Appendix — Continental Baking Co. v. Federal Trade Commission

Supreme Court brief1967

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UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT :

}

Savewly Sroum, INCORPORATED, Decmax

Bakine Co., and GrorGE 8S. ‘BUCHAN,

LANGENDORF Untrep Baxertgs, Inc.,f

Hansen BakIna CoMPany, INC., and :

Ricuarp Hoyt, Petitioners, \ No/ 19,325.

Vs. ; ;

FEDERAL TRADE Commission,

" Reibeniianl

[September 14, 1966]

Petitions to Review An Order Of The

Federal Trade Commission

Before: MERRILL, BROWNING; and ELY, Circuit

Judges

ELY, Circuit Judge:

Petitioners seek review of a cease and desist order

issued by the Federal Trade Commission (FTC), The —

order relates to unlawful price-fixing acts and prac- -

tices found to have been committed by the petitioners

and others ‘in. the sale of bread: The FTC made and

entered the. challenged order under the authority of

‘section 5(b) of the Federal Trade Commission Act, 15

U.S.C. § 45(b). Our power of judicial review is con-

' ferred by section 5(c) of the Act.

SAE IMENT MERIT EA SD

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The petitioners are Continental Baking Company,

‘Langendorf United Bakeries, Inc.,;-Hansen Baking.

Co., Inc. Safeway Stores; Incorporated, and Richard

Hoyt, an officer of Hansen. A number of others were

involved in the, proceeding, and while the order was

directed against them also, they have net sought

review.’ They. were held, with petitioners here, to

have engaged in a conspiracy wrongfully to fix and

regulate the price of bread in the general vicinity of

mere, Washington.

Thee of the cekiitialins nkiee, companies, (een

with nearly all others who were eharged in the Com- |

- Inission proceeding, were members of a voluntary or-

7 ganization ealled Bakers of Washington, Ine. This

corporation, of which the petitioner Hoyt. was vice-_

‘president, was also named ‘as a respondent. It was : |

‘initially incorporated in 1936-in the State of Wash--

ington under the name of ‘Bakers of Western Wash-

ington, Inc. In August, 1937, the corporate name was

changed to its present name. Bakers’ members are

classified by division according to geographical loca-

tion. In September, 1961, there were fifty-nine mem-

bers. More than half of these had places of business

in Seattle, but divisions of the association were also .

located in other Washington cities, Aberdeen, Yakima,

1Petitioners Buchan _— Co. pr Seite S. Buchan, named in the

‘heading, filed petitions but have offered no briefs in support of their

position.

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Bellingham, and Tacoma. All dues were paid to

Bakers in Seattle. Both wholesale and rétail bakeries

were included in the mmbership, but within the. trade

areas served by the association, the great majority was .

engaged in wholesale distribution.

The Commission contends that much of the wrong-.

ful activity was committed through the conduct i

Bakers and of two individuals who were its successive

secretaries during the period. in question. The pur- ~

poses for which Bakers was formed, as specified by

its corporate articles, included the collection and dis-

-. semination among its members of all lawful infor-

mation for the benefit of the business of its - members. °

3 Petitioners contend that the primary purposes of the

association, though not specified in the articles, per-

tained to its negotiation of labor contracts as a col-

lective bargaining agent for its member companies.

and its dealing with union labor grievances and with

problems concerned . with legislative and governmental

regulations. ,

We must first examine petitioners’ vigorous chal-

lenge’ of the Commission’s power to. exercise ° juris- /

diction.. It is claimed that the’alleged acts and prac-

ticés, even if wrongfully committed, were not com-

.. | mitted ‘in’ commerce’? within the meaning of section

.5 of the. Act. Petitioners assert that. the challenged .

activities were wholly intrastate and are thus not

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' within the intendment of, the statute. The FTC insists

' “that its jurisdiction is properly supported by three

ers to Alaskan customers f.o.b. dockside at Seattle,

were sales in interstate‘commerce, (2) bread produced:

and sold by integrated, multistate corporations Con- -

- tinental, Langendorf, and Safeway is necessarily in -

interstate commerce, even if all sales were made in

. only one state, and (3) an unlawful conspiracy be- .

tween petitioners, Bakers of ‘Washington, “Inc., and

others, fixing the price of bread in the State of Wash-

' ington, is an unfair method of competition in inter-

state commerce regardless of whether or not petition-

‘ers’ bread sales in the State’ of Washington are con-

_ sidered to‘have been made in interstate commerce. We

believe that the first ground sufficiently supports the

. Commission’s jurisdiction and ‘that it is lirinecessary

to examine the other two. |

Four of the-petitioners, Buchan, Continental, Han-

sen, and Langendorf regularly sold bread to custom-

ers in Alaska, f.0.b:. dockside at Seattle? The Alaskan

sales by each of these four amounted to less than one

percent of its total sales. The prices to Alaskan cus-

2In addition to such Alaskan sales other regular out-of-state shipments

were made by Safeway and Snyder’s Bakery, Inc. ‘Safeway shipped bread

from its Seattle pat to an adjoining state and Snyder, a wholesale baker -

in Yakima, sold bread to retailers in the State of Oregon.‘On April 1, 1959,

Trennery’s Bakery Co. in Yakima was acquired by Holsum Baking Com- .

pany. Thereafter all bread sold by Trennery’s in Yakima was imported from

Lewistown, Idaho. Petitioners conceded in proceedings before the Com-

mission that this bread sold in Yakima was “in commerce”.

. - grounds; (1) sales of biréad® by ¢értain of the petition--- tase

tomers were, ‘regular wholesale prices,” determined

on the same basis-as the prices for sales within. Wash-

.,.. Ington State. Therefore, price fixing in the State of

| Washington necessarily. affected the sales’to Adaskan |

customers. The sales to the Alaskan customers were

sales in interstate commerce. See Dahnke-Walker |

_ Milling Co. v. Bondurant, 257 U.S. 282, 290, 66 L. Ed.

239, 42 Sup. Ct. 106 (1921); Addyston Pipe « Steel

Co. v. United (States, 175 U.S. 211, 241, 44 L. Ed. 136,

- 20 Sup. Ct. 96 (1899) ; California Rice Ind. v. FTC,

102 F.2d 716, 718 (9th Cir. 1939). This is sufficient to _

fix jurisdiction in the FTO. E.g,, Standard Container :

Mfr’s Ass’n v. FTC, 119 F.2d 262, 265 (5th Cir: 1941).

Petitioners contend, however, that we should ignore

the Alaskan sales as a valid basis of jurisdiction by:

application of the doctrine of de minimis non curat

lex and because the sales were ‘unrelated’ to the al-

leged conspiratorial acts. We have recently held that

only: $3,086:31 in interstate purchases was sufficient to

_ sustain ‘the: jurisdiction’ of the NLRB over a local’

cemetery association. NLRB v. Inglewood Park Ceme-

tery Ass’n, 355 E. 2d 448 (9th Cir. 1966). In that case,

we quoted the Seventh Circuit’s response to an ‘argu-

ment of. de minimis, “fhe time has not yet arrived

when $2,000 is but a trifle. "> NLRB v. Aurora City.

Lines, Inc., 299 F.2d 229, 231 (7th Cir. 1962). Here

: the amounts involved are substantially greater than

the amounts involved in the cited cases. The pro- —

AG.

| PeKe .

.- visions of the respective statutes granting jurisdiction

to the NLRB and the FTC are not identical. The

labor statute probably is intended to be more exten-

sive, but the question as to what is “de minimis”

\" \ the- amounts of the Alaskan sales were “‘de minimis,’

should: not call for: different answers. Assuming that

it would not. necessarily follow that the -FTC was

here without jurisdiction. In United States v. Socony-.

Vacuum. Oil Co., 310 U.S. 150, 225,.n.59, 84 L. Ed.

- 1129, 60 Sup. Ct. 811 (1940), it was written, ‘‘the

amount of interstate or foreign trade involved is not

material (Montague & Co. v. Lowry, 193 U.S. 38),

since § 1 of the Act brands as illegal the character of.

the restraint not the amount of commerce affected.’’

See also United. States v. McKesson & Robbins, Inc.,

351 U.S. 305, 310, 100 L. Ed. 1178, 76 Sup, Ct. 806 -

(1956) (Footnote omitted,), wherein the Court stated,

“It makes no difference whether the motives of.

the participants are good or evil; whether the

price fixing is accomplished by express contract

or by some more subtle means; whether the par-

ticipants possess market control; whether the -

amount of interstate commerce affected is large

or small; or whether the effect of the agreement

is to raise.or decrease prices.’’ (Emphasis added.)

See also:Sun Oil Co. v. FTO, 350 F.2d 624, 631-32

(7th Cir. 1965), cert. denied, 382 U.S. 982 (1966).

_ The Alaskan sales were not wholly unrelated to the

activities which the FTC seeks to prevent. The prices —

y Be

AT Aa

received for these sales, sales which were clearly made

“in commerce,” were determined .in the same man-

ner as sales made in the State of Washington. While

' it may be that the petitioners intended. that their

activities affect only those sales made within the State

of Washington, the effect was otherwise.

- | )

wean and Hanisen eontend that since tae are

engaged in\ the sale of bakery products at wholesale —

prices only, \they could not have conspired to fix and

maintain retail prices. The argument is specious. Con-

tinental, Langendorf, Hansen, and Buchan all stamp

the retail price on the bread wrapper. ‘The wholesale/

price paid by the retailer is the stamped retail price:

less twenty percent.. This was established by testimony .

of representatives of the wholesale bakers. Any price- -

fixing activity with regard to the wholesale price

would necessarily have a direct and immediate effect

on retail prices. | |

All of the petitioners contend that the isiiaibeion! s

order i is not supported by substantial evidence. We do

not agrée. Our attention is directed at certain signi-

ficant and relevant facts. =

Representatives of Continental, Latigendort, Han-

’ sen, and Buchan regularly attended the meetings of

Bakers of Washington, Inc., at the Washington Ath-

_ letic Club. ‘Meetings were held not less than er

He,

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six times annually. During the summer of 1958 meet-

ings were held at which jprieee were discussed.’ ,

On August: 11, 1958, Continental, Langendorf, Han- °

sen, and Buchan all put into effect identical increases

of two cents per one and one-half pound loaf. of white

bread, from thirty-one cents to thirty-three cents. The

bakery supervisor /of Albertson’s Stores, Inc., was

‘informed by the secretary of Bakers of a price in-—

crease. Petitioners ‘contend, that prices were only ‘

_ casually discussed at the Bakers’ meeting in conniec-

tion with negotiation of labor contracts, but the record

_ téveals that price discussions took place, not only

prior, but also subsequent to labor ‘negotiations. .

On September 19, 1960, Hansen. and iiiinboes a

* yaised prices of the standard one and one-half pound

loaf of white bread from thirty-three cents. to thirty-

four cents. Buchan and Continental made a similar

increase three days later. .

One example of .a price rise after price discussions

at the Bellingham division of Bakers took place in

1958. ray ial Hall, of Hall : Bakery in Bellingham,

3Albert Pettersen, a hnien baker supervisor for Albertson’s Stores, Inc.,

owner of a grocery chain, a member of Bakers and a oo below,

‘ “Well we e discunsed the labor, we discussed our ante of our r material

— flour, shortenin And labor had j so high that t :

ee ot a ri

- decided that we ve a raise in our bread. From there we just

. took it and.they said, “What do you think about certain prices?’ and

: they kicked it around and, so that is as far as it went as. ong as I sat

there.” — added. Baas :

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which: had been known as a “cut-rate”” bakery, testi-

fied that he had been asked: by ‘‘the’ representatives

of Bakers of Washington, Ine.’’ to join and follow .

in line with other bakeries in the prices: set.

One Schafer, o owner of a baking company, testified’

that a meeting of the Yakima division of Bakers was

. called subsequent to a price-cutting incident in that

- eity. The meeting was. attended - by representatives of

~ both wholesale and retail bakers. Schafer’s testimony

. indicates that much of the discussion at the meeting

was directed at the expressed need to coordinate prices’

| among the retailers and eliminate “thrift-store” com-

. petition. Lalime, who became the secretary of Bakers

in N ovember, 1957, was quite active in maintaining

prices. The bakery products | supervisor of:a grocery

chain testified that after having lowered his com-:

pany’ S price on raisin bread to nineteen cents per

loaf, he received a telephone call from Lalime. Lalime —

. informed him that a wholesale baker had eomplained

, about the nineteen-cent price and Lalime told the

) supervisor. that he should charge the regular price. On

another occasion, ‘this superintendent himself made »

~~ use.of Bakers. to combat price ‘oaitun He called up :

Lalime and complained of the low -price of. bread in’,

Bellingham. Lalime told him not to cut his prices,

‘You just wait and. let me take’ care of this. ”” The

supervisor testified, :

OW: Well, Mr. Lalime. represents all the bakers here

the ‘State of Washington and he is supposed to’

kind of keep us all in line, to try to help us all

out. That is his job, to-keep ‘the people that belong . .

_to the association and. to keep the — where

they belong.’’ ;

~ Robert Hall testified that he ‘had oe solicited fe *

join Bakers three ‘times. He was told by Lalime that

the purposes of the association were - “to make better

‘labor relations, to maintain prices and generally bet-,

‘ter baking conditivns.”’ (Emphasis added.)

‘The foregoing points to only some of the dostimony

‘Yom which it might. be reasonably inferred that price- :

“fixing activities occurred. “IT ]hie function of this

Court » Is merely to make a compreheusive review of

- the record before the Commission and to determine

_if the findings are supported by substantial ‘evidence

on seh record “tensidered as a whole.’’ Goodman v.

FTC, 244 F.2d 584, 589.90 (9th Cir. 1957) (Emphasis

in original. ) (Footnote oinitted.). See also Sun Ou

Co. v. FTC, supra. ‘The findings-of the Commission

“as to the facts, if supported by evidence; ‘shall be con- -

' elusive.’’ 15 U. S.C. § 45(c). It is-not the province of

our court, in reviewing FTC findings, to substitute

' its own appraisal of the testimony and to pick ‘and

choose among uncertain and conflicting inferences.

| “Statute: and decision .. . forbid the exercise of that

power. ”? FTC»: Gan Lumber Co., 291 US. 67,

: _%, Ae Lt Ed. 655, 54 — Ct. 315 en (Citation

‘ «fF

ry : : >

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omitted.) Stauffer Laboratories: Ine. v. FTC, ne a

75, 80 (9th Cing1965).

a we , have. a determination of, a et 4

fix prices. It would “be “‘naive,”’ as J udge. ‘Barnes

wrote for our court in Esco Corp. v. United States,

- 340 F.2d 1000, 1006: (9th Cir. 1965), “‘to believe that

a formal signed-and-sealed contract or written resolu-

tion would conceivably be adopted at a meeting of

price-fixing conspirators in this day and age. In fact,

the typical price-fixing agreement is “usually accom-

dina contrary amanner. ‘i

Petitioners contend that the ETC erred in finding

and holding that a conspiracy ‘existed ‘solely upon

evidence. of general discussions of price levels oc-

casioned- by and.‘ occurring during discussion of col- |

lective bargaini te for labor union, contracts. They

als ‘conteni at the FTC erred i in determining, upon

. the sole asis of simultaneous or. nearly simultaneous

price increases, that a couspiracy to set and fix prices

existed. We do not believe that the FTO so found

and so held: It seems anomalous that. petitioners would

contend that there were two “sole” bases for the

| FTOC’s finding of a conspiracy to raise,. set, and fix

prices. It. is quite trye that “‘even ‘pure’ conscious

parallelism of prices is, standing alone, not unlawful.

- Nor is an individual competitor’ S sole decision to fol-:

low a price leadership, standing alone, a violation of.

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law. ™ Esco Corp. v. United States, 340 F.2d at 1007¢

It is of some significance here-that at no time was a -

_ decreasé in price by one of the wholesalers or retailers

joined in by all his fellows nor was any such-decrease

of an enduring nature. The contrary was true. when.

: prices were increased. We see more than mere con-

scious parallelism and: the use of the Bakers’ forum |

for the discussion of prices. The vigorous ‘activity. of

the secretary of Bakers cannot be ignored. His acts

‘were committed under the color of his official author- —

ity, and.while all those involved apparently knew of

his endeavors, none voiced objection to his attenipts

to keep prices in line by all means chosen by him. In —

the activities which concern us, he was the agent of

the association and the association was the agent of

its members. | a >

- Safeway contends that it. stands apart, that there

- was no substantial evidence that it: participated. in

the conspiracy. It points to the faets that it was not -

a member of Bakers and that it charged one cent per

loaf less for its house brand of bread than was the

prevailing price on the other brands. The existence

of the price differential did not compel the Commis-

sion to find that Safeway. was not a conspirator. See

FTC v. Sun Oil Co., 371 US. 505, 9 L. Ed. 2d 466, 83

Sup. Ct. 358 (1963). It may have be a inferred that

Safeway enjoyed a position disempowering others to

prevent its reducing its price or that it merely fol-

~ he fer

lowed the common practice of many chains in + une

ing less for items soli. under house labels, _or both. As.

‘to its nonmembership in Bakers, the record reveals |

that Safeway directly paid to Bakers’ secretary the

sum of $600 per year, an amount equivalent to the

maximum annual dues charged for Bakers’ members.

While Safeway claimed that the consideration was the’

secretary’s individual representation i in its labor mat-—

ters, the Commission was free to infer otherwise.

| “Once the existence of the common scheme is es-

tablished, very: little is required to show that defend-

ant became a party —‘ slight evidence may be ‘suf-

ficient to connect a defendant to it.’ Nye & Nisser v. !

United States, 168 F.2d 846, 852. (9th Cir. 1948),

affirmed 336 US. 613, 69 S.Ct. 766, 93 L. ‘Ed. 919. tis

Hernandez v. United States, 300 F.2d 114, 121-22 (9th |

Cir. 1962). (Footnote omitted.) Our eourt made the

quoted pronouncement in a criminal case, wherein the

Government’s burden of proof was greater than that

which here rested ‘upon the Commission. As to. the |

alleged conspiracy itself, we hald that there was evi- ~

dence which, with its inferences, was sufficiently sub-

stantial to support a determination that thé petition- -

‘ers ‘had a.unity of purpose ora common design and

understanding, or a meeting of the minds in an uh-

lawful arrangement, . ’ American Tobacco C6 U,

United States, 328 US. 781, 810; 90 L. Ed. _ 975, 66

Sup. Ct. 1125 (1946). See also: Continental Baking vias

hig OND aS CAR Ft rin BSE wine ito alee ts eA, ener ei la a wp Nn 8

rer

v. United ‘States, 281 F.2d 137 (6th Cir. 1960). We

nh ain Ate

also hold that there was substantial evidence to sup- on

port findings that each of petitioners, including Hoyt,

_a Hansen officer and panes vice-president, partici-

ig.

