# Appendix — Rabiner & Jontow, Inc. v. Federal Trade Commission > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385603_1246%3A3 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1968 - **Citation:** 390 U.S. 1004 ## Text es tein wl ° 8S . . ° * . . *: ee \ . ’ , 2 5 »* ° e - ow GN a : ' ” . i _ : as q: : | : : . . ¥ - t . Ww : . : y q¥ g ; i : 5 . $ ? 2 : \ q z oe el ™ a . . f ; . : : : ae o4 * i p , ; fs “ 7 bad %} P . oe Pr af ,2 . id | % . ee" - ‘ ’ . - } i " a 4 * — ‘ ° } = fe d - . * : . ‘ ~* > * : : . i $ . 4 ey) as * . 3 3 * : A . F j , . a , ss _ 3 . eee ¢ ; 4 . os 7 wey rit. ’ ;. ' . . ” ° ' ia e : ‘ ’ ; 2 , 3 ra1 ; * . ; 2 . : : es . * . ° * 4 G % » ‘ " e 4 ’ ° a . - « , : 3 ot 3 ; y LF hl ea ’ ore é : : : ,. . 8 ‘ or ay . : z » x . * bd . 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Z ; . : . « Pe > # i lla - Final Order . UNITED STATES OF AMERICA : BEFORE FEDERAL TRADE COMMISSION. Com MISSIONERS : “i Paul Rand Dixon, Chairman Philip Elman Everette MacIntyre John R. Reilly ‘Mary Gardiner Jones - dy. - In the Matter of RABINER & JonTow, INc., a corporation. sa Docket No. 8629 This matter having been heard by the Commission upon respondent’s appeal from the hearing examiner’s initial deci- sion, and the Commission, for the reasons stated: in the accompanying opinion, having denied the appeal : IT IS ORDERED that’ the initial decision of the hearing examiner be, and it hereby is, adopted as the decision of the Commission. . bs IT IS FURTHER ORDERED that respondent shall, within sixty (60) days after service upon it of this order; file with the Commission a report, in writing, setting forth in detail ' the manner and form in which it has complied with the order to cease and desist. — . rire a Ow eRe. , IRS Sh le WR Gh a le Se AD * . as oe “ CL eR NE i cD N abet 6c? nite tok a TE nL te yobs ple 12a Final Order By the Commission.. Commissioner Elman dissented and has filed a dissenting opinion. ? SEAL . Joseru W. SHEA, | j Joseph W. Shea, Secretary. IssuED: September 19, 1966 | ATTACHED ARE: (1) Opinion of the Commission by Com- G.: - __ missioner Reilly | - (2) Dissenting Opinion by Commis- | sioner Elman. S, ' 13a Initial Decision Unitep States oF AMERICA BEFORE FEDERAL TRADE COMMISSION dy. v In the Matter of _ RABINER & JonTow, INc., a corporation. ty. vv "Docket No. 8629 . By Leon R. Gross, Hearing Examiner, Peter J. Dias, Myer S. Tulkoff, and Thomas W. Smith, for the Commission: Erwin Feldman, New York, New York, and Alexander Kushner, Jersey City, New Jersey, for the Respondent.: In this proceeding under Section 2(d) of the Clayton Act, as amended’, respondent, Rabiner & Jontow, Inc., a New York corporation organized in 1942, which manufac- tures and sells in interstate commerce women’s coats and suits which retail from $70.00 to $90.00, defends its ad- mittedly. non-proportionalized cooperative advertising pay- | *§2(d) That it shall be unlawful for any person engaged in com- merce to pay or contract for the payment of anything of value to or for the benefit of a customer of such person in the course of such commerce as ¢ompensation or in consideration for any services or facilities furnished by or through such customer in connéction with the processing, handling; sale, or offering for sale of any products or commodities manufactured, sold, or offered for sale by such person, unless such payment or consideration is available on proportionally equal tems to all other customers competing in the distribution of such products or commodities. ; a ae . Se eh oe eee a feb Silat Tai BS ds FT IOI aa i Ti SR th RN se OLAS PA esto Aa) aN a aS Sa ss awn aaah gi Raa: tr a anebame yp 14a > I nitial Decision | ments to favored customers. in New York, Boston, and . - Washington, D. C., in 1960, 1961, and 1962, by asserting” _that (1) this proceeding is not in the.public interest because the entry of a § 2(d) order against respondent would retard, | rather than promote, the legislative purposes of the statute; and (2) that its non-proportionalized cooperative advertis- ing allowances were paid in order to meet competition. Throughout the prehearing conferences and during the hearings, the hearing examiner ‘has reiterated to respond- ent’s counsel that the defense that this proceeding is con- _ trary to the public interest is not of a sort which the hear- ing examiner is empowered to, or would, within the frame- _ work of this particular record, adjudicate. If such defense DBPL IT WN AS ete PLLA nln be EI SN nee newer eteledin ae aN Pe may be asserted and adjudicated, it can properly be passed upon only by the Federal Trade- Commission, itself. | Respondent’s answer admitted the material allegations of the complaint, but denied that its advertising payments - or allowances to its customers violated Section 2(d) of the Clayton Act. In its answer, the respondent asserts “that in all instances referred to in the complaint, in which it is alleged that respondent. made payments or granted allowances to customers for promotion of products of the respondent by means of advertising, in each and every in- stance, respondent made such allowances in good faith, to meet competition, and in accordance with the provisions” ° of the Clayton Act (Answer, p. 2). Respondent further asserts “that in every instance where such payments or allowances were made. . . that said- payments or allowances | ‘were granted for the suepose of defending the respondent’s position with its customers” and that respondent “did not engage in such practice for aggressive selling purposes” (Answer, par. 8): : . Respondent alleged further that advertising allowances gil so firmly rooted and established that companies I5a | Initial Decision ae similar to respondent” were compelled, in order to protect their position as a resource, toogrant allowances and pay- ments to their customers to meet such competition” (An- swer,.par. 9), 4, | It is well established now by judicial authority that a respondent charged with violating Section 2 (d) of the Rob- inson-Patman Act may defend such charge by asserting a § 2(b)* or “meeting competition defense”. Exquisite Form Brassiere, Inc., et.al. v. Federal Trade Commission, 301 ° F. 2d 499 (G. A. D. C. 1961). The discussion in this initial decision will focus prin- cipally on the effectiveness with which respondent has pre- sented and proven its meeting competition defense. Several years ago the Federal Trade Commission con- ducted an investigation into the garment manufacturing | industry in general, and, on the basis of the results of that investigation, concluded that a substantial number of firms engaged in the manufacture and sale in interstate commerce of garments were in-violation of Section 2( d) of the Clay- ton Act (RX 23A-23M). Opportunity has been afforded the various persons, firms, and corporations in the garment industry to avail themselves of: the consent procedure pro- _ vided for in Sections.2.1 through 2.4 of the Commission’s 7§2(b) Upon proof being made, at any hearing on a complaint under this section, that there has been discrimination in price or serv- ices or facilities furnished, the burden of rebutting the prima facie ‘ case thus made by showing justification shall be ‘upon the person charged with a violation of this section, and unless justification shall _ be affirmatively shown, the Commission is authorized to issue an order terminating the discrimination: Provided, however, That noth- ing herein contained shall prevent a seller rebutting the prima facie case thus made by showing that his lower price or the furnishing of _ services or facilities to any purchaser or purchasers was made in good faith to meet an equally low price of a competitor, or the services or facilities furnished by a competitor. — ™ 2 > - l6a Initial Decision Rules of Practice for Adjudicative Proceedings. As a result of-the industry-wide investigation and subsequent proceed- ings, 242 business firms have, as of the time of writing this initial decision, availed themselves of the consent procedure and have signed agreements containing orders to cease and | desist which will be made effective by the Federal Trade | - Commission‘at a time and under circumstances which the Commission shall, in its discretion; determine to be appro- priate? As of the date of the writing of this initial deci- sion, only two of ‘the firms mentioned in the Press Releases have elected to proceed to formal hearing, the House of “Lord’s, Inc., Docket No. 8631, and the instant proceeding. In the House of Lord’s proceeding, the hearing examiner . found that the cooperative advertising offer was, propor- tionalized, i.e.,.made available on proportionally equal terms, and there had been no violation of Section 2(d). The com- plaint was dismissed and oral argument on appeal before the Commission has taken place. | : In-the instant. proceeding, respondent admits and has stipulated that its cooperative advertising payments were not proportionalized, i.e., made available to all its customers : on proportionally equal terms, but asserts that such coopera- tive advertising payments were made in good faith to meet similar practices by its competitors in the industry. Respondent represents a specialized segment of the gar- ment industry, i.e, women’s coats and suits which retail from $70.00 to $90.00.* Respondent subpoenaed 17 manu- 3See FTC News Releases of May 1, 1963, August 12, 1963, Jan- uary 3, 1964, March 13,1964, July 16, 1964, July 29, 1964, August . 18,:1964, September 25, 1964, November 18, 1964, January 26, 1965, February 27, 1965, and April 14, 1965. (See RX 23A through RX 26D, inclusive; RX 38, RX 39, RX 40.) if 4Some testimony places this price range at $60.00-$110.00. 17a | : Initial Decision facturers whose competition, it asserted, it was meeting when it made its non-proportionalized cooperative advertis- _ ing payments in Boston, New York, and Washington, D.C., in 1960 through 1962, inclusive. — This record involves for 1960 through 1962 six favored customers in three cities: In New York City, Lord & . Taylor, and Best & Co., Inc:; in Boston, Jordan Marsh, Jay’s, Inc., and-R. H. Stearns Co.; in Washington, D. C., Woodward & Lothrop, Inc. . Although seventeen alleged competitors of respondent were subpoenaed, it is interesting to observe that, as to Jay’s, Inc., none of thé competitors testified to making advertising payments, and, as to R. H. Stearns Co., only one competitor out of seventeen testified as to making advertising payments ; only two competitors testi- fied to payments to Jordan-Marsh Co.; and possibly three competitors testified to advertising allowances to Woodward & Lothrop, Inc. Such evidence hardly sustains respondent’s - assertion that its non-proportionalized advertising payments were responsive to industry-wide non-proportionalized pay- ments to its favored customers. As part of its meeting competition tibinen: respondent . asserts that non-proportionalized cooperative advertising payments are rampant in, and an integral part of, the modus operandi of the garment industry. Complaint counsel did not contest this assertion. ‘The Federal Trade Commis- sion’s investigation alluded to. above (see RX 24) found such to be the fact. The fact that the garment industry, as such, is engaged in making non-proportionalized coopera- tive advertising payments does not exculpate or excuse un- lawful payments. The criteria used for evaluating meeting - competition as a defense to a-2(a) violation include the - caveat that price discrimination is not excused on the - i ai Stshescalatbsiaatt mat nie ON - ee es ee 18a Initial Decision natory pricing system.