# Appendix — United States v. Topco Associates, Inc. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386413_0378%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1972 - **Citation:** 405 U.S. 596 ## Text 12/13/68 > out (Draft). Order ay trial briefs to be filed ene within 10 days. . 12/13/68 Filed Plaintiff's Reply to Defendant’s Pre-trial L Brief. iled Defendant's Reply ts Plaintif’ Pre-trial 3 * Brief. / 20/ 69: Order cause wal for trial on Wehieary 25, 1969 at. 2/25/69 Cause called for trial. Plaintiff waives ipaifeg 10:00 AM. “Will, J. statement. Opening statement heard for de- a fendant. Evidence: heard. Evidence heard for. . - plaintiff. Plaintiff ‘rests. Evidence heard i — for defendant. Order cause ging February 26, 1969 at 10:00 A.M. Will, J "226,69 " Warther evidence heard . for defendant, Order _ eausé adjourned: until February 28, — at 10:00 A.M. Will, J. "9/28/69 Pusthsc jolainan kiasd ice defended Order 3/4/69 3/6/69 : _.* ant rests. Rebuttal evidence heard for plain-~ ‘Gt, Plaintiff rests. Sur-rebuttal evidence | heard for defendant. Defendant rests. Plain- 4 ‘tiff rests. Order simultaneous briefs to be filed 378769 3/5/69 _ cause adjourned until) March -:3, 1969 at 10:00 A.M. Will, J. Further evidence aed for defendant. Order cause adjourned until March 4, 1969 ~at . 10:00 A.Ms: Will, J. . ; Further evidence heard for defendant. Order - cause. adjourfed until ‘March 5, 1969" at 10:00. A.M. Will, J. Further evidence heard for “defendant. Order — - @ause adjourned until March 6, 1969 at 10:00 A.M. Will, d. i | Further evidence heard for. daneiadaat Defenid- 9 ; @ and » cnhnstinionl to the ended findings of ' fact and conclusions of law to be presented Soe ’ within 30 days, simultaneous answering briefs. to be. filed within 15 days. thereafter. Order cause taken under advisement. Will, J. | 4/21/69 Filed plaintiff's post-trial brief. ; 4/21/69 Filed defendant’s post trial brief a | 5/6/69' Wiled defendant's post-trial reply brief. 5/6/69 © Filed plaintiff's reply to defendant's post-trial. oo brief. 11/16/70 Filed Opinion etre : 11/16/70 ‘Enter Findings of Fact sad Doseucine of Law, ra (Draft) Judgment order entered: It is ordered . ~ and adjudged, that a judgment be, and it here- ~ by is entered for defendant-Topco Associates, | Inc. and against plaintiff, United States of - America; and that the complaint bé and it hereby is dismissed with prejudice, (Draft) — Will, J. > : * % 1/15/7 1 Filed notice of eeu’ to the + an Court of the United States by the United States of America fo. : of . a * Ss ---Unrrep States oF AMERICA ] ac. es Unirep States. District Court . .. + Nortuern District or, Inzrvo1s Eastern Division Pl wif |. eT ewe) | Civil Action’ No, 68-C.76 Peace Assoctates, INo., | Filed: 1/16/68 raat Defendant. fi “% ~ a . .? rece. CoMPLAINT : , The United States of America, plaintiff, by its attorneys, ae acting under the direction of the Attorney Genera] of the ‘Daited. States, brings this civil action against the above- _ newied Getemttnt and hese igor: and alleges as follows: oe | _ Jurisdiction and Venue. | 1. This complaint is filed and these proceedings aire in- stituted against the defendant under Section 4 of the- Act of Congress of: July 2, 1890, as amended (15 U.S.C. § 4), . gommonly-known as the. ‘Sherman Act, in order ‘to prevent _— and restrain continuing violation by defendant, as herein-. after alleged, of Section 1 of the Sherman Act (15.U.8.C. § > «2. The dete ndant maintains offices, transacts - hese, 2 and i is found within the Northern District ef Illinois. ) 1 ‘The Defendant 3 Topco. Amnesia, Inc., (hereinafter referred to as . - “Topeo”) is hereby made the defendant. Topco is a corpo- | ration organized . and existing under the laws of Wisconsin, G with its’ principal place. of business in Skokie, Llinois. Pept operates asa edie ee for its sharehold- Oi - ‘ : ‘seinen (hereinafter referred i as: » “member firms”), : ‘ supplying these member firms with a broad line of groeeey | and related: non-food jtems bearing Topeo-controlled bran names. Topco’s member firms have ‘been and are independ- _ent: persons, firms and corporations engaged i in the whole-— = sale and retail sale and distribution of grocery and related non-food. products. ° Ses ek | thee ' Go-Conspitators 3 - 4, ach of the member firms, ‘not made defendants . t % ae has participated as a co-conspirator and is a-party . th\Topeo i in the combination and conspiracy in fiolation | of Section 1.of the ‘Sherman Act as hereinafter alleged. a Each of these co-conspirator. member firms has éxecu a membership _— with defendant Topeo.. o- . | ‘ Iv ; | Definitions ® sa 7 olf, “Topeo-controlled brands” means grocery ‘and rege _ non-food products which are procured, ‘produced and tributed by: Topco to its member Ste neee Roped's 8 trade- _ names ‘and trademarks. Ve vila of Trade and Tisatiags 6.. Toxo has approximately : 25 member firms located 3 in various cities and States throughout the United States. These member firms are licensed by Topco ‘ta sell one or more of -the , Popeo-controlled pene under Topeo trade-_ names and trademarks, - 7 7.° During the period of time ie by this Complaint, ; | Topeo has:sold and shipped in interstate commerce Topco- . controlled brands from the States in which its warehouses: . and distribution centers are located to ‘member firms il ‘cated i in ree States. 6 - & ti the year 1966, the soabined retail. sales of grocery z ‘and related non-food items of the,Topeo member firms ex- _ | ceeded: $2,500 ,000,000. During 1966 Topco sold and distrib- uted to its member firms ee brands valued at : approximately _ :000,000. sa trolled. brands only within the 2 marketing territory -allo-~- e \ z VI. Offense Charged - 9. Beginning at least as early as 1960 and soitiaeink’ up to and including the date of .the filing of this Complaint, Topco and the co-conspirator member firms. have engaged in a combination and conspiracy in unreasonable restraint of the aforesaid interstate trade and commerce in violation — of Section 1 of the Sherman Act (15 U.S.C. § 1). The of- fense is continuing and - will continue unless: the relief "prayed for herein is granted. . * 10. The combination and conspiracy has cenalated of a continuing agreement, understanding and concert of action among the ‘co-conspirator member firms acting through» - Topco, the substantial terms of ywhich have been and are that each co-conspirator member firm will sell Topco-con- cated to it, and will refrain from selling Topco-controlled ? brands outside such marketing territory. - lL. In effectuating and carrying ‘out the aforesaid combi- ~ nation and ‘éonspiracy, Topco and the co-conspirator mem- ' . ber firms have done those things which, as herein alleged, | , they — and agreed to do. .. , Effects - ee § 12. ‘The es offense has had the flowing ¢ erg - among others: (a) Competition among the co-conspirator ‘timber firms ® in the sale and Satribationd of ee brands has ¢ been eliminated; : (b) Competition among ne co-conspirator teiinline firms oe "in the sale and distribute of he: grocery and related ‘non-food products has been eliminated ;. (c) Consumers have been denied the benefits of free and: open competition between member firms in the sale of. ~ Topco-controlled products and in the sale of other grocery — - and related non-food products. | : | pe WHEREFORE, plaintiff prays: 1. That the aforesaid combination and conspiracy in un- reasonable restraint of trade and commerce’ be adjudged and decreed to be unlawful and in violagpn of Section 1 of the Sherman Act. — 2. That’ the defendant, its successors, cthieirs: Mion, managers, agents and representatives, and all persons act-_ ing or claiming to act for or on behalf of defendant, be ‘perpetually enjoined’ and restrained from continuing, -re- ' viving or renewing the aforesaid combination _and-eonspir-—— BY, and into, maintaining or participating « in any contract, agreement, understanding, plan, program, or other arrangement having the purpose or effect of con- tinuing, reviving, re or Tehewing this combina- tion. and conspiracy. . 3. That the defendant, its menibeds, officers, directors, ~ managers, agents, employees and representatives and their respective successors, assignees and transferees be perpet- ually enjoined from entering into, adhering to or maintain- ing any contract, agreement, arrangement, understanding, plan’ or program to ljmit or restrict the territories within which or the customers to whom any. member firm may sell Topco-controlled brands. _ _ 4, That Topco be directed to fonish to each of its mem- bers and to each ‘person, firm or corporation which hereaf-. ter becomes a member.a copy of. any final judgment ae may be entered in this case. 5. that the — have ‘such other and further relief th 8 4 as the nature of the case may require and the Court may — - deem just and proper. 6.. That the pais: recover the costs oft this action. at Daieds 3" ; : " /s/ Ramsey Clark = - Ramsey ChanK = “> Attorney General | . Js/: Donald F. Turner - Donato F. Turner ; Assistant Attorney General - /a/ Baddia J; Rashid Bappw J. Rasop.. . ” _/s/ Charles D.Mahaffie,Jr, 8 = +» -Cuantes D, Manarrin, Jr. Maat ee ae __ Attorneys, Departnent i Justice. aie ote Oe SY Rowan V. 1 a i ote 43 ve -_ fn United States Attorney - | oo : a @ '/s/ Hugh P. Morrison, Jr. Hues P.. Morrison, JR. * _/s/ Theodore M. Jones, Jr. | Tueopore M, Jongs, JR. i - Attorneys, ‘Department of Justice United States Disraicr Court | _ Nortuern. District or ILLinos 70% Pats 5 Eastern | Divistox 1 =. ee Answer : “4 \ 2 oo " Defendant, Torco Associates, ‘Inc, (Cooperative) (here- ; inafter sometimes referred to as “Topeo”) , by its ‘attor- j _ neys, answers the complaint herein as follows: 3 “4 aa Defendant admits that the complaint purports. -to be ~ filed under Section 4 of the Act of Congress of July"2, 1890, as amended, (15 U.S.C. § 4), commonly known asthe. — “Sherman Act,” but dénies each and every remaining alle- gation contained in paragraph 1 of thefomplaint. — Pe 2. Defendant admits the allegations contained. i in ¥ pare oe .* graph 2 of the complaint. : o 3 Deféndant admits the allegations onntieak i in para- graph 3 of the complaint, except that it denies that- all & member firms of Topco are engaged in the wholesale distri-.~ butipn of grocery and related non-food items. Further an- swering, ‘defendant allegés that the correct corporate name ee of defendant is Topco Associates, Inc. (Cooperative). + 4, Defendant denies each and every’ allegation contained: | - in-‘paragraph 4 of the complaint, except that it admits that 4 - -each’member: firm of Topco has exevuted a memes and licensing agreement with Topco. ; . § Defendant denies the allegations contained in. pain: graph 5 of the complaint, except that it accepts plaintiff’s. definition of “Topco-controlled brands” insofar as it relates to ‘products ‘procured and distributed by Topco for member firms under trademarks: owned by je rs Further answer- ae ears . ¥ ris ‘10: . ing, defendant states that it does not produce a any grocery “.* _. or related non-food products. Es 6. Defendant admits the allegations contained i in the first sentence of paragraph 6 of the complaint, and denies each *and every remaining allegation contained in paragraph 6. of the complaint. Further answering)defendant states that . all member firms are licensed to sell one or more: Topco-- - -. controlled brands except Frankford-Quaker Grocery Co., , Ine. which sells products under its own oe, some of ‘. whieh are procured by Topco. 7. Defendant denies the allegations dcateined i in para- graph 7 of the complaint, except that it admits that some products procured by it are sold and shipped in interstate. * - commerce. Further answering, defendant states that it . owns no ‘warehouses or other distribution facilities, but it- uses public warehouses for temporary storage of some -. products procured by it. In most cases, Topco places or- ders ‘with suppliers for its members-and the products are : shipped directly from suppliers to the members. Further ‘ answering, defendant alleges that its member firms have stores located in thirty-six states. 3 8. Defendant admits that in the year | 1966, the ‘combined aie: retail ‘sales of. grocery and related non-food items of those ~~ firms which were Topco.members on January 1, 1966 ex-. ceeded $2:5 billion, and denies each and every remaining al-. “ legation of paragraph 8 of the complaint. Further. answer- — ing, defendant alleges upon information and ‘belief that in ' the year 1966, the combined retail sales of grocery and re-’ ! lated/ non-food items of those firms which were Topco mem- hers on December 31, 1966 was substantially less than $2.5 billion. Further answering, defendant states that during its :. fiseal year ending March 31, 1967, the dollar volume of ~ ‘Fopeo-controlled brands procered for members was b- _ proximately $140,900,000. - \ ‘9. Defendant denies sidele and every allegation contained in paragraph 9 of the complaint. - | 10. Defendant denies each and every allegation ae oo . , tained i In pian cyt 10 of the complaint.. me , | - . ea: ee ie Ae ore © : a et toe 41. Defendant denies each and every allegation con- ~ tained in paragraph llofthecomplaint. = =) _ 12. Defendant denies each and every. allegation con- -. tained in paragraph 12o0fthecomplaint, ~~. 