Kintner, supra at 254. But even if we assume for purposes of this discussion that all seven categories of alleged dis- criminatory payments, including the show fees, inured somehow to the benefit of the Gibson retailers, that does not auto- matically bring such payments within the purview of Sections ota) or 2(e). Although it is not entirely clear, it both the discrimination and resale issues. 100ur holding is not inconsistent with R. H. Macy §& Co. v. FTC, 326 F.2d 445 (2d Cir 1964), in which Macy's solicited (footnote continued on next page) 116a As to the “indirect benefits" iden- tified in Alterman, we believe they play a role too incidental in the overall transaction here to warrant applications of Sections 2(d) and 2(e). In general, marketing assistance, if discriminatorily granted, does run afoul of Sections 2(d) ———e— 6 eee Oe 8 et Ee et te eee ee (footnote 10 continued) vendors to contribute $1,000 apiece to help defray advertising and promotional costs of its 100th anniversary celebra- tion. While Complaint counsel would read Macy as proscribing the receipt of pay- ments as "general revenue", in fact the court specifically found that Macy's used the contributions for advertising purpose [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385010_0073%3A1. Public record. Not legal advice.