° a . ’ Moreover, the Federal Trade Commission in Flotill Pio- grounds that it is necessary to combat a general discrimi- | ducts, Inc., Docket No. 7226, in its opinion of June 26, 1964, has held : But a seller is under an obligation to affirma- tively offer or otherwise make available promotional allowances on proportionally equal terms to all cus- tomers who compete in the resale of its goods. This obligation entails whatever inquiry is necessary to establish whether customers in fact compete. If it were otherwise, sellers could avoid their obligations under the statute simply by closing their eyes to the obvious. A violation of Section 2(d) is determined by objective rather than subjective considerations, If the favored and nonfavored’ customers actually compete in the resale of the seller’s goods, the Act _ may be violated without regard to the Seller’s knowl- edge of the lawfulness or unlawfulness of a dis- proportionate promotional allowance. To hold other- wise would recognize the right of a seller to dis- criminate in favor of or against any customer who conducts his resale operations in more than one trade area. ~ | remus / } The Supreme Court has held, in passing upon a meeting ‘ competition defense to a-2(a) violation, “. . . The seller _ 5See F.T.C. v. A. E. Staley Mfg. Co., 324 U. S. 746 (1945) : F.T.C. v. Standard Oil Co., 355 U. S. 396 (1958) ; F.T.C. v. Cement Institute, 333 U. S. 683 (1948) ; F.T.C. v. National Lead Co., 352 U. S. 419 (1957) ; F.T.C. v. Standard Brands, Inc., 189 F.2d 510 (2nd Cir. 1951); Standard -Oil Co. v.. Brown, 238 F.2d -54 (5th Cir. 1956) ; Standard Oil Co. v. F.T.C., 340 U. S. 231 (1951) ; Corn Products Ref. Co. v. F.T.C., 324 U. S. 726 (1945). whe Dee etait ad maim b cheee'® ai ; as 19a Initial Decision has the burden of bringing himself within the exculpating provision of §2(b), .. .” Federal Trade Commission v. Sun Oil Co.,. 371 U.S. 505, 514. Respondent’s meeting competition defense will exculpate its non-proportionalized advertising payments only if such ~ discriminatory payments were made in good faith to meet individual competitive situations. Good faith is-not present if a seller adopts the unlawful discriminatory practices of a competitor ; good faith is not proven in the record if the seller acts entirely on unsupported, unverified verbal estate- ments, nor is good faith established if the seller knew or should have known that ‘his competitor’s system was un- lawful or inherently illegal. (See cases cited in footnote 5, supra. ) Once the threshold applicability of the meeting com- petition proviso is resolved, the same criteria gov- erning its use in Section 2(a) price discrimination proceedings would apply to Section 2(d) and 2(e) cases. Rowe, Price Discrimination Under the Rob- inson-Patman Act (1962), page 420. | In addition to the testimony of Abbe Rabiner, its presi- dent, and representatives of its seventeen alleged competi- tors, respondent produced as an expert witness Bernard W. Smith, Associate Professor of Retail Merchandising at the Institute of Retail Merchandising, New York Univer- sity, New York, New York. Among other things, Professor . Smith testified to the. universality of cooperative advertis- ing payments in the garment business; that students in his classes are taught to demand cooperative advertising pay- ments from manufacturers if they become buyers; that the average life of a coat and suit manufacturer is less than a tl nc ile dao s Pee) EE Pe Tee ? ae aed) Mere poy te wee jiaictiads (finds . 20a Initial Decision twenty-five years; that in 1960, 623 firms manufactured women’s coats.and suits; that by-1963 this number had shrunk to 552, or that 71 firms went out of business be= tween 1960 and 1963; and that the coat and suit business _had_lost some $18,000,000 in volume, from $698,963, Q00 in 1960 to $681,000,000 in 1963 (Tr. 948, et seq.; the Apparel Manufacturing Industry’s Market Planning Serv- ice of the National Credit Office issued 7% Dun and Brad- street [RX 28, 29 in evidence] ). Mr. Rabiner testified to the unusual Vigor and keenness : of the competition in his business, and to the necessity of permitting him to continue his advertising payments so that he may stay in business. Mr. Rabiner asserts that he cannot afford to proportionalize his cooperative advertising pay- ments so as to make them available on proportionally equal terms to all of his customers; and that, if the women’s coat ; and suit business generally were required to proportionalize their cooperative advertising payments, only the “giants” in the industry would be able to survive. .It is Mr: Rabiner’s contention that the order sought in this proceeding, ff made applicable on an industry-wide basis, would encourage an oligopolistic industry pattern contrary to the intent of the Robinson-Patman Act. He asserts that only the “giants”, who do a very large dollar volume of business and manufac- ture many different lines of garments, can afford to propor- tidnalize their cooperative advertising payments. | Although the ladies’ coat and suit manufacturing busi- ness has, in the aggregate, a substantial dollar yolume per annum, other than the “giants” alluded to, it is composed chiefly of small businesses whose individual annual dollar volume is not large. Respondent is considered a subsfantial concern. Its annual dollar volume exceeds $4,000,000, even though its annual sales volume has not increased ‘to any ~~ noticable extent over the last few years. aot a at alleen Sasidil ni. wien ‘it i Z2la Initial Decision | Professor Smith sought to define competition in. the women’s coat and suit business in terms of “price lines”’. The exact nature of competition for the retail customer’s dollar spent for $60.00 to $90.00 coats and suits is not precisely delineated nor specifically described in the record. A representative of one of the competitor manufacturers, Modelia, Inc., testified that Modelia uses an “avant garde” styling, and therefore does not compete, with the more con- ventionally styled lines. Several of the firms, who were subpoenaed as “competitors” by respondent, denied that they were competitors in-fact. , Where, as here, respondent defends on the grounds that S meeting competition, the burden of proving the com- petition, as well as proving the “meeting” of Such competi- * tion, is upon the party asserting such defense. ‘ Two decisions important to resolving the issues pre- sented in this proceeding were rendered since the. record was closed in this proceeding on April 28, 1965. On June 18, 1965, the Federal Trade Commission in Ace Brooks, Inc., et al., Docket No., 8557, affirmed a 2(d) cease and desist order (Opinion, page 18), and, inter alia, held: It has been recognized that the burden of es- tablishing the Section 2(b) defense is upon the pro- ponent. Federal Trade Commission v. Sun Oil Co., 371 U. S. 505 (1963). ‘Since the defense has the effect of ‘exculpating a discrimination which would otherwise be forbidden, the evidence upon which the defense is predicated must be of sufficient preciseness to permit an informed determination. See Callaway Mills Co., Docket No. 7634, a SM (February 10, 1964); Cabin Crafts, Inc., Docket No. 7639 RT. C. (February 10, 1964); . ee an ee ee LEWES / ee We 22a Initial Decision cf. Continental Baking Co., Docket No. 7630, F. TX. (December 31, 1963) ; Ponca W hole- sale Mercantile Co., Docket No. 7864, te ng, | (February 24, 1964). We think the evidence * . presented here does not permit such a determination. | The evidence does not show when respondents’ com- . petitors began granting allowances .. . or when re- spondents themselves. initiated’ the prides: The record fails to establish the rates used by. re- - spondents’ competitiors to compute their allowances ,or the amounts of such allowances. . .. Respondents _ failed to show any of the circumstances surrounding the initiation of their allowancés to these retailers and made no effort to establish that their allowances. did not in fact exceed those of competitors, by. reference either to the rates or the total amounts of these allowances. Without evidence of a more specific nature, the Commission is unable to make an’ informed, determination on the various questions which must be resolved and, as a'result, is compelled to reject respondents’ contention that they have met their burden in awe the defense. | 2 “On July 2, 1965, the United: States Court of Appeals for . the District of Columbia Circuit in Exquisite Form Bras-: stere, Inc., et al. v. Federal Trade Commission, No. 18524, F.2d , in an appeal from an opinion of the Federal Trade Commission upon remand ‘(see supra, 301 _ F.2d 499 (1961), affirmed the opinion of the Commission = finding that Exquisite had, upon remand, failed to prove its meeting competition defense. Inter alia, the Court of Ap- peals- — 23a . _ Initial Decision Exquisite Form in the present case essentially. premises its position upon the proposition that in a ; Section 2(d) case, if the accused company estab- ; af lishes that its competitors have plans or systems —F whereby they make advertising allowances to their _&€ customers, any company in the industry can combat such systems by inventing and operating a system or plan of its own. Exquisite Form states a number of points, but all 6f them.arise from or are enveloped in the proposition just stated. This, as it phases the matter, is the crux’of the case. Admittedly the Su- _ prenie Court has held‘ that in a price discrimination’ case (a Section 2(a) case) it is not an effective pro- tection for.am accused company to show that it oper- - & ated a plan or,system in order to combat its com- ) petitors’ plans @r systems; in other words, that in | _ those cases a plan to combat other. plans is not an - effective defense under the proviso in Section 2(b). ‘ The Court held that in such cases the combative act had to be a specific act aimed at a lower price on the. \ part of a competitor in “individual competitive situa- ° tions, rather than * * * [in] a general system of competition.” Exquisite Form‘argues that that rule cannot apply to the advertising allowance practices in the brassiere industry, because of the factual char- acteristics ‘of that