13 Joe pes . “ApprrionaL DErense -. ; ee eee Boe 1. Private label merchandising is a way of eblenntis life ; - in the food retailing industry; and exclusivity is the ess- -ence of a private label program; without exclusivity, a pri- . _ vate label would not be private. Each national and large : _ ‘Tegional-chain has its own exclusive private label products aes , in addition to the nationally advertised brands which all - |. °. chains sell. Each such ehain-relies upon the exclusivity of | _ |.” . ‘its_own private label-line to differentiate its. private label _ . - products-from those of its competitors and to attract and | ° ‘petain the repeat business and loyalty of consumers. "Smaller retail grocery stores and chains are unable to com- — "4 >>. pete effectively with the national and large regional chains “|. without algo offering their own exclusive private label ” | oo) pas AES ON aap Cae ee cE Ese, Oe 2: Topeo is a cooperative procurement organization _ serving a group of independent small and medium-size - local and regional grocery chains. Topeo was created to “help its members compete with the national and larger.re- . Pes, Sional chains. Through Topco, its members obtain private ge, label products of consistent quality to supplement nation-. Silly advertised brand products carried in their stores and - aehieve the economies of combined purchasing, quality con- trol, packaging design and_ procurement, all-for the~pur- pose of competing effectively with national and larger re- gional chains. . 3 - 7 _ 3. The only feasible method by which Topco can procure : private label products and assure the exclusivity thereof is through trademark licenses specifying .the territory in - which each member may sell such trademarked products. This arrangement is e ectuated by Topco’s bylaw provi-| . eee sion which praviden “No member will sell or offer for sale ae * any products bearing any of the Association’s trademarks Paid ee 12 wi any point outside of the saesteniy whieh has bela. ex- pressly assigned to himrsunder his membership and licen-> , agreement.” This: provision applies only to Topco pri- . oe an labels; it leaves: members wholly free to sell products . == . bearing other labels wherever they please. © : 4, Topco’s- territorial licensing provisions } to Topeo private labels are necessary and ancillary to i purpose of | procuring private and exclusive ~ label products rm .°’ members on a cooperative purchasing basis, are reasonable ‘within the meaning of Section 1 of the Sherman Act (15 ‘U.S.C. § 1) and promote ‘and enhance competition in the See Ee food retailing industry to the direct benefit of consumers. Pe. ¥ oy a WHEREFORE, defendant denies that plaintiff je entitled to . \- the relief prayed for, or. any part thereof, and prays that Ny Sn —* be dismissed with prejudice. bis jeer Ayia ie | Joux T. Lovewun : P RY Be W Huan P. PE Ja Department of. Justice oer 4 ae ro 4 attorneys or. seetife aoe ‘iret class, mail on » Ma a gt: ‘ ie mee ; sie Sees, Dotk Niles; Hania h Baad: NS ea cara 135 Soth TaSnlle Street =} fy ts ’ . and between counsel for ‘plaintiff and defendant for pur-. ' grocery chains ‘were as ‘shown j in Appendix A: (Sales vol- - = oer ~ fs , Wt: & In Tue Unrrep Srares Distatct Court. * vor THE NortHeRn District or Inuinois Eastern Division’ | a ~ [€aption Omitted i in Printing) “ ‘SrrPuLaTion ; The following tipts are hereby stipulated and | agreed by | poses of this action only: | oe _ (1, Total retail fogd: ‘store. sales in the United States for the period 1963-1967 were as follows :. | a 1967 _$74,195,000,000 ade ee 1966 ~*~ —-_-70,750,000,000 = t. 1965 =~ 65,810,000,000 » 1964 ~ —_62,050,000,000 .. 1963 > __-58,700,000,000 2. The total number of. stores operated. by grocery maine and the total number of stores operated by all grocery re- tailers in the a States during 1966 and. 1967 were aS = * follows: | P : | 7 ; Chain Stores AU-Stores. me, 1966 25,205 - - 227,005 ° 1967 | . 27,670 . - 226,170 » = . a 3. During thépyears 1966 and 1967 nena ‘sales cdaun and the numbers of stores operated by eighty-one leading. umes include manufacturing, retail non-food discount, res: taurant and drug éperations. ) | aaa, —g§ e - ia . . - 15. The- lactams of ‘Topeo is managed by the board of directors. The members of the board of directors of. Topco’ . Serve also as executive officers i in their respective member - —— ° 7 aa) e. e 19. Topeo’s Bylaws provide that unless a member’s "Membership and Licensing Agreement permits sales at wholesale, a member may not wholesale products’ supplied by — | . . a * * | * *. - 14—- a ss kb ts, 4 = 91. The shemnberdhtp of Stevens Markets, Inc. was wit. , nated effective J ure 30, 1964, by its resignation. The mem- * 45 bership of Giant Food, Ine. was terminated effective March 31, 1966 by its resignation. The membership of Allied .Su- permarkets, Ine. was terminated effective October 31, 1966, by its resignation. The membership - of Hills-Korvette - “ Supermarkets, Inc. was terminated effective December 31, ..1966, by its resignation. The membership of. Pick-N-Pay ~ Supermarkets, Inc. was terminated effective December a1, . 1967, by its resignation. 24. In or about’ June, 1964, Asienrdetn Comniunity Stores Corp. was authorized; but not licensed to- sell products bearing Topco trademarks in Milwaukee and Waukesha, Wisconsin. 25. Schultz Sav-O iiete: fic. is licensed to sell Topics branded products both at retail and at wholesale within” sixteen counties within the Stafe of Wisconsin, including a the Counties' of Milwaukee and Waukesha, Wisconsin. * -Schultz’s sales at wholésale in 1967 totaled $10,667, 000 and _ ineluded, among other apogee reste some: Topeo branded it ucts. 26. "The Membership and Licensing ‘Agreement executed ~~. by A. W: Cullum & Company, Inc. licehses A. W. Cullum & -Company to sell Topco branded produets at: retail within seven counties in the State of Texas. In or about June - 1966, A: W. Cullum & Company was authorized, but not li-. _‘gensed, to sell Topco ‘branded products at‘wholesale in six - L of the seven counties in which it*is licensed to sell at retail ~~ and was also authorized, but not licensed, to sell ‘Topéo _ branded products at wholesale. in twenty-six additional. . “Texas counties. A. W. Cullum’s sales at wholesale in 1967 ~ totaled , $6,792, 000 and included, among other products, some Topco branded products. 27. The Membership and Licensing Agreement enon’ by Fred Meyer; Inc. licenses Fred Meyer, Ine. to sell Topeo © branded products both at-retail and at wholeslaé i in. twenty counties i in the State of Washington, eight counties in Ore- gon, nine counties in Montana and ten counties in Tdaho. | Fred Meyer’ s sales at wholesale i in 1967 totaled 94028, 000 | / " & —" >». and ulated. ‘among other products, some Topco branded roducts. | ~ @ 28, The Membership wad Siew ‘seeneneiah: executed — _ by: Hills-Korvette Supermarkets, Inc. licensed Hills-Korv-. ette | to sell Topco branded products at retail within eight counties in the State of New York. The Membership and _Licensing Agreement executed by Hills-Korvette also au- - “thorized the sale of ‘Topco | branded products at wholesale - to B & B Market, located in Suffolk county. The member- ship of Hills-Korvette Supefmarkets, Inc. was. terminated by resignation effective December 31, 1966. 29. Giant-Eagle Markets, Inc., by action. of the Topeo board of directors in January 1964,- was licensed to sell. Topco branded products both at retail-and at wholesale in. three counties within the State of Pennsylvania. _ ‘30. The Membership and: Licensing Agreement executed “eal Allied Supermarkets, Inc. as amended from time to time. % "licensed Allied to sell both at retail, through Allied’s Michi- - . gan-Ohio, Oklahoma, Missouri, and Ideal divisions, and at wholesale through Allied’s Abner Wolf wholesale division, "in thirty-six counties in the state of Oklahoma, seven: coun- _ ties in Kansas, two counties in Missouri, seventeen coun- ties in Michigan, two counties in Illinois, “and six “counties * . “in Texas. The. membership. of Allied Su rkets, Inc. _ was.terminated by resignation effective Oct r 31, 1966. _ 31. The Membership and: Jicensing Agreement executed _ _ by Twin Ports Grocery Company licenses Twin Ports to. , ‘Sell Topco branded products at wholesale in.eight counties in the State of Wisconsin, seven counties in Minnesota, and two counties. in Michigan. Twin Ports Grocery Company -.. 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Qeeeeeceeee ts, Inc. . , Inc. 4 (a) Tacaen mannfactaring, ¢) Procured under Frankford-Quaker labels: e an © ‘ 3 fecz o\ _ stand Mr. Morrison correetly, justify a motion. for. summary j c _ © that eorrect, Mr, Morrison? - : tion for summary judgment. called as a witness by and on. behalf of the Defendant a es a — | re a THE : UNITED STATES 5 ‘DISTRICT COURT FOR . THE NORTHERN DISTRICT OF ILLINOIS ‘EASTERN DIVISION [Caption | Omitted in. Printing] — ‘TRANSORIPT OF ‘PROCEEDINGS \? > had on the trial of the above-entitled catise, before the Honorable HUBERT L. WILL, one of the Judges of said Court, in his courtroom in the United States Courthouse, - Chicago, Illinois, : ‘commencing on: Tuesday, —_— 25, - 1969, at 10:00 o'clock, a.m. | . PRESENT: MR. J OHN E. SARBAUGH, - >. Chief, Chicago,- Office, Anti Trust Division, MR. HUGH P. MORRISON, JR, _ -- MR. JOSEPH A. TATE, : an oo \ . MR. THEODORE M. JONES, JR; on behalf of the Governinent; oe Ng BELL, BOYD, LLOYD, HADDAD & BURNS, 135 S. LaSalle St. Suite 3400, Phieago, ll. ) VICTOR E. GRIMM MEOW ARREN C. HASKIN, . a MR. JOHNT.LOUGHLIN “ MR. a CARNEY ae o . * * [38] Tae Court: I take-it there is no case, if I under- ere is no case which would ,., ent in this case. Is Mr. Mozaison: Well, your SHeaas 5 I didn’ 3 that:flat out last time,.and I won’t this time. - “§39) Tae Courr: Then make your motion: for summary . . «judgement, if you please, and I will save myecit a ——T" | deal of time listening to Mr. Grimm, Mr. Morrison : I agree with you. ay se igy ‘Tare Court: There.is no such case that will justify sno ty reethecegraph-atgenen:4 our most important ge furiction. | cote f { Most successful brands, aiosthies in food or non-food, KG that gain a successful share of the market are products _ .., | which are of consistent high quality. In getting ‘such qual- ity, deciding what quality to get, setting-the quality stand- ards, : learning: how to produce them, and particularly hav- >. Inga consistency, require considerable specialization ‘and ‘. «Knowhow ‘and expertise, and I think this is one of our _...* most important functions. ~~ 7 -[67] ~ ‘We start out with trying to decide—as any of : you * who shop in:supermarkets know, inthe food field as well as | ae tion-foods,. the new products which keep hitting the mat + | ket, place come fast and: furious. The first problem is to. \’ >. reallly decide the kinds of products that you want to try to: 7 ‘bring out under your. label. because when you bring it out ? " under your label and’a customer is buying it, she is: ‘buying as _. + it-with the endorsement of that brand, and if the product is Be ec fine, consistent high quality product, it will -gradually i ‘gain consumer acceptance and get repeat sales. The process that we go through is a continuing one, de- ciding what: we “want, developing specifications with our ae technical ‘people working—I don’t think I mentioned we - “~~ Have some 25 technologists working out of our laboratories _ ‘on the West Coast and in Chicago—with our product peo- ‘ple. These) are specialists, scientific people who work nat only with our product managers, but also the production , and quality eontrol people in. the literally hundreds of plants from which we supply products. - [68] So it is. a continuing ‘process of deciding tink we ‘want, finding. the suppliers that will produce it, auditing “their quality control, and then periodically reevaluating . how our produets. stack up in the market place against the _ competition, not,only against the bratids, but against other ~ private labels, against A&P, Safeway, and Kroger. Most good Topeo members, and when I say good, mean- ing ones who have been most successful with their pro- . grams, handle eight hundred to nine hundred items. This is food, non-food, meats, and general merchandise items. These are only iterns under, Topco brand, first, second, and third quality. Some handle over a thousand. ; Q. Do you ever add new items toTopco’ s line?. A. Yes, it is a continuing process. I referred earlier to . the constant flow of new’ products, particularly in the, household suppl¥ chemical field and- in the prepared, whether it is boil-in-bag regetine, it is a continuing al rade. {72] Q. What types, of new produgts do you give consi | eration to for adding t6 your-line? . AL Well, first, of course, we try to look at a sindhaette ¢ po- tential. In some.cases, we do move into products, or we have moved into products in the last few years that we had -- Just never been in before, whereas other ~~ had been in 3 them under private labels. Withiti the last year or two,-we have moved into a num- ber of processed ‘meat items. These are items which the- major chains and major regional suppliers have under pri- es sad 2 4 fe Al vate seiliiesiaaial ah inn iinet esi meats, and ‘prod- ucts of tHat type. ‘ In addition, there are the, truly. ‘new Mena that hit the >. marketplace. Our first problem is to try to find out whether ‘it looks like a winner or a loser, but the mortality on new - "products is very high. Some brands click. General Foods i is successful in one field, and in another field they won’t be as successful. Our problent i is first to decide or to try to decide. _ which type of product, which type of package, which size looks ljke the most successful, and then to try, or our next © ' job is to try to find out whether. or not the [73] members have an:interest. Do they think they could sell it under pri- vate label. If théy say “yes,” then we try to see if we can, . get it produced, set a specification, find .a producer and start marketing it. Any ‘new item has to be watched oretty carefully for e sory couple of years to make sure you. get it airborne. —- 3 Q. Would Topco do any marketing: research activity be- ie fore introducing a product? 