Fees

Continental alleges error in the denial of its motion

to disqualify Commission Chairman Dixon from par-

- ticipating in the proceeding. Dixon became chairman ~

_ of the FTC in ‘March, 1961. In 1959, in his then

. ¢apacity as Chief Counsel, and Staff Director of the

- Antitrust and Monopoly Subcommittee of the United

States Senate; he participated in a Subcommittee

hearing on administered pricing in the.bread indus-

try. He interrogated Continental’s president, and it.

is urged that his questions suggest such a fixed view ©

on one aspect of the present controversy that we

should overrule. the Commission’s determination that

he was not disqualified. Continental points to gone of

the questions which Dixon put to its president in 1959,

which was, ‘*You don’t want to leave the impression

that your independent plant managers have the right |

to make a major price change without. your approval,

do‘you?’’ It is claimed here that the question reveals

Dixon’s definite opinion that Continental’ S “independ-.

“ent’’ plant managers could not effect a major price

change without the approval of the president. We doa

not agree that an attorney’s personal opinion on 4

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on factual controversy may be ‘inferred from questions

~ he puts in the performance of his professional duty.

Moreover, if the existence of an opinion which Dixon

would retain for two years could be inferred from the

quoted question, the answer given by Continental’s

president reveals fhat he ‘himself - agreed with the

opinion claimed to have been entertained by Dixon.

Continental:relies on Texaco, Ine. v. FTC, 336 F. 2d

"754 (D.C. Cir, 1964), vacated and remanded on other

grounds, 381 U.S. 739, 14 L. Ed.2d 714, 85 Sup. Ct.

1798- (1965), in which it was held that Chairman

‘Dixon was disqualified from joining in a Commission

: order. There, the basis was a statement made by Dixon *

in a speech delivered while the controversy Was pend-.

ing before'an FTC examiner and before it had been

- submitted to the Commission. A disinterested reader

of kis speech, wrote the D.C. Circuit, “could hardly

fail to conclude that he had in some measure decided

in advance that. Texaco had violated the act.’ 336

F.2d at 760. This is a different case. There is nothing —

here to ‘indicate that Chairman Dixon has “taken a -

position: apparently inconsistent with an ability to

* judge the f fairly, . . .”\336 F.2d at 764 (Wash-

ington, J. concurring in part and dissenting i in part).

We reftise to hold that, on the basis of ‘the questions _

asked of Continental’s president by Chairman Dixon,

then not a member of the Cotamission, prior to the

initiation of the present proceedings, and not inelud--

ee Te

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- ing a statement of opinion as to an ‘ultimate contro-

- verted issue which he would judge; a disinterested

_ observer would have reason to believe that he had pre-

- judged the dispute. See Gilligan, Will & Co. v. SEC,

267 F.2d 461, 469 (2d Cir.), cert. denied, 361 U.S. 896,

41. Ed.2d 152, 80 Sup. Ct. 200 (1959) ; Baaaee, Ine.

v. FTC, supra at 764.

Dixon’s disqualification was sought under the pro-

visions of section 7 (a) of the Administrative Pro--—

eedure Act. It provides, “*. . . Any such [presiding

officer or officer participating in the decision] may at

any time withdraw if he deems himself disqualified ;

arid, upon the filing in good faith of a timely and suf-

ficient affidavit.of personal bias or disqualification of

any such officer, the ageney shall determine the matter

as a part of the record and decision in-the ease.’’ 5

U.S.C. § 1006(a) (Emphasis added.). The motion for

- disqualification was not ‘timely.’ Continental became

involved in this proceeding in April, 1961. The Hear-

ing Exdminer’s decision was issued July 20, 1962.

Continental prosecuted its appeal, filed its briefs, and

argued orally to the. Commission, with Chairman

Dixon participating, on January 9, 1963. On February

‘28, 1964, the Commission’s decision ‘on the merits was

handed down. Not until October 21, 1964, nine months

after the Commission had issued its decision and

opinion, did Continental claim for the first time that

Dixon was prejudiced and not qualifiedesfsoritinental —

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-was es fully khowleligeable, of course, as és the )

_ extent of Dixon’s participation, over five years earlier,

.-in the Senate hearings, In these circumstances, it

could not remain silent, await the decision of the Com-

‘Mission, and then, doubtless because of its disappoint-

- ment, seek for the first time to asperse the objectivity

of a quasi-judicial officer who joined. in the chal- —

lenged dpintion.

In American. Gees Co. v. FTC, Nos. 15805,

15797, 15801, 15806, and 15788, June 16, 1966 (6th

Cir.), it was held that Chairman Dixon was disquali-

fied. In that case it appears that he took a much more

active part in the investigation of the drug industry

when he had been Chief Counsel and Staff Director

of the Subcommittee’ on Antitrust and Monopoly of

the Committee on the Judiciary of the United States

Senate than he did i in the hearings related to the case

at bar. Furthermore, the petitioners in American Cya-

namid filed their motions for disqualification almost

_ immediately after their noticing appeals from the.

Hearing Examiner ’s initial décision.

Petitioners Langendorf, Hansen, al Hoyt contend

that the Commission erred in taking official notice

and incorporating in ‘the record findings of another

Commission proceeding, In re Continental Baking.

Co., Dkt. 7630, October 27, 1959. These three petition-

ers were not parties to that proceeding. They urge

—

°@.

that the taking of sucg)official notice was in vidlation

of sections 7(¢) and ) of the Administrative-Pro-

cedure Act, 5 U.S.C. § 1006(c), (d) ‘and the Fifth-

Amendment. ‘Safeway also complains. Continental ar-

gues that the taking of such official notice was error‘ °-

because the issue to which that testimony was ad-

dressed was central and disputed in the present con-

-troversy and because the Commission adhered to its

reliance after Continental had “proved” facts to the

contrary. , Sai

The question relates to compliance with section Bea

1006(d), which provides in pertinent part, ‘‘Where

_ any agency decision rests'on official notice of. a-ma-

terial fact not appearing in the evidence i in the record, |

any party shall on timely request be afforded an op-

portunity to show the contrary. — .

| While all parties were given the “opportunity,”

only Continental chose to attempt to show the con-

.trary to the matter officially noticed. The remaining

petitioners, not having followed the statutory require-

ment, must be held to have waived objettions.

‘The officially noticed material eaifhe from a Hear-

ing Examiner’ s decision involving Continental which —

| was ‘then, in 1959, charged with illegal price _ discrimi-

nations and discriminatory payments in violation of

15 U.S.C. § 13(a), (d). Continental had been accused

_ of granting discriminatory price concessions and dis-

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criminatory promotional allowances to certain favored.

customers. The Examiner’s decision was that the com-

_ plaint should be dismissed, and his decision was af-

_ firmed by the FTC on December 31, 1963. The no-

ticed matter related to the structure and operation of

-Continental’s. business. It inéluded, as is recited in the

. . eT ae © . ° Sah : .

Commission’s opinion, corporate organization, terri-

torial assignments, purchasing, production, pricing,

money collected from sales, accounting, personnel, in-

. Surance, engineering, vehicles, ‘sales, labor relations,

packaging, and advertising.. _\ - :

The Commission included the material in its opinion

as foundation for its conclusion that Continental’s op-

eration in’ the State of Washington was “tin com-

merce. n Couching the conclusion -on=this point in

terms ‘of the Supreme Court: decision in U nited States

v. South-Eastern Underwriters Ass’n, 322 U.S. 533,

- 88: L. Ed. 1440, 64 Sup. Ct. 1162 (1944), the Commis.

sion wrote,

. “Its local sales agent can easily agree to deliver

on consignment.a dozen loaves of “Wonder’ bread

‘every Monday, but ‘innumerable transactions,’

any of them directly ‘in’ interstate commerce, °

~are ‘necessary to performance.’ The work of Con- |

tinental’s driver-salesmen is merely the peak of —

the ice-berg; beneath it, sunk deep into the stream

of interstate commerce, is the real. body of the,

transaction. Saas

‘We find that all of Continental’s sales ‘in the

State of Washington were ‘in’ interstate com-

merce. All of them involved a New York seller

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and ‘ a Washington buyer. Each of them was an’

indivisible part of a host of ‘transactions * * *

[that] constituted: a ‘single continuous chain of :

events, many of which were multistate in charac-

ter, and none of which, * * * could possibly have

been continued but for that part of them ‘which

moved baek and forth across state lines.’ South-

Hastern Underwriters, supra, 322 U. ” at 537.”

| We have already expressed our sidan that the

jurisdiction of the Commission was properly founded °

upon the. interstate, Alaskan sales. Since the Commis- —

sion’s application of the officially wiaiaed material was

obviously limited to an alternative Dasis of jurisdic- |

\ _ tion, it is unnecessary to dwell upon the Sey of

\ . the reliance. |

‘\

_ Petitioners contend that Flotill Pood ‘Ine. Vv. FTC, >

No. 19521, decided by a panel of our: court on March

15, 1966, requires a remand to the Commission.

In Flotill, only tivo of the three participating mem-

bers of the Commission voted affirmatively for the

‘challenged. order. Our court held that ‘a majority of —

the five-member Commission must join in issuing a

valid order ind: remanded the case to the Commis-

sion. The case was, resubmitted to the court’ em bane

and the panel decision sustained with four of our nine

_ judges dissenting. F.2d. “eae

In the present proceeding the. Conimission sail two

decisions. The first, ordering - the petitioners to cease

and desist from fixing prices, was issued by a three-to-

a? s

)

was established. ”

A-21 ‘

one vote. It was held that an unfair act. or practice

was ‘shown by the record, that- all respondents below

were legally responsible therefor, and that the Com-

mission had jurisdiction under section 5 of the Fed-

eral Trade Commission Act to issue a cease and desist

order. Thereafter, upon- ‘Continental’ ’s motion, the

Commission stayed the issuance of its order and re-

_ manded the case to the Hearing Examiner to permit

| | Continental to attempt to prove the contrary of the

officially noticed facts. After further hearings, and

. despite an attempted ‘showing of facts contrary to i

those officially noticed, the Commission by a two-to- .

one vote affirmed its original decision and directed

that the order issued by the three-to-one vote to be

made effective.

Continental says that Flotill “requires the remand ;

to the ‘Commission for further consideration of the

question decided by less than a majority of the Com- |

mission — that an unfair act.or practice in commerce

4 disagree. Our decision as to the

‘‘in. commerce” ’ requirement of the.

upon. the interstate character of the ac-

tivities resulting from the Alaskan sales and not upon

the possible interstate nature of Continental’s overall

operations. -Thus, though Flotill would perhaps be

applicable if we sustained the Commission’s.alternate

ground for its exercise of jurisdiction, the decision i is

of no ) present consequence.

d i 7 a2 me ;

‘Finally, petitioners challenge the scope of the cease os

and desist order, quoted below‘, as being “excessively

and unreasonably broad. In our judgment the order

withstands the challenge. We are taught that ‘‘unless

the remedy bears no’ reasonable relation to the existing

unlawful practices, the Commission’s discretion as to

‘the. scope. of the order should not be-disturbed. Fed-

eral Trade Commission v. National Lead Co., 1957, |

pee weet “ORDER. :

_ IT IS ORDERED that the respondent Bakers of Washin on, Inc., an .

a . inedrporated association, and respondents George B. Buchan, Richard

7 - for

Hoyt, and Arthur H. LaLime, iridividually and as officers of respondent

association, and their representatives, agents .and.employees, directly or

praia. 09 any corporate or other device, in or in connection with the offering

e, a A or distribution of bread, do forthwith. cease and desist from:

_ Entering into, carrying. out, continuing or cooperating in arly .

planned common course of action; understanding, agreement, com-

bination or conspiracy, between or among any“two’ or more of said °

‘ respondents, or members of Bakers of Washington, Inc., or between

. _ any one or more of them and others not parties hereto, where any

_ one or more of the parties to that planned common course of action,

understanding, agreement, combination or conspiracy is selling bread

_ in interstate commerce in competition with bread sold by any one or

- more of the other parties thereto, to do or perform any of the follow- °

. ingthings: © -_ : | ;

(1) Establish, fix or maintain. prices, terms or conditions of sale

of bread, vs ; if:

(2) Adhere to any prices, terms or conditions of sale so fixed or.

loge » -Maintained, or... __ _— ye, y-

(3) Deter or attempt to deter any competitor from exercisin

is individual judgment as to. prices, terms or conditions o

. Sale of bread. mE 58 .

IT IS FURTHER ORDERED ‘that ‘the respondents Buchan Baking

_ Co:, Continental Baking Gompany, Langendorf United Bakeries, Inc...

Hansen Baking Co., Inc., Trenerry’s Bakery ‘Co., and Snyder’s Bakery,

Inc., corporations, John M. Larson, trading as Larson’s Bakery, and: Vic -

H. Goethals, rem as Fortune's Bakery; all’ members of respondent

association, and the following members of said association, not named as

respondents herein, Ashbrook Bakeries Corp., 1407 11th. Avenue, Seattle,

'. Washington; Albertson’s Inc. 17000 Aurora Avenue, Seattle; Baders’ Dutch .

Bakeries, 3755 University, Seattle; Baker Boy Bakery, 8050 Bothell Way,

Seattle; Bake-Rite Bakery, 1414 14th Avenue,.Seattle; Bellinger Bakery,

North Bend; Best Pie Company, Inc., 132 Queen Anne Avenue, Seattle;

. Big Four Donut, Inc., 319 Nickerson Street, Seattle; Blake’s Bakery, Inc., ©

a ee ee ae ee clit _ —— Be.

“ . -

A-23

352 U.S. 419, 428-429, 77 S.Ct. 502, 1 L.Ed.2d 438,”

Gellman v. FTC, 290 F.2d 666, 670-671 (8th Cir.

1961). It can hardly be denied that the challenged

order bears a ‘‘reasonable relation” to the practices °

found by the Commission to have been unlawful.

In FTC v. Colgate-Palmolive Co., 380 U.S. 374, 392,

"13 L.Ed.2d 904; 85 Sup. Ct. 1935 (1965), the Supreme

4729 California Avenue, Seattle; Bookter’s Seattle Bakery, Inc., 3409 4th

Avenué South, Seattle; Butter-Krisp Bakery, Inc., 2203 23rd Avenue

South, Seattle; Boldt’s Western’ Hotels Food Service, Inc., Boeing Cafe-

teria, Boeing Plant #2, Seattle; Carolyn’s Cakes, 518 15th Avenue North,

. Seattle; Caster’s Lake City Bakery, 12532 Bothell Way, Seattle; Frederick:

& Nelson (Bakery Department), 5th at Pine, Seattle; Gai’s Seattle French ‘

Baking Co., Inc.; 2006 Weller Street, Seattle; Golden Rule Bakery, Inc.,

- 4450 Fremont Avenue, Seattle; Grandma Cookie Baking Co., Inc., 3402

' Wallingford Avenue, Seattle; Karl’s Bakery, 1614 Hewitt Avenue, Everett;

Kent Bakery, 213 First South, Kent; Lippman’s Bakery, Inc., 119 23rd

Avenue, Seattle; Lindsay’s Thriftway Market, 11100 ‘Roosevelt Way,

Seattle; Manning’s, Inc., 621 Seaboard Building, Seattle; Richard’s Fried

Pies, Inc., 220 Ist Avenue, North, Seattle; Swiss Pastry & Candy Shop, .

1325 5th Avenue, Seattle; Smith & Sonnleitner Cookie Co., 1238 No. 99

W.,. McMinnville, Oregon (7710 Bagley, Seattle, Washington); Van

dé Kamp’s Holland Dutch Bakers, 823 Yale Avenue North, Seattle; Grand

‘Central Bakery, Market & H Streets, Aberdeen; Swanson’s Foods, Inc.,

1401 Simpson Avenue; Aberdeen; Veldkamp’s Olympic Bakery, 417 W.

Wishkah Street, Aberdeen; Bame’s Ye Olde Home Bakery, Riverside,

Mount Vernon; Bellingham Baking Company, 2001. State Street, Belling-

‘ham; City Bakery, 607 Ist Street, Mount Vernon; Thrifty Foods, 130

Fairhaven Avenue, Burlington; Golden Rule Bakery, Inc., 915 Center

Street, Tacoma; Jordan Baking Company, 3623 S. 54th Street, Tacoma;

Eddy Bakeries Campany, Inc., 232 S. Front Street, Yakima; Sigman Food

Stores, P. O. Box. 618, Yakima; Miss Maud Pemberton, Golden Rule

_ Bakery, Inc., 4450 Fremont Avenue, Seattle; Henry Richards, Continental

faking Company, P. O. Box 3227, Seattle; Lloyd C. Mitchell, Van de

Kamps Holland Dutch Bakers, 823 Yale Avenue North, Seattle; Lou

Blackfield, Bake-Rite Bakery, 1414 14th Avenue, Seattle; Horace Snyder,.

Snyder's Bakery, Inc., 31 North 4th-Stréet, Yakima; Al Moore, Langendorf

United Bakeries,“ Inc., 2901 6th Avenue South, Seattle; ae Reynolds,

Grandma Cookie Baking Co., Inc., 3402 Wallingford, Seattle; LeConie -

Stiles, Jr., Ashbrook Ruth Bakeries Corp., 1407 11th Avenue, Seattle;

- Henry Gai, Seattle French Baking Co., Inc.; 2006 Weller Street, Seattle;

Donald R. Due, Best Pie Company, Inc., 132 Queen Annie Avenue, Seattle;

‘and Maurice Bybey, Baker: Roy Bakery, 8050 Bothell Way, Seattle; and

their representatives, agents and employees, directly or through any cor-

porate or other deviice, in or in connection with the offering for sale, sale

or distribution of bread, do forthwith cease and desist’ from: ©

all .

Court repeated its opinion in FTC v. Cement Insti-

tute, 333 U.S. 683, 726, 98 L.Ed. 1010, 68 Sup. Ct. 793

‘(1948), that ‘‘an order’s prohibitions ‘should ‘be clear

and precise in order that they may be understood by

_ those against whom they are directed,’ *"* * *’’ 380

7 U.S. 392. Here the Commission has directed that the ~

‘petitioners shall not engage in a conspiracy to

Entering into, carrying out, continuing or cooperating in any

lanned common course of action, understanding, agreement, com-

. bination or conspiracy between or among any two or more of said |

respondents, or members of,Bakers of Washington, Inc™ or between

- any one or more of them afd others not parties hereto where any .

one or more of the parties to that planned.common course of acti n,

understanding, agreement, combination or conspiracy i selling bread.

in interstate commerce in competition with bread aol ‘by any one

or more of the other paities thereto, to do or perform any’of the follow-

ing things: i its ;

(1) Establish, fix or maintain prices, terms or conditions of sale

of bread, ; rast bs

(2) Adhere to any prices, terms or conditions of sale so fixed or :

maintained, or oS RE

(3) Deter‘or attempt to deter any competitor from exercising

_ his. individual judgment as to prices, terms or. conditions of.

