# Appendix — Continental Baking Co. v. Federal Trade Commission

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1967
- **Citation:** 386 U.S. 932

## Text

A-1
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT :

tS
}

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.

B

SAE IMENT MERIT EA SD

A-2

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.

A-3
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

d.

¢

A-4 ©

' 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,’

La

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 —

A-11
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.

A-12

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

A-15

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

A-16

- 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 —

a)

A-17

-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

—
°@.

>

AB
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-

i)

L.

| . A-19 8
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

a

er

A-20 _

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
ae
ty

)

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.
“ . -

i

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 .

Ak
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

1

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

* 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

I.

“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

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

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:

ae

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, —

I

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

7

.

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.

i,

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

4

- 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).

a

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

4

|

Q.

A.

‘© >

. 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~

Ba

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: ..
Q.

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:

Q.
A

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.” |

Representatives of the © lereer respondents “were

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-

>

na

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

ad

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

2
¥
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

testified as follows: ©

\ ( )
\
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 . ~

>
.

b
c

‘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
A
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

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. .

e
& * . ’ 8
; :
. °

G

~ “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.

a)

om Ba

. é -
. : ’
. . . Lo as ints daninstanae aang
ee
e ie °
F : .
. 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
l

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-

°

‘
7

. *
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

a

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 -
that part. of the preamble that prohibits conspiracies ©

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

8

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-;

#

Ye
—_—~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

e
4

%. 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-

eS

noth

»
. oes menace ye uimer ss biiien os Mitten ts ve
pe Conta ner ORE aA OTHE Penh * a

Y

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
a

4

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,
derived from ints interstate activities, in furtherance © 3
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.

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‘Direct evidence is rarely” available to prove a con-
spiracy or secret agreement to fix prices. To estab-
lish the requisite meeting of minds, it may often be
| “necessary to rely exclusively on circumstantial evi- |
“dence. Considered individually, the circumstances may
be equally consistent with an ‘inference of innoéence
as with one of guilt ; ; the pattern may have-a Signi-
. ficance which the. pieces - lack. But in the present case
"I. fail to discern * a pattern indicative of unlawful

| gs fixing.

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bi

_ {The Commission in its opinion makes much of the |
fact that “prices”’ swere occasionally mentioned at
- meetings of the respondent trade assdeiation But I
‘find it difficult to see a sinister significance in this
fact, since the ostensible — and concededly legitimate
— purpose. of ‘the association was to act as the col-
lective bargaining agent for its members. Some dis-
_ cussion of prices, surely, is inseparable from dis-
cussion of wages. Indeed, in N.L.R.B: v.. Truitt M fg.
Co., 351 U.S. .149, ‘the Supreme Court held .that it
was an unfair labor practice for‘an employer to refuse —
to furnish information as to ‘his financial status .to .
‘substantiate his claim of inability to pay a requested
| wage increase. |

Next, the Commission emphasizes —and exagger-
ates—the price uniformity prevailing among the

wae

B-77

- members of the association. Actually, all the record —
“ shows is that the pricés charged by the largest bak-.
\ eries were ‘generally: the. same, and that a price in--.
-erease by one was soon followed by the others. These
facts do not. suggest abnormal competitive behavior,
especially since bread is a highly standardized product
and the bakeries mare ee identical costs.

The Commission places very great emphasis on the. .

conduet of Arthur Lalime, the association’s manager. *
‘Lalime, the Commission observes, had. a ‘ *philosophy”’

_ of antipathy to bread price wars, and he occasionally

communicated his feelings on this subject. to some of’
the members of the association: It was not unnatural
for Lalime, whose. job was labor negotiations, to have
definite views on the price of bread. That he’ ex-
_ pressed . his views on. a few occasions to a few of his
employers does not, without more, prove that he was
a participant. in or agent of a price-fixing conspiracy.
If all he did was ‘‘tell them that a price war would ©
be very devastating to the industry, se suey that does
“not make him a price fixer.

There is some - evidence that Lalime oceasionally
crossed the line between persuasion. and intimidation,
and also that he, sometimes communicated. price in-
formation to members of the. association: Such con- .
duet was ultra vires his position as manager ‘of the
association;-and there is ho evidence that the members -

1)

B-78

of the association (apart, of course, from those he.
allegedly communicated with improperly, who are not
respondents in this proceeding) were aware of this
conduct, let alone that they. put him up to it. The
* Commission is unable to link up the members of the
association. in price-fixing conspiracy, except on the
.theory, which the record does not support, that they
“should have known’? of Lalime’s misbehavior.

Viewed severally or as a whole, the circumstances
‘upon’ which the Commission relies do not permit. an
inference of a conspiracy or agreement: to fix prices;
| they form no sinister pattern. At most, they suggest _
that Lalime acted with excessive and officious zeal in

expressing ‘his views on price ‘Wars. ;

is III.

Even if the Commission is.correct in its conclusion
_ that a price-fixing conspiracy or agreement has been
established, I have reservations concerning ‘the ap-
‘ propriate remedy. Stripped of redundancies, the
Commission’s order is simply a general. prohibition
against unlawful price fixing. While I do -not be-
lieve that an ‘order which merely repeats the applic-
able statutory provision or rule of law is necessarily
inappropriate as a ‘remedy for unlawful conduct, in
the present cireumstances I think it falls short of the
‘most effective ‘relief. . ? oe as

B79

Do prevent recurrence of Sie unlawful conduct, iia |
order i in a price-fixing case such as the present, where:
the existence of a conspiracy is inferred from circum-
stances - which in themselves are for. the ‘most, part
innocuous, should not simply enjoin the conspiracy. |
- Conspiracy is a rather shadowy thing. Its essence is _
pe: not’ overt .conduct, but a meetizig of minds. There
may be some deterrent value to enjoining participa-
tion in a price-fixing conspiracy. But in view of | the.
existence of criminal sanctions for price fixing, there |‘
is -a question how much additional deterrence is pro-.
-.vided by such an injunction. Moreover, effective de-
terrence would seem to require that the persons sub-
ject to an injunction have a reasonably clear. idea of ‘
the conduct they must avoid if they. are to comply
with it.