3 A. Yes, we do, certainly. We do not have a large sabiront research staff, but we try to keep apprised of this, as a- _ part of our job, to talk to our members, and to get their re- _ actions, their ideas, They are‘a pretty good cross-section of . different types of stores and also in different areas, and they are also pretty good merchants, so our own as ah : track record is pretty good on new items. Most private label people are not primarily Lenattdiien: ‘ In other words, we can’t be as much an innovator as can a __- national brand, although many ees brand people are cjust “me, too” markets. [74] Q. Why can’t you be an tanovedot A. It is just in new products, we-just don’t have the dis- - tribution. In other words, while we have pretty good distri- bution among our -stores, if we bring out a product in a ' market\and we don’t get the coverage, we don’t have the advertising and we don’t have the promotional support, it is only sold and promoted by the retailer.. ~ . 8) THE Covrr: But you don’t get any national aan: . a ‘ store level. " — 4 - thaing for any of your products private, label produets, do - _ vost : Tue Wrrness: No, we don't. fe A Tue Court: Whether it is a new product or an old one, it stands or falls on whatever promotion — you gan develop for it? =~ ~ Tas Wrrness: With the retailer, yes, sir.. But, your Honor, we were one of the early entrants in the early ’50s of frozen orange juice concentrate. We weren’t the first, but we came early with it. But after people began to real- ize you took three cans—the education process of a truly - new product, bring out a product like Miracle White, I - think all you have. to do is watch television and I have a_ « difficult time telling all the different kinds of soaps and de- tergents and soakers, and what-not. Just the education process for a truly new product i is complicated. It is a dif- ficult message. i me ‘Our message is primarily told i in the local saciid at the * _@ * . e e : [81] Q: Has Topco. ever dropped items from its line of Topco branded products? a eet A. Yes, we have. : Tus Court: Buggy whips and things of that kind? [82] Tue Wrrnsss: No, some a little: more new than - that. I think most people probably find it harder to drop © items than they do to get into them, but there are products . that we have dropped. The health and beauty aid field is one , whieh comes to . - mind. We were in deodorants, i in roll-on deodorants, cream deodorants. Those have been dropped and we are now in a spray deodorant. We are about ready to introduce a new _ type of spray anti-perspirant. This has all happened within a relatively few year sai It is a a. very — fast. aes Geld. : . Why have y you cincmabtbies oredectat | ae A. We hadn't been too. successful. The nature of | the | produet changing that we are semapilid with, Serenghedy is bringing out something new, something different: The . style of product. It is a fast-changing competitive thing. There are many brands on the shélves and these brands are fighting for their share of space and share of turnover. ein ee ° .- =: o reste 4 - : [84] « Tue Court: I take it that there is some relation- . Ship between the degree of consumer acceptance of highly advertised brands and your ability to compete with an offbrand or private lable. Is that true? THE Wrrness: Yes. I would say that probably the erodh: a ucts, your Honor, that have the highest share of the mar- két under a private lable are products which are, more: in -. th& commodity class, more with the: soasacscaies like canned f if rozen foods; however,—— reo)” By Mr. Grimm: | Q. Mr. Fenn, | can you describe for the Court how ‘Soon | | anticipates what the requirements of its members will be -for products procured by Topco? _ | lke Everything 1 in our business revolves around a pro- curement plan in the sense that we procure for the needs of our members, so obviously the first thing we look at is _” the past, what we have used, where we have used it, and _ then the next most important thing is to anticipate forcast- ing our future requirements, and for this purpose we need to know, have a pretty. good feel of the change in size of our members, change in* location: of .our members, any— . changes in our membership, because as we expand our items, more and more of them are regionally produced. ss _ . In other words, all peaches may come from: California, : - 6r most orange juide comes from Florida. ‘e As you get in the manufactured items, why, [90] as we discussed soft drinks, you can’t ship these very far and so you have a regional source. You have a source in the Northeast, one in the Midwest, and accordingly, it is very important for us to know not only what our total demand © is, but what the changes, what the growth pattern and what 2 c : ‘ ahs : ; ‘ “ is happening with our members, what that is going t do to ; their demand and potential market. — ‘Then, of course; we have to look at the items ienanbivis. | “Some items are on the increase, and some items are on the decline, Then, of course, there are market conditions which come into play. ‘Tur Court: Do you have any: ‘authority with respect to, well, anything, store layout, use of shelf space, quantities of any particular one of your 1,150 basic items which any ee particular“member takes? Tus Wrrnéss: No, we don’t. That i is ‘their decision as to: | _ how they use it, the way they use it. Tux Court: And quantity? | - rs Wrrnass; And quantity. - Tae Court: How mnych lead time do they have to give you on orders? Tan Wrrness: [t varies with the item. On [911]. items 7 which are. seasonaly produced, that is different than sell- : "ing. In other worcs, I — your question, sir, was di- ' rected to displays. . Tur Court: Wel, it was. I know, for tial the Cen- tury people,exercise a great deal of control overthe nature of the layout, the store, the construction of the store, the allocation of shel’ space to various products, quantities taken. They, in fac, determine on the basis of thejr compu-. terized statistics what the Aaa store should sell of a particular item. [92] Tae Wrrnsss: Our “member headquarters sauple probably do that for their own stores. We spread ideas of may pass on a gocd idea in the form of a bulletin, or sug- gestion that such-and-such a firm has had good luck put- ting this product up here, or putting it down here, or inter-. spersing brands. So we do pass on ideas of that type.° Tue Court: But you have no authority, so-you cannot place your’ orders on the basis of a — — you — | made up in advance.» : ‘ Tae. Court: That i is _ reason I asked the quan of 45° ini Wrenn Selita: tc tac namsk eneng: Mica quiré commitments, and we have to make commitments, as . you do when you buy packaging or you sit a year’ 8 o oupply of something—— ‘Tur Court: Right. | | Tar Wrrness: We in turn ask our. people, « our members _. for commitments, - | spies Tx Court: So you do have i some sdenaieids ‘Tur Wirness: We don’t tell them how to sell t. Instead x we give them a market projection [93] on-an item like ' frozen strawberries. Those are all packed in a Telatively — short period.. You have to order containers and the brand is part of the container. We commit for containers and we | a commit for deletes them i in our: brand. We enter into a con- tract.” , So, in those cases. we will ask-our seapeitive : sntinbeul for a orders for a year in this particular case, and we will spell out the terms of the. shipping period, .and so mee and . oe _ then we book and plan accordingly. Now,-in other cases—— ' Tue Court: Let me ask you one , further oiiitien: Who - stores those over the preceding 11.or12 months? | “ . Tae Wrrnzss: In general, the pattern in the industry, in an item like strawberries is the packers work with their customers. They are stored in public storage, and it de- _ pends on what the terms of purchase were as to whether it — is pack time, or whether itis for deferred shipment price -at the time of shipment; but, they have to be in cold stor- age and freezer storage, and: generally they do that > at the point of pack. We would prefer it that wxPcintes if sviinlingy A gives us’a commitment for 5,000 cases, and member B said he wanted 10, and we see member B being a little long, we will attempt to relieve him, particularly if member A wanted Some more. But, until we say you are relieved of 2,000 cases, he owns them and it is his problem to sell them. ‘Tue Covrr: You don’t customarily warehouse any sub-° stantial amount of private label brands? : _ Tue Wrrness: We do not own any warchotites. We do > 4 gj net own any production facilities: One of our more impor- tant: functions is several distribution programs ‘that we have. We have a storage in-transit program. in a public warehouse incthe caves in Kansas, underground inland storage for frozen foods and grocery products. So we ship into these points straight carloads, the largest cars we can _ ship in of peaches, and so forth. They are stored in transit nets and then shiipped.qut in mined cars te the member's ware- house. So, we might ship out 30, 40, 50 different teens. We man- -age that. inventory but we don’t own the facility. [96]. Q. How do you determine, or how is it determined what prices will be charged to the Topco members? er A. We try to charge our members actual average cost. We. pass. on all discounts or any allowances we earn, . whether it is a cash discount. In other words, we do not : try to’ make any profit.on our pricing’to the members. In- _ ‘stead; our operating costs are. covered out of service © . charges, and in pricing our products at average cost, I mentioned that we might be buying from two different packers. If we are buying from two different packers at . two different prices at the same’ time, we may do what we — call average pricing. We will bill at one price for equity reasong, ona then we will either pass that money back to the members in a fur; ther price adjustment, or if we end up with any moriey in such an averaging account, itis passed back to the mem- bers atthe end [97] of the period in. proportion to their ._ perticipation. We also, of course to the extent we maintain stocks, we have stocks in Kansas City at these public ware- houses; and from that point of view we are doing some . pricing. In:some cases we may buy products on‘an f.o.b. point of pack basis, in other words, f.o.b. a Wisconsin plant, and priee them ‘on a zone Melivered bests depending on what the tradition in the industry is. In those cases—the reason I am touching on this—we do _ some. price averaging, but our objective is to try to break even, but with the volume of transactions we are handling, ‘You'ean't break even. a ee eae ae ee = bd en fs : di pga eso al f over or go under, so it is good business to be over and have oe ee ee _ them..: We.do not try to make «prof on our pricing to the : \_gnembers. sigs nee 98] .Q. You mentionéd service charges Could you ex- cae pand on that a little bit? hae A. The general and administrative expenses for operat- ing Topco are covered by service charges from the.mem- . bers, which are assessed anauslly and paid quarterty in advance. . = ‘| think this is an important point, your Honor, to have an understanding of Topco. ae oe _ - What we do is we make a program, we come out for this , as next fiscal year. This is our. progam, and this » our = budget. . That program and that budget i is feniiaatal to o our Board of Directors and our membership, our stockholders, and ; when it is approved we then have decided how much money is going to be spent to run the business. * - Now, the service charges for our general and aieioleten: ee tive expenses are assessed to the members in accordance _ with the formula which is in the by-laws, and they pay . Service charges on an annual. basis based on their retail : sales volume. 7 3 Tx Court: Of the previous year? gee 3 : x Tae Wrrvess: Yes,sir. o _ Te Court: And they’ pay them i in a Inmup [99] sun, o% ‘ yousayquarterly?; =—s. THE Wrrness: Quarterly, ij siete What we do, in essence we have a formula that is called reported sales vol- ume, which in essence we were talking about. earlier. I tried to define the difference in grocery products. In essence, it - ' is the total retail sales in grqcery items and grocery non- foods, plus a factor one than these sales, which I wk —. plain. For example, ts a seabed hit 40 million: dollars a year i in _, total sales in the previous fiscal year—the previous calen-. dar year, his reported sales volume would be based on 40 -. million dollars plus up to two and a half per cent of that - amount for his non-foods. In other words, he would have what we call a reported sales volume of— \_.. Loe Tux Covar: When you are talking 40 million; you oil 3 : talkingabout 40 million in food sales? ‘Tar Wreness: Grocery sales, and 41 adjusted, In’ other words, it is his. total-retail sales. It is his ability to use our - service Palouse: But: that dieu’ mean that [100] his ac- tual. sales will have mene 41 million. dollars i in the previous year, i: - Tur Werxast: No. If he was heavy. in general taerehan- - dise he might have'done 50 million. If he didn’t have much ~ ‘ general merchandise = peoyeny was pretty close to 41 million. - Tur Court: Right. | Te Wrrness: And it doesn’t include his sales in’ restau- rants and liquor stores, or gas cet or whatever else he might operate. -{101) And two members who both ‘did the s same volume, dollar volumeavould both pay the same service charge. THe Court: What do you mean. the same dollar volume? ~ ‘Tur Wirwess: In their sales. . - Tae. Court: esr sales ad the two and a half per cent factor. Tae Wrrvess: If they both deal 41 aitinee dallawe: they | would both pay the same service chatge, which is an indi- : cation of their ability to use the Topco service: Tse Court; But the two and a half per cent is an arbi-. 