ERICA RETAIL BOARD OF TRADE, INC....respect, hereby issues its complaint, accepts sa,id agreement, makes the following jurisdictional findings ancl enters the following order: 1. R.espondent

856 FEDERAL TRADE COMMISSION DECISIONS

Complaint G7 r.

Ix THE J\1ATTER m'

A1\ERICA RETAIL BOARD OF TRADE, INC. , ET AL.COXSEXT ORDER , l:TC. , IX REG.-\RD TO TIlE ALLEGED YIOLATIOX or THE

FEDERAL TRADE COl\DnssIOX ACT

Docket C-898. Complaint, Jlay IS , iD65-Decision, Jlay IS , 1.965

Consent orc1p.l' requiring a Springfield , ::0., collector of delinquent accountsOpPl'Rting a sUlall business witb one offce and OIle employee to assist ,,,jththe indiyidual respondent, to cease representing falsely, through the USe of

their trade JUlme and tbe use of fictitious terms anel statements in the COl1rseof lmsiness. that their business is fll1ationwicle organiz.ation of retailers \yithconpsponding attorneys and collectol s affliated with them.

COl\IPLAIXT

Pursuant to the provisions of the Federal Trade Commission Actand by virtue of the authority vested in it by said Act , the FederalTrade Commission, having reason to beJieve that the AmericanRetail Board of Trade, Inc. a corporation, and Alvin B. Ayersindividually and as an ofticel' of saiel corporation , hereinafter re-ferred to as respondents , have violoted the provisions of said Actand it appearing to the Commission that a proceeding by it inrespect thereof would be in the public interest , hereby issues itscomplaint stating its charges in that respect as fol1ows:

P,,\.RAGHAPH 1. Respondent , American Hetail Board of Trade, Inc.is a corporation organized, exis6ng and doing business under andby virtue of the Inws of the State of )'Iissouri with its office andprincipal place of business located at 1022 South Glenstone Street

O. 108 , in the city of Springfield, State of C\fissouri.

Respondent Alvin D. Ayers is an offcer of said corporation. Heformulates , controJs and directs the acts and practices of the cor-porate l'' spolldent , including the acts and practices hereinafter setforth. The address of the individnalresponc1ent is the same as thatof the corporate respondent.

PAR. 2. Respondents no,,- operate, and ha ye operate,d for more thanone year last past a col1ec.ion agency nnder the name AmericanRetail Board of Trade , Inc. Business is secured by respondents bysolicitation of n,gents.

Hespondents nse assignment forms upon which eaeh delinquentacconnt is listed showing the name of the debtor, address, date ofindebtedness incurred and the amount clue. These assignment formsarc sent from respondents ' pJace of business in the State of 1\Iissourito creditors located in various States of the United States. The credi-

A::IERICAN RETAIL BOAHD OF TRADE , DtC. , ET AL. 857

B5G Complaint

tor executes the form assigning the accounts , so listed , to respondentsfor collection on a commission basis , and returns it to respondents atSprjngfield or it is sent to respondents by one of thejr agents.

The debwrs eoneernedl'eside in various States other than the Stateof :l\issoul'i. Respondents receive money from debtors located inStates other than :Missouri and transmit it, less their comn1-issionto creditors who reside elsewhere than in I\'Iissoul'i. Respondentsoften reCeiY8 checks from creditors representing debts paid direct

the eredjtor.In carrying on their aforesaid business respondents maintain

and at all times hereinafter mentioned have maintained , a substantialcourse of t.rade in commerce, as "co11merce" is defined in the FederalTrade C011mission Act.

PAR. 3. In the course and conduct of their business, at all tjmesmentioned herein , respondents have been in substantial competition

in comr r('e with other corporations , firms and individuals engagedin the business of collecting alleged de1inqucnt accounts.

PAn. 4. Through the use of the name A_merican Retail Board

of Trade , Inc. , said respondents represented , and now represent, di-rectly or by implication, that the corporate respondent is a nation-

wide orga,nization of retailers.PAR. 5. In truth and in fact the corporate respondent is not an

organization of retailers and has no connection \vith any organiza-tion of reta.ilers but, on the contrary, the sole business of the re-spondents is the operation of an agency for the collection of a1legeddelinquent accounts.

herefore, the statements and representations set forth in Para-graph Fonr are false , misleading and deceptive.