: . saleofbread. = = * a \ :

“IT IS FURTHER ORDERED that Safeway Stores, Inc., and Holsum -

Baking Company, corporations, respondents, but ‘not members of the

respondent association, and their representatives, agents and employees,

directly or through any corporate or other device, in or in connection with

the offering for sale, sale or distribution of bread, do forthwith cease and

desist from: ee

Entering into, carrying out, continuing or cooperating in any

lanned common course of ‘action, understanding, agreement, com- -

' ‘bination or conspiracy between or among any two or more of said

respondents, or members of Bakers of Washington, Inc., or between

any one or more of them arid others not parties hereto, to do or.

perform any of the following things:

(1) Establish, fix or maintain prices, terms or conditions of sale

of bread, 5 _ 4

(2) Adhere to any prices, terms. or conditions of sale so fixed br

Maintained, or = :

(3) Deter or attempt to deter any competitor from exercising his

: individual judgment as to prices, terms or conditions of sale

e . Of bread. : 5 are ;

“

De meh ht tt labia ahr tng ap Sh eos

A-25

* <3) Establish, fix or maintain’ prices, terms or

conditions of-sale of bread, .

- (2) Adhere té any prices, terms or conditions of

sale so fixed or maintained, or

(3) Deter or attempt to deter any competitor

| from exercising his individual judgment as

to prices, terms or conditions of sale of.

bread.’’

To us, these injunctions seem clear, and we are-unable

to accept, the contention that they are so imprecise as

not adequately to.warn a reasonable man of the pro-

hibited. activities in which he’ shall not. continue to

engage.° |

“*Tt has been repeatedly held that.the Commission ‘:

has wide discretion in determining the type of -

order that is necessary to cope with the unfair —

practices found, e. g., Jacob Siegel Co. v. Federal

Trade Comm’n. 327 U.S. 608, 611, and that Con- ©

gress has- placed the primary: responsibility for

fashioning orders upon the Conithission, Federal ©

Trade Comm’n v. National Lead Co., 352 US.

- 5Commissioner Elman, dissenting, believed the order to be insupport-

. prod broad. He suggested that the order shéuld have been made so spe-

cific as - ; 5;

“to forbid not only the conspiracy itself but also the -specific acts

and practices upon which the effectiveness of the conspiracy — its

Ganbiion into actual anticompetitive conduct — depends.”

Commissioner Elman continued,

“It is immaterial that these acts and practices may be lawful in them- -

selves; the Commission has ample power to forbid them if neces

_ to ensure that the conspiracy will cease and not be resumed. F.T.C.

v. National Lead Co., 352 U.S. 419, 430.” _- ‘

We agree that the Commission, applying its expertise, might have properly

chosen to issue an order containing prohibitions against specific acts.

Obviously, however, it determined that there was no pressing need that it

do so. We would not order the Commission to amend its order sa as to

impose upon the petitioners specific prohibitions more severely yestrictive

than: the Commission, from its review of the evidence, believed ‘to be -

required. oD ‘4 .

6S Saat DOR eka A with, Sek a hiilon a hi tiaeianl lines sigan ‘ EAs CMR Nahi MB Dt eae ie ai LT Sts ya Mae EON anil A ai aslen, TA en

A-26.

419, 429,- For these reasons the courts should ek

‘lightly: modify’ the Commission’s orders. Federal

Trade Comm’n vs. Cement cuairiee 333 U.S.

683, 726.’’

FTC v. Colgate-Palmotive Co., supra, 380 U.S. at 392.

Some of the petitioners claim that the order is over- -

: broad because it would regulate their conduct through-

out the nation even though the activity found to be

illegal took place in only one area of the country. We

- do not believe the complaint is Justified: Since the

order i is sufficiently specific and since it prohibits only |

conduct which’ is per se illegal under the Act, we do

not think it is objectionable simply because its appli-

- eation is made as broad as petitioners’ business activi-

tles. As the Commission concluded, ‘‘there is no reason

' to suppose that an entity showirg no reluctance to fix

prices in Seattle, Washington, would act differently

in another city or another state’’ in which it does busi-

ness. Fn a comparable situation the Court of Appeals: | |

. for the Fourth Circuit stated, “As to .territorial ex-

tent, the company, having been found guilty of Ae

flagrant violation of the Act, was properly required

to cease and desist from such practices in all areas in

which it was doing business.”’ Maryland eee Com-

pany v. Federal Trade Commission, 243 F.2d 716, 718 °

(4th Cir. 1957). See also: Foremost. Dairies, Ine, v

|, Federal Trade, Commission, 348 Fae 674 (5th Cir.

1965). eee fics Sak

Affirmed. — aur gin ¢: ee

* : saint Doar cccieenetes aoa a

eh Fd Gh hi tc é “

| oan |

UNITED STATES OF AMERICA

BEFORE FEDERAL TRADE COMMISSION

COMMISSIONERS: im

f °° Paul Rand Dixon, Chairman

Sigurd ‘Anderson

Philip Elman

Everette MacIntyre

John R. Reilly

In the Matter of -

Bakers or WasHIneToN, INc., an

incorporated association, its officers,

' Board of Trustees, employees, _

representatives and agents, including

but not limited to the following:

GEOoGRE B. Bucuan, ;

RicHarp Hoyt,

ARTHUR H. Lauime; ° .

the following named members of

respondent association:

‘Bucuan Bakine Co., ~

-CONTINENTAL BAKING CoMPANY, ~

LaNGENDORF UNITED BAKERIES, INC.,

- Hansen Baxine Oo., Inc.,

TRENNERY’S BAKERY Co., 7 !

SNYDER’s Bakery, INc., corporations.

JOHN M. Larson, trading as

LARSON’s BAKERY,

Vic H. GorrHats, trading as

ForTUNE’s BAKERY,

each individually and as a member

‘ of. the respondent association and

all as representative of all of the ~

members of respondent association ;

SAFEWAY Stores, Inc. and |

Hotsum Bakina CoMPANY, corporations.

FINAL ORDER

This matter beanie haar heard by the Commissions

j “upon exceptions to the hearing examiner ’s initial de-

, cision filed by respondents and upon briefs and oral.

argunients in support thereof and in. opposition there-

to; and. A : o™

| | The ‘Commission having rendered its decision “ean

'. _ having determined that the initial decision sliould: be”

‘ modified -in accordance wit hthe views expressed in

the accompanying opinion, and, as so modified,

adopted as the decision of the Commission:

IT IS.ORDERED that the findings-of fact in the

’ initial decision be, and they hereby are, modified by:

adding to finding number 26, page 10 of the initial -

decision, the further findings set forth in the para-—

graphs designateg “A” through “O” beginning on

‘page 15 and extending through the second paragraph

‘on page 20 of the accompanying opinion. |

IT IS FURTHER ORDERED that. in lieu of the

order to cease and desist contained in the initial de-

cision, the following be, and it hereby is, entered as

the order of hoa Commission: . |

IT IS ORDERED that. respondent Bakers of

“Washington, luc., an ‘incorporated association, and

"respondents George B. Buchan and Richard Hoyt, in-

a dividually and as officers of respondent association,

ees ee Tae ee

», B8

‘and respondents Buchan Baking Co., Continental |

Baking.Company, Langendorf United Bakeries, Ine.,

‘ Hansen Baking Co., Ine., Trennery’s Bakery Co.,

and Snyder’s Bakery, Ine., ‘corporations, John M.

Larson, trading as Larsen’s Bakery, and Vice H.

Goethals, trading as Fortune’s Bakery, all members :

of respondent association; and the following members

' of said association: Ruth Ashbrook Bakeries Corp.,

(1407 11th Avenue, Seattle, Washington; Albertson’ 8,

Ine., 17000 Aurora Avenue,, Seattle; Baders’ Dutch

| Bakeries, 3755 University, Seattle; Baker Boy: Bak-

. ery, 8050 Bothell’ Way, Seattle; Bake-Rite Bakery,

. 1414 14th Avenue, Seattle; Bellinger Bakery; North

Bend; Best Pie Company, Inc., 132 Queen Anne Ave-

hue, Seattle; Big Four Donut, Ine., 319 Nickerson

Street, Seattle; Blake’s Bakery, Inc., 4729 California

Avenue, Seattle ;-Bookter’s Seattle Bakery, Inc., 3409

4th Avenue, South, Seattle; Butter-Krisp Bakery, .

- Ine,, 2203 23rd Avenue South, Seattle; Boldt’s West-

ern Hotels Food Service, Ine., Boeing Cafeteria,

Boeing Plant #2,_Seattle; Carolyn’ s Cakes, 518 15th

Avenue, North, Seattle; Caster’s Lake City. Bakery,

12532 Bothell Way, Seattle; Frederick & Nelson

er nt ee

(Bakery Department), 5th at Pine, Seattle; Gai’s

_ Seattle French Baking Co., Inc., 2006 Weller Street,

Seattle ; Golden Rule Bakery, Inc., 4450 Fremont Ave-

nue, ‘Seattle; Grandma Cookie Baking Co., Inec., 3402

Wallingford AYenue,. Seattle; Karl’s Bakery, 1614

Hewitt Avenue, Everett ; ‘Kent Bakery, 213 First _

- South,. Kent; Lippman’s Bakery, Inc., 119 23rd Ave-—

| ‘nue, Seattle; Lindsay’s Thriftway Market, 11100

Roosevelt Way, Seattle; Manning’s, Inc., 621 Sea-

;. . board Building, Seattle; Richard’s Fried Pies, Inc.,

: 220 1st Avenue, North, Seattle; Swiss Pastry & Candy

’ Shop, 1325 5th Avenue, Seattle;.Smith & Sonnleitner

_. Cookie Co., 1238 No. 99 W., McMinnville, Oregon.

(7710 Bagley, Seattle, Washington) } Van de Kamp’s |

} Holland Dutch Bakers, 823 Yale Avenue, North,

| Seattle; Grand Central Bakery, Market & H Streets,

Aberdéen; Swanson’s Food, Inc., 1401 Simpson Ave-

nue, Aberdeen ; Veldkamp’s Olympic Bakery, 417

-W. Wishkah Street, Aberdeen; Bame’s Ye Olde Home |

__- Bakery, Riverside, Mount Vernon; Bellingham Bak-

i . . ing Company, 2001 State ‘Street, Bellingham; City

22 Bakery, 607 1st Street, Mount Vernon; Thrifty Foods,

‘130 Fairhaven Avenue, Burlington; Golden Rule

Bakery, Inc., 915 Center Street,.Tacoma; Jordan

Baking Company, 3623 S. 54th Street, Tacoma ; Eddy

: -Bakeries Company, Inc., 232 S. Front Street, Yak-

ima; Sigman Fgpd Staten, P. 0. Box 618, Yakima;

x the following’ officials of Bakers of Washington,

| Inc.: Miss Maud Peniberton, Golden Rule Bakery,

| | Toa. 4450 Fremont Avenue, Seattle; Henry Richards,

| ontiyental Baking Company, P. O, Box 3227, Se- ,

latt}é; Lloyd .C. Mitchell, Van de Kamp’s Holland —

Dutch Bakers, 823 Yale Avenue, North, Seattle; Lou

ce a ea ee

° : ’ . B-5 e | .

|; “Blackfield, Bake-Rite Bakery, 1414 14th ‘Avenue,

' Seattle; Horace Snyder, Snyder’s Bakery, Inc, 31.

North 4th Street, Yakima; Al Moore, Langendorf

United Bakeries, ‘Ine, 2901 6th Avenue, South,

Seattle ; Rey Reynolds, Grandma Cookie Baking Co.,.

Inc., 3402 Wallingford, Seattle; LeConie Stiles, Jr., -

Ruth Ashbrook Bakeries Corp., 1407 11th ‘Avenue,

‘Seattle; Henry: Gai, Seattle French Baking Co., Ine.,

2006 Weller Street, Seattle; Donald. R. Due, Best Pie

Company, Inc, 132 Queen Anne Avenue, Seattle; and

Maurice Vyvey, Baker Boy Bakery, 8050 ‘ Bothell

. Way, Seattle, as. Officers.of Bakers of Washington,

Ine.; and respondents Safeway Stores, Ince., and

Holsum Baking Company, corporations ; and respond-

ents’ representatives, agents ‘and employees, directly

or through any corporate or other dévice in or in con-

nection with the offering for sale, sale or distribution

of bread, do forthwith cease and desist from: _

Entering into, carrying out, ‘continuing or ¢o-

operating in* any planned common course of

action, understanding, agreement, combination or

conspiracy between or among any two or more of

said respondents, or members of Bakers of, Wash-

ington, Inc., or between any one or more of them

» and ‘others not parties hereto, where any one or

more of the parties to such planned commion |

course of action, understanding, agreement, com-

bination or conspiracy is selling bread in‘inter-

state commerce in competition with bread sold by _

any one or more of the other parties thereto, to-

do or perform any of the following.things: -

SO ee ee

- (1) Establish, fix or maintain prices, terms or

conditions of‘sale of bread,

(2) Adhere to any prices, terms or conditions X

Of sale so fixed or maintained, or |

(3) Deter or attempt to deter any gompetitor )

fro mex@gcising his individual jidgment as

“to prices, terms or conditions of sale of .

7 bread. 7” |

IT IS FURTHER ORDERED. that the complaint

herein be, and the same hereby is, dismissed as to .

/ . Arthur H. LaLime, deceased..

IT IS FURTHER ORDERED that fespondents. tes,

shall, within sixty (60) days after service ‘upon them

~ of this order, file with the Commission a report, in

writing, setting forth in detail the manner and form

in which they wane complid with the oe: set forth

herein. » |

| By the Commission, aie Anderson con-

--eurring in th e result; Commissioner Elman dissent-

ing; and Commissioner Reilly not participating for

the reason that he did not hear oral argument.

thier S—Joseph W. Shea,

ad Secretary.

ISSUED: iicaiy 28, 1964

ATTACHED ARE: (1) Opinion of is Oodsataniois

; by. Commissioner Dixon

(2) Dissenting opinion by Com-.

missioner Elman —

B-7

" UNITED STATES OF AMERICA

BEFORE FEDERAL TRADE’ COMMISSION

COMMISSIONERS :

Paul Reéid Dixon, Coates if

Sigurd Anderson ,

Philip Elman

ae ac 83 Everette MacIntyre

: | John R. ‘Reilly

' In the Matter of

ay BAKERS OF WASHINGTON, INnc., an

incorporated association, its officers,

Board of Trustees, employees,

representatives and agents, including

“ but’ not ‘limited fo the following:

. Grocre B. Bucnwan,

RicHarD Hoyt,’

ARTHUR H. LALIME; ars

the following named members of

respondent association:

Bucuan Baxrna Co.,

ContTinentTAL Bakinc CoMPANY,

- LANGENDORF UNITED, BAKERIES, ‘Inc.,

Hansen Baxine Co., Inc.,

TRENNERY’S BAKERY Co.,

. , SNyYDER’s Bakery, Inc., corporations

JoHN.M. Larson, trading as

LARSON’S BAKERY,

Vic H. GorTHALs, trading as ©

‘ ForRTUNE’sS Bakgnky, .

~ each individually: and as a member : |

of the respondent association and

all as representative of all of the

members of respondent association ;

SAFEWAY Srores,- Inc. and

HotsuMm Baxina CoMPany, sinipdeaticias:

& ™

B-8

OPINION OF THE COMMISSION.

By. Dixon, Commissioner:

Respondents~appeal from the hearing examiner’s

; ‘decision holding that t they-have fixed bread prices in

_ violation of Section 5 of the Federal’ Trade eae:

sion Act, 15 U.S.C. 45. Se

Bakers of. Wibtinetek Ine., is a corporate trade |

‘association organized under the laws of the State of

_ Washington for the purpose of promoting the interests -

of the baking industry. Its principal office is located

in the city of Seattle, and more than half of its 49

"members have their places of business there. The other

members are located in the ‘surrounding cities and

towns of western Washington, particularly in Bell-

_ ingham, Aberdeen, Tacoma, and Yakima. The associ- ©

ation. has ‘‘divisions’’ in each of those towns. ‘=

The complaint name? as respondents the associ-

ation; its three officials, including its: former secretary-

manager, Arthur H. LaLime, now deceased; eight of

its members as. representative. of the entire member-

ship; and two other companies, Safeway Stores and

Holsum re itera iy ha

The examiner found that the ‘pital and sista

members of this association had attended frequent ’

‘association meetings at the Athletic Club in downtown .

Seattie ; that, by meetings at the Athletic Club in

x ae

- * ‘there has been no price’ fixing; that,:if such price

— BY.

downtown Seattle; ‘that, by means of agreements or:

. “understaiidings” reached at these meetings, price

compétition i in the sale of bread at. both the wholesale

and retail level -had been eliminated or lessened ; ‘and

that ee Arthur H. _LaLime, then ‘secretary-

manager of the association, acting as common agent’ —

for the several ‘members, had engaged in various acts .

of suppressing or lessening price competition among

- the members of the association. 7

Respond: nts take exception to the examiners’ > de-

cision in iour principal particulars. They contend that ©

. fixing occurred, it did not occur “‘in’’ interstate com-

| merce ; that, if. the association’s Secretary did in faet

-cause the suppression of price competition among cer-

tain of. the association’ 's members,.the evidence is

insufficient to: hold vatious .6f the other. members

_ legally responsible therefor; and that, in any event,

the order is excessively broad. - ra aoe

“The hiiiiile of in puma include both «hole

_ sale”’ and “‘retail’’ bakers. As we understand the trade

terminology a “‘wholesale”’ baker is one that produces 2

(bakes) bread and sells it exclusively to retail estab- }

lishments (e.g., grocry stores) ; it does not generally

sell directly to consumers. ‘A “‘retail’’ baker, on the

other hand,. is one that performs both the producing

- ee ie ee ae re ee a

(baking) an retailing dissin The most familiar

example is’ the. traditional retail bake shop with. its

baking plant in the rear of the establishment, and its

retail’ sales counter in. the. front of the shop. Another ;

is the “in-store” bakery. This includes the grocery

~ store owner who installs, in one section of his store, a

_ baking plant’and a bakery. products “sales counter,”

or who permits another party to lease a portion of his

| store for‘such an operation. The term “retail” baker

also includes the grocer that, instead of installing

| baking equipment ‘on its store premises, sets up a

2 separate baking plant at some other location’ and on

then trasports’ the. self-baked bread to its grocery -

stores for retail sale. Safeway, a respondent here, has

such a plant in Seattle. It bakes a ‘‘private brand”’

bread called ‘‘Mrs. Wright” and retails it at the vari- .

ous Safeway grocery stores located throughout’ the

western Washington marketing area.