4 trary figure. Any ‘particular dealer may: be over or under? - Tue Wirvess: Yes, and this, frankly, is something. that ‘. we are trying to figure out, some changes in our formula, - because there are some members who have more of an abil-— ity to use our general merchandise service, and this is ac- , tually under study at the present time. © Tse Court: Which. would mean they were getting 2 a par. tial free ride? ny! sg _ [102] ‘Tas Wrrnzss: Yes. Tego - . ‘ > . Be si : Ph J Tae Court: To the extent ‘the two and a half per cont - was— “wy iif as ‘Dan Wreenss: Yes, that is correct, if they gre—— ® Txe Court: ——an unrepresented factor. . oe : ~ Tae Wrrnsss: ‘As the ability to use starts to fall apart.” w ee What we do then is we have a by-law formula, and it is a ” + graduated scale. - ‘Dae Court: That is revised annually; not quarterly. Tur Wrrvess: Yes, or whenever the budget is ideals os _So that'in essence, we have an annual budget, and it is re- | ' vised once.a year. We just had a meeting in January, and _ - the budget for next year, -fiscal 1969-70, has already been . .. approved. We are in the process of accumulating a report . . __of sales volume figures, and we-will make our first assess- — "> ment of quarterly service charges as of April Be ETE Tue Court: What is your fiscal year? THe Wrrness: April 1 through March 31. _ Tae Covrr: Apriil through March31.- [103] | Tae Wrrness: : We handle produce charges-— “ ‘> "re Court: You said you compute them on the previous year’s sales. 3 ‘Tae Wrrnzss: The previous calendar year. * THe Court: You are talking about December 31? It : gives you a three-month computation? = - : Tae Wreness: Slants cts thse cs ao Mon ecaiy try. | : to get a reasonable indicator of a figure to use. There is ' bound to be some mix in each person’s business. ' "Tre ‘Court: There ‘is no question. Some advance at a faster rate than others, or some fall off im sales. tee Tue Wrrness:Thisistrue. _. Te Court: And it is disproportio - the current year, and it catches up the next THe WIrxNEss: We assess produce the way for use _. forthe people who are in the produce program. Not every- one is big enough to be in the produce program. We handle - our service for promotion apd packing, what little: et dover ae made reference to that. | es - . “All we do, in promotion and advertising” (104) isto make up some en mnbvertiitng aide ‘Package a > the base eee 5 3% mats, and little in-store signs, but the Simary onus of pro- : ens ‘the product rests with the members, and then the ee of packaging are edvered separately. By In addi if member is, engaged in wholesaling. of any Tapco brande ducts, then we have to.come up with some, special kind of form ‘ture of his operation is, which according to our by-laws is -avorked out between the memberijand the Board on what- a ever is considered to be an equitable basis. ‘ TH; Court: Some of your members are engaged in a lesaling?. * 8 . , ee Tue Witness: Yes. . Eee . THe Court: To sslaabehnier? OR “THE Witness: Yes, in some cases. We will get into that. - [105] Tue Court: What happens to your territorial in- tegrity?- Are they limited in their wapleaaeng to people in, their area? ‘THe Witness: There are only a few. cases’ where this ~ takes. ‘place, andaf a.member wants to wholesale in an area which is exclusive with him, he has always been able to. do _ it. The only problem i is then one. rn aH out the service _ charges, and-in essence the practice‘has been, and we re- cently changed our bylaws to conform to state that he - could also wholesale ‘gan tivea whergé-ho other member in which he has exclusive rights. _ ‘Tue Witness: Or no other member. - , “THE Court: Or no other. member i is listed in the area? om! was listed at retail... ¢~ ea ., ‘Tar Court: In other words, he can wholesale i in “oi THE Witness: We have had the problem. The nature and — the extent, of it is varied. It is a minor part of our busi- . - ness, and as a, résult, we have never hada formula or a,eri- © teria to approach it. The way the bylaws have read is: the ‘member had to—when it was approved, then we had to - work out some arrangement which was equitable. 1106] Tue Court: Do you do anything about the whole- . sale price which he charges, or is that Smaliy:3 in his disere- tion? we THe Wanwnss ‘Tat is his’ Hsssitinn. We do not get-in- - idepending upon what the na- — ogi” by: and trying to.do a good competitive job. - Seiiiae in pricing. All we teh: to; p is to” WOrTy | ‘ghont getting a good product, getting it shipped to him efficiently, - By Mr. Gama: ; seni. Q. Mr. Fenn, int your Fears i in the bebisiiey: haye you be- - come familiar with the different types of brands available - on the food-products in the indistry? 3 A. Yes. I obviously have. to try. to keep’ well posted b be. -eause this is part of my job. ~ Q. What types of brands are available toa retailer? A. Well, we have been discussing one type.. There are several types. This may be: important, A think, ¢ as we use words later. First of all, there ts the difference i in the brands helenae pei —the:first consideration is who owns‘the brand. There-is a manufacturer’ s brand, and there is a diStributor’s brand. ~ [107]. .The -‘manufacturer’s brands are really of two types. One is the highly advertised, widely promoted, "es widely distributed. national brand. The Proctor and Gam- ples, the Campbell Soups, the cigarette people, the people \\ - that have their products handled by practically every from coast to coast and border. to border. ‘The cigarettes, for example. These are truly. and are commonly é¢alled na- tional brands. These ‘products cost more because of this : heavy advertising, promotion, and selling expense, and ‘if they have a high share of market and a high franehise, _ they often deliver to the owner of the.brand a healthy. profit. _In addition, there ¢ are man apinilinabiadat - brands which are By ‘unadvertised, local manufacturers; small manufacturers, - regional manufacturers. Now not aj small—there are some regional manufacturers and in a few cases local manufac- are turers who devdlop what might be called an unadvertised ° brand. In other ares ow —_ don’t have ow distri- — bution: . ‘So I think there is a Sicehiaiedal! difference bent a manufacturer’s brand, heavily advertised, heavily pro- — . moted, and unadvertised. The unadvertised brand’ ofter- ° - times may not be as good quality. I ) certainly” ‘2. vehise. The costs are considerably less, and in soine cases, * doesn’t have the consumer acceptance, the consumer fran- _ these brands are made available to a given distributor ina . — as the only customer that. that supplier has. In- trade parlance, it: is called*a controlled. brand. In other. words, in Chicago, he will only sell that brand to one cus- . tomer, and, in essence, it kind of. becomes a form of “pe ~ > vate brand.” ’ Re big enough, if can have its own private brand. The -_* [109] Distributor: ‘brands areAt the other: ty pe, Leer that’ : is a distributor brand is a brand which is owned by the- dis- tributor. It is his brand. He sets the quality. He.determines where it will be produced. He determines where it will be marketed. He plays an important part. In other words, Be. | takes the marketing responsibility for the brand. Tre Court: ‘That, too, can be nationally advertised, can “it not? _ Tue Witness: Yes. , . Te Court: If there are a number of nationally gdiver: tised brands which are not manufactured by the—— . Tue Wrrnsss: That’ is where the confusion comes from. _ Certainly, some of A&P’s brands, some of Sears’ brands are _, true national. brands in the -common-term,.‘but sometimes ' - people do mix the two. up, and imply that national brands» ' per se are always manufacturer brands, but there are some . . distributor brands. These are the strong brands in the food field in many cases that we are competing against. , Now there are also the. distributor [110]. brands which © may be owned by. somebody, maybe a wholesaler’s brand. You’ mentioned. rey,. who, I guess, serviced the Century ss _ stores in Milwaukee. a THE Court: Well, it was all of Windia: © Tae Wrrvsss: All of Wisconsin. That would bea a whole- saler brand that heservices. THE ‘Court: They have a number of ‘stores and different qualities. "THE Wrrngss: And so also is our - program, _ ‘in reel: ity, in our program, on the one hand, if the organization is _ = ——o-——_—«, . to whether he is talking about the fact that the distributor has these economies or the rétailer has these economies. 0 SB the Safeways, the Krogers, the Sears, the Pénny’s,andour program or other cooperative ventures either on the na- tional level or on the. kgal level are an attempt: ‘to have a ‘private brand program more comparable. to the big na- - tional brand with which they can compete. ie By Mr.Gamm: — Witt bee Ot a oN Q. Mr. Fenn, with referinee to. private. bneenbili or private : labels, what cost - economies, if any, does: seat oe achieve by utilizing such a brand? me 8 be {111] A. Well, first, cost against what? I think we hiv to-address ourselves to that question, The cost advantages of.a good product, opr an A&P product, or a Sears & Roe- buck product, against the heavy advertised brand is the’ ' cost to the distributor. The cost to the distributor is much less because it doesn’t carry the costs of merchandising, advertising, and all of the support that goes into it.. Now the cost advantage of a private brand versus an un- . ‘advertised manufacturer’s brand may not be very great, © . but the cost advantages : to. the marketer of the brand and other advantages are many. So I think that in the first ~ease,.sometimes they speak about cost. advantage, and the . cost cheek 38 private brand e versus Tide _— is “great, but the cost advantage ivate-bre sus Mother Kelly’s Old-Fa¥hioned Bibi, which is ‘nade j in Mil- -waukee, and sold in Milwaukee, may not.be very great. It . _May even cost more because it might be a better product. | When you have a private label and you set high quality standards, and you put that same label on- a wide variety of ednsistent high [112] quality produets, you ‘have very » efficient merchandising cost. Good peaches help~sell - good - .tomato juice. on + Mr. Morrison: Excuse me, your Honor, I am confused as Tue Court: If I understand the Topco situation, the = " economies are in effect passed. on to the retailer. - | . . _ Tae Wrrnsss: Yo. (115) —— that question. Is it your nen - ~~ $mpression, enn, that the margin of profit of private . label product is greater tham the margin of profit ingihe av-— ! erage sae is greater: than the margin of aegis on ay nag . - gram, and in all three of their cases, they do manufacture’ _ anumber of their own products. On! le What are the benefits or advantages in Saving a _lhroad line of private label oo over a thousand, as -yousay? — Be ee : A. Well, I guess I— 2 en Par ia ANE ae IN . THE Court: I think he covered that: _ : — Tue Witness: I have touched on that part, Mr: ‘ie when I said the umbrella éffect: Good’ peaches help sell good peas. And I think in all , aD eR. you are that much stronger. 7 Q °° - By Ma. GRIMM: | » [128]. Q. How does the retailer go about establishing. a _ private label in his marketing area? - . es Well, first of all, he has to’ see the ane for it, and it - takes a- tremendous commitment. The ability to establish a! private brand-depends on the caliber of the retail opera- _ _, tion, -his commitment, and how long he stays. at it, with Dap ci ‘Well, yes, there 8 ‘are. Of course, ‘that gets into the kind of produet,-4eur Honor,— well, in the drug . - field, I think this is part of the problem of. the small drug- gist. But a druggist could get aspirin under his label. ? Tue ‘Court: I grew.up in-a drug store, and’ we had .Will’s White Pine and Tar Cough Syrup, with a sign that - said “Head off your cough or. cough off your head. Use .: Will’s\White Pine and Tar Cough Syrup.” sso * They let me put the capsicum in, three drops in every bottle, when I got to be around 14 years of age, and that i is what made it ours, unique. ‘ . ‘Tue Wrrness*Was that your brand? Tux Court: No, my father’s name’ was Will, too, and it . was Will’s Pharmacy ;-but this was manufactured by some manufacturing chemist, who: the next store’ up [184] the street, they had Farber’s. White: Pine and Tar Cou Syrup, the same stuff; and my friend, young Edward Far- ber, who was a year: younger, ‘he started to prt the. capsi- cum in when: he was.14, too. He probably had the same sign . saying the same sign saying the same thing. [sic.] THe Wreness: Part of the problem, of course, is produc- . tion. efficiency. You can put a little labelon a jar of‘aspirin, > OF as you say, some of these other things, but every time — you stop the line and change things it costs more. If you are going to deliver five. cases of ee ae instead ofa . . truckload, it costs more. — THE Court: As a matter of fact, now that I think about it, we put thé label. on. We just got the bottles unlabeled, and purchased the labels arid made our own private brand. Tae Wrrnsss: gs ge are a number of so-controlled : brands. | . Tue Court: And I think Century does that, if my ‘cated | lection is correct. : - LL LL ENT IE INT ; saa aacecmeaeniaai sere sia calae stiaaeahemeeamnainaiita . . . — . : e : . lies Weed There are some, they do some sinbieine Some wholesalers will buy bulk beans, [135] and -products of that. type, and package it. In some cases they do.a little - ~ ufacturing. They take candy and — it and put on . their brand. - Tur Gourt; So, the combinations i are idwoiiat endless: The bulk of your operation is a mass purchase, mass produc- tion, mass distribution single - private label for the whole organization. THe Wrrness: Yes. oh oe Tue Court: That is thie essence of it. : THE Wrrwess: ‘Yes. _ [136] °° By Mr. Garam: Q. Mr. Fenn, are you generally familiar with ‘the prac-. tices.