industry.and the practices in it. ® We think the doctrine of Staley must be applied here. There are differences, of course, between a price discrimination (Section 2(a)) case and a case involving advertising allowances. But we are not shown that any such difference goes to the basic ‘FTC v. A. E. Staley Co., 324 U. S. 746 (1945). Sil te aie ido a cw eT alla ea ee i ol phi See up ae Ce) 24a ~ Initial Decision - thesis involved in the statute or to the rationale of Staley. We are not shown any. compelling reason for different treatment. = Exquisite Form also contends that, even if the doctrine of Staley applies, its proof satisfied ‘the requiréments of that casé. The only evidence which related to individual competitive situations consisted of a table which set forth the dates of retailers’ advertisements of Exquisite Form products and com- petitors’ products. There was no testimony which explained how this table related to company policy. The Commission found that Exquisite Form’s evi- dence was insufficient to support its. contention. We _ agree with the Commission. . In view of this recent decision by the Court of Appeals, it” is only necessary to apply “the rationale of Staley” to the _ record in this proceeding. _ Prehearing conferences in this matter were held in New York, New York, on September 21, 22’ and 25, 1964; in ~ Washington, D. C., on November 4 and December 8, 1964, and on January 21, 1965. Evidentiary hearings were held . in New York, New York, on February 15-18, and March 16-22, 30, 1965; April 1-2, 26, 1965; and were concluded on April 27, 1965. __—. | a . Proposed findings, conclusions, and briefs have been filed. The hearing examiner heard and observed the wit- nesses in the hearing room and on the witness stand. He observed their demeanor and their manner of answering questions. He has considered the reliability, credibility and probative value of the witnesses’ testimony in making his. findings of fact, as well as their respective interest in the outcome of this proceeding. . Proposed findings not made | . 25a Initial Decision . herein in the form proposed, or in substantially that form, are rejected. Any motions heretofore made and not previ- ously ruled upon are denied. The undersigned hearing ex- aminer has carefully considered the entire record, including © the exhibits, pleadings, and the testimony of the witnesses. Based upon the entire record in this proceeding, the hearing -examiner makes the following: - Frnvine.or Fact ; Respondent, Rabiner & Jontow, Inc., a New York cor- poration since 1942, with its office and principal place of business at 512 Seventh Avenue, New York, New York, has, since its incorporation, traded under the names of. Finger, Rabiner & Jontow, Inc., Finger & Rabiner, Inc., - and presently as Rabiner & Jontow, Inc. (Answer; Tr. 26, 29, 39). Respondent is now, and has been, since its incor- poration, engaged in manufacturing and selling, in interstate commerce, ladies’ suits and coats to retail specialty and department stores throughout the United States under the » 99 66 _ trade names of “Bardley”, “Bardley, Jr.”, and under private labels. Respondent’s sales exceeded $4,000,000 annually dur- ing the period involved in this proceeding (Tr. 30-31). ~ Respondent has been under the same management, basically, since it -cammenced business, and its policy with reference to payment of cooperative advertising allowances has been unchanged (Tr. 50). Respondent’s garments retail at a price range from $70.00 to $90.00° (Tr. 30), and are designed primarily for spring and fall sale. Its coats are not fur trimmed. ; | °At Tr..909, respondent’s expert, Professor Bernard W. Smith, testified that he had beén advised that respondent’s retail prices range from $60.00 to $110.00. These are-the figures in respondent’s pro- posed findings (p. 2, par. 4). : | . PAS ADDIE cong RRA 274 = Takase hat Rank TARA Di te MEE IR 0 Tate y . 4 a ; vs , 4 Initial Decision R. H. STEARNS COMPANY Se ERAS SUP ANT 1960 | 1961 “Manufacturer Sales | Allowances References —" Sales : Allowances : References a : Glenhaven, Ltd. . -$ None $ None Tr. LAs, 157, Rk 20A, B $ None» -. $ WSone Tr. 145, 157, RX 20a, B Buddy Bates Corp. ; ‘None . None Tr. 218, 258 None None Tr. 218, 258 . Barberini, Ltd. 1/ Pe, ag p | 2° : | ‘ CO se Suitmaster Classics, Inc. None - None Tr. 219, 250 None "> None "fe, 249, 250 Lumay Coat Company 800 .00 None _ Tr, 318-319, 321 a lione Tr. 318319, 321 Modelia, Inc. ; None None Tr. 372 ; | _ None - None - Tr, 372 . c ° Toamcliffe, Inc. a None Tr. 423 - eg None | Tr. 423 Zelinka-Matlick, Inc. Yes None. Tr. 438, 4B ae ej mee a: None Tr. 438, 448 _ ; i Handmacher-Vogel, Inc. ; ‘None ° _. None Tr. Sk, 526, rca > None Kone Tr. 504, 526 RX JA Faees te | David Crystal, Inc. . 2/ . None Tr. 624-625, 037~640 2/ - None Tr.. 624-625, 637-640 Briarbrook, Inc. . a ry Nome Tr. 588-589, RK 32 2 None Tr. 586-589, BX 31 Cuddle Coat, Inc. , | Yes None Tr. 729, 735, 743 Yes None . Tr. 729,°735, 73 | Davidow Saits, Inc. Yes 1559-i0°. Tr. 659, 662, RL 17 } Yes 1339.60 Tr. 659, 662, RK 17 Linker & Company Yes None Tr, 714, 721 Yes Nene. Tr. 71s, 721 Devonbrook; Inc. 2/ lene RX 21 me 2f Mone Ri cl Country Tweeds, Inc. oP tis ‘ None Tr. 1159, 1169 ” Yes None - Tr. 1159, 1169 Jack Feit, Inc. . ‘Yes None ss Tr. :1198, 1199 Tes % Nene Tr. 1198, 1199 om }/ Barverini, Ltd. was not in business during 1960 and 1961, | i a . ° 2/ Evidence -f dollar amouny of sales to X. =. Stearns, if any, not in record. - : . * Bchibits which are underlined were received "In Camera". se ; ice : 5 ee See eee arene Toa . 4 : * . . 3 | . . 45a Initial Decision 4 ; @ ° oe © ce ig) she | JORDAN MARSH COMPANY —, a vi | 1960 se , 1961” acturer Sales Allowances ‘References : Sales Allowances References _ Glenhaven, Ltd. $20,541.94 $ None . Tr. 145, 164, RX 20k, B $34,434.90 $ None Tr. 145, 164, RX 20A, B Buddy Bates Corp. 17, 500.00 None Tr. 256, 258 6,000.00 a 256, 258 Barberini, Ltd. 2/ ° | . " | oe ‘ a : Suitmaster Classics, Inc. _ 9,000.00 - None Tr. 250 | 25,000.00 ‘100.00 Tr. 250, RX 7 | Lumay Coat Company, Inc. _ None None _ Tr, 318-320. None None = Tr. 318-320 ; . Modelia, Inc. | . Yes | None Tr. 372 Yes None Tr. 372 7 1 Towneliffe, Inc. .. # ’ None Tr. 423 | -2/ None . TP. 4B = Zelinka-Matlick, Ine. i Yes None Tr. 448, 438. | Yes None | Tr. 448, 438 | " Handmacher-Vogel, Inc. | None Nene Tr. 526, 504, RX 1A -Yes_ ~ None Tr. 526, 504, RX 11A “David Crystal, Inc. | 2/ | None | Tr. 624-625, 637-640 . 2/ None Tr. 624-625, 637-640 : Briarbrook, Inc. 2/ 1590.00 Tr. 589, RK 12, RX I Mies), % None Tr. 589, RX 12, RX 31 ‘Cuddle Coat, Inc. _ . None _ None = Tr. 729, 735, 743 - None None Tr. 729, 735, 743 “Davidow Suits, Inc. 3 Yes ; None Tr. 659-660 — | ~ Yes None Tr. 659-660 Linker & — 2/ a None . Tr. Th | See None Tr. 71, = ° «° Devonbreok, Ine. Yes | None Tr. 787, RX 2h - Yes Kone © Tr. 787, RX 21 Country Tweeds, Inc. ‘ Yes xy | ; ah Trs 1159, 1168 Yes . 6,700.00 Tr. 1159, 169 Jack Feit, Inc. Yes . None Tr. 1198, 1199 Yes None. Tr. 1198, 1199 1/_ Barberini, Ltd. was not in business during 1960 and 1961. | : o 2/ Evidence of doller amount of sales to Jordan Marsc not in record. d/ .No figures available for 1960. i. ; | * Exhibits which are underlined were received "In Camera". | qT i a 2 5 — —_ —) m ~ ‘ 5 Calais | itd bas SIS Ree et Ente 8 ern WIP NG ROSES Sa iin pa Cs lain Sis Seca sis SO PL aa at, Tae ela ald cel es As Sel la eRe pls al OF a leat i q. oz ° ay ? Initial Decision | 1960 _ | 426) | " Manufacturer _ Sales_ = Allowances References Sales ces References Glenhaven, Ltd. $36,349.52 ° $ 100.00 Tr. 16h, RX 20k $4,010.60 $ None Tr. 164, RK 204 Buddy Rates jim. 1,500.00 None Tr. 257-258 700.00 None. ‘Tr. 257-258 Barberini, Ltd. }/ - a - | | - ; =. = - s Suitmaster Classics, Inc. Yes None . fe. 249, 250 Tes ~ None « — Tr. 249, 250 lumay Coat Company, Inc. None == None «= ~S=«wT.«23184319, 32 None Wone f = Tr. 318-319, 322 Modelia, Inc. mally Yes 2/ None . Tr. 378, 379 ax , Yes Py, None Tr. 378, 379 Tomeliffe, Inc. None =o tr. 422 | None None ‘tr. 422 ‘ 1 Zelinka-Matlick, Inc. : Yes iene. Tr. 437; 438, ae , es Norie * Tr. 437, 438, L48 ‘2 Handmacher-Vogel, Inc. lene None . Tr. 504-505, 526, REJIA ——None None Tr. 504-505, 526, BX 1) ‘ David Crystal, Inc. _ None None fr. $12, 6214-625, 637- - None None Tr. 612, 624-625, 637= — 640 640 Briarbrook, Inc. sl /. None Tr. 568-589, RX 3) 5, | None Tr. 588-589, RK 3} Cuddle Coat, Inc. Yes None Tr. 729, 735, 743 | Yes. None = Tr. 729, 735, 7h3 Davidow Suits, Inc. | None None fr. 659 None None Tr. 659 "Linker & Company / Mone ss None tr. 7, 722, None None Tr. Tk, 722 Devonbrook, Inc. 22,000.00 None fr. 787, RX 2. 6,000.00 — Tr. 787, RX 21 Country ‘Tweed, Inc. Yess Se 59 a 1° 1,190.23 Tr. 1159, 1168 Jack Feit, Inc. a ee None fr. 1198, 1199 Yes 0—(ié rs tr. 1198, 1199 )/ Barberini, Ltd. was not in business during 1960 and 1961. 2/ Total. volume of sales to Woodward & Lothrop for the entire period was $45,150.00 2/ Wo evidence relating to sales to Woodward & Lothrop. aa 4/ No figures available for 1960. — . a * Respondent's exhibits which are underlined were received "In Camera". 47a. Initial Decision Respondent has failed to prove by a preponderance of — reliable, probative, and substantial evidence that garments manufactured by its seventeen “competitors”, ‘or any of. them, did, in fact, compete with respondent’ 's garments for the business of its favored customers, or for the retail customers’ dollars. The burden of proving this competition . was upon respondent. The price zones, testimony of Pro- fessor Smith (Tr. 897, et seq.), standing alone, “does not | prove such competition. Representatives of “most- of . the competitors who were subpoenaed denied competition with the Rabiner & Jontow lines. Not one of respondent’s cus-. tomers was called to testify as to competition between respondent and’ other manufacturers. a Evidence of competition between respondent and the firms which it subpoenaed*may be summarized: ; Glenhaven, Ltd.: Bernard Gold, Vice president and general sales manager for the past seven yeats, appeared on behalf of Glenhaven, Ltd., 512 Seventh Avenue, New York, New York (Tr. 122, . et seq.). This firm manufactures ladies’ suits (no coats), which retail fr6m $30.00 to $40.00. Occasionally, some of its items may retail for as much as $60.00. It sells to retail department stores and specialty shops (Tr. 130). There is little price competition between the Glenhaven and Rabiner & Jontow lines (Tr. 125-26). Respondent’s garments retail at higher prices. Mr, Gold testified (Tr. 190) : Q. Are you a competitor, is Glenhaven a competitor _ of Rabiner & Jontow? A. I don’t believe so, ao, sir, ae j ree i an 2 y 3 ie Oe a een 1. SE ee eee i Ce ay ee a ee Dil Miia TA? ida nein asin Bar. / a 3% 4 48a | Initial Decision “Mr. Gold ‘further testified that, although Glestaicen did make /advertising- allowances to some of its customers dur- ing 1960, 1961, and 1962 (Tr. 145), it did not pay.any ysuch © allowances to Best & Co., Inc:, Jordan: Marsh Co., Jay’s, Inc., and R. H. Stearns Co, It. paid $100.00 to Woodward & prem Inc. in 1960; $35.00 to Lord & Taylor in 1960; and $238.00 to Lord & Taylor j in 1962. On occasion Eastman Kodak would give Glenhaven money to promote the sale. of garments made from Kodel, and the Wool Bureau would allocate funds ,to promote the sale of garments made from wool. These monies were given to Glenhaven, which, in turn, allocated them ‘to the retail firms (Tr. 148). Glenhaven suggested that the fabric advertising be carried in local newspapers ( 3. 