PAR. 6. Respondents , j)1 the course and conduct of their afol'esajdbusiness, and for the purpose of inducing individuals, firms and

(',

orporations to sign the aforesaid assignments, as well as aiding inmaking collections from debtors, have made certain statements andrepresentations, directly or by implication, with respect to theirlmsines::. Typical , but not an inclusive , of snch statements and rep-resentations are the fo1lmving:

J. ation-\Yide corresponding attorneys and collectors.2. Dear :\Jember.

3. Pl'cessing by our staff of expert.s is well under way.4. Karl Quinn. Pre-Legal Dept.

5. Robert. Furmar. Collection Department.6. Carl Stine , ::lanager , Collection Dept.7. :Uanagel' Legal Department.

S. J. ,Y. Kerns , Pre-Legal Department.

379- 702--71--

858 FEDERAL TRADE COMMISSIQX DECISIQKS

DecisiOll and' Order 07 F.

PAR. 7. By and through the use of the aroresaid statements andrepresentations , respondents represented , and now represent , dire.ctlyor by implication , that:

1. The business or the respondents is nationwide in scope with

corresponding attorneys and collectors directly affiliated and con-necteel with them.

2. The corporate respondent is an organization havjng members.3. The business of respondents is departmentalized and has a

considerable stafl: of employees.PATI. 8. In truth and in fact:1. The business or the respondents is not nationwide in scope and

cloes not have corresponding attorneys and collectors affliated andconnecteel with them but, on the contrary, respondents' businessis a small one with no departments, one offce and one employee toassist the individual respondent.

2. The corporate respondent has no members but , on the contrary,those designated as "n1embers ': are persons 'who have, assigned a.lleged

delinquent acconnts to the respondents for collection.Therefore, the statements and representations set forth in Para-

graphs Six and Seven are false , misleading and deceptive.PAR. 9. The use by respondents of the foregoing false, dec.eptive

and misleading representations and practices has had , and now hasthe tendency and capa,city to mislead a substantial number of credi-tors and debtors into the erroneous and mistaken belief that such

representations 'Yere and are, true, and into the assignment ofaccounts to it for collection and in the collection of monies fromdebtors because of such mistaken and eITOneOllS belief.

PAR. 10. The aforesaid acts and practjces of respondents , as herein

alleged , were , and are , all to the prejudice and injury of the publicand of respondents ' competitors and constituted , and no," constituteunfair methods of competition in commerce find unfair a,nel deceptiye

nets and practices in commeree, within the intent and meaning ofthe Federal Trade Commission Act.

DECISION AXD ORDER

The Federal Trade Commission having initiated an inyestigationof certain acts and practices of the respondents named in the captionhereof, and the respondents having been furnished thereafter w1thD, copy of a draft of complaint which the Bureau of DeceptiYe

ractices proposed to present to the Commission for its considerationand which , if issued by the Commission , would ch \.rge respondentswith violation of the Federal Trade Commission Act; and

AMERICA:l RETAIL BOARD OF TRADE , INC. , ET AL. 859

S;:G Decision and Order

The respondents and counsel for t.he Commission having there-a.fter executed an agreement containing a consent order , an aclnlissiollby the respomlents of all the jUIisdictional facts set forth in theaforesaid draft of complaint, a statement that the signing of said

agreement is for settlement purposes only a.nd does not constitute anadmission by the respondents that the law has been violated as

anegecl in such complaint, and Ivaivers and provisions as required

by the Comnlission s rules; andThe Commission, having reason to believe that the respondents

helve violated the Federal Trade Commission Act, and having de-termined that complaint should issue stating its charges in thatrespect, hereby issues its complaint, accepts sa,id agreement , makesthe following jurisdictional findings ancl enters the following order:

1. R.espondent American Retail Board of Trade , Inc. , is a corpora-tion organized , existing and doing business under and by virtue ofthe Jaws of the State of Missouri , with its offce and principal pJaceor business located at 1022 South Glenstone Street, M. O. Box 108

in the city of Springfield , State of Missolli.Respondent Alvin B. Ayers is an offcer of said corporate respond-

ent and his address is the sa,me as that of the corporate respondent.2. The Federal Trade Commission has jurisdiction of the subject

matter of this proceeding and of the respondents , and the proceedingis in the public interest.