‘and policies with reference. to Toped’s’ licensing of -members to distribute the Topeo a: ae » A. Yes, Iam. . - . Would you describe in a, general way those policies and ‘practices with reference to territorial licensing? - A. If a member is considered to give a market wioniate coverage so that he ‘can successfully develop the market ac- ceptance fot Topco brand family he is given ‘an exclusive - license for that territory. Hf he does not give s the territory, - in the opinion of the Board. ef Directors which governs, controls the issuing of territory licenses, he does not. give the markéf adequate coverage in their judgment, ‘he is - given either a coextensive or a non-exclusive license. Q. What do those tetms, coextensive. cand non-exclusive, refer tot . % “A. An exclusive. license i is. a license where he is licensed “to use the ‘Topco brand in that territory to the exclusion of all others. ‘(13877 A non- ae license is. a license hae he-i is li- eensed to use_the brand mm a given market, but the Board "may grant.a license to anyone ‘else it .so chooses in that - market.. g ae Tue Count: Without his consent? . Lan, oN Tue Wirnzss: Without his consent. . : ne. 65. Tue Court: What i is ee re a. oe ‘Tue Wirysss: Coextensive is of two ‘types. There is. ome... ease where he is coextensive with:one or ‘more other mem ~~ — bers, to the exclusion. of all other members. It may be de- fined. Then there are some instances where the wording is __ such that he is coextensive with such other members as the Board of.Directors may designate, and in that particular case it really i is essentially the’ same as non-exclusive. In’ . these cases this has only to do with Topeo branded prod- * ucts. | THe Court: Say that. again. fas every case, or many cases? | — Tue Witness: We are-only concerned. with the licmistng | on Topco branded products. | oy By Mr. Grimm: Q. You eferred to store coverage. “What [138] is the relationship between store coverage and the type = li- cénse? Tue Court: Wait a ‘mnimite. You. re got third grip —— - who don’t have any mhonopoly-at-ait, isn't that aul - Pers Witness: The non-exclusive? 7 THe Court: What are called none, no Siseaia. Tue Witness: They ‘havea right to sell something— Tue Court: Well, I am looking at A. W. Cullum Com- pany. You have got exclusive, and no license. . . ‘THe Wrrness: That is a wholesaler. ‘Tue Court: Is that what that is? . ~. THe Wrrness: Yes. ; ~ Mr. Grimm: I think those refer. to rath stores. You ~ are talking about the stipulation? ~ THe Court: I am talking about the stipulation. T notice in a number of instances—well, some of them seem to have everything. They have exclusive, non-exclusive, eoexten- sive, non-exclusive, some ‘Say none, as. for example A. W. Cullum. — - [139] What is. the tention -with Cullum? Here are stores in Pasadena, Altadena, Pasadena, Duarte, Mon-.— rovia, » Long — Costa —_ rs ise pera: ante | 66 e ° . - . . : e - = h 68 By Mr. Gane: -Q, Tam not sure that the last ‘italic has been an- : granted. | A, If, in the opinion of the board— | Tue Covrt:, I thought I understood it. If- a member is ~giving the market: adequate- coverage, in the opinion of the board, of directors, he gets an exclusive. license. If he is giv- _ing it inadequate coverage, he will get a non-exclusive’ or — " voextensive license, in the sense the board of directors may _ determine somebody else is not unfairly competing with him, but would give better coverage to the market: and™ . aprengtnes the private brand, they will put him in. Then, there: is also the coextensive thing where you may. _ be with some other member from the outset, I take it, or ; “ta Wien Wrrvess : Or someone may have.come in. : ~~ Mr. Grium: That is right, your Honor, but. my. eaation is the significance of store coverage.. oe \ a a THE Wrrness: A. I was going to. try and atectity this. “Cortadaly it is not an easy question. There is no mathematical formula. It is.a matter of judgment, number of stores, type of stores, type of area. . THE. Court: Let me ask you the question, [143] the - | key question, I think. Let. us suppose that I eB, ‘in the opinion of the board : of directors, that my five stores in-a county entitle me to ‘ an exclusive license, but my five stores in the county, well, Cook County is what, 800 square mule, yepien ay! of \that sort? “ i .s \ |) Dare Wrens: Asefui big. = | _ | Tae Court: Yes, and there is at least 15, 30 ‘miles BN more between each of my stotes. Now, somebody in there ; ~-warits to come in. If I have an exclusive licénsé, the board 7 of directors has no discretion to let them in?. » , swered. The question was, what is the relationship, if any, . between store atti Oe and the type of Us) license " ~ ° wer ; te THE Werwues: That i is right, without your consent. . Tue Court: Without my consent? Even though you _* could make out a pretty good case that the definition of ad- equate coverage. under those circumstances was verge gener- | dus, or friendly to me, if you like. ~~ - Tue Wrrvess: Well, your Honor—— —_- il -, Tue Court: As I look at some of these, and it seems to ; me the exclusive license’ for a particular county with one - .Store, and there [145] are a lot of them, is hardly —— Tae Witness: You will have to. look at the CORRSY where ‘it is and its population. , Tue Court: I was looking at some of the counties, for | example. Now, you take the Milgram food stores. ‘They . have got an exclusive in Jackson County in Missouri, andI : ° - can understand that because they. have got 31 stores. ae [146] Tue Wrirness: That is Kansas - City, een, and that is a big metropolitan market. ' Tae Covrt: And in Kansas, Overland Park, T can un- . derstand them’ covering. . - Tue Wrrness: But; in some outlying county in Kansas . that only had 20,000 people in it, they might have a store and theoretically they could have as high a percentage of coverage or even more, so you can’t just look at county Ce “But, you are right, your Honor, you look at the cover- @&4be in the market, the size of the market, the potential for the member for growth. In general, when a new member . comes ‘in he usually asks for. an exclusive license, “and where his warehouse is, his major metropolitan area. . . Tue Court: Here is Meijer’s who actually was the outfit involved in that English dinnerware case. In Kent County ‘they have got ten stores - and. that covers. Ionia, Cedar . Springs, Grand Rapids; Wyoming, et cetera. But, in Cal- houn County, which -is sei Creek, they have got one store, and they have got [147] am exclusive for the whole of Calhoun County, which i is not a small county. fits Tue Witness: His stores are gigantic.” : Tue Court: One store. is Tue Witness: His stores are gigantic. e ~ ¢ eo eee Tae Cavite They } have to. he aetle Smatie’ in order to 7 cover all of Calhoun Coynty.in any effective sense. . ° ag. Wrrwzss: These are big, super discount food stores. Iti is also quite possible sometimes that‘therg is 4 store just across the county line that services. We use county lines ag. © the best measure we have, but the territory, the market, may encompass part of another county. But, in ‘essence, that is the breakdown between exclusive, non-exclusive, and . coextensive, and the Board tries to administer: this with consistency. ‘Tue Court: I hive some ° problem, For - example, take King Soopers, Inc.: - i . 2 _ THe Wirness: Denver, . ° ' Tue Court: Denver. They.have got a seal of soli in. Denver. In Colorado Springs, which is a pretty good sized . place, [148] they have- got. one stgre and they -have the - monopoly. for El Paso- County, which is a pry good.sized -~ county in Colorado. ° I just am cprious as.to how you. pate that one King Sooper store in Colorado Spring's is adequate coverage for,’ _ all of El Paso County, ‘so as to entitle them to prevent any- : _ ° body else in that enfire area from handling this. Pe Tue Wrrvsss: I think we will get into that shortly as to “how Bome ‘adjustment can be made in outline fringe areas _© incase there is some justification for reclassification. Rae. “Tze Court!: Look at Cook County in Chicago: Hillman’s — ‘with 16 outlets. Well; it is even more than Cook County; be: __. . ¢ause there are two in Du, Page and“14 in Cook County. ‘They don’t really cover Cook County with 14 outlets... : “Tae W: : They only have the City of Chicago, and _ ‘part é6f Cdok County, but there is no other member that we could get in Chicago: This was a condition of their coming © into Topco, and we think that they will a ait They do. advertise in the metropolitan papers. [149] Te Court: Now what you have just told me | isa . variation of what:you described.as the standard for deter- mining whether or not you get exclusivity, because what you have just said is this wa# the condition on which they ' would come in, and that is’ not the! mee OR AT e adequately cover theterritory, sh | ing adequ i change in/size and type ae eee in recent years. ‘, ee Oe ay You have said this was. the beat dittributdr’ you could. : ” get. I take it you agree with me they don’t really cover. Tue Wirwess: This is our ‘lowest, I would think this is take’it on-percentage of per populati [150] ‘Tue Court: I hope some slong , our lowest percentage of share of. a i if s! were to ie am going to see some statistics on yolume of the exclusive store to total weg ene volume in the area, say. ©3559 _ Tue Witness; We hav had; I think é , Tue Co You mus have some ering: for determin- - *: of eoveragé: *» ~ ‘ . THe Wrrngss: We have- generally blai’ at ‘the number of stores and populations, ‘As I say, there has been rite’ a. . Tuer Court: Yes. THE WITNEss: I think that it.is most essential, your .. Honor, in @ major metropolitan market, where he is given . ' adequate coverages, and as will come out, we do have some . procedures and some policy where, if @ thing were to ‘~..change or not, why, it is possible that the Board has au- _ thority to change the classification on a territory in- an outlying area. | Tur Court: What interested me and the reason I asked the question, for example, is because your own statistics in-’ dicate that-in the Washington, D. C. area you have got Giant Foods, cichiyilaribi a is one of your largest : . tmembers. . is Tae WITNESS: They have Piss ciatmeod your Honor: [156] . Tue Courr: They had only. toextensive rights to use—did they resign because that is all they sara "Beg THe Wrrness: No. . ” . Tur Court: What about Hills Korvette Salat eapihih, , Inc., in New York, which likewise has no exclusive? | | Tas. Witness: In those particular cases, there was al- ready some license in the area to another member. ptt eae THE Courr: I understand. = | Te ; Pain Wilintes: And they came in, on that basis. Txs Courr: They were prepared to come in with that? Tui Witnsss: In-those particular cases, they did. Giant came in originally as a frozen only member. They were only in our frozen food progrant, ~~ ‘Tux Cofar: But it is your judgment that the exclusiv- a essential element of membership attractiveness, if at: tes Witness: Both attraction and retention. Txx Court: And retention. = oe {[157] THe Wrrnesa: And also, ev evibiad, because Topco will not be something unless its members make the investment and give it support: In other words, it is not. — _ just the service.charges that are paid, but rather it is the extent to which they deliver, build a prograin, and deliver the market. Court: I have no question about that. # would as- sume any intelligent Board of Directors would understand that, but. that depriving them of the discretion and giving the- power exclusively to the franchisee. might very well—. you have to balance, I take it, the relevant considerations. O.K., if an exclusive franchisee has a veto, he may veto ~ . somebody who has been or who would be a desirable addi- tion in the market area. If he: didn’t have agveto, he - ‘wouldn't be a- member at all, and maybe that’ would be worse. I don’t know. I take it that it is a value judgment you have made, and you have concluded that it is better to . ’ deprive the Board of the opportunity to even examine into the desirability of a new member in a- ‘particular territory © [158] than it is to:ran the risk of losing a member. 7 Tae Wrrvess: Your Honor, think a little later, counsel plans to cover. a point where some of this question which is raised might be answered, where something. like ‘this has been built in. ; By Mr. Gramm: _ + And if T may proote, I think some bf thee things - will become evident in the testimony. oe ‘Tae Court: I didn’t mean to anticipate your proof. Since we are talking about how you decide these things, as _ Tread tlie list, I have;some questions of my own. I didn’t want to anticipate your proof, sir. Why don’t we take betet recess and then we " proceed.. . | -@ * : 7 - (159) Q. Mr. Fénn,. is the entire area, of the United _- States licensed to Topco members? A, Excuse me. I couldn’t hear you. Q..Is the entire area of the United ats Hosa’ to Topeo members? a __A. No, only a very small part of it. . .Q: Are there any major metropolitan areas _whiel ang not licensed? -° | | A; Yes, there are a number of them. ‘There i is no-licens: ing at the present time, in the Los Angeles, San Francisco,. ~ and in fact, we have'no licenses in the entire State of Cali- . fornia, and other areas like Cleveland, Detroit, Atlanta, St. Louis, San Antonio, Minneapolis, and many others. - 7 . Q. Have the geographic areas of the county which have been covered PY. Topeo licenses, changed from ‘Gme to time?’ : A. Yes. As eens come and join Topeo; of course, ter- _.ritory is added. As members leave Topco for one reason or another, why, territory is vacated, as they expand, mays sell ‘out, merge. - * Q. How does Topco obtain new enters? 