A further aspect of the relationship between the

wholesale and retail bakers. should be mentioned at |

the outset .The grocery store that bakes its own bread

also handles the major ‘name brand”? breads. For

example, Safeway buys ‘‘Wonder” bread.from Con- |

tinental and retails it alongside its own self-baked

, private brand, “Mrs. Wright. ’» Hence Sateway is both

a competitor and a customer of Continental. The sniall —

retail bake shops, those that generally deal exclusively

in baked goods, are of course competitors of both

Saree yes Bu” y ee

Safeway and Continental — all-are. ‘dildtin for me +.

same consumer bread dollars. Me as ae

_ It is undisputed th#t a number of these ‘bakers are |

not: engaged i in interstate commerce. Some of them are —

‘small bake shops who do no business of any kind out- .

side the city of Seattle. They. bake the bread in Seattle, es:

and retail it to consumers | ‘in Seattle. Obviously, a oe

c price fixipg conspiracy exclusively among these bakers’ .

to regulate their prices in Seattle would be of no con-

cern to the Federal Trade Comniission. On the other

hand, if it appears that they have joined in a com

spiracy with one ‘or more firms that are fixing prices

in interstate commerce, then even the most local of

these bakers is ‘subject to the federal law. Federal

Trade Commission v. Cement Institute, 333 3 U. 8. 683,

- 695-696 (1948). , : ce

_It is also undisputed that several of these respond- -

ents are, in fact, “engaged in’’ interstate commerce. _

Respondent Continental Baking Company, a Delaware

Corporation with principal offices in Rye, New York,

the baker ‘of “Wonder” bread, owns and operates

_ more than 70 bakeries in 60 cities located in 29 states

and the District of Columbia. It had sales of bread |

and other bakery products of more than $350 million

in 1960, and more.than 27,000 employees. Respondent *

Langendorf United Bakeries, Ine., a Delaware cor-

_ poration with general offices in® San Francisco, Cali-

B-12

- fornia; owns and entation il ‘panied in California,

. Oregon, and Washington. It had 3, 896 employees, a

sal& of more than $73 million in 1961. Safeway wind

- Ine., a ‘Maryland corporation ,with its principal offices .

in Oakland, California, operates some 2,000 grocery

stores in 28 states and the District of Columbia. — Se

1960. it had more’ than 63, 500 employees and sales oo ae

_more than ‘$2, 468, 000, 000.: Safeway is one of the three

'. largest retail grocery chains#in the. United States.

These respondents argue, however, that, while they :

“are ‘“‘engaged in commerce”’ and thus subject generally

to the jurisdiction of the Federal Trade Commission, ,

the particular “acts” or “«pxactices”? challenged in the

instant complaint did not themselves occur ‘‘in com-

merce.”’ They contend that counsel supporting” the

complaint would have met_his burden—on this point

only if he had#hown that state lines had been crossed

by either (1) the price fixing conspiracy itself, or (2)

overt acts committed pursuant to that conspiracy, a. en,

sales at the fixed prices. Respondents contend that this ©

record shows neither. | |

—_— —_——

. : —

———

: ae iatinbee ‘that a _ conspiracy has been established,

and assuming further, for the sake of argument, that

thé conspiracy itself i is ‘local’? i in the eyes of the law,

we do not agree that the overt acts committed pur-

suant’ to it — the sales subsequently made at the fixed

prices + were themselves loeal. First of all, this record

ORR I Ce ENN REI GRE mtg ME Tt on

Ant te it athe Yb babs. a

of Washingon. Je

< §

B-13 cae

shows that several of these wholesale bakers sell some-

thing.like 1% or less of the production of their Seattle

| plants in Alaska. ‘Further, it appears .that ‘some .

Seattle bread is shipped to adjoining states*and that -

a small amount of.the bread sold in the Seattle area

"was in fact baked in ‘another state. *While these

amounts are not de minimis, this case involves a much

larger problem. We think it not only important but

necessary. that we deal with the question of whether

these great interstate firms can claim-immunity from

- the statutory prohibition against, price fixing in regard

to the remaining 99% of the transactions involved,

those that took place within the. borders of the State

__—1Eangendorf’s Seattle plant manager testified that jess than 1% of his

. or that Sea

sales were thade to buyers in Alaska. Tr. 313. According to his affidavit,

‘n. 4, infra, this amounted to $35,789.50 in 1960. “It is sold FOB Dock

right here [Seattle] at our regular wholesale prices.” Tr. 344. Continental's

' Seattle plant manager testified that he sold less than “one-half of one per

cent” in Alaska. Tr. 399. Since his plant has annual ‘sales of some $4.5 _

million, this suggests annual sales from Seattle to Alaska of about $22,500.

Buchan, with annual sales of some $4 million, sells “less than a fraction of :

one per cent” to Alaska buyers. Tr. 230. Hansen makes some shipments

to Alaska also. Answer, p. 3. wey ES ate v.

Interestingly-enough, respondents claim even these sales, assuming a

~~ Seattle conspiracy, are not actionable under the statute. They say there

is no ye that prices charged to Alaska buyers “affect” Seattle’ prices,

e sellers are “interested” in Alaska prices. But this assumes

the inquiry is directed solely to retail. prices. To be sure, the price at which

an Alaska buyer resells the bread is of no interest to the Seattle conspirators.

But we are concerned here with wholesale as well as retail prices.. And

. these sales to Alaska purchasers were made FOB the Seattle docks, at the

“regular” (i.e., the fixed) wholesale price. Hence they are saels “in” com-

merce at a price inflated by a conspiratorial agreement. ;

p. 2

Yakima (Answer, pp. 1-2).

aeied (Answer, p. 2), Snyder ships some bread to Oregon (Answer,

- 3Holsum ships. bread from its Idaho plant to its Trennery subsidiary in

} ai because of a “duty” Canada imposes.

| ee

é Bakery products; including bread, are highly perish- .

able’ (bread, to, be considered acceptably “‘fresh’’ must: /

be sold to the ultimate consumer-within something like’

48 hours ‘after baking). And bakery products are |

bulky in relation to weight and value, thus making

leng distance transportation economically impractical. |

The result is that Continental, for example, instead of _—

baking all its-bread in New York and then transport-—

ing it into 29 states fe for sale-to- local grocery stores,

. _ gathers, up the inen, n, equipment, and ingredients that.

it “needs, transports them to each of the 29 ‘states,

- erects a baking plant i in each, bakes the product inside ; |

the borders of each state, . and sells it inside those

: orders ers.

ss |

- The fact , tbat Continental -has ‘selected this method

. of doing business\in Seattle is thus due to the nature —

of bakery product: At appears ‘that, because of the

bulk and perishability of, bread, something on the

order of 150 miles i is the maximum distance from the

baking plant it can be economically marketed. Here |

the Seattle marketing area (See Map of Washington,

4p. 7) runs generally from Seattle to the Canadian

7 border on the north; "Sto the Pacific Ocean on the weet

; imeiaeais affidavit of Al Moore, manager of Langendorf’s ome in

Seattle, filed July 13, 1961. (For ‘a description of the marketing area of

Continental’s Seattle. plant, see attachment; affidavit of Covington plant

manager, filed July 10, 1961. The Yakima area-is served by another —

. tinental plant, the one "located in Portland; Oregon.)

5It appears that these respondents’ do not sell their bread in Canada

« * Sag

ee ee eee eee ATS TERR UA OE RRR ERMC #18

rw)

_» Federal Trade Con ommission v. Bunte Bros., ‘Ine., 312

} iesesree ———

OR ae

‘to ‘Yakima’ (Washington) to the southeast; “and to the .

Cascade ‘mountain range to the-east. None. of these

| ‘market boundaries’ are-tMore than 150 miles from

Seattle. This-is” the area this ' ‘trade association has

_ selected for its theater of operations. Within it, Te-

| ~ spondents’ prices are-the same. When the retail price

of bread goes. from’ 33 to 34° in Seattle, it also goes

up by precisely that amount in Bellingham €about —

100: miles to the north, in. Tacoma (some 25 miles

south of Seattle), in Aberdeen (near the Pacifip,

| roughly 100 miles west of Seattle), and in Yakima

(over 100 miels southeast of Seattle). Yet, because —

this marketing area:is ‘well “inland”? from the borders

em of a any adjoining state, respondents contend that, if

_ they fix prices in this area, they are beyond the reach

-of the Federal Trade Commission Act. | JaBe a

Seembiet claim support for their position in

U.S. 349: (1941). There Bunte, a manufacturer of _

candy, made’ the candy : in Illinois; and sold it in

Illinois, The Commission, finding that Bunte was ‘sell-

ing its candy in Illinois by means of ‘a “lottery”

scheme, and that: it therefore enjoyed an unfair ad-

. vantage over out- of-state competitors who could not

lawfully sell their competitive candy across the state

line into Illinois by: the “lottery” sales method, con-

cluded that Bunte: was adversely affecting ee. ,

oy “oe,

B-16

commerce and ordered it to cease and desist. The bey

| Supreme Court. reversed, pointing out that the Federal

- Trade Commission Act, by -its express terms, reaches

only unfair acts or. practices ‘‘in’’ interstate com- .

merce, and hence des not include those that merely

“affect?” interstate mnierce. The Bunte case is not

in point here. This’ complaint alleges that these re-

spondents have xed prices “‘in”’ interstate commerce.

‘We think the controlling case law here is not. to be

found in Bunte, but in Federal Trade Commission v.

Cement Institute, 333 U.S. 683, 695-696 (1948), and in

United States v. South-Eastern Underwriters Assn.,.

322. U. S.: 533 (1944). In. the first of these cases, the

N orthwestern Portland Cement ‘Company, engaged — |

wholly in intrastate commerce, entered into a planned,

i common course of action with others who were -en-.

ah gaged in interstate cémmerce. The planned, common

nes coure ‘of action ‘restrained price competition. ‘There

the Supreme Court held that ‘the fact that one or

twe of. the numerous participants in the combination

_ happened to be selling within the borders. of a single:

state isnot controlling in determining the scope of the

Commission’s jurisdiction. ” In the second ofthese.

; cases, namely South-Eastern. Underwriters Assn., an

7 association of. fire insurance. companies had been -in-

: dicted ‘under Section 1 and * of the Sherman Act

“tor fixing fire insurance premium rates (prices) and

attempting to monopolize the fire insurance business,

‘in six Southeastern states .The district court, relying

’ upon Paul v. Virginia, 8 Wall. 168 (1869), had sus-

| tained a demurrer on the ground that insurance simply

- was not commerce at all, either local or interstate. The -

? . Supreme Court reversed. ae |

One of the contentions of the defendant insurance ~

companies (more than half of which maintained their .

- home offices in either Néw York, Pennsylvania or:

- Connecticut, employing “Jocal?? agents to solicit |

“local,” not interstate, contracts. The Court replied: |

But this reason rests upon a distinction between

. what has been called “local” and what ‘*inter-

state,’’ a type of mechanical criterion which this

‘Court has not deemed controlling in the measure- °

ment of federal power. * * * We. grant that a

contract of insurance, considered as a thing apatt

es _ from negotiation. and execution, does. not itself ,

_ constitute commerce. *.* * But, it does not follow .

from this that the Court is powerless to examine —

| the entire transaction, of which that contract is

; _ . ~ but a part, inorder to determine whether there

»may be a chain of events which becomes inter-

state commerce. Only by treating the Congres-. - -

_ sional power over commerce among the states as |

. a “technical legal conception” rather than as ‘a

‘*practical one,:drawn-from the course of busi- .

__, yess’’ could such a conclusion be reached. Swift <c)

6While Sherman Act cases are not applicable to Federal Trade Com-’

mission Act “commerce” problems when the former turned on whether

commerce had been “affected” by the acts charged, su cases are of

course ae acy og whien the. issue, as in South-Eastern Under-

writers was whether those acts occurred “in” interstate commerce. ;

ieee

: : . . “ *

‘ 3 BAB

& Co. v. United States, 196 US. 375, 308. to

short, a nationwide business is not deprived of |

2 «8 interstate character merely ly because it is bault

-*. wpon sales contracts which are local in nature.

- . Were the rule otherwise, few businesses could be

said to’ be engaged in interstate ecommerce. 322

a 8. at 546- 547 (emphasis. added).

ae Oe ne the activties of the défendant insurance

companies that were in interstate commerce, the Court

' said: ae oh ic ARS OS CNTR iat %.

Andi in ae detail the indictment set out these

: total activities, of which the aetual making: of

. .. €ontracts was. but a part. As recognized by the

District Court, the insurance business described |

in ¢he indiétment: include not. only the. execution

of insuranee contracts but also negotiations and

events prior to exécution of thesontracts and the:

innumerable transactions necessary to perform- |

ance of the contracts. All of’ these alleged trans-

actions, we shall hereafter point out, constituted

a single continuous chain of events, many of which

_.* * * eould possibly: have bgen continued but ‘for

that part of them whigr ved back and forth

across state lines. 32 S. at 537 (emphasis

. added). |

‘The so-called ‘local’? parts of these transactions

had no separate existence of their own. The feet of

each transaction were planted i in a single southeastern '

: state, but the whole body stretched across ‘several states

to its guiding member — the head — in one of the

financial centers of the east, ¢ither New York, Penn-

. » Sylvania, or Connecticut.

| This business is not separated into 48 dis-

aD, tinct territorial compartments which function in

She

Lee ae B-19 —

isolation from each other. Interrelationship, inter-

_ dependence, and integration of activties in all

the states in which they operate are practical

aspects of. the insurance companies’ methods of

. doing business. A large ‘share of the ‘Insurance

business is concentrated in a comparatively few:

- companies located, for the most part; in the finan-

cial centers of the East. 322 U. S. at 541.

_ A, contipuous, life-giving stream flowed back and | .

forth between the head of those distant extremities:

Premiums collected from policyholders in every |

part of the United States flow into these com-

‘panies for investment. As policies: become pay-

able, checks and drafts flow back to the many

states where the policyholders reside. The result

is a continuous and indivisible stream of inter-

“ , course among the-states composed of collections

of ‘premiums, payments of policy obligations, -

and the countless documents and communications

wich are essential to the negotiation and execution

of policy contracts. Ibid. (emphasis added). °°

The. channels and instrumentalities of ‘interstate

commerce — telephone, télegraph, mail, and traveling . &£

agents — were used to effect the ‘so-called ‘‘local”’ <8

sales, as

~ Local agents solicited prospects, utilized policy

forms sent from home offices, and made regular

reports to their companies by mail, telephone or

telegraph. Special travelling agents supervised .

local operati ons. 322 U.S. at 542. gees Kei

The terms on which the ‘‘ocal’’ purhcasers bought,

and the value of what they got for their money, were

determined not by the “‘local’’ salesmen, but by out-of-

/ °

-B-20

state management:

Individual policyholders living in many dif-

-. ferent states who own policies in a single company

have their separate interests blended in one as-

sembled’ fund of assets upon which all are equally

dependent for payment of their policies. The de-

cisions which ‘that company makes at its home

office — the risks it insures, the premiums it

charges, the investments it makes, the losses it

pays — concern not just the people of the state

where the home office happens to‘be located. They

concern people living far’ beyond the- boundaries

‘of that state: 322 U.S. at 541-542.

. In the instant case, at least three of the respondents

.do business in substantially the same manner as

those insurance companies. On November 29, 1961,

- Continental, Langendorf and- Safeway entered into .

written stipulations with counsel supportigg the com-

* plaint describing the interstate: character of. their —

‘operations. The stipulation with Continental, set out

‘in part. in the footnote below,’ is substantially the

74. Continental is regularly engaged in interstate commerce in the<sale

_of bread and other bakery products.

5. Membership in Bakers of Washington, Inc: was made in Continental's

name and approved at headquarters. . -

6. Continental assumes legal responsibility for the acts of its plant’man-

ager-in Seattle as to which testimony was taken.

"7. Continentai operates onan integrated basis. Ingredients for the prod-

ucts are purchased centrally [from central offices in New York] and receipts

from sales go into a _— treasury [in New York]. aot

8.-Ultimate responsibility for comapny affairs is vested in ‘top manage-

ment personnel at the company’s general offices in Rye, New York.

9. Each element of Continental’s bread and bakery product business is

art of an ~~ eng whole. The company is a single business entity and

nefits’ or suffers from what is done locally by and through eacli plant

or office. :

10. The control over operations which rests in lant managers, beyond

that which is peculiar to the position such as the, housekeeping functians,

is vested in them by delegation from top management. 4

_—

B-21

Same as the nis two. ‘Continental operates onan

integrated basis. Ingredients for the products are pur-

chased centrally [New. York] and receipts from sales

' go into a single treasury [New York] * * *, Hach ele- .

ment of Continental’s bread and bakery product busi-

; ness is part of an integrated whole.’’

_ ’ The sales involved here are physically made through

what are called ‘‘driver-salesmen,”’ employees that —

generally perform both the selling and delivery fune-

tions. Each driver-salesman is assigned a specific’

‘delivery route,”’ generally a given number of: city

blocks. Continental serves a delivery routes: from its

Seattle plant. On those delivery routes, the driver-

salesmen make deliveries to those stores that have

already agreed t6 accept their product, and attempt

to ‘‘sell’’ those stores that have not yet been persuaded

to do SO.

There is no suggestion here that these sales have to

he ‘“‘approved’’: by Continental’s New York manage-

ment. ‘We have no doubt that they are ‘‘local’’ sales.

in the sense that; in an action for the price of goods

sold and. delivered, the law of the State of Washingtiin

would be controlling: But that is. the “type of me-

chanical criterion” the Supreme Court’ rejected in-

_ South-Eastern U: nderwriters. A purchase-sale trans- |

action: under the trade regulation law is considerably

more than this. We must, instead, ‘‘examine the entire

mes :

‘transaction; of which that contract is but a part, in

order to determine whether there may be a.chain of

‘events which becomes interstate commerce.” Here; as.

there, the business involved includes not only the ex- —

ecution of. the contracts, “but also negotiations and

events prior to execution of the contracts and. the -

innumerable transactions vapneanat d to performance of

the contracts.”’

The instant record provides us with very little in-

formation as to the ““nnumerable. transactions neces-

- gary to performance of the contracts’’ entered into by

these local. driver-salegmen on behalf of their out-of-

-state employers. From the stipulation quoted above,

we know that Continental’s plant manager in Seattle

does not: buy the ingredients or raw materials that go,

into the bread he sells; all purchasing is done for

him by a central " purchasing office located at the

company’s headquarters in New York. And from his

testimony and certain exhibits we know also that there

_is a “‘chain of command”’ running from his plant in.

Seattle, Washington, to a. “Regional Office’’ in Cali-

fornia, and thence to top management in New York. , %

‘When he wants to increase prices, the plant manager i

writes to his regional manager in California asking —

for approval. The regional manager, in turn, gets

approval from headquarters. in New York. (In fact;

8Tr. 420-427; CX 23A-29.

ep |

B-23

it appears that the president of Contixental _pérson-

ally approved the price: increase in 1958?)

From this. ‘ine bones’’ vileciii we see only the

broad contours of the taut strings that tie the Seattle

plant manager to his out-of-state employer i in Ne ew York.

Fortunately, however, this. Commission knows con-

_ siderably more than this about Continental’s over-all

operation. On October 27, 1959, -we issited_ our com-

plaint in a proceeding entitled In the Matter of Con-

tinental Baking Company, Dkt. 7630, charging this’

same respondent, Continental. Baking Company, with

violating Sections 2(a) and 2(d) of the amended

- Clayton Act by granting discriminatory price con-

cessions, and discrimipatory_ promotiorial allowances, -

to certain favored customers. On March 8, 1963, the .

hearing examiner issued his initial decision dismissing

the complaint.. He found’ that, while the discrimi-

nations had occurred, and while the discriminations

in price may havé the requisite adverse effects: on

competition, they were riot violative of the: statute

‘ because they had been granted to meet the equally low

prices and equally attractive promotional allowances

a competitors. That initial decision was affirmed by

this Commission” on December 31, 1963.

ee vv :

; One. of the principal issues involved in that pro-

ceeding was similar to the instant problem — ~ namely,

9CX 23E.