58). ° Glenhaven used its own advertising funds to promote a par- ticular line (Tr. 153), and a partitular fabric. During 1960, 1961, and 1962, Glenhaven placed in- stitutional advertising in the fashion magazines, such as Mademoiselle; Glamour, Harper’s Bazaar, and Vogue (Tr. 174). Such advertisements contained the names of the. stores at which Glenhaven’s advertised garments could be pur- chased. Glenhaven would notify these stores that their names would appear in the advertisemerits (Tr. 175). Mr. Gold, with his sales staff, selected the store whose name. appeared. in the ‘institutional ads in the fashion magazines (Tr. 176). As many. as five or six Glenhaven customers ’ might be listed in a single ad (Tr. 180). The ad showed thé | garment; the name of the company, and the’names of stores at which the garment was available (Tr. 181). ‘When Glenhaven spent its own money for advertising, it was on a “promotional basis for a particular fabric group * to a ‘particular city. In some of the cases of the fiber. -. money we would offer it to the whole country” (Tr. 183). 49a Initial Decision Respondent has failed to prove that Glenhaven suits compete forthe retail consumers’ dollars with suits manu- factured by Rabiner & Jontow. -Respondent has failed to “prove that, at the level at which Glenhaven suits are pur- _ . Chased by retail firms for resale, they compete in fact with “Bardley” (Rabiner & Jontow) garments. : - Respondent has further failed to prove that the adver- tising allowances, which respondent paid. to its favored customers, were granted to meet or match similar or identi- ~~ _ Cal advertising allowances paid by Glenhaven to such favored customers. ; 3 ve Barberini, Ltd.: Kermit Bass, president, appeared on behalf .of Bar- berini, Ltd., 512 Seventh Avenue, New York, New York (Tr. 192, et seq.). This firm manufactures and sells for | ~ resale ladies’ coats and suits which retail from $80.00 to $150.00 (Tr. 193). Barberini, Ltd. was incorporated and Mirst commenced to do business in May 1962. During the years involved in this proceeding, Barberini did not sell its products to any of respondent’s favored customers in any. of the relevant trading areas (Tr. 193, 196).- Barberini — granted no advertising allowances to. —— s favored customers (Tr. 198-99, 204). | Respondent failed to establish for the years here ins | volved any competition whatsoever between respondent and , Barberini, Ltd. . . ‘ Buddy B Bates C orp.: _ Buddy Bates, president, appeared on behalf of Buddy | Bates Corp., 250 West 39th Street, New York, New York asta i A i Ne bee! a H Oo» init a Hea ini Blah LE Sih ME RINSE TARR LS B SANFL gM AA ASA 08 ions Ste cs : , AAR ee i aos? en ocean 50a" Initial Decision (Tr. 210, et seq.). This corporation manufactures ladies’ coats and suits (Tr. 210), which ordinarily retail from . $60.00 to $150.00, and during the years 1960 through 1962, retailed from $50.00 to $110 (Tr. 212, 215). During these years, Buddy Bates’ suits retailed principally at $50.00, $55.00, $59.00, and $69.00 (Tr. 302-303). Mr. Bates testi- fied that there is a basic style difference between Buddy _ Bates’ garments and those’ manufactured by respondent (Tr. 304). He was not too’ familiar with the Rabiner & ' Jontow line, but he did not consider Rabiner & Jontow to. _ bea competitor, nor has it been represented-to him as a : competitor by any of Buddy Bates’ customers (Tr. 215-16, 304). No advertising allowances were paid by Buddy Bates | to respondent’s favored customers during the years involved (Tr.219)., . Respondent has failed to establish by reliable, probative, and substantial evidence in this record that the non-propor- tionalized cooperative advertising payments, which it made to its favored customers during the years in question, were made to meet or match similar payments by Buddy Bates, Inc. : Suitmaster C lassics, Ine.: Harry Snyder, president, appeared on behalf of Suit master Classics, Inc.,-221 West 37th Street, New York, New York (Tr. 247, et seq.). This company manufactures ladies’ suits retailing from $40.00 to $50.00.(Tr. 248, 254)... During the years in question, it sold to Jordan Marsh Co., Woodward & Lothrop, Inc., Best. & Co., Inc., and Lord & Taylor (Tr. 249). It paid $100.00 to Jordan Marsh Co. in 1961. Suitmaster’s volume item in its line was a man- - tailored, one-button suit which retailed at $39.98 (Tr. 251- Se ee Sla | Initial Decision 54). Suitmaster gave only one form of advertising allow- - ance, i.e., one dollar per suit to all persons who purchased: and “advertised the one-button suit. -Mr. Snyder testified (Tr. 254-55); _ Q. Were you in competition with Rabiner and’ Jontow during 1960 through 1962? A... . As far as Rabiner and Jontow, I. believe they make higher-priced suits... . I would say that my competition would be, -in ; my eyes, the people who make suits at my price bevel, . ... Q. Would you therefore consider yourself in com- petition with a firm whose retail price range is from seventy dollars to ninety dollars? | A. Not in my eyes, no, sir. Respondent failed to prove by reliable, probative, and substantial evidence in this record that its advertising pay- ments.to its favored customers were made to meet or match similar payments by Suitmaster Classics, Inc. Lumay Coat C ompany, Inc.: - _ Sidney Malvin, Secretary-treasurer, appeared on behalf - of Lumay Coat Company, Inc., 230 West 38th Street, New York, New York (Tr. 311, et seq.). This company manu- factures and sells ladies’ coats and suits (Tr..311), popular- - priced fashion garments, retailing from $70.00 to $90.00 (Tr. 313). The company has made no attempt to promote © the Lumay trade name (Tr. 313-14, 323-24). Of the re- spondent’s six favored customers: and during the years involved, Lumay paid only-$202.00 to Lord & Taylor in PO IR CPOE NE a La la y x | shoe _ 52a Initial Decision hi oe ae tee ; 1962. Lumay’s sales to Lord & Taylor for the three years : ; involved were $29,000 in 1960; $42,000 in 1961; and | * — $90,000. in 1962, a total of $161,000—with.a $202.00 allowance on one job lot (Tr: 322). Mr. Malvin testified - . .-? (Tr. 336-37): ...'..: ree, $750.00 . rao A (RX 15A-15Z10, (RX 13F yee, é in camera) im camera) Bost & OR. a stasacd _ Davidow Suits: Archibald Davidow, one of its principal stockholders and officers, appeared on behalf of Davidow Suits, 205 _ | West 39th Street, New York, New York (Tr. 650, et seq. ). . _. This company manufacturers and sells women’s suits for resale at retail under the label “Davidow” for a price of ' $125.00 and up (Tr. 652-53). Prior.to 1960, Davidow a Suits developed a cooperative advertising plan which ‘was offered to all Davidow customers throughout the country : (Tr. 657). Davidow has been very selective in its market- ing and sells to very few marketing outlets in.each mar- ‘ keting area (Tr. 657). Davidow may also give only one — : of these very few outlets the exclusive right to buy and ( § resell’ a specified style in a particular area (Tr. 658), : Davidow has mariy styles in its line, and it, has marketed ; ' generally by giving exclusive styles where advertising “is put on it” (Tr. 659). Although many Davidow styles are’ .£ carried by more than one retail outlet in a marketing area, —&| if a style is advertised, it will usally be available only at the retail outlet which advertises it (Tr. 659). 4 . SON dea oe 62a Initial Decision The Davidow cooperative advertising plan was”made available to all Davidow customers throughout the country (Tr. 659). Davidow made no sales to Best & Co., Inc. in New York City in 1960, 1961 arid 1962; nor to Woodward & Lothrop, Inc. in ‘Washington, D. C., in 1960 and 1961; and. it did not offer to sell its products to these establish- « ‘ments, and it did not pay nor offer to pay any advertising . allowances to them (Tr. 659). In 1960 and 1961, Davidow did not pay any advertising allowances to Jay’s Inc., nor to Jordan Marsh Co..in Boston (Tr. 660). Jay’s and Jordan ~ ” Marsh were offered Davidow’s advertising plan, but re- © fused it (Tr. 660). Pursuant to the plan, payments were , made in 1960 and 1961 to R. H. Stearns Co. in: Boston— $1559.10 in 1960, and $1339.60 in 1961 (RX 17m cam- era); and to Lord & Taylor in New York City, $5606.68 in 1960; $8358 in 1961; and $7828.86 in 1962 (RX 19 in camera). Davidow’s letter“Offering its cooperative adver- tising plan to its customers is in evidence as RX 18 m camera. ; In 1960, Davidow Suits paid advertising aici to the extent of 50% of the cost of the advertising actually expended by Lord & Taylor. Payments were made based. upon tear sheets of the advertisement, plus a stated sum for production costs (Tr. 663). Lord & Taylor’s advertising department did the art work for the advertisement. Later Davidow changed its arrangement with Lord & Taylor from that of paying 50% of the cost of the advertisement to a basis of paying 5% of anticipated sales during the course of a year. Mr. Davidow testified that his firm has received more benefit from the 5% of sales arrangement than from the former 50% of cost plan (Tr. 664-65). Davidow's 5% arrangement with Lord & Taylor was not duplicated with any other Davidow i in Boston, ‘wrew ia ee 63a Initial Decision New York City, or Washington, D. C. Davidow paid for | all its advertising in fashion magazines (Tr. 669). Davidow’s cooperative advertising plan, exemplified by RX 18 in camera, was offered to all Davidow. customers (Tr. 673). | | ' There is not’ any reliable, probative, and substantial evidence that respondent’s non-proportionalized. advertising payments to its favored customers in New York City, Boston, and Washington, D. C., were made in good faith to meet or match identical or similar payments by Davidow Suits to the same customers. — Linker & Company, Inc.: Maurice Linker, president, appeared on behalf of Linker & Company, Inc., 512 Seventh Avenue, New: York, New York (Tr. 706, et seq. ).» He has been in the ladies’ garment business for twenty-five years (Tr. 707). From » 1960 to 1963, its garments retailed from $49.00 to $69.00 .. (Tr. 708). During these years, the company .did not use - its funds to advertise its products (Tr. 710). Linker never received any money from any textile, fur or fiber company to be used in cooperative advertising (Tr. 713). During the three year period, Linker sold about $15,000 to Lord & Taylor, and $500,000 to Peck & Peck: One specialized $1,000 advertising allowance was paid to Peck & Peck over the three year period. Linker made gafments to "Peck & Peck specifications. It did not seek to build up its own label. The garments, which Linker made for Peck. & Peck, were classic—basic (Tr. 718). The styles of the merchandise manufactured by Linker for Peck & Peck were usually “confined” to Peck & Peck only, and not sold to. other Linker customers (Tr. 721). Linker sold R. H. Stearns Co. in Boston, but gave them no advertising allowances (Tr. 721). Linker gave no - . al A Be es eRe alec | 7 > . & . + DO OGLE IEE VII OE NOG VALOR OIE SEO AEE RN e Bin a hg an ai gate eI DebaS dbo RE UM Lallaeetsd Hak MoI Ze cats Sialat Tobie ae Initial Decision : advertising allowances to the stores it sold in Washington, D. C. (Tr. 722). : Respondent’s non-proportionalized advertising payments to its favored customers were not made to meet or match similar or identical advertising payments by Linker & Com- pany, Inc. to the same favored customers. | C uddle Coat, Inc.: Justin Lipman, vice president, uy on behalf of Cuddle Coat, Inc., 500 Seventh Avenue, New York, New York (Tr. 725, et seq.). A Cuddle Coat advertisement in The New York Times’ magazine section of February 28, 1962, in which the name of the manufacturer and retailer (Lord & Taylor) appeared, is in evidence as RX 37. Cuddle ‘ Coat, Inc., a division of Petite Miss Co., manufactures and sells highly styled, only untrimmed coats which retail from $50.00 to $75.00. It caters to smaller girls’ and misses’ sizes (6 to 14 or 5 to 13)—the younger market (Tr. 731). During the years from 1960 to 1962, the firm sold Wood- ward & Lothrop, Inc. in Washington, D. C.; R. H. Stearns Co. in Boston; and Lord & Taylor in New York City (Tr. 729). Cuddle Coat mentioned the names of some of its — retail outlets in its ads (RX 37; Tr. 737).. During the years 1960 to 1962, it did not make cooperative advertising payments: to its retail store customers (Tr. 735). Mention. of the retail establishments in its ads was for the purpose of giving Cuddle Coat prestige—not the retail outlet (RX 37; Tr.'736). In addition to Lord & Talyor, Cuddle Coat sold in New York City to Franklin Simon, Macy’s, Gimble Bros., and Bonwit Teller. It did not’ pay any advertising allowances t Eon See ace) ane ENE . 65a Initiql Decision i to anyone (Tr. 743, 749). It was not Cuddle Coat’s policy ‘ during the pertinent years to give money toward advertising (Tr. 747). . : | The Cuddle Coat representative testified that The New York Times’ magazine Section requires 60 days lead time ° ‘ magazines require 90, days lead time. | In the fashion magazines, Vogue,, Mademoiselle, and for the placement of fashion advertisements, and fashion _ Harper’s, Cuddle Coat usually did not mention. the retail establishments selling its merchandise. . | . | A one page color advertisement in The New York Times’ magazine section cost Cuddle Coat about. $5,000. Cuddle Coat usually ran ‘such advertisements in The New York Times’ magazine section about twice a year. (Tr. 737). Unlike respondent’s procedures, Cuddle Coat adver- tisements were not worked out in consultation with its re- tail store customers; nor were its retail store. customers asked to cooperate (Tr. 738-39). Cuddle Coat’s advertis-” ing policy was totally different in purpose and execution from respondent’s advertising policy. A retail store was mentioned in the Cuddle Coat ad strictly as a matter of “convenience”, so that the Cuddle Coat office “wouldn’t be badgered by telephone calls and letters in New York City” inquiring where the Cuddle Coat in the advertisement might be purchased (Tr. 740). At the time Cuddle Coat men- _ tioned Lord & Taylor in its advertisements in, The New York .Times, it was also selling in New York City to Franklin Simon, Macy’s, Gimbel.Bros., and Bonwit Teller, as above found. = Since Cuddle Coat didn’t give advertising allowances to any of its customers (Tr. 743), respondent’s advertising allowances could not “have been made to meet or match - : a . ‘BS aah edits iit lair | Nha bd haath Tet cal hiya tot vers th DotA n Saiki A b . 2 4 Initial Decision those of Cuddle Coat. Respondent’s evidence fails to prove that its nen-proportionalized advertismg payments to its favored customers were ‘made in good faith. to meet or, match similar advertising payments made by. Cuddle Coat, Inc.-to the same favored customers. . Devonbrook, Inc.: . 2 - Morton nie comptroller and assistant secretary, ap- peared on behalftof Devonbrook, Inc., 1400 Broadway, and , 500-512 Seventh Avenue, New York, New York (Tr. 769, et seq.). This company has the following subsidiaries : Devonshire. Junior, Inc.; Brandshire, Inc.; Devshire, Ltd. ; . Heart Throb, Inc.; Devonaire, Ltd.; Devonknit, Inc.; and Miss Devon, Inc. Devonbrook’ stock is publicly held, and traded over the counter (Tr. 770). The principals in the company are Sigfried Alper, Owen Alper, and William | - Alper—‘“a father, brother and son” combination. The com- pany manufactures and sells junior dresses and*suits, which ‘retail in the fall season from $23.75. to $42.75 (Tr. 770).. In the spring season, the line retails at wire 75 to $39.75 (Tr. 771). Devonbrook and its subsidiaries did not use traveling salesmen. They sold from their showrooms at the addresses stated above. In 1960, 1961, and 1962, the companies did not partici- . pate in national advertising, as such (Tr. 777). If one of the Devonbrook customers would feature a particular Devonbrook garment in an advertisement, Devonbrook would give the retail outlet an allowance equal toa dollar per garment, provided the retailer mentioned the Devonbrook name, and submitted tear sheets as proof that the advertisement had been run.. The average cost to Devon- — Sn ae 67 a Initial Decision brook of such advertisements would be about $200.00 to $300.00. Most of such advertisements were run in The New York Times (Tr. 778-79). The Devonbrook customer usually submitted a debit emo with a tear sheet of the ad attached (Tr. 779). If a Devonbrook customer spent $2,000 on an advertisement and sold only ten Devonbrook garments, such customer would have been paid only $10.00. So the burden was on Devonbrook’s retail outlets. to be very astute in selecting the Devonbrook merchandise to be ad- vertised (Tr. 780). The Devonbrook look . . . is accepted in the junior market as young, fashionable and. popularly priced” (Tr. 781). es). During the years: involved in‘ this ‘proceeding, Devon- _ brook did. not engage in national advertising of any kind P (TF. 782). Devonbrook has learned that, when the cus- tomers advertise its products in the local newspapers, they get the best results (Tr. 783). Devonibrook did no business with Lord & Taylor during _ the years involved. Devonbrook’s only advertising pay- ments to any of respondent’s favored customers for the relevant years were to-Best & Co., Inc., as follows: 1960—_ $7,750; 1961—$11,100;° and’ 1962—$8,650 -(RX 21 in camera). : Respondent’s non-proportionalized advertising pay- - ments to its favored customers were not made to meet or match specific ‘or similar payments by Devonbrook to the same customers. The evidence will not support a find- ing that respondent’s garments and Devonbraok’s garments competed with each other for the patronage of retail estab- lishments, or for retail customers’ dollars. Se ce) @ cum wistotih ‘ is iainaacnss Initial Decision Country Tweeds, Inc.: ° Harry Glassman, controller, appeared on behalf of Country Tweeds, Inc., 250 West 39th Street, New York, New York (Tr. 1158, et seq.). This company manufactures ladies’ coats which retail from $75.00 to $225.00, roughly (Tr. 1159). During the relevant years, Country Tweeds would cooperate with stores generally for newspaper adver- tising where Country Tweeds would pay 50% of their ads © usually, and sometimes more, up to the amount of a commit- ment which it would make to such customers at the begin- ° ning of the season (Tr. 1160). After a particular retail establishment had spent the amount which Country Twéeds had allocated to it, all further advertising was at the retail establishment’s own expense (Tr. 160). During the relevant years, Country Tweeds advertised in Life, Vogue, Harper’s Bazaar, and “maybe one or two ~ others” (Tr. 1161). Some of Country Tweed’s retail stores may have been mentioned, but Country Tweeds:“were then told” that they could not mention the names of some of . their customers .without mentioning all, so they stopped ‘mentioning any names (Tr. 1161-62). During 1960, 1961, and 1962, Country Tweeds never received any allowance from any textile fiber house or textile company to be used in advertising their products (Te. 1366)... ; Country Tweeds paid Lord & Taylor a $4,299.99 advertising allowance in 1961, and $4,014.72 in 1962 (Tr. 1167). They’ paid Woodward & Lothrop, Inc., $1,190.23 in 1961 (Tr. 1168), and $1,641.98 in 1962 (Tr. 1169);.and paid $6,700 to Jordan Marsh Co. for cooperative advertising in 1961, and. $2,979 -in 1962 (Tr. 1169). "i Lala RAN abla at 2 li airs in elec pce ch, 69a Initial Decision During the years in question, Country Tweeds provided » their customers mailing pieces, brochures, with the company name upon them without charge. Country Tweeds fur- nished such mailing pieces to those customers who requested them. All their customers did not request them (Tr. 1169). Their free mailing pieces were made known to their cus- tomers “by word of mouth” (Tr. 1170). Their 1961 advertising payment to Lord & Taylor of $4,299.99 in- cluded a $1,350 figure for advertising in a Lord & Taylor catalogue (Tr. 1170). fact | Mr. Glassman testified (Tr. 1173): Q. Do you know the company. Rabittér"& Jontow? ' A. I frankly never heard of them until I received this subpoena. | Country Tweeds make a “prestige” garment which they sell to “prestige” retail establishments (Tr. 1174), They have a few customers in each retail market (Tr. 1175). In 1960 and 1961, Country Tweeds sold to Woodward & Lothrop, Inc., exclusively, in Washington, D. C., and to Jordan Marsh Co., exclusively, in Boston (Tr. 1175-76). The evidence fails to prove that during the years in- volved Rabiner & Jontow, Inc. competed with Country | Tweeds, Inc. for sales to respondent’s six favored cus- tomers, or that Country Tweeds’ garments competed. with | respondent’s garments for the dollars of the ultimate con- sumer—the retail purchaser. Although Country Tweeds, Inc. paid advertising allowances to some of, respondent’s favored customers during the years involved, the hearing examiner cannot find from the evidence that respondent’s non-proportionalized advertising allowances. were paid to meet or match a similar payment by Country Tweeds, Inc. Sa as al a ce i ot Ay . Se PR eR pete FR ees 2 rae et - 70a i : Initial Decision “in ‘individual competitive situations, rather than * * *. [in] a general system of competition.’” (See Exquisite Form Brassiere, Inc., et al., supra, p. 10), Jack Feit, hess : Due to the illness of its president, Lillian Hertzberg, its bookkeeper, appeard on behalf of Jack Feit, Inc., 530 Seventh Avenue, New York, New York (Tr. 1191, et seq. ). This company manufactures coats and suits, mostly suits, which retail from $70.00 to $125.00 (Tr. 1202). She testi- fied that the only advertising allowance paid by Jack Feit to any of respondent’s favored customers during the years 1961 and 1962 was $3,783.95 paid to Lord & Taylor (Tr. 1199, 1203). Jack Feit sold its garments ‘to some of re- spondent’s other favored customers, but did not pay any advertising allowances to these others. It did not make its cooperative advertising payments pursuant to any puBlished plan (Tr. 1204). The evidence in this record fails to establish that re- spondent’s non-proportionalized advertising allowances paid to its favored customers were paid to meet or match a specific, similar payment by Jack Feit, Inc. to the same favored customers. Respondent failed to prove that Jack Feit, Inc. competes with it in the sale of coats and suits to respondent’s favored customers. Respondent failed, likewise, .to prove that Jack Feit’s garments compete with Rabiner & Jontow’s garments for the dollars of the ultimate consumer—the retailer pur- chaser. CONCLUSIONS OF LAW Respondent, Rabiner & Jontow, Inc., 512 Seventh Ave- nue, New York, New York, a New York corporation, 71a Initial Decision which has been doing business continuously since 1942, - manufactures and sells in interstate commerce ladies’ coats and suits under the trade names of “Bardley”, “Bardley, Jr.”, and under private labels. Respondent’s products are sold for resale at retail. : ) Respondent has been, at all relevani times, and now is, engaged in commerce as “commerce” is defined in’ thé Clayton Act, as amended. - Respondent has been, and now is, in competition with other persons, firms and corporations who manufacture and * sell for resale at retail similar lines of ladies’ coats and suits. The Federal Trade Commission has jurisdiction over Rabiner & Jontow, Inc. and the subject matter: of this pro- ceeding. This proceeding is in the public interest. . In the course and conduct of its business jn commerce during the years 1960, 1961, and 1962, in the Cities of New York, New York, Boston, Massachusetts, and Wash-. ington, D. C., respondent’ paid non-proportionalized adver- tising allowances to its favored customers, as hereinabove found, without making such payments available to all of its. other, nonfavored, customers who competed with its favored customers. in the sale at retail of respondent’s products of like grade and quality. | ee Respondent represents that segment of ladies’ coat and suit manufacturers, whose garments usually sell at retail - basically in the price range between $70.00 and $90.00. - Respondent’s non-proportionalized advertising payments did, and do, constitute a violation of Section 2(d) of the - Clayton Act, as amended, and should be enjoined. Respondent has failed to prove by reliable, probative, and substantial evidence that its garments compete with . DPE PPE De TIN OE II Ye OPS nomntctihatiahrcopeitinte’ 2d tos oe ta a ial iid bata” oi Be = dda ae a hae een ns d ea opiates Si Ral RA A (I aot EE BASEN Sada E > } 72a | I uitial Decision the sail of the ‘ ‘competitors”, whom it, subpoenaed, for sales to the rétail establishments who purchase respond- ent’s garments, or for — to the ultimate consumer—the retail buyer. ‘Respondent has failed to to prove by reliable, probative, ‘sia substantial evidence that its advertising payments were made in good faith to meet or match the same or similar) advertising payments made by any one or more of its comé petitors to the same customers to whom respondent made -. its advertising payments. -Respondent’s evidence fails to bring its non-pr opor- tionalized advertising payments within the criteria estab- lished by the Federal Trade ‘Commission in. its opinion in . Flotill Products, Inc., Docket No. 7226 (supra, pp. 5-6) ; " Ace Books Inc.; et al., Docket No. 8557 (supra, pp. 8-9) ; and.Exquisite Form’ Brassieve, Inc., et al., NY. Federal Trade Commission (C. “A. ‘=D: C. No. 18524). = — fii 2d (supra, pp. 9-19). Counsel scaecentie the complaint have a the ma- terial allegations of the complaint by reliable, probative, and substantial evidence, and respondent has failed to prove that its unlawful, non-proportionalized advertising pay- ments were made to meet a specific payment of a competitor in an individual competitive situation, rather ‘than in a general system of competition. “ bs ORDER Now, THEREFORE, IT IS ORDERED that. respondent Rabiner’& Jontow, Inc., a corporation, its officers, directors, agents, representatives, and employees, directly or through — any corporate or other device in the course of its business 73a Initial Decision in commenrice, as “commerce” is defined in the Clayton Act, as amended; do forthwith cease and desist from: Paying or contracting for the payment of anything of value to, or for the benefit of, any customer of the respondent as compensation or in consideration for ad- _vertising or promotional services, or any otlter service. or facility furnished by or ‘through such: customer in connection with the handling, sale or offering for sale of wearing apparel products manufactured, sold or of- fered for sale by respondent, unless such payment or consideration is ‘made available on proportionally equal — terms to all other customers competing with ‘such favored customer in the distribution: or resale of such products. | 7 Leon R.. Gross. ray ps Leon R. Gross, _ | - Hearing Examiner, July 16, 1965 e @* nee Ri ect Ned Ce ‘ - . Mn pe pbs Weg wNeohinda tradi adn tbh Ea Gat oe A 2 Nt RM dase wee . / & nih loved a's ” pasgailisiennwitcs ls’ Wega dy tit di - 74a Opinion of the Commission UNITED STATES OF AMERICA _ BEFORE | FEDERAL TRADE COMMISSION CoM MISSIONERS: Paul Rand Dixon, Chairman. Philip Elman Everette MacIntyre 7 | John R. Reilly : fs es ‘ Mary Gardiner Jones | : - a. T? In the Matter of - - RABINER & Jontow, INc., a corporation. _ Docket No. 8629 A oe By Reilly, Commissioner : This matter is before the Commission on the appeal of respondent, Rabiner & Jontow, Inc., from an initial de- cision of the hearing examiner holding that respondent had- violated subsection (d) of section 2 of the Clayton Act, as amended, and ‘ordering respondent to cease and desist from the practices found to be unlawful. -° The complaint herein alleged that respondent, a manu- facturer of ladies’ suits and coats, had granted promotional allowance to certain of its customers without making such allowances available on proportionally equal terms to other “customers competing in the sale of respondent’s products. The respondent admitted many of the material allegations of the complaint in its answer but claimed as an affirmative 75a Opinion 0 f the C ommission defense that inevery instance in which it granted promo- tional allowances it did so in good faith to meet competition. The hearing-examiner found, primarily on the basis of re-. ' spondent’s admissions ‘and stipulations of fact, that during the years 1960 through 1962 respondent had granted ad- vertising allowances to certain favored customers located _in the cities of Boston, ‘Massachusetts, New York, New York, and Washington, D. C.; that other customers com- -peting in the sale, at retail, of respondent’s products did not receive any advertising. or promotional allowances dur- ing this period; that allowances’ granted by. respondent were individually negotiated on an ad hoc basis for each adver- tisement ;‘that respondent had no plan whereby competing customers might qualify for an, advertising allowance; and. that respondent’s payments. were not made available on proportionally equal terms even among favored customers. To establish the claim that its allowances were justified . under the 2(b) proviso as good faith efforts to meet al- * lowances furnished by competitors, réspondent called as _ witnesses the president of the corporation, Abbe Rabiner, representatives of 17 coat and suit manufacturers, and an associate professor of retail mechandising at New York University whe testified as an expert witness. The examiner rejected this defense, holding that respondent had failed’ to prove through the testimony of these witnesses that its non-proportionalized advertising payments were made in order to meet comparable payments in specific, ‘individual, competitive situations. The examiner -found in this con- nection that the testimony of Rabiner and the expert wit- ness related only to general competitive conditions in that ~ segment of the garment industry of which respondent is . Part and not to the.issue of whether respondent’s discrim- inatory payments were made defensively in good faith - e FEN ee ee ae ER AALS Ai abet Bho Sahl si VR IE PABA i DP lca PE eh a ee ee ' in aoa tiene ea iat Hepsi aga , : . 76a “Opinion of the Commission . response to promotional payments offered to its customers by competing garment manufacturers. The examiner also ‘found that respondent had’ failed to prove through the testimony of the 17 manufacturers’ representatives that it was in fact competing with those particular manufacturers in the distribution of its products. He also found that none of these. mariufacturers, individually, paid to respondent’s favored customers the large cooperative advertising allow- ances that respondent paid. He concluded from his review of the record that there was no evidence that respondent’s allowances were granted to meet or match a similar pay- ment by a specifically named competitor who, at the time, was selling competing merchandise to. respondent’s favored ‘ customers. . In its appeal from the initial decision respondent does not contest the examiner’s finding of a prima facie violation of 2(d). It contends, however, that the complaint should be dismissed on two grounds; the first being lack of public interest in the proceeding and the second, that its allowances were made in good faith to meet competition. Respondent’s “public interest’’ argument-.is based pri-. _marily-on the undisputed fact that violations of 2(d) have been widespread in the wearing apparel industry. This argument, as we understand it, is not that the Commission - should have made no attempt to correct these illegal prac- tices but that the Commission has gone about it in the wrong way. The.respondent is, of course, well aware of the Commission’s efforts to secure industrywide compli- _ ance with section-2¢d). See Jn the Matter of Abby-Kent Co., Inc., Docket No. C-328, et al. An investigation under- abet by the Commission in 1961 disclosed that a large number of- garment manufacturers were discriminating ities competing customers in the granting» of advertising -—. 