7 ‘A. In sonie cases whiere primary contact is by the ‘re- tailer who feels the need for a stronger [160] private © label program, and contact us about the possibility of the Topco program. In other cases, as part. of our new member development program we may establish the contact and ex- plore the possibilities of membership in Topeo withhim Inan organization like ours where members grow, get to be bigger and in effect graduate from Topeo, get big enough to handle their own label, or merge, we are bound to have membership turnover. As such, in order to‘stay a - healthy, viable organization, we must keep having some new ——— addition. - L a » 4 i 76 Q. When you week new members, where do you 1 ‘seek them? A, Generally i in territories where we don’t already have ‘members; in open territories, as I indicated, ‘for example, ‘on the West Coast we have-a very limited @stribution at* the present time. We look at- the kind of firm that they are, and hope that ideally they would logically grow and “fill some of the vacant territory in the country. .. THE Court: You have people whose principal responsi- bility it is to recruit new members? Salesmen, so to speak? [161] “Tue Witness: Not ‘salesmen. I have a man. who works with me, reports to me, who works ‘on what we call ‘member. development and marketing services, but we are _ not peddlers in that sense of, the word. This is a big buying — decisjan, big selling decision. Some cases the contact comes - to.us, as I say, from the members themselves, and in other cases Wwe see new organization development or change in the marketplace and do some contact work ourselves. Tuer Court: Do you do institutional advertising in ade journals, anything of that sort? ‘Tue Witness: No, sir. Tur Court: You don’t solicit membership inquiriest | Tae Wrrness; No. We have little public relations. type information pamphlets. If someone says what is Topco we have that, but not in the. manufacturing, & Svertiaing, retail - Sense. By Mr. ae Q. Mr. Fenn, what criteria or seasdarila are [162] used = to determine whether or not to accept a new member? A. Well, the first thing we look for, of course, is the kind | - of organization that it is, kind of management, type of | stores they operate, their financial responsibility because . when a member becomes, when a firm becomes a member of Topco, he; in’ effect, becomes a part owner of Topco. So, | obviously, we are very concerned, make sure that we get: - good, responsible, aggtessive people who look like they can run an efficient business and build a growing business. [163] . Tue Court: Can ‘you terminate their - member- aa) , ° 407 \ @ ship? Do the by-laws provide for involuntary termination by Topeot : THe Witness: Yes. ‘The only besis on which there is - gome’such provision, your Honor, is when there is a change in control. The by-laws specify, for example, if a chain. sells out to a larger company, and there is a change in con- - trol, the association has the right within a specified period to termiriate the membership. That is. the only on which any membership has ever been terminated. an _.' There are some other‘ general conditions such as if- he be- came finandially irresponsible. | Tue Court: Suppose he doesri’t pay you for purchases? Tue Witness: We have never had that, or that type-of . thing. If: he became an ‘irresponsible bad risk, or was abus- ing the trademark, or that type of thing, there is the usual ~ type of recourse action in our by-laws. . By Mr. Grimm: -Q. By “bad risk,” you mean financial risk? . A. Yes, God forbid if a fellow who was iynning a busi- ness got into financial disorder. Q. When: a member— Tue Court:-May I just ask one more question? Mr. Grimm: Certainly. Tue Court: Let’s take the other side of the coin. Besig. nation requires some advance notice? THe Witness: Yes, sir. “Tue Court: At the end of. some fiscal period, or some- ‘thing of that sort? . THE Witness: The by-laws provide that depending upon . how long he was a member,-he may resign, and the resigna- tion becomes effective within 60. days ater the date of the month in which he resigns. * . Tae Court: What would happen’ to his contribution ‘to: the annual unde, for example? . | THE. W: ; That depends. upon how die he was a member. We tetently revised our by-laws in this respect so that at the present time, if he had been a-member of Topco. for two zo or less; after the effective date [165] | of the ve © @,° 78 = s termination, he is liable for six months of service charge, _ during which period we will Zive | him tapering off service. - If he was a member of Topeo for. two years or more, he is liable for one year’s service charges, and we would give — ->~him-a tapering off serviee, ‘phasing ‘out.service in that pe- : riod. | ~~ Tue Court: Do vo. ever take. back from a resigned ’ member any of the private label goods he has? Tur Wirnxss: On that, too; he is required to- live up to | his commitment. I think the by-law has some provision in it — that if-he-was irresponsible and was hurting the brand — name, or something, we could, but we have never had to do that, fortunately. We have been very fortunate: i in that re- gard. . . . , By Mr. Gru: Q. You have made a statement that depending upon how long he is a member.of Topco, he may eee _A. I didn’t mean ‘that. « Tur Court: He didn’t say how long ‘he was [166] a member, he may resign. He stated what the terms of resig- - nation.and conditions of resignation ‘were. ‘L think he can resign no matter how long he has been a member, but it is: ona different basis? : rc THE Witness: Yes. ee By Mr. Gris: mo When-a | new member comes in, he © applies for a. li- cense, 1s that, Se ee iE A. Yes, sir. | , Q. How. is it determined in what area’ he will be he censed ! ies 7 A. Well, we touched 0 on that a little bit, I-think, but it — . . bears repeating. . We survey his operates and he makes application; usu- ally, for the import’ market in which he operates and usually asks for an exclusive license where his headquar- ‘ters are and where he feels he is giving adequate coverage. In outlying areas where he may have fewer stures or it . A> ’ Bag might be different trading areas, he may ask for a non-ex- _clusive or a coextensive license which would permit Topco a little greater leeway to admit some other member who might grow and. expand [167 ] into that area if. we- ‘had. a new member. Qs You referred to two things, I (@leve—market. cover- age and trading areas: How do those factors: come into play i in determining this licensing? A. We try to look at the number of stores, size of store, ° the size of the market, the population of the market, and, as I said earlier, it is not a mathemtical formula because there is a great difference in size of store. We have gener- .. ally granted licenses by counties as a convenient way, of ei- ~ ther a single county or combinations of counties as a con-~ venient way of designating the market. - [168] Q. Would those county lines be the same thing as trading areas? A. In many cases, they are. In ‘some cases, the: trading area might be a little different. It may be a-combination of — it, but, generally, the county breakdown, either singly or. in combination; has: -been a a reasonable and practical ap- | . proach, : Q. Ina case where the county line did not necessarily | correspond to the trading area, what would you do? A. We would define the difference. We would seek some different trading area. There have béen a few such cases, — and we mentioned earlier Hillman’s in Cook County. Their - concentration was primarily in Cook County, and as the | Judge pointed out, their’share of market mathematically is . not as high as some other criteria for other members, but - - nevertheless, there is their dedication. As a result, it makes. it harder for them-in a market of this size to establish the brand. In order: to-make a dent brand-wise, market accept: ” ance-wise, and consumer acceptance-wise, it takes a greater amount of effort for those 17 stores which they have in Cook County, or Chicago, which is a part [169] of Cook County, than it would he. out in some other lesser county area. & I believe: earlier winds the Court was inquiring on a . ee 80 related subject, he referred to situations where there were coextensives, and my question is, is it not important. in a situation where there are coextensives for the members __ who are operating there to have an exclusive, to deal exclu- _ ‘sively in Topco products in that‘area? - ° A. Excuse me, I don't = understand your “question, sir. &@ Q. In any situation. where there . are two members: oper- ating on a coextensive basis, would they necessarily be-op- erating i in the same ytrading area? . A. Oh, excuse me, I see: No, we have had some members who were coextensive in the same metropolitan marketing area. This was true in the early days of Topco. There were three small firms, namely, Star Market Company, Brockton _ and Supreme, who, when they joined Topco, were so small. - that they weren’t even big enough to participate on their own, and they formed a group called the New England Food Buyers Co-op. They were coextensive. members of” - Topco ia the Greater Boston area. [170] They at that time were generally in different parts of the Boston market. One of them was east, and one of them was south, and one of them was in a different area. As they, have grown and expanded, they have had some de-. gree of coexistence. - Sometimes within this country bivesidoive: two people may be licensed in the same county, and one fellow is in one town, and one fellow is in ahother town quite a-dis- tance away. It may bé a part of the same metropolitan trading area, and it may be a different trading area. Q. Mr. Fenn, with respect to applications of new mem- bers, have ‘you ever requésted ‘a atabe tt member to ase operating in any stores? A. No,I have not. - Q. Toe your knowledge, has anyone reprenenting card ever made such a request? : ’ A. Not to my knowledge. : 0 5'N Mr. Grium: I would like to get into- some documents ~ now, if I may, your Honor—53, 34, 65 and 80. rn ' jieense. - © ar 81 By Ma: Ganax: Q Mr. Fenn, I show you now r Government’s. Exhibits 54, a 53, 65 and 80, and ask you to look ss those [171] docu- ments. _ Have you seen, » those documents tietoret + A. Yes, I have looked. Shem over. I ae them straight * here. : .Q. Have you seen those documents? A. Yes, I have. ) Q. Would. you tell. us. whether or not those documents refer t8 licensing in’ the Dane County, Wigeopetn! A.: Yes, they do. Q. Are \you fgmiliar with the licensing situation at that | time in a area? A. Yes, I am. [172] Q. Would you denne that situation, please. A. In Jan yary—let’s see if I have got these in the right _ order. They are not i in the same order as they are numeri- cally. “. In January 1962, we. received a- request from Schultz. | Sav-O Stores for a license in Dane County, Wisconsin. THE Court: They were already a member? > Ke Tue Witness: They were a member, yes, ‘sir, ‘in another _ area, and at that Tequest, at that:time, we had a member i in * Dane County, namely, Eagle Stores, whose Piggly-Wiggly | Division with stores in Rockford and Madison had’ ‘seven stores in Dane County, which includes Madison.. They only oon had a non-exclusive license, but based on the number of the 7 stores that they had, it w Wag considered generally’ good cov-. | s,in other cases, in comparable \\_ cases it would have been construed to warrant an n exclusive \ erage, and in some case & Government’s Exhibit 80 refers to the fact that that mat- ter came before the [173] Board as” a. request from Schultz, and it says: “Tt was pointed out that Eagle Piggly:Wiesly Division od had a number of stores in the Madison area. The question a was raised whether the Board would: be in & position to — * ‘mittee... rie. . . : . . 82 Z € * | ° rd We grant Heit to Schultz in this. county. It was oswisiided that further information was necessary, and the subject “was & proper one for consideration by the Territory Com- \ -~ By Ma. Gaim: : Q. Did Schultz subsequently receive & a Receae? A... Yes, he did. / ; | Q. For what area? A. For the V} lage of Sun Prairie’ in Dane County. Tae Court: Where there was a Piggly-Wigaly store in ' the City of Sun Prairie. . THe Wits iT am not familiar with that in Sun Prai- Tue Court: I happen to isis Sun Prairie. I lade to be g@ stockholder of Soil Research [174] ‘which is located in: - : - Sun Prairie. There is a big’ Piggly-Wiggly Store. I have Pe _ been there: It ss. not have been: a -Piggly-Wigsly ‘of oe Eagle. ‘Tae Witness: I was going to ‘Bay “ak | that time, I think the Piggly-Wiggly stores in that area were operated bythe Piggly-Wiggly: Comriany that later became merged with Eagle. \e Tue Court: Yes. ; ; Tue Wrrxess: Whereas ‘Schultz cuenatat Pigely-Wig- gly stores in the eastern half of the United States. Tue Court: Eastern half. - : ‘ Tue Wrrness: :The Village of Sun Prairie in. Hone County was licensed to thath,, By Mz. Gramm: Si Q.. Why only the Village of Sun Prairie? ae? That was all that they requested. And that grant of license was recommended to the Board and made by the Board in—this is cOvered by Government’s Exhibit 65. -: | “St the May meeting, the Board approved the granting. of a non-exclusive license to Schults Sav-O Stores in the Town ‘of Sun hana Prairie ‘in Dane ¢ ' oF rd ‘ * 4 . Pe af & : et: -. 88 ‘County. lean’ its ‘planned store at. tn location is opened.” °. “ws eos —Q. What Topco members ‘presently — ‘in Ger’ : ‘ County? ‘A. Ghly Schpitz. | ee What happened to Eagle | -A. Eagle has resigned: Q. What Topco licenses are presently | in "existence for. _..,;Dane County? — | oe A. Only Schultz. ‘oyliade | Q. Has Schultz. navenind any Seseut for any part of lee County. other than Sun Prairie? ss : , - ae 92 Stores made application for Dane County, and when this was presented to [194] the board, it was pointed out to the board that the Eagle Piggly-Wiggly. operation had a number of stores in that area and that it ought to be inves-- tigated and looked into to see what the facts and coverage | were, * [195]. And then dihasecasntty, I believe, the ‘letter which _ _,was written reférs to the fact that the reason that he was ‘ only opening the store in Sun Prairie, and the reason he asked for Dane County, was he thought that was the only . way he could get a license, and. that was to ” the entire _ county. . By Mr. Grimm : =Q: Mr. Fenn, will you state whether or not you: dase ever requested a member not to open a new store? . - A. Thave never made such a request. . Q. To’ your knowledge, has anyone representing Topco . ever made sucha request? A. [have no knowledge of such request. Q. Mr. Fenn, are you generally familiar with the histori- cal development of the mete system * Fopeot A. Yes.. oped? B A. Well, in the edrly doen: of ‘Topeo, in the. 1940’s when there were relatively few members. and they were smaller members, the licenses which [196]. were granted. were pri- . marily exclusive licenses fer the market areas in which the ’ members operated. There were in those days—I referred | to one of the situations: yesterday ; I réferred to one group. | Q. Would you briefly. state. for the Court how i it devel- | a a ‘There were three members in the New England area who | _ were so small that they weren’t big enough to be a member. - on their own, and they formed a cooperative group in the - _ Boston area to participate: as the combined member. There were, I believe, one or-two other. situations, one in ~ New York State,.and one in the Middle West, where, in ef- fect, little groups of guys got together and had a joint membership in 1 order to be able to oe the se aati out, L 93 _ In the early days, it was+primarily..exclusive licenses. ' Then, later on, as the organization grew, it developed the .