. 4

/ ~

B-24

' + whether, when one‘ of Continental’s ‘‘local’’ plants

‘discriminated in price between ‘two customers located °

in the same state in which the bread was baked, either

of the two ‘purchases. involved in such discrimi-

nation’? was “‘in’’? commerce. Section (a) of the

Clayton Act, as amended (emphasis added). The hear-

ing examiner held that those purchase-sale transactions

were ‘in’? commerce. | | ; Pay. :

In reaching this conclusion, the hearing examiner

had the benefit of an adjudicatory record that explored

_ the structure and operation of Continental’s busi-

ness with highly commendable thoroughness. Under

the principle that a tribunal may take notice of its

own records in other cases,'® we take official notice of

the following facts developed in that record through-

-10“We may notice the record of that case in this court” National Fire

Insurance Co. v. Thompson, 281 U.S. 331, 336 (1930). See also Virginian

Ry. Go. v. System’ Federation No. 40, 300 U.S. 515, 546, n: 4 (1937) °

(quoting testiomny from another case); West Ohio Gas Co. v. Public

Utilities Comm. (No. 1), 294 U.S. 63 (1935) (noticing evidence. in record

of a companion case between same parties) ; Crichton v. United States, 56~

F. Supp. 876 (S.D.N.Y. 1944), affd., 323 U.S. 684 (1945) (ICC noticed

record of earlier case involving same party); Davis, 2 Administrative Law

Treatise 338, 381-384. :

whether such notice is taken at the ginning of a proceeding or in the

agency’s decision, turns upon whether the party is afforded an opportunity

to challenge the facts so noticed, if it desires, and thus to correct any errors

Ine., 327 U.S. 515, 528-590, (1946); Davis, id, at 388, 994, 400, 411;

( g

aminers’ First Annual Seminar 13, 22 (September 23-25, 1963). Section

7(d) of the Administrative Procedure Act. provides: “Where ‘any agency

decision rests on official notice of a material fact not appearing in the

evidence in the record, any party shall on timely request be afforded an

opportunity to show the contrary.” Section 3.25 of our-Rules of Practice

. authorizes the filing of a “petition for reconsideration” of any Commission

decision. Should Continental desire to challenge any of these noticed facts,

went we

United States, supra, 56 F. Supp. at 880. e

B-25 .

documentary evidence secured from Continental, and

“by examination. and cross-examination. of Continen-

tal’s officials and employees: aes |

A Corporate organization. Ultimate responsibility —— ~

for corporate affairs: is. centered. in the company’s |

headquarters in Rye, New York. The headquarters Z

staff_is functionally divided into several ‘“‘divisions,”’ |

| i “ purchasing,” ‘‘sales,’’ ete.

‘

yo The company’s multistate operation is divided into

a number of “Regions.” Each “regional office” is as-

signed, by headquarters, a given geographical area,

an ‘area that generally includes several'states and, of

course, several baking plants. The regional office staff,

like the headquarters staff, is functionally divided into

a number of divisions: or departments. Each of these.

it will thus have an opportunity to do so in such a petition for reconsider- |

ation, specifying those particular factual statements it wishes to dispute,

and setting forth, preferably by affidavits -of knowledgeable persons, the

true facts in those particulars. ; ;

It appears, however, that these noticed facts are undisputed. They were

taken from another record involving the same party; they were presented

were through the party’s own officers, employees, and written records; they .

,. were adduced there for the same purpose as here (to show interstate com-

_ Inerce); and cross-examinatioA and opportunity to present rebuttal evi-

dence were afforded. These facts were then found y the examiner and

set forth with great ‘particularity in his initial decision in that case (Dkt.

. 7630, initial decision filed March 8, 1963, pesticulerly pp. 11-21). On its

appeal to the Commission; Continental c allenged the examiner’s legal

conclusion that those facts evidenced interstate.commerce, but gnade no

effort to dispute any of the factual findings themselves. We could, of course, -

remand the instant case for,the taking of this same evidence a second time.

And on a proper ao Be the necessity: therefor, we would do so. But

until such a showing has been made, we are guided. by ‘the principle that

’ “the intelligent functioning of the administrative process demands that the

Commission [ICC] be not required to indulge i lengthy evidentiary re-

aeiiadaiies ad oe ae ee Pmt ober ~ Bh es Alana

«>

JA LIIOT) Cas

B26

‘has a department ‘ia that reporte to the ‘regional

manager.’’ He has (1) a ‘Regional Sales Manader,” |

(2) a ‘Regional Production Supervisor,”’ (3) a ‘Re-

gional Cost Analyst,’’’ (4) a “Regional Vehicular

-Supervisor,’’ (5) a ‘Regional Engineer,” and (6) a

_ “Regional Personnel Director.’ _

This form of ‘organization is, in effect, repeated at

_ the bakery or plant level. The ‘‘plant manager”

& responsible to his immediate superior, the regio”

- INanager. The plant. manager has several divisional or

departmenta heads to, assist him. He has: (1) a

“Sales Manger,’’ (2) a “Shop Superintendent, ” (3)

' ah ‘Office Manager,’’ (4), a ‘‘Fleet Superintendént,”

(5) a “Chief Engineer,” and o a “Chief J anitor. —..

B. “Perritorial assignments. New York ringed

controls the geographical territory served by each

regional office. It rearranges these sometimes, taking

a baking plant (or a distribution “‘depot?’) out of one

region and putting it under the jurisdiction of an-

other. The regional office, presumably with the ap- .

- proval of the headquarters sales manager, controls the —

' territory to be served by. each of. the local baking»

plants. It can have a particular plant manager confine -

his sales inside the state in which his Lomo is located,

' 11Jn the: Matter of Continental ota Company, D Dkt. 7630, tr. 712.°

12]d., at tr. 336. , -

» or it can have him sell across state lines. Local plant

_ managers are assigned, promoted, and transferred |

from one plant to another, and. from one “region” to

ey |

°°. At :the bakery level, ‘the plant: manager divides his

: territory into ‘delivery routes.’’ Such a route might

- be 10 blocks long, or only two blocks, depending upon

the “density” of the ‘‘stops’’ on that route. (A ‘‘stop”’

is a customer, e.g. -» & grocery store that buys Con-.

tinental products. ) (ts

| yu

C. Purehasing. Ceaiitienias's S baking, ssdadutin in 29 |

states secure the raw materials or ingredients needed

in the. baking of their goods by sending a ““requisi-

1 ¢ °° tion,” -apparently through the regional office, to the

| company’s “purchasing division”’ in Rye, N ew ork.

{ _ It does. this by sending in, each and every /week,-a

. ; ““weekly inventory”? of the supplies it has on hand. :

From these, headquarters doés the ordering ‘‘auto-

' matically.’’ The suppliers of the’ various products

needed by Continental’s 29-state bakery. operations.

are themselves located in many different state. Upon :

reeipt of an order from Continental's Rye, New York, .

purchasing division, the suppliers deliver, in many

instances across state lines, to whatever baking plant

is. indicated. Payment for ingredients is‘ of course

made by. the purchasing division in New York from’

. the central N ew York peas

feb terd Ata. o> Det vee

a Ne taal A

B28

D. Production. Continental, in support of its efforts

to maintain ‘‘a rigid standard of quality throughout —

‘the country,”. issueg ‘‘Production Bulletins’ pre-.

scribing in exact detail ‘the production standards its

plants are to follow. The regional production super-

. visor ‘‘is constantly in touch with the plants. -_

E. Pricing. The local plant 1 managers ean only ‘‘rec-

ommend’’ prices. The regional office, presumably with-

the approval of the headquarters sales manager, de-

termines prices. To get permission to vary his prices, _

either generally or to a particular customer, the plant —~

manager sybmits a request to his regional superior.

F. M oney collected from sales. Continental’s local’

baking plants have. no control whatsoever over the -

money collected from their sale of Continental ‘prod-

_ ucts. The bakery has two bank accounts. ‘Money col-

“lected from. customers is initially deposited | ina

| “general” account, and then periodically transferred

. toa New York headquarters’ bank. For its own local

expenses, the bakery is given a ‘‘local’”’ account. From

this account, it can meet its payroll and make: certain

other ‘‘miscellaneous’”’ expenditures. Except in case ¢

_ of emergencies, the purchasing of the local plant man-

ager is limited to expenditures of $50 or less ($300

for engineering services).* For expenditure of more

+) 18[d., at tr, 714-715.

' 14]7d., at tr. 526-527, 601-602.

a ee er ne

B-29 te * . Bs

than $50 the’ plant manager must send a requisition.

', to hgadquarters. As to the money received from the.

_ sale of Continental’s products, he is simply ¢ a collection :

agent for the headquarers treasury.

G. Accounting. ‘Continental’s baking plants follow

an accounting system prescribed by the headquarters

office in New York. Each week they submit a report

- that’-gives the home office in Néw York a .complete.

breakdown on the past week’s production, sales, per- ;

centage of “returns,” ete. The’ bakery. ‘also submits a

weekly ‘profit and loss” statmént. A “Travelling

_. Auditor” audits the bakeries’ books twite a- year, and ee

may also make additional visits. The regional cost

’ ‘analyst also checks on the bakeries. "

H. Personnel. Continental’ 8 helene ‘manager < can

hire and fire employees below the ‘department head”?

level. He must have regional, “approval” before he can

hire, say a ‘“production ;supervisor,’’ or a ‘sales

supervisor.”’ The regional ‘‘personnel director”’ helps

the plant personnel man with such programs as ‘the

“student program which we ‘carry out at. each plant,”

that, is, recruiting from local colleges. Also, the re-..

gional personnel director “‘is a sort-of liaison operator |

working with the plarit personnel man in clearing

ideas on safety programs and clearing the distribution

. of thoughts. on hiring, training, -et cetera. 16

: id, at tr. 716.

16]d., at tr. 712-713.

cae)

= —— , . >

L. Insurance. All group life and health insurance,

for all Continental employees; is purchased by the

‘‘Insurance Department’’ in Rye, New. York.”

J. Engineering. ‘The ‘regional engineer “irons out —

the engineering kinks” at the local plants. “He is

very important. A plant will develop a new. manner

of maintenance. He picks it up” at. one plant and

passes it on to the next plant, such as it might help

. their: efficiency and: maintenance § att and so

forth. 9918

i Vehicles. The regional “vehicular supervisor”’

assists the local plants in the maintenance and oper-,

ation of their truck fleet.

: i Sales. ‘The paren manager’s responsibilities

| “‘are to operate the business and the bakeries under

_ my control and try to make some money. * * * I am ©

_- responsible for pricing in the trading areas that I have

charge of.’”® He is responsible to headquarters for the .

sales volume “of each of his bakeries. ‘‘I run sales’

figures for my region constantly. 0 To assist him, he

| has a regional “sales manager,” whose duties are to: |

_ “Call on the bakeries, work with the sales department ©

to develop sales, help them to develop sales campaigns,

P .

17]d., at tr.'719.

_8id., at tr. 715-716.

"197d, at tr. 1837.

20]d., at tr. 1888, fk. ss 2%

| B-31

help in getting the right kind of sales people, help to.

train them, and make store contacts when neces-

sary.’”! “He is in contact with all the plants in my ©

- Region. Each‘ plant has some kind of sales activities

- going on constantly. Various sales promotions, various

| sales activities and the regional sales manager’s job

is to go around [to] the plants and confer with the

plant manager and i insure that.these dre activities that

_are going along, and. general contact with the. activi- es

ties of each plant, in the direction of sales.’”*

M. Labor Relations. Continefital has “.. Labor

Relations man’’ and “functions for my region and

“several others * * *. He is the one that wai dtmeaten the

contracts.’ | ,

ON, Packaging. Continental, at its New York head-

: quartes, has an ‘‘art department”’ that designs most

of the packages and wrappers. in -which its bakery

products are sold (e.g., “Wonder” bread). However,

if a bakery manager feels strongly about a | particular

design, it won’t be forced on him,

O. Advertising. In 1961, Continental’s’ bread sales

were approximately $187 million. About 6. 5% of that —

total was spent for advertising. Most of” this is local

‘ or fegional, except for some national TV advertising.

21/d., at tr. 1922.

. 22]d., at tr. 714.

_ 231d, at tr. 713-714——™

B-32

| Netinabits: ee TV, and billboards are the: prin- “

cipal media used. National magazines are _not used. —

Virtually oi advertising is placed from ‘neatoniay

‘ters in New York, and is paid for from New York.

The company has its own *' Advertising Department”

at headquarters. Further, it, retains a New York ad-

vertising agency to handle its account. Local bakery |

managers can “‘suggest’’ ads they would, like to see

run in their local areas, but the preparation of the

ad copy, the making of the. arrangements with the

local media (newspapers, radio and TV stations),

and the payment of the media’s bill are all headquar-

ters’ functions. |

The home office also prepares. point-of-purchase”’

advertising material (signs to be put on the grocery,

store’s bread ‘rack, signs for its windows, etc.) for the .

- local bakeries. The home office keeps the plants in-

formed of the material available, and sends it to them

from New York on request.

‘ While the local bakery does not prepare, place, or |

handle the payment for advertising conducted in its

- trade’ area, the - costs: incurred ° “by eer are

charged to the bakery.” |

We think the foregoing facts bring Continental’s

sales in the State of age squar ely within the:

24] d., at tr. 457.

B-33

rule of South-Eastern Underwriters” that a pur-

chase-sale transaction includes not only the ‘‘execu- -

tion” of the ¢ ontract “but also negotiations and events

prior to execution S04 ce ‘the innumerable transac-

tions necessary’ to, performance.’ ’’ Here, the acts by.

which technical title passes from Continental to its

grocery store customers are obviously a ‘small part of

Continental’ s total operation. Its. local sales agent can

easily agree to deliver on consignment a dozen loaves

of ‘*Wonder”’ bread every Monday, é ‘‘innumerable

transactions,”’ many of them: directly’ ‘‘in’’ interstate

_ commerce, are ‘necessary to performance.’ The work

of Continental’s driver-salesmen is merely the peak

of the iceberg ; beneath it, sunk deep into the stream

of interstate commerce, is the real body of the trans- .

action.

We find that all of Continental’s sales in the State

of Washington were ‘‘in” interstate. commerce. All

; of them involved a New York seller and a Washington

buyer. Each: of them was an indivisible part of a

host of “transactions ’ 7 oP [that] constituted a single

continuous chain of events, many of which’ were multi-

state in character, and none of which, * * * could pos-

-sibly have been continued but for that part of them

which moved: back and forth across state lines.”’

South-Eastern Underwriters, supra, 322 U.S. at 537.

We think this result is also in full accord with the

. Court’s decision in. Moore v. Mead’s Fine Bread Co.,

B-34.

348 U.S. 115 (1954),° and with the Fifth Circuit’s

recent opinion in Shreveport Micayoni Mfg. Co., Inc.

\. v. Federal Trade Commission, 321 F.2d 404 (1963);

Ne denied, J anuary 6, 1964. In the latter case it was —

squarely held that purchase-sale transactions may be

‘in interstate commerce although the deliveries * soe

[are] intrastate.” 321 F.2d at 407 (emphasis added).

Until: the Strpreme Court resolves whatever conflict.

may exist bétween’this case and Willard Dairy Corp.

v. National Dairy Products Corp., 309 F.2d 943 (6th

Cir. 1962, cert. denied, 373 U.S. 934. (1963), we feel

- bound to follow the Court’s clear reasoning in South-

Eastern Underwriters, supra, and our understanding

25In that case, a private treble damage action brought under the .

Robinson-Patman Price Discrimination Act, the Court found a discrimi-

nation “in” commerce where thé defendant, operator of a bakery in Clovis,

New Mexico, cut its,prices inside the State (in Santa Rosa, New Mexico),

thereby injuring a local competitor, while keeping its Lag d g ‘on sales

made nine miles across the borde® in Farwell, Texas. To sure, the ©

latter sales were enough to meet the technical requirements of the statute.

But they were trifling in amount, by any standard. Farwell, Texas, in 1950,

_had a population of 400. Assuming the defendant had all the bread busi-

ness in that town, that it received its full wholesale price of-14¢ per loaf,

and that every.man, woman, and child in town consumed half a loaf of

_bread per day, the defendant's. gross sales there would have been no more

than $28 per day. Assuming a net profit of 10% of gross sales, it’could not

have netted more than $2.80 per day on its Texas sales. (See analysis in -

Proposed Findirigs and Conclusions of counsel supporting the complaint,

Continental Baking Co., Dkt. 7630, submitted December 31, 1962, p. 59.) -

The: injured New Mexico competitor won a judgment of $68,400. If the

Farwell, Texas, sales were the keystone in the Court’s decision, then the

holding is simply that. teh. defendant used’ poor financial judgment in

letting its trucks wander nine miles inside the Texas border: it would have

had to retain all of the Farwell, Texas, bread business for more than 75

years to earn back that nearly $70,000 sum. * we

The real basis for the Court’s decision, we think, was not that the Mead

lant in New Mexico made a few inconsequential sales in a small Texas - -

Mander town, but the fact that Mead was one of several “interlocked com-

anies,” a member of an “interstate combine,” 348 U.S. at 119, doing

usiness in many states.

B-35.

of its opinion in Moore, supra. iii doing SO, we note

that nothing in Willard suggests that the Court. had

the benefit there of the kind of intra-corporate data

‘we have dispussed here, a study in ‘depth of the vast

substratum of out-of-state control exercised over, and

the never-ending stream of interstate activities and

communications that form the underlying support for,

the out-of-state firm’s allegedly ‘‘lo¢al’’ sales. This is

the “economic and business stuff’’ out of which. these '

- transactions are. made, White Motor Co. v. United

States, 372 U.S. 253, 263 (1963); and we think it

shows that any other ruling would not only do vio- -

lence to the purposes of the statute, but. would require

this Commission to ignore what our careful study

here has led us to believe are the economic realities

of present day interstate commerce, —

Respondents contend that the hearing examiner

ee: in finding that they had, in fact, conspired to

“suppress competition among’ and between them- .

selves and others in the production, distribution and

sale ‘of bread” as charged i in the complaint. They call

it merel a case of ‘*conscious arallelism. ” Arguing —

y gulng

that nothing has been shown here but price uniform-

ity,. they note the principle that: ‘“‘An inference of.

conspiracy would only arise from. similar business con-

‘duct if it appeared‘more to the interest of competitors

B-36,

”

ra toadopt ‘different practices.” ‘ Indepéndent - Iron ;

__....Works; Ine.v- United States-Steel- Corp. 177-B. Supp.

743, 747 (N.D. Cal. 1959), cert. denied, November 18,

1963.