77a Opinion of the Commission and promotional allowances. The Commission thus having | reason to believe that violations of section 2(d). existed throughout the industry made the determination, after con- sidering and rejecting other proposed remedial approaches, that a general correction of these practices could best be accomplished by affording members of the industry an- opportunity to sign consent agreements containing orders to cease and desist from granting discriminatory allow- ances. Subsequent thereto, the Commission during ‘a period of approximately two years accepted agreements and orders from 298 apparel’ producers including those significant - sellers who were granting the largest. amounts of allow-’ ances to the greatest number of buyers. On August 9, 1965, all outstanding orders were made effective, the Com- mission having determined at that time that this particular _ Phase of the wearing apparel inquiry was for the most part terminated and that “The few. unresolved matters do not involye suppliers who constitute a force capable of com- petitively disadvantaging those indystry members who will _ be ‘under order.” Abby-Kent, supra. The Commission . - further pointed out that: its enforcement program in this industry would, when necessary, be supplemented by formal proceedings against selected buyers who knowingly induce or receive discriminatory allowances. Although cognizant of the foregoing facts; respondent — now asks us to reconsider our enforcement policy in the light of the decision in the Max Factor and Shulton cases." In these two cases complaints charging two cosmetic manu-. ‘ facturers with violating section 2(d) were dismissed, the _ Commission having found that the respondents were only two among a large number of suppliers participating in 1Docket Nos. 7717 and 7721, July 22, 1964. TR RESTS SITs . EOL LENS BRD NIE eS Fs ht ROR i a ah i ti ™ ER RNS AS Se Shite oe Wcxnel, . * 78a Opinion of the Commission special promotional . events . sponsored by a single buyer. We held in our opinion that the entry of cease and desist — orders against these particular respondents would not be an equitable and fully effective method of eliminating the discriminatory practices and that in the circumstances shown to exist the “enforcement policy best calculated to achieve the ends contemplated by-Congress” was one based on Section 5 of the Federal Trade Commission Act and directed at the recipient of the discriminatory allowances. Respondent contends that on the basis of our holding in Max Factor and Shulton' we should dismiss the complaint - against it and bring suit against its favored customers under Section 5 for inducing discriminatory allowances. This “argument is rejected. Our disposition of the two Cases: re- - Tied upon by respondent cannot be interpreted as a policy decision to proceed only against buyers who induce 2(d) | violations rather than against the seller who has violated 2(d). The fact that in a given industry or market buyers may be largely responsible for inducing discriminatory ~ practices is not sufficient reason for suing them to the ex- clusion of the supplier. It may,be that more often than not . large buyers aré responsible for a seller’s discriminations. And Congress was fully aware of this fact. when it: passed the Robinson- Patman Act. The Act nevertheléss is directed _Against the seller as well as the buyer. In any event, our. enforcement policy must be guided by the circumstances as we see them which will also take into'account the respective ; effectiveness of the various remedies available to us. For example, proceeding against buyers under Section 5-would certainly be indicated where such a suit against one or. two | buyers would have the same remedial effect as a multitude of actions against sellers under 2(d). Grand Union vy. ee me 300 F, 2d 92 (2nd Cir. 1962), American News Opinion of the C ommission "Co. v. FT. C., 300 F.2d 104 (2nd Cir. 1962), Giant Food Inc. v. F. T. C., 307 F. 2d 184 (D. C. Cir. 1962), R: H.” Macy's & Co., Inc. v. F. T. C.,.326 F. 2d 445 (2nd Cir. 1964). Furthermore, we fail to detect any similarity in the circumstances under which this case was brought and those of the Max Factor and Shulton cases. Our investigation « of the wearing apparel industry had disclosed the likeli- hood that in many instances department and specialty store cKains had: been responsible for the discriminatory allow- ances. In other instances it seemed ‘likely that it was the ‘ suppliers themselves who had ‘initiated the practice. Being fully aware’ of the existing situation, the Commission made the determination long before ‘it. brought ‘suit against re- _Spondent that the elimination of the discriminatory prac- tices could best be achieved by proceeding against’ the sup- pliers. It has executed this policy by securing consent agreements from all but a few firms, which include the re- spondent, where the facts disclosed by the investigation ' gave it reason to believe that 2(d) was being violated. Thus 7 the factual situation here is diametrically opposite that shown to exist in the cosmetic cases. Here a decision not to " dispose of ‘the.case on the merits would not only be unfair . to suppliers already under order but would tend to weaken '. the Commission’s entire enforcement program in this. in- ‘dustry...’ ee = ee Respondent also asserts that the proceeding is not in the public interest because small manufacturers cannot af- ford to make promotional payments on the same basis or . in the same amount as their larger competitors. It: states in this connection that some large apparel manufacturers have set up programs providing for proportionalized allow- ances of up to 50 percent and higher of the buyers’ cost -of advertising and further claims that it would be impossible . . a inna el me Be . . 80a Opinion of the C a | for it to grant such large payments on. proportionally equal terms to all-of its competing customers. As found by the: hearing examiner. the evidence on this point is inconclusive. . But even if respondent were able to prove its inability to duplicate the lawful promotional programs of the very large apparel manufacturers there is nothing in the record to in- dicate that respondent could not establish its own nondis- criminatory promotional plan and, when necessary to meet’ competition, deviate from: that olan by paying to certain customers the same amount as the larger competitor whose _ allowance it is rheeting. In its appeal from the examiner’s holding that’ its dis- criminatory promotional payments were not granted in good faith to-meet competitors’ allowances, respondent in effect concedes that it has failed to make out a meeting competition defense under established legal criteria, It contends in this. connection that there is a difference bétween’ price discrim- ination and the granting of disctiminatory allowances and that: the Commission, therefore, should utilize different: standards for determining the sufficiency of the meeting competition defense in 2(d) cases as distinguished from those involving prima facie violations of 2(a). . Respondent has failed to suggest any standards or tests for determining whether, and under what circumstances, an advertising allowance has been properly granted to meet in good faith a competitor’s allowance although it obviously _ believes that the practice of making promotional payments on a discriminatory basis for 20 odd years without. attempt- ing to establish a nondiscriminatory program comes within the realm of permissible behavior. It does suggest however . the elimination of one element of proof required in a meet- ing competition defense to a 2(a) violation and that is proof: that the discriminatory payment was made in response to a 8la Opinion of the Commission payment offered by another seller in an actual competitive | situatfon. This element of proof, however, goes to the “actual core” of the meeting’ competition defense which ° “consists of the provision that whencver a lawful lower price of a competitor threatens to deprive a seller of a cus- . tomer, the seller, to retain that customer, may in good faith ‘meet that lower price.” Standard Oil Co. v. F. 7,6. U. S. 231, 242.” , : ¢ Respondent’s argument, as we understand it, is that the. granting of promotional allowancés is a legitimate method of competing and that in an industry in which the practice of granting allowances is widespread a seller should be per- mitted to grant disproportionate allowances to meet com- petition generally without showing that any, particular pay- ment was made to meet a specific competitive offer. There is, of course, nothing inherently unlawful about promotional allowances. Cooperative advertising has traditionally ‘been regarded as a legitimate method of sales. promotion. Con- gress has found however that 4 sales promotional allowance “becomes unjust when ; . . the customer is derivin. from it . , 5S equal benefit to his own business and is thus enabled to shift to his vendor substantial. portions of his own advertising” cost, while his smaller competitor, unable to command such © allowances, ‘cannot, do so.” H. R. Rep. No, 2287,, 74th Cong., 2d Sess, 15-16 (1936). Consequently, the basic pur- pose of 2(d) was to insure that competing purchasers from’ the same seller would receive allowances on a nondiscrimin- atory Basis. This purpose would be defeated if a seller could justify discriminations by the general showing that its com- _ petitors were granting promotional allowances and ‘that it ° would be competitively disadvantaged by failure to utilize allowances as a.method: of. sales promotion. If this were the rule, all sellers could justify discriminations in the grant- gear Dden giles Ge Be Ree See > 2 gt ero vere . FR Ones TAAte pM ET ENN OF TRIED RIAN nN SPS rk . aa 2M > r ~ 4 ata Iie ae tit pL. sient ted yee tie “ iba hte h é 4 KC OS babi ec i Getdawe ar ddsnites wien pik ie Satliceat br innsen Dies abet 82a. i Soot oe Opinion of the Commission ing of promotional allowances merely by, showing the gen- eral use of such allowances by others in the industry and the value of such allowances as a competitive tool. The granting - - of promotional allowances would then be governed by a _° broad ‘reading of 2(b), not by 2(d) which requires that promotional payments be made available on proportionally equal terms. ’ 7 | : The meeting competition defense, however, is an, excep- tion to the prohibitions of the statute arid, as such, must be strictly construed. -The Great Atlantic & Pacific Tea Co. v. Federal Trade Commission, 106 F. 2d 667 (3rd Cir. 1939), - - United States v. Scharton, 285 U. S.518, Spokane & I. E. Rw Co., v. U. S., 241 U. S. 344. In cases brought under both 2(a) and 2(d), therefore, a discrimination may be justified as a good faith “meeting of competition” only when the seller is otherwise complying with the applicable sub-section. and the particular discrimination is made in a genuine de-> fensive response to another seller’s offer in a specific trans- - action,” In other words, a seller who has-made no attempt to comply with the substantive requirements of the Act is pre- cluded from claiming that his discriminations were made in good faith to meet competition.