- What, concretely, must respondents do to comply
with -the Commission’s order in this case? Must they
dissolve the trade association ?. Abandon multi-employ-

L | /er colleetive bargaining? Fire Lalime? Monitor all his
a telephone conversations ? Repudiate his. “‘philoso- |

phy ?’’ Cease providing customers with notice of price

increases ? Engage in price wars? I take it they need

do none of these things; but if they do not depart:

from the overt conduct on which’ the Commission

~~ bases its inference of unlawful price fixing, how can

they be sure that they have ceased to conspire ?. Under

the kind of general order entered here, respondents’

B-80

- .
only guides are their consciences They are. -being or-
‘ dered to refrain from conspiring to fix ‘prices ‘but

are. not being told what, if anything, they must de :

to obey this order. If that is all the order does, one
wonders, to repeat, whether a significant deterrent
has been added beyond ‘the criminal, prohibitions to
which price fixers are subject in any event.

In my opinion, the way to ‘‘beef up’’ a price-fixing —

order, and.avyoid the pitfall of ineffectual generality,

is to forbid not only the conspiracy. itself but also
the specific acts and practices upon which the effec-

tiveness of the conspiracy — its translation into actual
anticompetitive conduct — depends. It is immaterial
that these acts and practices may be lawful in them-

selves; the Commission has ample power to forbid

them if. necessary to ensure that the conspiracy will
cease and not be resumed. F.7.C. v. National Lead

Co., 352 U.S. 419, 430. It might be appropriate in this.

case — on the assumption that a conspiracy was es-

tablished —to direct the ‘trade association to termi-
nate its employment of. Lalime, who, on the Comthis- ,
sion’s view of-the case, was the prime actor in the °

conspiracy; to order that a complete record be kept

of all association meetings and turned over to the
Commission periodically; and to forbid respondents _ .
to.send price-increase notices to customers more than, .

say, three days in advance. Conceivably, the Commis-
sion might even enjoin respondents’ joint bargaining

B-81

with labor. Cf. Hale, Agreements Among Competi-
tors: Incidental and Reasonable Restraints of Trade,
33 Minn. L. Rev. 331, 339-43 (1949). These are ex-
amples — not the only and not necessarily the best
examples — —of. what a price-fixing order in a case
such as the present can and should provide if it is
to offer a fair promise of effectively astopping the |
conspiracy. . aa . s
February 28, 1964

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, TRENNERY’S Bakery Ca.,
. Snyper’s Bakery, Inc. corporations.

| a
|. ° UNITED STATES GF AMERICA: *
_ BEFORE FEDERAL TRADE COMMISSION .

COMMISSIONERS: . ee a eee

° er ee i. »
- Paul Rand Dixon, Chai wi
Sigurd a:

: Philip Ehman
~ . Everette MacIntyre

A Soha B. Reilly

In the Matter of |

BAKERS OF WASHINGTON, INC., an

- Incorporated association, its officers, — |
Board of Trustees, employees, == *
representatives and agents, including
but not limited to the following:

GrEocRE B. Bucuay, - | :

RicHarp Hoyt,

ARTHUR H. Laie;

_ the following named. members of
respondent association : oe

Bucuan Baxine Co., oa ~ Docket
CONTINENTAL BAKING CoMPANY, :

. a No.
LANGENDORF UNITED Bakerigs, INc., .
Hansen Baxine -Co., Inc, 8309

JOHN M. Larson, trading as
__ Larson’s Bakery, ,
Vic H. Gorrnats, 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; .
Sareway Stores, Inc. and ;

Hotsum Baxine Company, corporations.

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WPTLOGIS Ge Fa LAO REy oe oa Fes
.

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_ FINAL ORDER

The Commission by orders of, May 21, 1964, and
June 8, 1964, having reopened this procteding, re--
‘served ruling on respondent Continental ‘Baking Com- -
* pany’s petition for reconsideration, remanded the pro-
ceeding to the hearing examiner, and stayéd the ef-
fective date of the order to cease and desist previously
entered herein, for the purpose of permitting respond-
ent Continental Baking Company an opportunity to
‘‘show the coutrary”? of certain facts officially noticed
by ‘the Commission in its decision of and 28,

. 1964; and

The hearing examiner having received further testi-
mony pursuant thereto on July 20 and 21, 1964, and’
having éertified the record thereof to the Commission
on September 24, 1964, together with his recommenda-
“ tion that the Commission affirm ‘its original decision
~ of February 28, 1964; and

‘The Commission, having considered respondent i

-Continental’s exception to that recommended decision,

together with its proposed findings of fact, conclusions
of law, and argument in support thereof, including
| respondent’ s argument that certain changed circum-
stances require a dismissal of the proceeding, and
having considergd the proposed findings of fact and
‘conclusions of law proposed by counsel supporting

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A Ae ii ebb ta vapticlisat Shes Bas Rind

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«the: complaint di respondent Continental’ S reply
thereto; and : :

The Commission having concluded that respondent,

after having full opportunity therefor, has failed to

‘‘show the contrary” of the facts heretofore officially

. noticed except-as noted in the accompanying opinion ;

\
\

that respondent Continental’s proposed ‘findings of

_ fact, conclusions of law, and arguments in support

thereof should be rejected except as noted in the

accompanying opinion; that respondent’s

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385603_0220%3A5. Public record. Not legal advice.