Respondents further contend that, whatever inter-

ences of conspiracy might otherwise have been drawn

here, they. are affirmatively. rebutted by several ad-—

ditional facts, namely, (1) that there is no community

of interest between the ‘“wholesale’”’? and ‘‘retail’’

members of ‘the association, and thus no reason for

them to conspire; (2) that there is no community of |

. interest, and-henee no motive for a conspiracy, be-

tween those membeis that are located in different

“metropolitan areas; and (3) that several of the al-

leged conspirators said they had lost money during

-a part of the relevant time period.

. The third contention is wholly fallacious. Even if:

it had been fully established that some of these whole-

gale bakers had in fact sustained losses,”* that fact

“would be izisufficient to rebut a reasonable inference

of conspiracy. While conspiracy is normally associated

with: affluence on the part of the conspirators, it is

. certainly no guarantee of prosperity. |

‘ 26Those respondents offered no ney evidence to support the

claims on this point. The only written financial data in the record is CX 32,

. Continental’s 1960 Annual Report, which shows a net after tax profit of

over'$9 million (p. 6); and CX 34, Safeway’s 1960 Annual Report, which .

_ shows a net profit of over $34 million (p. 18). .

Ait Amnncrntion dle «_agssth

Bor. tl.

- Nor is there anything in respondents’ “territorial”

and ‘‘functional’’ arguments that negate the exist-

ence of a price fixing conspiracy here. The latter con»

tention — that ‘wholesale’. and ‘resale’? bakers do

not compete with each other — is patently unsound.

For example, one of the “‘retail’’ bakers, Mr. Vincent

_N oga, operator of an ‘in-store’? bakery in ‘Yakima,

testified that while he was baking and selling his own

bread in one section of the Yakima supermarket

where he had his baking operation, the various

‘“‘wholesale’’ brands (including Contirental’s ‘*Won-

der’’ bread) were being sold in another section of the

same store, under the very samé roof. He had no —

- doubt that he was “competing” with the bread baked

by the wholesaler.”” It could not be otherwise. Whole-

sale and retail prices are tied together by a simple,

mathematical formula. On their loaves of bread, the

wholesale bakers stamp, for the’ consumer to see, a

“‘suggested retail price.’’ This is the price the retail |

. grocer almost invariably charges the consumer. The —

- price he pays the wholesale baker is simply that sug-

gested retail price less 20%. 8 When the consumer is -

paying 34¢ for the regular loaf, the grocery store is

paying 20%. less, or 27.2¢. One of the wholesale bakers,

testifying in regard to the 2¢ price increase in 1958, -

remarked that: ‘‘We don’t get the two cents.. We |

27“[ T]he wholesalers were my main competitors.” Tr. 526.

" 28See, e.g., tr, 42-44, 205; CX 31. .

B-38

: ‘ay ac a en of that. 207% of it goes to the ietailer, |

| the grocer or the ‘restaurant’ ‘owner * * * 29

Hence the big wholesale bakers have a direct. and

_immediate’ interest in ‘preventing price competition

between the. retail bakers themselves, and thus be-

“tween the retail bakers on the one hand and the retail ©

grocery stores (the wholesalers’ customers) on the

other. For example, one: wholesale baker summed up

his competition this way: “Well, I was thinking of

everybody in the baking industry. You know, our

competition isn’t just the wholesale baker or the re-

tail baker or the grocery store baker or the house-

..to-house baker. SS * The housewife can bake her

- own bread. * * * TI]f she thinks the price is too

high, she’s “going to: bake in her own kitchen: -

she says ‘she does a better job. 708

As to respondents’ argument that the geographical

distances between these various metropolitan area

‘establishes the absence of competition and hence any

“motive for fixing prices, it should be noted first that

many of these respondents sell in two or more of

the towns in question. 31 In “fact, it appears that Safe-

’

29Tr, 182. |

30Tr. 245 (emphasis aided’.

310f the 49 members of the esscciation, all of whom are respondents in

' -this proceeding (either named directly or through representative mem-

bers), more than half of them have their businesses in Seattle itself and

thus compete with each other in that city. (CX 8, a list of the members

as of date complaint issued, and amount. of dues paid by each, tr. 177, lists -

29 Seattle members.) The others are located in North Bend, Everett, Kent,

Aberjeen, Mount Vernon, Bellingham, Anacortes, Burlington, Tacoma and.

aaa Darts AR bt aseed raw wp oe

B89

way sells in all of them.” Therefore, a break in prices

in any one of these towns would adversely affect not

merely those respondents with. baking plants in. it,

but. also-those who sell. there from baking plants lo-

cated elsewhere. 8 839- . * |

Returning to respondents’ argument that ‘‘con- _

scious parallelism,” i.e., uniform, prices, does. not

prove a conspiracy, it should be noted at the outset

_ that this is not a ‘‘conscious parallelism’’ case. It is.

a conspiracy case. To be sure, the record. shows that.

these respondents have ‘‘matched’’ each other’s prices

with great diligence. But the evidence here goes

substantially beyond that. The record shows (1) that

these alleged competitors have held regular “meet-

ings’’ almost every week, generally every Monday at

: Yakima. All of these towns are well within 150 miles of Seattle, the distance

bread can ‘be economically transported from the baking plant. (See Map,

p. 7.) Buchan has four plants: two in Seattle, one in Bellingham, and one

in Tacoma. Tr. 179. Continental's Seattle plant; sells all.the way north to

the Canadian border, east to North Bend, and south to Renton and Tacoma.

Tr. 399-401: For example, it has a delivery rogte in Anacortes (near Bell-

ingham), tr. 438, and thus competes with | bakers there. Langendorf’s

Seattle plant sjmilarly sells north to the Canadian line, south to Aberdeen,

and Southeast all the way over to Yakima. Tr.-312-313. Hansen has two

plants, one in Seattle and one in .Tacoma. Tr. 288,+294-295. It appears,

therefore, that each of the 49 members of this association, regardless of the

town in which it sells, is competing with bread baked by ‘one or more of

these wholesale bakers. 7

32Safeway “ship[s] all over the State of Washington.” Tr.262. = ™

33The hearing examiner’s initial decision tabulates, at page 13, the

‘simultaneous and nearly simultaneous price increases by these respondents

_ in the years 1957 (from 30¢ to 31¢ on the standard of bread, 1958

(from 31¢ to 33¢), and 1960.(from 33¢ to 34¢). For example, i#91958, four

of the largest — Continental, Langendorf, Hansen, and Buchan — all raised

their prices on the standard loaf of bread from 31¢ to 33¢ on precisely the

same day, August 11, 1958. | ;

y gus 5 =o

eeeenietnee

others...

B-40

the Athletic Club in Seattle; (2) ‘that they “*dis-

eussed’’ prices at those meetings; (3) that, after cer-

tain of these meetings, the association’s manager in-

formed certain of the me

_ there would be an increase in the price. of bread; and

(4) that the association’s’ manager, as well as his pre-

. -decessor in that job, r peatedly called on individual . —

members of the association for the “purpose of in-

ducing them to refrain from cutting prices, some- 4

times threatening them with drastic price retaliation

; if they refused ito keep their prices in line with the

- Only one company was allowed to. deviate from

those prices — Safeway. While all the, other bakers,

: wholesale and retail, were pressured to retail their

bread for the same price . Continental got for its

‘“Wonder”’ bread, ‘Safeway was permitted to sell for

1¢ less. It was permitted to do so for the simple

reason that none of the others, not even the big whole-’ |

gale bakers, had the power to stop it.4 The result is

that respond nts have two prices. in this market: (1)

the high, uniform price: (e.g., 34¢ in 1960 for the

standard loaf ) charged by the group in general —

including the advertised brands produced by the big.

° wholesale bakers ° (Continental’ s. ‘*Wonder’’ bread,

34Buchan, asked why he didn’ t.meet Safeway’s 1¢ lower price, replied: -

- “Well, I am "afraid that we are not financially able to earinans Safeway.”

Tr. 195.

ers that, on a certain date, hss

i ey B-41

ete.) as me as ‘te unadvertised breads produesd by

the smallest of the retail. bake shops, and (2) the 1¢

. ; lower (33¢) price charged by Safeway for its self-

| -baked, “‘private brand’? bread.

While: the. assuciation’s by-laws provide for “an-

nual’”’ meetings of. the entire membership, these are

srarely held. Instead, “special?” meetings are called

frequently. The Seattle division. meets almost. every

week. ‘‘At times we have a meeting every week, not”.

“always every week.’® The number of special meet-

ings actually held’ each year totals less than 52, but

-more- than_26.°° While_ the meetings in Seattle are

usually held on Mondays, and at the Athletic Club

~ (ae Seattle, each meeting is individually called. The

record contains a list of the “regulars” who: have

requested’ ‘that they be notified of. all meetings.?” |

4 ee Members of the association located in the towns sérved :

| by the other four divisions® are not routinely in-

formed of the Seattle meetings, but are free to, and

do, attend if they a to be in town.” The man-

Rial ca eet oewe

wets rie nates .

°%

‘35Tr. 36. “Whenever the. occasion iterates it,” a meeting is called. Ibid.

seTr114, 0 *; ks

37CX 1, tr. 175.

38As5 noted, the association has five divisions: Seattle; Bellin ( about

100 miles north of Seattle, and about 20 miles south of the Canadian

‘ border); Aberdeen (on the Pacific Coast, about 100 miles southwest of

Seattle); Yakima ryan over 100 miles southeast - of er ; and

‘ Tacoma (less than 50 miels south of Seattle).

S9Tr. 35. The other four divisions have their own meetin . The associ-

ation’s manager, LaLime, a , apparentl y called meetings in the divisions when-

ever those memory asked him to. He visited the divisions ‘ ‘[w] henever the

@-= B-42

ager of the association (then Arthur alin) pre-

~, sided at the ———

The cenaiie purpose of these meetings is to dis-

" cusse such matters as. contracts with labor unions,

ies labor. grievance ‘problems, and: regulatory legislative

issues. But the testimony of several witnesses who

\ attended these meetings makes it clear that the dis-

“gussions frequenly involved prices, particularly the

alleged “need”? of the -members to raise their prices

in order to recoup the costs. of wage incréases.

Witness. SFB former owner of a bakery in

" Bellingham,3testified that, as a member’ of the associa-

‘tion, he occasionally attended its meetings’ at .the -

Athletic Club wher-.he was in Seattle. ‘“Whenever

Siar i,

it was convenient for me. to be down here, I would

go to their noon luncheon “which we considered a .

Juncheon and a meeting combitied.”” ”" He testified -

. further:, . ; eee sa ee

: - 4 s

.Q. Did you. ever hear any prem re < prices

or price rises when you were at a meeting -

Ps sof the Bakers of Wacengtet, Inec.? -

7 © Yes, sir. :

Q. What would be the Tukietention of such dis-

| ’ eussions? Would. they usually occur around

cal _ labor contract periods or what? .

hd ry pone requires it. Any time something car" that would require it.” Tr.

hasis ‘added). He estimated that he visited each of the divisions

os" » t 10 oF 12 times per year. Tr. 38-39. He presided (as chairman) over

gill meeting, Tr, 40. a e f

-§

“

: ee ror $

. 7 a

ee ee

B-43 .

That is the ison for raising ’em..* * *

Sometimes before and after our contract was’

. Signed. — pa he ee.

. Would you hear price discussion at other

periods at%tliese meetings or were they gen-

erally localized. around 1 the contract periods,

. Mostly contract periods, yes.

And what would be the nature of Ge: dis- .

cussions that vou heard?

“* * * we’re going to use red ink if we don’t

| do something about the bread price.’ «

To the same effect wag the’ testimony of witness Al-

bert Pettersen, formerly bakery supervisor for a local

food store chain:

‘© >

. Now, when you were liere in. Seattle, Mr. Pet- :

tersen, did you ever attend any meetings of

the Bakers of. Washington, Ine., sir?

Yes, sir. I attended their Monday luncheon at

‘the Washington — Club.

@ .

. [We have — igstirmomy to the effect that the

price of bread “rose in August, August 11, »

1958 here in Seattle, the Seattle area. Do you

recall attending any meetings at the Wash-

ington Athletic Club of ‘the Bakers of Wash-

- ington, Inc. in which ‘prices were discussed,

around that period?

Yes, I did.

What would be the - nature of the price dis-

cussion that you heard? °

Well we discussed the labor, we discussed our

price of our material—flour, ‘shortening, sugar.

Pie :

40Tr, 488-489 (emnphests added), 490.

- Bt

And labor had jumpsed so. hi that oo de-

cided that we should have a raise in our bread.

From there we just took it and they- said,

‘‘What do -you think about certain oe ..

and they kicked it around and, so that is’ as .

far as it went as ad as I sat there."

After these meetings were over, the witness was

notified by the association’ S manager, Arthur La-

- Lime, that there was going to be a price increase:

Q.. Did you receive information that prices were

goiig up after this series of meetings?

A. Yes, sir.

Q. And. how did you: ‘get that information? -

A. Well, I believe it was.a form sent to us. Now

I‘am not sure whether it was a form or he

called me, Art LaLime calledzme. I don’t

know whether it was a paper or elephone call. _

Q. Tt was just the one instance when he called

you or sent you a notice or was there. more

than one instance?

A. Well there was more than one instance because

‘ we weren’t sure on different.items to go up on,

. like buns and specialty breads.”

The aieaiies offered by respondents for the re-

markable coordination of their price increases is that

the whole thing is a matter of ‘price leadership.” ”

- First, they. say, one of the respondents, acting inde-

-penténtly of his competitors, decides to raise his

prices. Because certain’ of the very large grocery

41Tr, 259-260 (emphasis added).

427,261.

io Saeed eR nie nd Bred rier irio~

chains insist on it, a written notice of all price changes

is sent to them by the price leader several days. in=

advance of the effective date of the change. His com-

petitors, through. salesmen calling on the notified

chains, learn almost immediately (perhaps. the same

day the ‘notice was received) that the price leader

will inérease his prices on a certain date in the future. -

_ These competitors, equally eager to increase their

own prices (respondents contend), immediately send

out similar’ notices to the ‘chains. For example, four

of the ‘principal respondents — Continental, Langen-

dorf, Buchan, Hansen — all picked August 11, 1958,

for the effective date of their 1958 price increase.

On August 7, 1958—four days prévious — Conti- ‘

nental had sent A & P a written announcement that,

effective August 11, 1958, the price of the standard

loaf of bread would increase from 31¢ to 33¢. (and

similarly .on other bread. items. 8 The neat day —

August 8, 1958 — two. of Continental’ s competitors,

Langendorf and Hansen, sent similar. announcements

to A & P and their other large chain customers.“

‘ Their announcements, like that of Continental, stated

that, effective August 11, 1958, the price would go up

from 3¢1 to 33¢. Had these three and all of their.com-

| petitors made their announcements on the same date,

43CX 21; tr. 402-403. (These are c suggested retail — the wholesale

price to the grocer is 20% less.)

- 44CX 15; tr. 320. CX 13; tr. 297-208,

B46

say, August 7; it would have been hard to explain;

the only ‘inference would have been that each had

. agreed with the others to go up on that: day. But

| where the first move is made by only one company,

the others can claim’ they- subsequently and ‘‘inde-_

pendently” learned. of that competitor’s “‘independ-

ent’? announcement the day before, and thus that the

" moves of. all amount to nothing but ‘‘meeting com-

pore” ay aor |

‘But some of the baker witnesses testified that they,

learned of their. competitors’ impending price in-

-ereases not from the ‘‘trade’’ (grocery chain buyers)

but from the manager of the association. For example,

witness - Albert’ Pettersen was quite clear that, al-

hough. his employer, Albertsons ‘Stores, was not only

a baker of bread but a purchaser of it,*® it did not

“receive written notices of ‘price.increases from its sup-

pliers, but, instead, from the association.”

This was not the only baker witness that testified

tothe receipt of such advance price information from

the association. Mr. Frank A. Maxeiner, Jr., former .-

. proprietor of Model Electric Bakery in Seattle, tes- |

. 45See, eg., CX 23B, tr. 417, where Continental reported that it was

__ raising its prices “in order to meet the competitive situation ** °.”

46A]bertsons bakes-its own private brand bread and sells it in its own

grocery stores. In addition, however, its stores carry the various “brand

name” beads, e.g., Continental’s “Wonder” bread. Hence Albertsons is both

a customer and a competitor of Continental.

| ATT, 265-267.

tified as follows: ..

B47

N ow, during the time Mr. Alford was associ- :

ated with Bakers of Washington, did he ever

_ contact you with yespect to impending price

Ht OPopD

rises as to bread?. }

Yes, he called on the phone. |

And did this happen on several occasions?

Yes, it did over the years.

Did he advise you as to an impending price

rise in. bread when he ‘called?

. Yes,. he. would usually indicate that we weré

to advance the price of bread®

In the face of such testimony, we are not “obliged

to accept as true’’ the denials of the respondents.

Girardi v. Gates Rubber Co. Sales Division, I ne., 325

F.2d 196, 202 (9th Cir. 1963). Moreover, even some

of the larter respondents virtually admitted ‘they dis-

. cussed prices at their Seattle meetings and knew in

advance of their competitors’ impending price in-

creases. George Buchan, president of one of the larger .

respondents, testified as follows:

Were there any other discussions-at the Bak-

ers of Washington, Inc. in connection with the

discussions on labor regarding prices?

Oh, I imagine during the negotiations there

were, * * * 7 .

Did you discuss then what the added costs

would be of the added labor, payments? ..

' 48Tr, 282 (emphasis added).

A. Oh, yes. eras

| On the question | of advance kiiowledge of com-

petitors’ price: increases, the major respondents | re-

peatedly emphasized that they had merely heard

_“yumors’™ of what their competitors were going to, .

do.” -But much of this testimony had a decidedly

equivocal note to it. For example, a Mr. Covington,

Continental’s bread plant manager in Seattle, testi-

fied as follows concerning the 1960 price increases:

Q. Do you know in advance one way or another

_ . when a competitor i is going to raise his prices?

A. We have some knowledge of it, yes, sir.

* I

Q. * * * Do you. learn’ of prospective increases,

that is, do you learn in advance of the an-

nouncement of an increase that a competitor

is going to make that increase?

A. Not too far in advance, no sir.’

Q. Do you only jearn after some. announcement

has been made? Which is: it?

A. I only know for sure after some announce-

ment has been made.” |

something less than persuasive when interrogated —

about how they happened to have picked a particular

date to raise prices and about the. reasons for .de-

49Tr. 189-190 (emphasis added).

50See, e.g., tr. 186, 189, 237, 244, 247, 321-322, 335, 412, 443, 449.

. 51Tr, 412-413 (emphesie added). -

ie)

- .

Diich Diba i sas ——— nore hte ea cam ae ee

B-49

ciding to raise the price by the particular amount

chosen. Thus, the 1957 increase had been a 1¢ raise,

the 1958 increase had been a 2¢ hike, and the 1960

jump- was for only 1¢ again. Why pick 2¢ one year,

and I¢ another? ‘Well, I just didn’t feel that.I could

get any more ‘than one cent.’ But this doesn’t ex-

plain why he ‘‘felt’’ he could get 2¢ in 1958, In other

words, there were no ‘false starts” here. Each time |

a ‘‘price leader”’ raised his prices, it ‘‘stuck.”? The

a followed him“up quickly; the price leader did

not first try 2¢ and then have to “‘back down’’ to 1¢. f

The figure he selected — whether 1¢ or 2¢— was al-

| “ways just the amount that his major competitors, also

exercising their “independent” business judgment,

agreed was neither too large nor too small for the

state of the market.