- concept of trying to determine, to define, and to set forth _ some criteria, some criteria for market coverage, to define pringi#y¥ markets, and what would be ‘considered adequate _ coverage: for deciding whether to give a member an exclu- — sive license, or a coextensive license, or a non-exclusive ai cense. _ The policy. in the Jato ‘fifties—in [197] about 1959 the Board at one of.its meetings, in censidering a number of _ other territorial matters, suggested that perhaps an at-° ~ tempt should be made to curtail the number of exclusive li- censes, and, if pombe, to eliminate them in future arent ' of territory. [198]. But, as I tried to point’ out yesterday, in ‘the ensn- ing time, as we. talked with-prospective members, as mem- - bers dropped out of. the association, we found that it was - quite impractical, that in the majority of. cases, members who had made application for membership since 1960 came ~ _ dn on a basis which granted them exclusive. territory at least in the primary marketing area in which they oper- ated. Pine In. general, the coextensive and nonexclusive territories = | have been restricted to those, to the outlying areas, grants _ _of new: territory, and in some cases, what might be called fringe areas. There were a few instances where.one of the ~ “members which came in in the period since 1960 was a | smaller member in Central Massachusetts, Central Con-_ necticut, Holyoke Food Marts, and in view of the pattern * which had been ‘set in the New England a area, they. agreed ~ tocome in on a coextensive basis. Hills/Markets in Long Island came in on a coextensive basis because there was al- _ ready some of that territory eccecb was licensed to epather member. -Q. In ‘other words, there was a sideeetion [199] aie day to.a Hillman’s. Could you describe: how they fit into — this pattern you have just described? — 4 A. Well, Hillman’s came in, I think, et’s pacaiees a year or a year and a half ago. They had been a member of - Topco in the early years. As a matter of fact, we have had - a ‘three members in Chicago off and on over the period since the beginning of Topco. =. ‘In the early years of Topco, Hillman’s and the Wieboldt Department: Stores food departments were: both, in the ‘Topco program. Wieboldt’s et out in 1900. Hillman’ 8 dropped out in the fifties. There’ for a few years we had some stores in this area - with Eagle, which after their acquisition by Consolidated: ° ~ Foods and being merged with the Piggly-Wiggly operation, which was up in the Rockford-Madison area, they moved into the Chicago-land area. Subsequently, they moved out - of Chicago and sold out five, six or seven of their stores to Dominic’s. They did keep some sof their a ears the outly- ing suburbs. \. i So for some years after that, i, [200] we had no dis. ~ tribution in Chicago. So here’s an\important market, and in considering where we might get some distribution in Chi- ~ cago, we are faced with who are\the potential members . - that we could recruit. The ‘big operators in, Chicago, A&P, © - National Tea, Jewel, all have their own strong private — . label programs. One or two other chains of size either had no. warehouse. And in essence, Hillman’s was the only likely candidate for membership that we could ‘see. We felt \\they had the growth potential to develop the Chicago mar- € and to give us distribution in this market. In our nego-- tiations with them, we ‘agreed. to give them an exclusive li- ° ‘in the City of Chicago and some either coextensive or 3 non-exelusive rights in some ofthe outly{ng counties in which they are operating. ite i Q. You.made a reference to the early days. of Topco p when theré were pri exclusive licenses, I believe. ~ ‘ What was the purpose ofthat in the early days?) A. Well, I think that the important thing to remember is that inorder to\build and establish a private label ‘pro- ° gram, it’ requires \eonsiderable [201] investment of time, ‘money, and effort, and in order to get a firm to make that: ~ - investment, that commitment, I think you have to generally —_ = Se ee = ¢ OF ee et 7 - and effort, and build the label, build the brand, and it helps them to grow in stature in the market, that they will have ~ the protection of the private label which comes with exclu- — sivity, and it is the same type‘of competitive situation that ee: their competitors have in that situation. [202] Q. Mr. Fenn, I show you now a ‘document iniead Government’s Exhibit 5, purporting to be the Topeo by- laws, and ask you to refer to Article IX, beginning at Page . | rn and specifically pasagiege 5-B of sapeacenee' on n Page ep refers to territorial confilatis does it note ‘A. Yes, thatterm is used in the paragraph. .Q, What does that term referto? =. 3° A. It refers to situations where an existing siniees bali “a license in a territory or in part of his territory, and a / new member wishes ta come into that territory, or another _ situation of a slightly different type where there is a terri- _tory where an existing member or another existing member { or a potential member would like to enter into it. . Q. Are you familiar with the circumstances surrounding : the adoption of that bylaw, Mr. Fenn? i eplag’ : ‘A. Yes,lam. .~ re ‘ ~ Q. Would you describe those totheCourt?) A. I believe it was in 1961, there were three or four situ- . ~ ations involving this kind of ‘problem which came to the at-. tention of some of the members, and they were discussed, I _ ° believe it was at a [203].membership meeting at that time _ - by Mr. Samuel Cook, who was then chairman of. the Board .. of Topco. ° : Q. Mr. Fenn, how you Govetuenuete Exhibit 52, aind I direct your attention to the page beginning with the words 1 “Excerpts‘from Minutes of Special Meeting,” or “Special — oh Topeo Membership Meeting, January 13, 1961,” ‘and I ask \, if that is the meeting to which you have just referred? A. Yes,’ this is the meeting at which this whole subj : was discussed and out of epee this bylaw really came to being. ; Q. What happeneil then? is : Pe ee, there were these four situations, three or four ~ ple , for trying to. resolve them, and they subsequently ‘were resolved by the consent of the members | ‘involved ( whereby i in-essence they agreed tp some ification of "some of their territory from exclusive to either coextensive Or non-exclusive, which veld permit ¢ gp pouttions to 2 ‘resolved. I think the results s and the changes whieh took place were reported at the ‘board: meeting which followed a few months later, and in. essence, . I think [204}:I can name them. At * that- ‘time, Giant Foods, who had heen a frozen only mem- Dbér. in Washington, D.C. and in Baltimore, just prior to that, had expressed a’ desire to become « full member of * .Topeo and Ferticipate in all of our, ‘Programs and had 80 =— a eS 4 [205] At that time Penn, Fruit. Company, whose “eth | _ quarters are in. Philadelphia, also had stores in Baltimore -- _ and had_an exclusive license for products other. than froze ‘foods. in: the ¢ity and+ County ‘of Baltimore, in eoneral, I _ think. I.don’t know the exact territory. >. : >In, order to permit Giant Foods to come in as a full * member in‘ accordance with their request, Penn Fruit ~ agreed to a reclassification of that t authority from exclusive ; to coextensive. : : There were several others, : mo: ‘Court: I take it ‘Mr. Cooke was of Penn Fruitt. - Tae Wrrnzss: Yes, sir. He was chairman of the board of Topco and also chairman of the board of Penn Fruit Com- ~“pamy st thas time... wart oo leis Go ahead.. ~ : "By Tas Wervess: ees AL( Contimning) Another situation oe a \: sian proerrhicg- in Toledo, or:in Lucas. County, I ‘believe it is, ~ whieh is in the general Toledo area, where Big Bear Stores © had an éxelusive license, and the Wrigley, Abner Wolf; the _ Wrigley Stores which:later became part of Allied operat- — “ing out of =_—re im6} — up a store’ am: anaes iedtiint: which were discussed, ‘and out - it came)a pro- . | 97 : ‘a license to sell Topco branded products, also in the Toledo area at the same.time Big Bear agreed that they would have their license changed from exclusive to coextensive. . - At.about that time we were in negotiations with 4 firm in _ “Syracuse, New York about ‘the possibility of Topco mem- . _ bership. Some of their operations.in western New York ' State would extend into the same marketing’ area| where © _ Hart's, which i is now Star Supermarket, ‘has. some sal hence + ~ and in order for us to continue our prose rna o oe them, SS ' Star said they would consent to a Teclassifi ; Also, at that time I think the fourth situatio 1 tint was. resolved by the consent of the members; and as a result of - this line of discussion that came out of the meeting\in Jan- uary, involved some territory in what. would be the pan- : handle of Texas. - Furr’s, who headquartered i ba: Lothibock anil ecaeliles Yast some exclusive licenses in the counties, I don’t remember, but they are just up right against the Oklahoma-Kansas_ '.. border, and’ the Allied Supermarket which had. been a member of Topco in its original unit—as a matter of fact, ‘the Allied organization was an [207] outgrowth of some © ) of the original small Topeo members in Oklahoma. City and in Detroit. They had acquired a small chain in Kansas, in Liberal, Kansas, and they werecalled the’ Ideal Stores. They had expressed an interest, and we had had some dis- eussions with them about possibility of their bringing that division into the To program. Their stores ex- - tended: down ipto the northern tip of the panhandle area, and at this.same time, Furr’s said that if Allied wanted to bring their Ideal Division ‘into the Topco program they would agree to a coextensive license, . ; | think this is all reflected in the. minutes - the meetizig. - By. Mr. Grow: iQ. In the minutes of the meeting? | A. Of a board meeting at which this was seported. | Q. Are the minutes of = meeting. i in the exhibit which you have — . — «98 A. No, this is—well, I don’t know about that. .This is a. January meeting. I think it followed this. . Yes, this is the one. Report at the Topco board meeting on March 20, at which these situations were reported. - Q. This is Part of Exhibit 52, is 3 it? A. Ym Bae ae [203] Q. Mr.- Fenn, how would you characterize the _ store coverage which you have just described! . _. A. They were all what I would classify as fringe areas. They were outside the primary meee areas” of the members: et | : THE Covrr: What happens if you ‘tees something like Penn Fruit i in Baltimore, which is not its prime area—well, let us assume that Giant’s prime area was Baltimore. At that point,- Giant could not have an exclusive in its own. prime area, could it? Tue Witness: Well, we will have to. go. : beek a little: bit, your Honor. In other words, Penn Fruit was a member. Tue Court: That is right. Te Wrrness: And they had some stores in——__. 3 Txe Court: Baltimore, but everybody admits, Mr. Cooke and everybody else admits it is not the prime area. — Giant, whose prime area is Baltimore—— - THE Witness : No, your Honor. » Oh, you are. assuming it was? Tae Court: That is right. ; [209}* Tue Wrrness: In that particular ease, if they had insisted on an exclusive——.. : Tx Court: You couldn’t have taken them in. ‘Tae Wrrness: We couldn’t have taken them. in because we would have no vehicle, wouldn’t have wanted to take the» rights away.from Penn Fruit on a non-exclusive basis.. By Mr. Grbor: Q. Mr. Fenn, are you generally familiar with the activi- ties of the territory committee which .is referred to in. that by-law? A. Yes, T am. q ee 99 Q. How many times did it meet? A. It just had one meeting. Q. ‘When was that? ee * That was in January, 1962. I think it was the day a ‘after the by-law was passed. Q.. What activities, if any, were conducted by that com- . . mittee after that time? . A. It never had any further meetings, ‘end I don’t be- lieve there were any new members named to the committee . after that. / [210] -Q. Are you familiar, Mr. Fenn, with the situa- tions.in which ‘coextensive licenses are presently in exist- * ence? Tar Court: -You mean there is. no territory committee now? : a THe Wirness: It is on the sida. THE Covrr: But there: are no human beings assigned to, . . it. - THE Watens: : Well, the by-law reads, I believe the woee- | ‘ing is-that these people were assigned to the committee and would consider such matters as came before it, and new members would be appointed each. year by the president or the existing-members would serve until new members were appointed. There have been no new matters of this. type ~ which came before the territory committee after that date. ' Tur Court: It met once in history? . Tue Witness: Yes. _ By Me. Geom: | gy ~ Q. I believe there is a pending question. _ A. Excusé me. Could you repeat it? _ | . (Record redial.) [211], A. At the present time I believe eons are only two situations where members have co-extensive licenses in XY areas where other members are also operating in the same apa county, or same general marketing area. I believe those situations are in Boston. where originally . we had three members. They were all coextensive with, each J _ ow 100 - other over many years. Since then. one member has merged _ and has resigned, and the other two members are still coex- tensive. Throughout most of their operation they really op- ; erate in different marketing areas, different parts of Bos- _ton, different parts of New England—of the New England area. In a few situations they are directly — with each other. T believe the only other situation at the present time where members. have coextensive licenses in a given area - and both operate stores in the same county, are McCarty- - Holman—I am only talking now about stores with Topco brand licenses that handle Topco brand products—I believe there are a couple counties in Mississippi where both Del- champs and McCarty-Holman are both licensed coexten- sively and operate stores. NEN ad (212) © Tue Court: How about Schultz: in. “Wisconsin? Tue Witness: In ‘all other cases, your Honor,—this gets into the thing we were talking about yesterday on the term, coextensive. Schultz, when they originally came into ‘nen, and I . . think this would be an example, was granted a coextensive | license in certain counties because they weren’t considered large enough to give that area market coverage. As they - have added countiés in the interim period, they have been given some additional non-exclusive, but in the areas where Schultz has a coextensive license,—— Tue Court: There isn’t anybody else, Tue Witness: There is no one else. | Tae Court: In Racine they have got five: outlets in Racine. Tue Wrrvess: Yes, sir.