* .We have held therefore that.a seller engaging in cooperative advertising must do so 2Tt is for this rea$on that the Commission and the courts have con- sistently held that discriminations made generally to meet competition do not come within the meeting competition defense. “Section 2(b) - permits a single company to self one customer at a ‘lower’ price and of that only to the extent that it-is made ‘in good faith to meet an equally low price of a competitor’”. Federal Trade Commission v. Cement Institute, et al., 333 U. S. 683, 725. 8See in this cgnnection Federal Trade Commission v. A. E. Staley Mfg. Co., 324 U. S. 746, wherein one of the reasons given by the Court for rejecting the 2(b) defense was that respondents had “never attempted to establish their own non-discriminatory price sys- tem, and then reduced'their price when necessary to meet competition”. September 19, 1966 83a . Opinion of .the Commission | through a comprehensive, nondiscriminatory program, and that after such a program has been established, deviations - from it.in the.form of more generous allowances may be _ excused in individual instances shown to be good faith at- tempts to meet promotional allowances furnished by com- | petitors. Exquisite Form Brassiere, Inc. v. Federal Trade ‘ Commission, 1965 Trade Cas. J 71,491. ” Respondent’s argument that’ the hearing: examiner erred _ in dismissing its 2(b) defense ig rejected. We are of the opinion, that respondent has failed to establish that its dis- i Se allowances.were made in good faith to meet competitors’ allowances for the Teasons set forth in the - initial decision. . | | Respondent’s appeal is denie#: The hearing examiner’s ~ initial decision will be adopted ‘as the decision of the Com- ‘mission. , os . Commissioner Elman dissented and. has filed a dissent- | ing opinion. on ~ . Sa Dissen ting Opinion ~ UNITED STATES oF AMERICA : BEFORE FEDERAL TRADE COMMISSION ComMMISSIONERS: Paul Rand Dixon, Chairman Philip Elman Everette MacIntyre John R. Reilly Mary Gardiner Jones dp. ¥ - In the Matter of RABINER & JoNTOow, INc. a corporation Docket No. 8629 y% — + Commissioner Elman, dissenting: This case.is part of the Commission’s program, ‘edieated in 1962, to eliminate discriminatory promotional allowances in the wearing apparel industry. through the imposition of. orders upon a number of sfippliers. I will not repeat here in detail any reasons for believing. that that program has been neither effective: nor equitable. See Abby Kent Co., Inc., Docket No. C- 328 (August 9, 1965) ‘(dissenting opinion): As the Commission recognizes, violations of Section _2(d) have been widespread in the wearing apparel industry ; department and specialty store chains to a large extent ‘have been responsible for discriminatory allowances in the industry ; and individual-suppliers, like respondent, have felt ‘Gompelled to grant such allowances because of general com- ‘petitive conditions in the industry. The wearing apparel industry is-highly fragmented, consisting of thousands of: o SR ko eooerere ne ee ee ee 85a Dissenting Opinion manufacturers, most of them very small in relation to the chain and department store buyers. For most manufac: - turers, the buyer is in the driver’s seat; whatever he wants in the way of advertising or Promotional allowances, the buyer is usually in a good position to get. Respondent is one of the two suppliers, out of the group of about 300 sued by the Commission, which refused to sign 2(d) consent orders. The suppliers which signed such orders represent only a fraction of the entire industry, and only eight of the outstanding orders are directed against - members of respondent’s particular segment of the industry —ladies’ coats and suits. As respondent points out, more than 500 of its direct competitors,are not under order. It is not hard to see why an enforcement policy designed to place even a substantial number of suppliers under order can accomplish little. The ability: of large and powerful - buyers to exact discriminatory allowances: from suppliers Not under order remains unimpaired. Even if the Commis- sion could be sure of full compliance with the outstanding orders, this basic gap would not be plugged. Moreover, the impression persists that issuance of. these orders has had little or no effect in eliminating discriminatory allowances in the industry. According to industry spokesmen, “there is a great missing step between the law and its enforce- ment” and “the Commission orders have not deterred some leading retailers frorn continuing to demand and receive discriminatory advertising allowances.” (New York Times, July 10, 1966, sec. 3, p. 1.) In view of the general competi- tive conditions prevailing in the industry and the Commis- sion’s. limited capacity to police outstanding orders, many suppliers under order apparently feel that they must con- tinue to grant discriminatory allowances. Dicrpiigt trea lta eS See. ee adele Tt «Cen aly Re tt AEB Di DD, CB EAA RS LNB EA aS ee PALADINS hE LE AO ~ Reh B ee ARETE. Bo Dissenting Opinion - The Commission’s enforcement policy is deficient in yet | another respect. If, as seems to be assumed, many :de- ‘partment and ‘specialty store chains have ‘a practice of in- ducing and receiving discriminatory promotional allow- ances, that practice is surely not confined to ladies’ coats and ‘suits or to any other single line or product. Department stores nowadays sell almost everything under’ the sun. Even if the Commission were to place under order every supplier in the wearing apparel industry—and no one sug- -gests that it should or could—large department and chain store buyers would still be able to obtain discriminatory allowances on all the other products they carry. Thus, the imposition of orders on cloak-and-suiters like respondent does not even make a dent in the problem of alleged abuses | of buying power by large retailers. The issuance of this order, like the other orders against suppliers, has moved the Commission no closer to its goal of eliminating prevalent illegal and discriminatory promotional allowances—whether | in the ladies’ coat and suit industry, the wearing apparel - industry generally, or “in any other industry making pro- ducts sold in chain or department stores. I think it is also inequitable to issue this order a respondent. The Commission holds that it is not a defense - that these allowances were granted in response to general competitive conditions in that segment of the garment in- dustry of which respondent is part. Again, I will not repeat here my reasons for believing that the Commission’s in- terpretation of the 2(b) defense imposes an impossible and unrealistic burden on sellers. See, e.g., National Dairy Products Corp., Docket No. 7018 (decided July 28, 1966) (dissenting opinion) ; Tri-Valley Packing Co., Docket No. 7225 (decided July 28, 1966) (dissenting opinion). In © 87a Dissenting Opinion - order to satisfy the Commission that it was meeting com- petition in good. faith, a respondent must prove that the. “payments were made in order ‘to ‘meet comparable pay- ments in specific, individual, competitive situations”; it is not enough to show that it acted defensively in response to “general competitive conditions” prevailing in the segment of the industry in whicti it does business. To prove its _, ood faith, a respondent must conte forward with “docu-. _ mentation” or “specific evidence” showing that it used “reasonable diligence in verifying the existence” of comparable allowance offered by a particular cumpetitor. . As applied to the circutnstances existing in the wearing apparel industry, these requirements of proof make the 2( b) _ defense unavailable, as a practical matter, to any supplier against which the» Commission determines to proceed. Whatever the technical justification fqr the Commission’s position, we should recognize the actual commercial con- sequences.. In this industry, as the Commission has | * recognized, discriminatory allowancés are both ‘“‘wide- spread” ‘and secretive”. Abby Kent C 0., supra. To bar a single seller, or only some sellers, from granting allowances in an industry where the practice as become _ an everyday competitive necessity, and where it derives from the’ covert exertion of pressure by large and powerful buyers, means that such sellers will have to compete’ at a substantial disadvantage: In this industry, if.a chain or’ départment store buyer tells a seller that he wants a promo- tional allowance, the seller need not be informed whether the buyer has already received a specific offer of a compar- able allowance from a specific competitor; hé knows well enough from general conditions prevailing in the industry that the buyer can and will obtain such an allowance, . e - . te * ° " - : Pen eee : . . 4 , * i . eg OREO RIEL, CDI IO DEAE EARL aba OS NN Rae LEAR LAI CALE AM SY SiO PA GV EDM cal Divs Ni Meier bee hatahe ied san Neate S Me Rae aaa aa ne 3 °". @.45 Dissenting Opinion whether from the seller or a competitor, and unless the seller grants.the requested allowance he will lose the account. ‘What more does ‘he have to know in onder’ to meet competi- tion in good faith? For these reasons and others I have oe eee else- where, it seems to me to be a serious mistake in the alloca- tion of its enforcerfient resources for the Commission’ to have channeled, and to be continuing to.channel, its energies _ primarily in the direction of imposing 2(d) orders_on a relatively small number of. suppliers in_seattered segments . of the wearing apparel industry. It would have been, and 2 _, Still would bé, far more effective and more equitable for the ~ Commission .'to pursue an enforcement policy realistically designed to accomplish the central objective of the Robin- _ son-Patman Act, i.e., “to curb and prohibit all devices by ~ which large buyers gained discriminatory preferences over smaller ones by virtue of their greater purchasing power”. F. T. C. v. Henry Broch & Co., 363 U. S. 166, 168. I would follow here the general enforcement ‘policy—aimed primarily at alleged abuses of buying power—which was stated not too long ago in Max Factor and Shulton (Docket Nos. 7717 and 7721, July 22, 1964). September 19, 1966 a \ . ‘ . . \ ver 2 BN Le as er acbienanatt Aon in ei ‘ 9 a . ‘ . > . . % ' . R . . . Bs . . . . . ‘ e e F . ‘ . . . e - e . : ° e : . ° ‘, . ° ‘ . . . y . .- . . . ' ‘ \ \ . j- . ‘ / ¥ . . . , . . P A 4 | | 7 ° : . ‘ 7 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385603_1246%3A3. Public record. Not legal advice.