As to the dates selected for the increases, e.g.,

August 11, 1958, rather than, sav a week earlier or a

week later, Mr. Moore, manager of Langendorf’ Ss.

Seattle plant, testified as follows:

Q. Why.didn’t you do it the previous Monday

because you were. already paying the rd

creased] labor . wages,?

A. I can’t answer that right n now beeen I can’t

think why.® | |

Arthur LaLime, then manager of the ‘association,

52Tr. 303.

53Tr. 321-322 (emphasis added).

- ever, that

_cessor, LaLime, who took the office in November. )

0 tae

came to the job in Novetiger of 1957. He succeeded a

Mr. Alford, who had held the post for more than 20

years, until his death in June of 1957. This prede-

‘cessor had been regarded by the members as the price

‘‘bellweather.’’ Witness Harry Schafer, a baker in

Seattle until 1956, testified. as follows: .

Q. Was there someone looked to in those meet-

ings to be the bellweather for prices?

_. A. Well, usually the head of the bureau * * *.

* -At that. time it was Mr. Alford.™

Mr. Maxeiner, as. noted, testified’ that Alford had_

"made it a practice, ‘‘over the years,” to instruct him

‘ by telephone when prices were about to be raised:

“Yes, he would usually indicate that we were to_ -

advance the price ‘of -bread.’”°

Victor Goethals, proprietor. of a small bakery in

the Anacortes-Bellingham area, testified that Alford

had threatened him with a “price war” in 1957 “if

-I do not put it [prices] up with the rest of the bak- ii

ers.” The witness was similarly threatened .the fol-

—

‘S34Tr, 491. oe:

55Tr, 282.

56Tr. 50. “Alford who was in ‘charge of the [association] had called me

and told me to put my price up. I did not do it for quite a while until I had

several calls and then he threatened me to — there might be a price was

if I do eg it up with the rest of the bakers.” Tr. 50. (It apears, how-

Alford. Since Alford had died on June 13, 1957, ‘and since the incident

would have logically followed the price increase of July .22, 1957, some

e witness was mistaken in attributing this particular incident to -

five weeks after Alford’s death, this threat was soon an made either by .

the “interim” association manager, one Gene Crawfo

or by his stic-

; ros

B-51

lowing year. ‘In 1958 I went up because I was al-

most — well, I was told to go up’’ by LaLime. ‘‘He

said I should put the price of bread up with the rest

of the wholesalers. ’’>” This increase was followed be-

- eause “I didn’t want the same trouble I had before, |

that I had in 1957.’ Asked what kind of pressure

could be put on him, the witness replied: ‘Well, they -

can * * * undersell me and break me at any. time. _—

In 1960, however, the witness simply ‘refused to go

\Cup again. “‘T just felt I’ couldn’t afford to go up be-

, cause you lose too much business by keep ea and

rong the prices.’

Another ‘Aeitnsce Mr. Bennett Haggen, proprietor

of a supermarket (‘‘in-store’’) bakery i in. Bellingham,

. testified that LaLime visited his place of business‘in® 7

the fall of 1957 to discuss the fact that three ‘local ie

bakers were cutting prices. It was a substantial visit.

“One hour, two hours, T didn ’t have too much to —

Q. What occurred at this meeting between your- .

self and Mr.. LaLime? —

A. Well, I believe that Mr. LaLime was Sula new

in the territory then. and, of course, he came

J .

57Tr. 51.

58Tr. 54,

59Tr. 55.

60Tr, 51.

61Tr, 374.

B-52 °

and introduced himself and then because’ of

the situation, we discussed: the bread deal.”

~The witness. did not know whether LaLime had

actually visited the three price-cutters in 1957, but he

knew that, two weeks after LaLime’s trip tu Belling-

ham, the ‘‘price war’? ended.®

| In 1958, prior to the price raise of August 11, men-

tioned above, LaLime invited another witness, Mr.

Robert Hall, proprietor of a small Bellingham bakery,

- to attend a meeting of the local bakers. The witness

\ ( )

N .

. Yes, sir.

And in: the summer of 1958, was |

of bakers held in Bellingham?

’ * * *

By whom were you invited to attend?

. The representative for the Bakers of Wash-

ington. )

* *# *

And can-you tell us what transpired at*that

meeting? iy. :

. Discussion of prevailing prices, and the bread

rise that was about to take place and— -

Was there any discussion of what Hall’s Bak-

ery intended to do' with its price conduct?

. Yes.: Hall’s Bakery had been known as a eut-

rate bakery and they would like to have us

_ join and follow on line with the rest of the

- bakeries.

62Tr, 357.

63Tr, 366. es . ~

‘a meeting

aise

Pai

B-58 |

Q. And did you refuse to do that?

A. I told them that we still had Hall’s Bakery .

name on our place.of business ‘and we were

maintaining our own place of business. |

ae ' * *

. Q. Did Mr. LaLime ever tell you to wen your

- prices up?

A. Mr. LaLime told me that, for instance, if ~ ,

_ Wonder Bakery [Continental] eared to bring

up bread in Bellingham and sell it as an: un-

branded loaf of.bread for 10 cents a loaf,

what. would that do for your business? * *

He did not say ‘they were going to, he said:

“What if they’ did 77"

Mr. Albert Pettersen, former. bakery supervisor for

the Albertson grocery chain, testified that LaLime, :

the association’s manager, had threatened him with

a “bread wat’’ unless he stopped advertising his

bread at a cut price. In 1959, the ‘‘regular ‘price”’

of raisin bread had been 26¢ per loaf: The witness

ran an ad in a Seattle paper on August’ 3, 1959,® |

offering it for sale at 19¢Asked if the ad caused any _

‘‘repercussions,’’ th witness said: ‘‘Well, the. As-

sociation (called me and told me that I shouldn’t run -

- raisin bread at 10 cents. * * * Well, he thought maybe —

we might have a bread war if I keep fooling’ around

with the price of bread.’

64Tr, 466-468 (emphasis added) : :

65CX 12, tr. 250i-. 2

66Tr. 255-257, 273.

j ’

/ e

’ aes

“a .

\ P : | 7 ‘B54 .

The dmaller bakers in other areas testified to’ efforts Ly

ca an competitors and the association’ s manager to per-

* suade them to raise their prices. Mr. Ralph Hall,

ke brother and partner of Robert Hall, mentioned above,

: testified that “it was suggested by; Mr. LaLime on’

a two different. occasions that he thought we- eould get .

more ‘for our bread and more in line: with what the

- other fellows : were getting. However, we ignored all. ;

- bis suggestit ns and in fact told him that we would

not raise the pr ice,’"" One of those ‘ove asious was in

1959.. ‘Well, in this regard, he was up there — the |

| last time in 1959 . he was there and he naked us —

when this last, bread war was going ‘on, he ‘asked - the

reasons. He came in one day. and he asked’ me all

: about this price, that we had. on the window and asked

«ys who had started this thing and all *-* *. Well * * *

he asked me to-do: these things, I mean, he was asking

~ me about them -and, of course, the only thing that I

ean go on, he was the ‘representative for the Wash-

ington State Bakers Association and I had a talk with

“em

him and that’s what’ he was there about * * *. As my.

memory of the conversation goes he said to me:

‘There are several of the other stores now that are

getting ‘32. cents a loaf-and. we are “wondering if you

- couldn’t come up at. least to meet those fellows at. 32

cents.” 79968

eT ATTATS: . eee a0,

68Tr, 481-482. See Paul

RI il ot + 1 NB aN Oa erste.

| B-55 |

LaLime wasn’t the only one that tried to persuade

_ Hall to raise his prices: ‘‘Now, in the spring, I be- .

; lieve, of 1959 I had a phone call that+there was a

A bread war going on at the time and a fellow that rep-

‘- resented himself, he said he was a Safeway store -

man, he never gave me any name on the phone, but |

he said he thought we'd better get the price of bread

| up there. And that .was the only thirig that’s ever

been said by anybody from’ the Safeway store: * * *

No, in no way would I know except that_he told me

| that he was a Safeway stare man and that the price

should be brought up there or elsé we would probably

Bet in a bread war with theni.’ |

This mink: as noted, in theless some 100

“miles north of Seattle. Two years earlier, in 1957,

another such incident occurred in Yakima; over 200

miles away. Mr. Wayne. Atkinson, owner of a small

baa

bakery in Yakima, testified tltit- he had run an ad-

vertisement featuring a price eut from 31¢. (the price

- his- competitors were: then charging) to 21¢.. The ad

ran ona ‘Thursday night, and he sold at the low price

on Friday and Saturday. On Monday morning, he '

was. called on by Jim and Bud Snyder, owners of a

competing bakery. They told him they. had received ;

a telephone eall .from Seattle;

Foci

| B-56 |

Q. Whom did the Snyders say had called them

from Seattle; did they say? | ~

A, Yes, sir. * *’* Safeway. — ,

= * * *

Q. Mr. Atkinson, what. happened with regard to

your prices, what did you do about them fol-

‘lowing this conversation with the Snyders?

A. I went back to the original price.”

We conclude that, while some of the respondents

may have thought these repeated price increases were .

in their-‘‘own economie interest,’’ others did not feel

‘that way and would not have raised their priges had.

’ it not been for the urgings, and sometimes the threats,

of the association’s manager and certain of their

competitors. We think it clear that ‘there was an

actual agreement, understanding, or ‘‘meeting of ‘the

minds” here between some of the larger, more power-

ful of these respondents, and that the weaker\mem- _

bers acquiesced in the agreement as a ‘result of the

promptings and pressures put on them by the former.

‘ .

III.

| Respondents argue further that, even if the associa-

| tion’s managers had in fact suppressed competition

' 70Tr. 381-383. Before he went back, however, “we had a meeting that

was called. I believe it was the-following Thursday or withiri a few days

of when I had been called.” The. meeting was held at the Chinook Hotel,

in Yakima. The witness attended, along with “nearly all bakeries in the

city of Yakima, including retail and wholesale.” Tr. 383. “Well, there were |

several things that were talked about, mostly coordinating the prices a

little bits® * * [T]hey all more or less agreéd that we would not shoot [cut]

prices on large white and large whole wheat, a pound and a half loaves, we

wouldn’t shoot the prices on those.” Tr. 383, 385-387 (empasis‘added). —

- *

Ase ee

s . ’ of

‘ ,

Mints Ti hw itl Oe aha ie POE ENON at my ans 0 i te

|) a

Rete ee SLANG ri keet iS eS te bn cane et oor

B-57

among the Washington bakers, the evidence is in-

sufficient to ‘‘connect” the various. individual mem-

bers of the association with that official’s unlawful

acts. They argue that they hired him to handle their

labor relations with the various labor unions; that’

‘labor negotiations were ‘‘all he was: food for;’’ that

_ he was given no authority to fix prices; that, in fact,

he was expressly enjoined from doing so; that, if he

did in fact fix. prices, the individual members of the

association neither’ knew nor should have known of *

it; and that, therefore, | they cannot be held respon-

sible for it.

The record, however, is otherwise, First of all, Mr.

LaLime, the man they eniployed to run their associa- —

tion, had a deep personal convietion —a. working

‘‘philosophy” — that was wholly obpbeed to the na-

tional policy in favor of competition. He was against

it, and made no bones about it. He: described his

‘‘philosophy’’ in these words: |

A. No. I am not approached with the price situa- _

tion. However, I vehemently recommend no

price’ wars because it. is economic waste and

very devastating: to the industry.

_ Q. How do you de that? How do you convey that

recommendation ? ; Reet eis

A. By every persuasion that I.am capable of

— stating. | | is, A —-

Q. In the opening meeting you use that pilosophy,

eee | |

ar “ acid ca ashes abn inns sascha tank

“B-58 a4, :

A. No, I don’t recall of open meeting discussions -

on that basis. No, sir. .

-Q. Then how do you convey your philosophy to

the membership? — . :

Sst ee

A. By personal contact.

@. What is it you say to them? . ;

A. I tell that a price war would be very devastat-'

' ing to the industry. The demands that we

have from labor are extremely difficult to live

with without having a sick industry on top |

of it. : | eae 3

Re RO ee See ee te ee ten

Pom.

Respondents contend they knew nothipg of Mr. —

Oe eT Oe Re Pe ae

LaLime’s proselytizing on behalf of his ‘‘philosophy”’

of noncompetition. They would have us believe that

a Nk, te a .™

they were completely unaware of his many phone:

| 7 ene ‘ealls And visits to those members that, cut prices, and

; * ‘those that were slow to recognize their ‘economic in-

j terest” in raising their prices. They tell us they hired

him to take care of labor problems; if. he fixed prices, —

he-was strictly on a lark of his own. jong |

We find, as noted above, that. prices were discussed

at the wéekly. meetings of the association at-the Ath-

letic Club in Seattle, and at meeting held in Belling-

‘ham and Yakima. This record -establishes that at

71Tr. 41 (emphasis added). Mr. LaLime elaborated upon this “phi-

losophy” of his in describing the calls he made on members who attempted

‘ to cut prices: “I did all in my power to persuade these pe ees to do so.”

Tr. 42. “I asked, him not to perpetuate a price war, not to become involved

in one.” Tr. 44. “I pointed out that a price war was very uneconomical, that

it-would be disastrous to the industry and it would be particularly dis-

astrous especially to a smaller operation, that any time these price wars

started gy Na only one thing that happened and that was complete

chaos.” Tr.46. °° cana ; na,

in Be i Rar ce: BID WL Sea hk Hb

a a ee ee OUD SD Pn

cialis a biel

| Bog

least 14 of the 49 members of the oii were.

regularly in attendance at the Seattle. meetings, in-

cluding Safeway, and the larger wholesale respondents |

- in this Sproveeding, e@.g., -Continental, Langendorf,

Buchan, and Hansen.” It has also been shown by the

testimony that the group ‘was: small enough, and the -

physical setting was arranged in such a manner, that

wy every person present’ at those meetings was able to

see and hear everything that was. done or said. Mr.

LaLime ‘presided over these meetings. The smailer

~ membei's of the association did not understand that.

labér matters were “‘all he was good for.’’ They

thought the purpose of the organization he repre-

sented was “to make better labor’ relations, ta main-

tain prices, and generally better baking conditions.’”> _

They thought he association’s Manager was the in- -

dustry’s ‘“‘bellweather’’ on prices. They thought he

_ was the one to call when a competitor got out of line’

"on prices.”* When he appeared in Bellingham for

the stated purpose of stopping the local price cutting,

they thought he was -there as a representative of he —

association; they couldn’t say he was up there on his

own, no,’ ‘They took him seriously when he told them

720K 7, tr 81-94, 175. er a | /

' . Tr. 464 ¢emphasis added). Mr. Lidaes himself had said this to thé’

witness, Mr. Robert Hall of Bellingham. Tr. 464. °

_ Tr. 491.

75Tr. 258-259.

76Tr. 480.

tes Po aes ie seg Slade es ka et Oita bie hint x. Sian i rs

' B-60

he “thought maybe we might have a bread war if I.

keep fooling around with the price of bread. 77 When

they received a written notice that, on a certain date,

all the bakers were to raise their prices, they knew

it had to have come fram him. ‘*[T]hey [the associa-

tion officials]. would be the only logical ones to send |

us out the price. * * * Well, it was from him. It

couldn’t be from anybody else but him.’’® When he’

appeared at a member’ s place of huathees, the member

knew he was there as the spokesman for the associa-

tion: ‘‘He didn’t have to tell me. I know he is.’””

‘. He was not on a lark of his own: ‘‘How can he repre-

. ‘sent himself when he is working for the associa-

tion?’®’ And he did not represent. merely the whole-

sale bakers, or just the retailers: “Well, sure he .

represents the wholesale people and:.the retail peo-

pl.’’! When he told a yetail baker to raise his prices

up to: the level of his competitors’ prices, the baker

thought he spoke for the assoéiation: ‘I thought that

~ was: his -job.’? When he intimated toa small baker -

that Continental might be called in to crush him by ~

selling. bread at his front door for 10¢ a loaf, that

baker ‘‘fioured he [LaLime] was speaking for the

bakers’ association of Washington. shies

TT, 257.

_ 8Tr,265. ,

- 9T r, 270.

' 80Tr, 276.

. 81Ty, 275.

82Tr, 62.

83T ry, 469-470. .

& * . ’ 8

; :

. °

~ “uiocaiteieisameamesils a

| B41

. The association, therefore, and the activities of the

man they jointly put in charge of it, is the cement

that binds the members together here. We find as a

fact that each member of this association either knew ~.

or should have known that LaLime actively discour-

aged and suppressed price competition throughout the

-area in which it operates, and that they either affirm-

atively approved’ of those activities or acquiesced in

them. All knew or should have known of the activities

of the association and of: its manager, and all ad- .

hered to the fixed prices the manager announced and

policed. It is elementary that a conspiracy creates:

an agency relationship among its members; every act

performed by any member of the conspiracy in fur- :

therance of its purposes is, in law, the act of all .

members of the conspiracy.®5 Proof of participation

In meetings at which. prices have been “discussed”? is

“sufficient to provide a foundation for the introdue-

tion of evidence of other acts: on ‘the part of one con-

spirator, in furtherance of the conspiracy, binding on’

84Respondents enjoyed almost complete success in brin ing price cutters

into line. An exception was Mr’ Vincent Noga, owner of a small in-store

stayed at his own aoe level, Buchan, a wholesaler, replied: “Very much

so.” Tr. 197. See.also tr. 514. ; ; .

85“TW]hen any number of

‘ prosecution of a comomn plan or ente , from the

' very act of association there ari each member

ing‘constituted the agent of alll so th declaration of one, in

urtherance of the common obje and is admissible as

primary and original evidence em.” Hitghman Coal & Coke Co

ther inthe

ee oe es ee

B-62.

_ all. American Tobacco Co. v. United States 147- F.2d

98; 118 (C.A. 6, 1944). Continental Baking Co. v..

United States, 281 F.2d 137, 152 (6th Cir. 1960).

_ Here, the principal respondents, including Continen- -

tal, Langendorf, ‘and Safeway, all participated in the

‘Seattle price discussion meetings. Continental’s Se-.

attle plant manager testified that he not only attended

_ those meetings generally, but that he had attended

them ‘‘around September of 1960;’%° the month in.

which Continental and its major competitors simul-

taneously raised their prices‘from 33¢ to 34¢. Lan-

gendorf ’s Seattle bread plant manager testified that

-—" attend meetings quite often, yes.’*7 He was the

- witness that, when asked why. he had elected to raise

his" prices on August 11, 1958 (the date on which his

major competitors raised their prices), rather’ than

a week earlier or a week later, replied: ‘‘I can’t

answer that right now because I can’t think why.’

Jens Hansen, president of Hansen’ Baking Company,

a5 testified that ‘‘Well, I have always ‘been quite regular

[in attending. the. Seattle meetings] but I haven’t of -

aos

late; last year or so ‘Ihave been off and on.’ He . .