- THE Covrt:.On a coextensive basis, but it cua is ex- clusive. : Tse Witness: Yes, de facto it: is, because there is io other chain operating, This is true of much of thé territory which reads coextensive at the present time, or non-exclu- : sive. Our [213] machinery for changing classification, I made a reference to coextensive in the situation in Balti- - ‘more that I referred to. Since that time Giant has now re- en . 101. ; signed. The situation I referred to.in Lucas County, Allied © has resigned, and alse Big Bear, I believe, no longer oper- ates any stores in Lucas County. Swe mee There were other situations in the earlier. years -where some members were coextensive with someone ~ but the someone else has resigned or left. _ THe Court: In other words, you are telling me in large part these are in faet exclusive, whatever their label. . Tre Witness: If you take a _—o as of today, this is: the case. : Tue Court: As a practical mation they ‘bine a monop- - oly even though the arrangement doesn’t guarantee it to them.’ 1 ae WITNEss: They are the aly onl distributing Topeo: brands {that territory. —. = . Tux Court: The fact of the widdttet is they" have a mo- - nopoly even though technically they are -_ oe to - have one. [214] Tue WITNEss: Well, yes. Now, it may. a , Tue Court: That 'gets back to what I said to you yester- day: Why do you have to give them a technical right toa monopoly? If the board of directors has authority to de- termine, why can’t you leave. these all non-exclusive, and then as a practical matter carve out your territory in such a fashion so that there isn’t any derogation: of thg erate label by competition between different outfits? THe Wirtyess: I think that the: record shows ‘that cer- tainly the operator has more feeling of security. _ | Txe Court: But as a practical matter he doesn’t, Sie: chologically he may have, but i in fact, if ‘I understand him correctly-— Tue Wrrness: The} board could still’ put somebody in these counties. _ 3 Tue Court: Yes, - -but they don't. Schinltz Sav-O-Stores doesn’t have an exclusive anywhere. Tue Wrrwess: We haven’t had an application to con- sider, but I would say that the board would not entertain a . new member in Racine, Sheboygan, Kenosha, and so forth. | . [215] THE ere So, here iseSchultz Sav-0-Stores who . , 102 don’t hese an exclusive anywhere on paper, but i in fact there a __ is an exclusive everywhere. ‘Tue Witness: No, he does not have an peers every- - where, your Honor. — Tue Court: Where doesn’t het . Tur Witness: Well, he does now. You are right, becausé he is not competing-with anybody. There were some stores in Milwaukee where he was licensed, and then there were some stores ir Dane County, so you are sorvent. As of | ‘today he has no direct competition. . (216) Tue Court: ‘Go ahead, Mr. Grimm, | By Mr. Grinae:* 7 Q. You referred a little while ago, I believe; in your tes- _ _timony to the statement by the Board. I think it was in “ 1959. Does that come into play heret Well— oe ‘THE Court: ‘All sie said -was the Board considered. the desirability and possibility of reducing the number of ex- . ¢lusives toward the end of eliminating them, and decided . . as a practical matter they had to keep them. All I am ques- tioning is whether the decision that as a practical matter they had to keep them; was a sound one.” ‘By.Mn Gano: esr st Q. What is the experience since then? A. The experience since then, and I think, your Honor, “if I gave you the impression that they concluded they had to keep them at that meeting, that was not correct. Subse-- quent developments with new members has been in the case of Bayless and the case of Delchamps, the case of Mc- -Holman, the case of Giant-Eagle—and I am merely [217] trying to name some of the firms who had joined Topco in a recent period—all of these members were - granted exclusive territory because I don’t think they . would have come into Topco without it. They wanted the assurance and protection that they could. | *[218] Tae Covrr: You got yourself a an ‘antitrust suit © een ae ee 103 | : out of it. I don’t know whether that is worth the price or not, because the whole contention here is that by virtue of your having a provision in your structure, by-laws, and 7 _ what have you, which gives the member the right to ex-. clude anybody else, you havea per se violation wi the Sher-. ' man Act. That is the contention. ae seh I am just discussing with you ‘whether as a pr | ‘matter you need that kind of formal right, technical power, in the member to veto, because as a practical matter, if I : understand you correctly today, even though he doesn’t have the power, in the case of Schultz and a number of oth- - “ers, a8 a practical matter, there isn’t any derogatory com- | petition on the Topco private label between members. ‘Tue Wiryess: There-is always the possibility, but the : ~ Board still has that right. ieee Tue Court: Right, but that is exactly the point, that if - the members have confidence in the Board, they don’t have | to reserve [219] that ight to themselves—if-the Russians — had confidence in us and if we had confidence,in the Rus- sians, we wouldn’t need the veto at the United Nations Se- curity Council. That is the problem here. _ 3 You are saying to me that prospective members or ac- ‘tual members don’t have sufficient confidence in the Board. . so they say, “We won’t surrender the veto. ” That is what ‘the exclusive license is, Tse Wirness: If you put the saa on the positive, if you make the investment and the commitment in the an nhess—— es - Tue Court: Without retaining +: Tue WItNzss: Without ining te ve veto. 3 Tue Court: Without the veto. That is exactly the situa- ’ tion with the Russians. That is what the Supreme Power of . ‘ veto is at the Security Council. “We are not going to make | ‘the. investment in the‘ United Nations because we don’t - have enough confidence in our fellow members on the ques- tions which are Security Council status, the m- issues, reserving to ourselves individual veto.” [220] That is what this Sherman fight is. ehaak They | are saying that you are giving the members the same equiv- a: 104. alent as the Security Council veto, which is a violation of the Sherman Act. Isn’t that right, Mr. Morrison? - ‘Mr. Morrison: Basically, your Honor, that is correct. * Tae Court: Right: _. Tue Wrrvess: Your Honor, one thing: that I may not. have pointed out in my discussion of the by-laws that you referred to is the one thing that came out of this by-law and. this discussion about this problem and the approach used to it was the fact that the by-law actually gives, first, the territory committee and then the Board the classifica- tion or downward’ mpiatlicn power in what’ might be ealled fringe areas. - = [221] In other words, this was the first time that the board, or that first the territory committee and the board, had this authority. ‘In other words, if a member, a new ‘member, comes into Topco, we take in a member, and we — give him a territory, and it looks like he is going to make _ . the investment, and we are betting on him that he is going _ - to make the investment to become an important operator in that market, and then the thing changes, and then he doesn’t.—The food business. is a very dynamic, fast-chang- ing market, as you well know. Txe Court: It is one of the tighest [sic] operations in terms of margin of profit, cost control and inventory con- ° trol. Lam well aware of that. THE Wrrvess: It is. The board in its consideration of the. matter of a territory can give a member an exclusive, you “might” say, on the assumption that he is going to develop, but then he didn’t. Then the bylaw, the way it is set up, if it was a fringe area in an outlying area, would give them - the chance or the opportunity to say, “We are going to change this.” _ [222] Tue Court: It doesn’t give. them the authority to change it with respect to his primary. 3 _ - Uae Wrrness: No, it would not and, of course, if it did, it. would, I, think, drive him out of Topco because he would _lose what the private label program is all about. _ _ ‘Tixs Court: Precisely. That is exactly why I don’t see’ _ why you need the veto, because the membet has to know at . aes ss 106. . any time that. the board decides to detente his’ position i in his primary area, he is likely to leave. And you know, and '" [take it that the board isn’t looking for how to get rid of '” members of Topco. Its primary interest is keeping an ex- panding membership, isn’t it? » 2 Tue Wrrness: Keeping a healthy, viable catuleitinit: yf Tue Court: That is why I don’t understand it. I-am sit-. ; ting listening to a very Somerton novel legal issue } which : is unnecessary. . . [have to decide whether the right to maintain a veto is . ‘per se violation of the Sherman Act, when the right to | . veto, I-can’t [223] believe,.is a necessary indispensable in- ; ‘gredient of an effective kept organization. I just don’t 28 understand it. . : Mr. Grimm: Let me ask a question, your Honor. Maybe I can make it clear. — ; Tue Court: E ‘undianiena the board of directors, and I meted . guess Mr. Fenn, ‘believe that this exclusive veto is a neces- _— sary ingredient, but if you start looking at their aétual op- erations, you find that whether you have got it or not, . whether the member has. it or not, he nevertheless has an. exclusive territory. [224]. Whether it is called doneniliatied or coextensive, or exclusive, the practical result is the same. In prime ter-. _ Titory, he has a monopoly. In non-prime territory, he may have some’ competition, ire it is a which is @ agreed to in effect. jae . ' -Now if that is so, and I can uriderstand theite are reasons for this, it seems to me all of. or logistics I have been talk- . _ ing about lead. to this conclusion, that Topco doesn’t want ‘to throw members out. Topco knows members are not going to stay in if, in fact, they are ,. the Topco brand can be strengthened in the Chicago area © by their sales by: people who are not geographically proxi- “mate to Hillman’s. It is good for. Hillman’s to strengthen _the Topco brand in Chicago, isn’t it? - Tan Witness: ‘This is a tough one in a big market. -.Mx-Griuo : Letme ask a question or two, if I may. o ‘Tre Court: " any rate, there is no problem because it — isn’t a problem of somebody Who, wants to get into the Chi- . cago area that Hillman’s is ken’ ut of Topco. There is ~ no such situation, right? =~ ort ve . Tae Wrrvess: Right. ©: Te Court: So what does Hillman’s want an ipitaaive:’ . ; _ .fort- What do they want ari exclusive for? To clutch it:to- . . + their bosom and to keep everybody else out? It is in fact a ieee useless power because there i#:nobody else who wants to -getin. © bo Sed ‘Mr. ince May=F ‘ink a ietilei of the witness’ which may throw some light on the —— Os Eat 8 By Mr. Grimm: : wail ‘What would mares. to Topco if it didn’t get anys new « °:. members? SS ae THE, Court: You are not eving to get a with me because you are pulling a rabbit out of: a Tint,’ ail what happens? If you pull the zabbit “out of: the hat, you don’t — have a rabbit any more, because you assunie the exclusive . “ae, an ‘essential precondition to getting members. All we. ow is that members -have asked for it, and, they have a _ been given it, and as a’result, they. have it,'and other mem- _ : - bers have asked for it and haven’t been given it, but they still have.a practical monopoly..They stilt have a practical | exclusive whether it i is labeled coextensive or nonexclusive, | ; ‘or exclusive. They, in operating fact, have’ it. In operating .“ © - fact, it makes no difference: what the nominal authority a ~~ they have is. They all have exclusives, isn't that — 4 .. Tae Wrrness:.As of today. . ‘ eee ae Tue Court: Right. NALAS / | -: [232] Tue Lourr: The exception i is ; those i have men- as tioned would be the ones. vr re Tue. Court: Right, gnd even the ones, whe were excep: tions agreed because it was not their prime area? _ THE Wriryess: Yes. : ‘Tue .Court: And the ones oui were the aera agreed because it,was not their prime areas. : . Tue Wirvess: Right, yes, your Honor. - Tuer Court: So you have a Security: Council veto which «you don’t need, but which: gives you’ a ‘serious technical Sherman Act question. Mr. Grimm: The real issue is whether ‘it is “pecessary, hae and that is an e¢onomic question.’ Z | Tue Court: No, ‘it isn’t an economic question because | you are .never going to be able .to demonstrate anything more than that i [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386413_0378%3A1. Public record. Not legal advice.