- was quite regular in 1958; in. fact, of the 26 or more

meetings held by the association in that year, ‘‘I at-

; tended, a a sf i proportion of them.’ George Buchan,

via

“he ag

eer. 322. Sg ee

89Tr, 294.

. 9Tr, 304.

om Ba

. é -

. : ’

. . . Lo as ints daninstanae aang

e ie °

F : <

* president of Buchan Baking Company, testified that

he regularly attended the association ’s Seattle meet- -

ings, and that he ‘‘imagined’’ prices were “‘diseuss- :

ed?™ Other withesses testified to seeing representa-

tives of these and other companies at the Seattle

—meetings.2 ek By ais

‘

va ad

And of course Safeway was represented. at those

meetings. Safeway was not a ‘“‘member’? ofthe asso-

ciation. It was not carried on the rolls and did not

pay dues. But it nonetheless managed to secure all

‘the benefits of membership* by “retaining,” on an

1Tr, 189-190, |

92See, e.g., testimony of Harry Schafer, of Schafer’s Bakery, who saw

Jim Hansen, eGorge Bucan, Mr. Richards (of Continental), and Al Moore

(of aLngendorf), at the we tr. 496, together with numerous other

, wholesale and retail bankers. (The number attending varied from perhaps

10 to 25. Tr. 493, 495.) ie

‘The association’s manager, LaLime, submitted a list (CX: 7) of the

“regulars” who had. left standing instructions that they be notified of all

meetings (tr. 87, 94, 175). There are fourteen of these regulars, including

Pid - Continental, Langendorf, Buchan (represented by soepemeret George B.

Buchan), and Hansen (represented by respondent Dick Hoyt).

The association’s manager also testified to the attendance at the meetings

of representatives of Safeway, Continental, Lan endorf, Hansen (repre-

. sented: by its president, Jens aHnsen, or Richard Hoyt, who is also vice

’ president of the association) (tr. 81, 176), and Buchan (president of the

Chinook Hotel, in Yakima, attended “b nearly all bakeries ‘in the ee |

‘of Yakima, including retail and wholesale” (tr. 383), at which “they a

presence at that meeting of the Snyders, Dick Trenerry (of respondent

Trenerry’s - Bakery,: a whdily-owned subsidiary of respondent Holsum

- . Baking Co.), and Jack Larson (tr. 384). Respondent Victor H. Goethals,

. _ sion v. Cement Instituce,.333 vee 719° (1948), the association’s in-

aunt P

al att 2 ee ee a eer ects ais, — ‘ On ee ot ee ee

B64

- annual ‘*fee’’ basis, the association ’s manager to han-

dle its labor negotiations. Safeway paid LaLime, as

it had his predecessor, Alford, a ‘‘retainer’’ of $600

per year.” In addition however, Safeway’s fpre-

sentatives attended the Seattle meetings at we Ath-.

“3 wine Club:

Q. Does a jpeeiiitatins of the Safeway organi-

zation attend — of the Baker of Wash-

‘ington, Inc.?

Their labor saison man wotld on ocgasion

during contract negotiations.

What about their divisional bread man?

He would attend meetings. -

dal ap an

He does regularly’ attend meetings?

vee not hein ‘ar ;

As noted, Safeway aa its own baking plant in Se-

-attle, producing ° its “private brand’’: bread called

.. “Mrs. Wright.’’ It sells this bread in its various retail.

stores located, apparently, ‘‘all over the: State of .

Washington.’ In addition, Safeway’s retail stores .

handle the ‘‘name brand’’ breads produced by tlt

wholesale bakers. It thus has two prices: first, the full,

“suggested” retail price for the wholesalers’ bread

‘(e.g., 34¢ for ‘‘Wonder”’ bread) ; and, seeond, 1¢ less

(33¢) for its own self-baked brand, “Mrs. Wright.

‘OST. 32,

94Tr, 80 (emphasis. added). See also tr. 81-82. 7

” O5Ty, 262. é. ——

> .

. ifs Co etmen, ai Cat Tn Roan ai

: ’ .

a B-65

In: fact, Safeway is the local bread. industry’ s club_

- over the smaller bakers. Witness ' Wayne Atkinson,

proprietor of a small bakery. in Yakima, testified that

when he cut his” price, a local competitor, a Mr. ny-

der, immediately showed up at his place’ of business

“to tell him Safeway had called about his price:

Q. Whom did the Snyders say had called them’

_ from Seattle, did they Say? — Ste

7) ‘A. Yes, sir. - oo,

Q. And who was it? | O

A. ner? ? |

es)

hive price cutter testified that he had personally

received a’ threatning phone call from Safeway:

oN ow, in the spring, I believe, of 1959 I had a phone

eall.that there was a bread war going on at ‘the time

and a fellow that represented himself, he said he

was a: Safeway store |man, he never gave me any

. hame on the phone, but. he said he thought we'd better

ing that’s ever been said by anybody from the

Safeway: store. * * * No, in no way would I know

except: that he told me that he was a Safeway store

q the price of bread up there. And that was 4s the only [

__man and that the price baa be brought up there

or else we would probably in a bread war with . .

~ ‘them.’

9Tr, 381-382A.

97Tr. 478-479 a added).

& .

B- 66 2y.

. &

~~ As_to the penkiniie respondénts, it is-true of course.

that “mere e-membership” in ‘the association is not —

enough to warrant~an_ oFder against them. ' Phelps

Dodge Refining Corp. v. Federal-Lrade Commission,

139 F. 2d 393, 396. (2d Cir. 1943). Here, however,

many of these respondents were shown to have either |

attended meetings where prices were discussed, either

in Seattle.or in one of the divisions, or to have ac-

tively attempted to influence the prices of competi-

tors.* And they generally adhered to the prices fixed

at those meetings. ° But certainly all. of them knew’

or should have known of the price fixing activities

of the association’s manager, ‘LaLime. He was out- .

spoken in his hostility to price competition, openly |

spreading his “philosophy” to the members by ‘“‘per-

; sonal contact.’”? (Each of the “‘divisions”’ was visited

? ieee

es Cae ae asian ‘g ee natan

by LaLime from 10 to-12-times per year.) His |

threats, and those of Safeway ard the other powerful —

bakers, could hardly have failed to come to the at-

tention of these respondents, and ‘thus to have _put

them on notice of the fact that the associtaion was -

engaged in unlawful pricing activities.”

"8Seen. 92; supra.

99See n. 84, supra.

- 100Tr, 39..

- 101Thus the i issue is wate to whether a member who knows or + should ag

know that his association is engaged in an unlawful enterprise and con-

. tinues his membership without protest may be ree te yin ea as

mere

a confederate. We believe he may. Granted membership

does not authorize unlawful conduct by the association, once he is charge-

‘

. *

og. Layee re amy Nas

. yy .

*) Be

Pao as ae ban has

: Pe

Finally, respondents contend that the order entered |

by’ the hearing examiner is improperly broad — that

it shouldbe limited to the precise geographical area

in which the price. fixing has‘ been found (State of

Washington), rather than extending to wherever each

of the respondents do business ; and that, in enjoin- -

ing them from atinuing to fix prices in the future,

it should not preaibit them from fixing prices gen- -

erally, but only from achieving that, result by the pre-

‘cise means involved here, i.e., through this particular

trade association, Bakers of Washington, Inc. .

| The * latter contention borders ‘on. the frivolous.

While’ the. Commission must tailor its. order to the.

particular “practice”? found to have existed, “price

fixing’’ is a single, well- defined “practice. ’? Respond-

ents, in contending for an order that merely pro-

‘ hibits price fixing through the instrumentality of

Bakers of Washington, Ine.,_misconceives the dis-

tinction between a geucric ‘‘practice’’ ‘and the several

techniques of effecting it. For example, an order so

limited would leave these respondents free to resume.

their conspiracy ‘tomorrow, | holding ~ conspiratorial :

—-, at ‘high noon in the most aaa place in the.

able with em that his fellows are a pe 3 unlawfully his failure to

dissociate himself from them is a ratification of what they are doing. He

‘ mes one of the’ priticipals in the enterprise and cannot disclaim joint

responsibility for the illegdl uses to which the association is put.” Phelps

_— supra, 139 F.2d at 396-397.

Ba 7 ¢ : ‘ a ~

2. ; ry een B-68 *

city of Seattle, so- long as they kept the association,

Bakers of Washington, out of the -matter. Such an

order ‘would be no more effective than. one limited ‘to

a prohibition of price. fixing only where it was ac- .

complished by meetings held at a particular. place,

eg., at the Athletic Club in Seattle. The order could .

be avoided by using the: telephone ‘instead of having ~

. 6s meeting, or by moving: ‘the site of the meeting from —

“the Athletic Club to other premises. In, Cement In-

stitute v. Federal Trade Commission, 333 U.S. 683

, (1948), the respondents objected to the fact that the

’ order not only. prohibited -price fixing by means of.

the ‘‘basing-point system,’’ but alse by selling. ‘‘pur-

suant to or in accordance with any other plan or sys-

tem ‘which. results in identical price quotations or

prices for cement * * *.” The Court said: “The pata-

| graph is merely designed to forbid respondents from

acting in harmony to bring about national. uniformity

in whatever fashion they may seek by collective action

to achieve that result. We think that no one would -

find ambiguity in this language who concluded in good

faith to abandon the old practices.” 333 U.S: at 729.

Respondents’: suggested “‘territorial’’ limitation of

the order is equally unsound. The general. rule is that

a violation of law, whether practiced in one area or |

in many warrants an order covering the whole of the °

violator’ s business: There being no reason to suppose

that an entity showing no reluctance to fix prices in

: — B-69 os

Seattie, Washington, would act differently i in another *

. city or another. state, the public interést ‘in the cessa-

.tion of. such unlawful conduet requires -an order that’.

protects the public in all of the states, not merely in

. Washington.’ care ) ee

Finally, respondents profess the ‘Seas that the oddet,

as drafted, might be So construed as to prohibit such

awful business practices as marking their loaves: of

bread at the baking plant with suggested retail prices,”

especially since they, make “accommodation”? sales to

each. other. The language that bothers them here is -

and collusive understandings between any two or more

members of the association “or between any one or

more of them and others not parties hereto,” to fix.

prices, adhere to such fixed prices, or deter any com. — _ chen

| petitor from exercising his own independent judgment —

in pricing his+ goods. The prohibition of future price

fixing conspiracies between one or more of the re-

spondents ‘‘and others not parties hereto’” is a’ rou- -

tine px rovision, one that has been expressly sanctioned .

by the Supreme Court. For example, in Cement In-

stitute v. Federal Trade Commission, supra, the order

102“As to territorial extent, the company, having been found Daw Bi ty of i.

flagrant violation of the act, was roperly dare to cease and desist'fro

such practices in all areas in which it was a oon business.” Maryland Baking ‘

Co. v.Federal Trade Commission, 716, 718 (1987) « See also

Foremost Dairies, Inc., Dkt. 7475- ( 1963)" holding’ that an order was prop- .

‘erly extended to the respondent'’s operations throughout the country, rather

than being limited to janet ue, New magn, thé city where the viola-

tion was found to have occurr ed

}

Neh here eit oir smedandanaet

B-70

| - spieaad by the. Court prohibited future conspiraci s :

nofonly between the parties themselves but — '

2: any one or more of said ‘respondents and others not .

parties hereto_ e O The Court, noting that the

conspirators had secured the aid of others in ‘fhe -

past, and that the entry of new members: in the: in-

dustry in the future could -be reasonably anticipated, —

- declared that “the Commisgion was authorized to

make its order broad enough effectively to sighs a

| respondents from combining with others as well ‘as

c among themselves.” Id., at 728-729.

8 4

The ‘satan order, which is substantially the same :

as ‘the order ‘approved in “Cement Institute, supra,

could not conceivably be construed to. prohibit, the

common practice of placing ‘“‘suggested”’ retail. prices .

on bread wrafpers. The line between the ‘‘suggesting’’

of prices -and the ‘‘fixing’’ of prices is so well settled

as to require no discussion. Respondents are simply

being required to leave their competitors alone —to ,

-. ars 7 hens and ‘stop shiping with

s that Eappens to bear a ee a price.. consti-

| ‘tutes neither agreement nor interfer ence. As the court

said in Federal Trade “Commission v. National Lead

Co., 352 US. 419, 431 (1957 ): ‘Respondents pose

hypothetical situations which they say may rise up

to plague them. However, ‘we. think it would not be

good judicial administration’ * * * to strike the con- -

EAR SLIOOERET SAN MS PD OTE rete A me

fo e -

Nas ae

B-71

tested paragraph of the order to meet oth ‘conjec-

tures. The Commission has. reserved jurisdiction: to

tiary form rather than ° ‘as fantasies.” Moreover,

under’ the Commission’ S present rules of practice,

» - meet just such contingenies. As actual situatins “arise

| they can be presented to the Commission in eviden-

provision is expressly | made for those bound by an.

whether ‘a proposed course of action would be in

compliance — therewith. Rules Sec. 3.26(b), (ce), 28

gina. Corp. v.. Federal Trade Commission, 322 F.2d

165 (3d Cir. 1963); Vanity Fair Paper Mills, Ine. v.

Federal Trade Commission, 311: F.2d" 480, 488 (2d

i a

. We. think the order should te modified in one sae

‘order to secure advice from the Commission as to -

Fed. Reg. 7080; 7091 (July 11, 1963). See also Re-—

ticular, however. As issued by the examiner, it pro-

hibits any two of these respondents, or any one. of

3 them and any _other_person, from collusively en-~

4 ere ‘gaging in the described price fixing activities, without

regard to. whether any of ‘those activities occur in

interstate commerce. This Commission is without jur-

isdiction to issue an order prohibiting two Seattle

bakers, neither ; ‘of which does business of any kind

outside the city, from conspiring solely with each ~

: other ‘to fix local prices. Accordingly, the order will :

be modified to prohibit future collusion on prices .

‘“‘where any one or. more of the ee to that plan-;

—_—~1

ee B72"

ned -eommon course of action, understanding, agree- mi

ment, combination or conspiracy is selling bread in‘

“interstate ¢ommerce in competition with’ bread sold

by any, one or more of the vad: parties thereto, -

+ Respondents’ exceptions are denied. The initial —

decision and order as supplemented and modified to——

_ eonform to the: findings and views contained in this |

opinion will be adopted. asthe decision of the Com-

_ mission, nat Ct ees 3

~ aiasl

———

—

_ Commissioner Anderson coneurred in the ail;

Commissiorier Elman dissented and’ has. filed a dis-

: sentin opinion ; ; and Commissioner Reilly did not

participate for’ ‘the reason that he did not hear oral

argument. ass say

: February 28, 1964. \

Ne /

Oe : es

2 :

CLS ASPEN ery WGI Rao esoraeta. Meme

ate i aa

| UNITED. STATES OF AMERICA )

| ‘BEFORE FEDERAL TRADE « COMMISSION

‘

: _ COMMISSIONERS: . a ate “2

eerie coon hit Paul Rand Dixon, Chaiigaan, |

meh Toned acre ene Sigurd Anderson |

. Philip Elman.

- Everette MacIntyre

John R.. Reill illy tt

sie |

* In the Mater 0 RD Docket

| BAKERS OF WASHINGTON, INC.,/ | No.

et al. ads x 8309

‘ Ps Wie ? ; ; “% 6

%. Commissioner Elaan, dissenting : -

eae not concur for ‘the following reasons: The :

os Commission’ S assertion of jurisdiction seems to me

. ato be, at least, highly questionable. On the’ merits, -

the finding’ of an illegal price-fixing conspiracy, is not

Supported by the record. And, even assuming such a

conspiracy has been proved, the order is not respon-

| sive to the needs of the situation. | \

| I. \

“In F.T.C. v. Bunte Bros. Co., 312 US. 349, the

. ‘Supreme Court held that local practices are not within

the Commission’s jurisdiction under the Federal °

Trade Commission Act where they have a merely

remote or indirect —- to saperitate com-

noth

. oes menace ye uimer ss biiien os Mitten ts ve

pe Conta ner ORE aA OTHE Penh * a

B-74_

merce; they must be ‘‘in’’ commerce. Clearly, the |

Commission has jurisdiction. over a price-fixing con- .

spiracy if there are sales in commerce, or if the con-

spiracy extends across state lines, or if ‘any of the

Seite or. ‘instrumenta ities by which. the conspiracy

is. formed or carried Out is in commerce. Moreover,

the Commission .would ave jurisdiction, I believe,’

even over an essentially local price-fixing conspiracy,.

if one of the participants was engaged elsewhere in

interstate. commerce and used power or resources,

of the conspiracy, for example by bring pressure on -

local competitors or customers to join or continue in :

' the conspiracy. Cf.'Moore v. Mead’s Fine Bread Co.,

348 U.S. 115; Borden Co., ETC. Docket 7474 (de-

cided Feb. 7, 1964), pp: 2-4 (dissenting opinion). But,

-/ go far as appears from the record, none of these con-

ditions obtains in the present case., No interstate sales

" “were involved in the alleged conspiracy"; the mar- —

kets involved. were all within a single state; none of

. the other acts. ‘involved in the alleged conspiracy ‘was |

in commerce; and interstate. commerce: wassnot used

as a weapon for suppressing intrastate commerce.

* As to the evidence that some members of the sain trade associ-

ation made sales. in Alaska, I find no indication that these sales were part:

of the alleged ‘price-fixing conspiracy. The vast majority. of the association

- members, who did no business in Alaska, had no interest in fixing prices

there. And the theory on which this case was tried is that there was a -

conspiracy to fix prices in the Washington, not the Alaska, market.

B75.

/: | : |

I do not beli ge. that the Commission, unier- the

= "Federal Trade Commission Act, has jurisdiction over

interstate companies. as such (compare, e. g-, Section .

7.of the Clayton Act, as amended, Foremost Dairies,

7 ‘Ine., FT. C: Docket 6495 (decided April 30, 1962), ;

-pp. 36-37), which seems t6 be the upshot of the Com-

| mission’ S jurisdictional - holding. Certainly: United

States. v. South-Eastern Ungerwriters Assn., 322 US.

533, on which the Commission chiefly relies, stands for

no.such preposition. The Supreme Court’s detailed |

_tracing in that case of the interstate ramifications of

- othe typical large insurance company was directed -

showing that the insurance - -business is a commercial —

Y activity like any other, and that the localized act of

contracting for insurance is just one. ‘aspect of the .

business ; such an analysis was required because of

: earlier Supreme Court decisions which had held that - :

the insurance business -was basically not commerce at

-all. Since the indictment in South-Eastern Under--

writers charged nothing less than a single combina-

tion: to fix the price terms upon which insurance busi- o

ness was. conducted throughout a six-state area, the

decision can hardly be said to have established that

-- any restrictive practice by an integrated multi-state

enterprise, however localized in its scope arid char- -

acter, is within the reach of the federal antitrust laws, |

: and in _—— of. Section 5.

eae Pe as —s

‘Direct evidence is rarely” av

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