ORDER

It is ordered That respondents, American Retail Board of TradeInc. , a corporation , and its offcers , and Al vin B. Ayers, individuallyand as an oIEcer of said corporation , n.nd Emic1 respondents represent-atives, agents and employees, directly or through any corporate orother device, in connection with the solicitation of accounts Torcollection, or the collection of, or attempts to collect aCColmts, in

commerce, as '( commerce" is defined in the Federal Trade Commis-sion Act , do Iorth,,-ith cease and desist from:

1. Using the name "American Retail Board of Trade, Ino.

or any other name of simi1ar import or meaning; or represent-ing, directly or by implication , that they are an organization ofretailers or are connected in any manner with an organizationof retaiJers;

2. R.epresenting in any manner, directly or by implicationthat their business is other tha,n that of a private collectionagency engaged in collecting a11egec1 past due accounts;

R.epresenting, directly or hy implication, that, their busi-

ness is natioJlv,ide in scope or that they l1ave correspondingattorneys and collE\ctors affliated or connected with them;

860 :FEDERAL TRADE COMMISSION DECISIONS

Opinion 1,7 1,

4. :Misreprcsenting the size of the business through the useof fictitious names or departments or by any other means;

5. Representing that the corpol'ate respondent has members01' designating the persons who assign accounts to the respond-ents as :'members,

It fl(rther ordered That the respondents lwrein 8ha11 , withinsixty (60) days after service upon them of this order , file with theCommission a report in1vriting setting forth in detail the mannerand form in which they have complied with this order.

IN THE J\L\TTER OF

INTERSTATE TRAINING SEHVICE CORPORATIO~ ET AL.

:MODIFIED ORDER , OPINIOX , :ETC., IN REGAHD TO TIn: _'\LLEGED VIOLATION

OF THE FEDERAL TRADE CO")IMISS!OX ACT

D()c7.('t 576. Cornplwint, Apr. 17, 1950-Dcoision , May 19, 1965

Order modifying cease and dcsist order of Dccember 5, HJ50, 47 F. 'l. C. 680,

against sellers of H correspondence course in the operation, maintenance,

and repair of Diesel engines , by modifying paragravJls 1 , 2 , H , :lnd f1 of theorder prohibiting' misreprescntntion as to selection of sturlents , length of

course. relationship with manufacturers, and on-the-job training.

QpIXION OF THE COloI:fISSION

On December 5 , 19,iO r47 F. C. 680J, the Commission issued anorder against respondents providing in pertinent part as follows:

It 1s ordered That. Connrd E. Green and Leon A. Cronch , individually amI.as copartners trauing under the nmne of Interstate Training Service, or trad-ing under any other trade or partnership name, and their agents, representa-

ti ves, and employees , directly or indirectJy, tl1rough any corporate or otherdcvice, in connection witl1 the sale, offering for sale or distribution of courses

of study and instruction in Diesel training and training in heavy equipmentamI gasoline engines, in commerce, as "commerce" is defined in the Federal'lmde Commission Act , do fortlndtl1 cense nm1 (lesist from representing, directly01' by implication:

1. That students are selected and accepted on the basis of their mechanical

aptHurle or upon the recommendation of respondents ' representatives;2. That the training in Diesel engine C'rJl1ipment may he completed in 1 year

,dtb 1 or :2 bours a day devoted to tIw study of the l'oun:(':H. ' l:1t rf'spondents ,york closely witl1 ll8.nnfucturcr, . (,OJ1tr:lC' S OJ' otbers

in the Diesel engine field;

7. That the opportunities for employment, improvement, and adY(llcement

in the field of Diesel equipment operation are nnnsual and unlimited for those

INTEHSTATE TRAINING SERVICE CORP. ET AL. 861

b60 Opinion

who take respondents ' course without many years of previous practical ex-perience in that field;

8. That students receive resident shop Or on-the-job training;

On March 15 , 1965 , respondents, by their attorneys , filed ,yith theCommission an .Amended Petition to Set Aside Cease and DesistOrder. An answer partly in opposition to respondents' petition wasmed by the Bureau of Deceptive Practices A pril14, 1965.

Although respondents ' petition al1udes to prohibitions in the orderother than those set forth above, it does not raise any substantialobjection to them but rather confines itself to an assertion thatrespondents arc in compliance.

Compliance with an order is not, under the Commission s Rulesnffcient reason for setting it aside, and accordingly in this opinion

and order the Commission addresses itself solely to those prohibitiollsof the originaJ order as to which respondents have submitteel llew:facts and argument in favor of a.mendment, modification or excision.

In sllpport of its petition that Paragraph 1 of the order be set8sicle respondents cite a catalog issued by them in conjunction withInterstate Training Service (ITS) Home Study Course ;002 con-cerned with the mr.inienancc, repair, and rebuilding of CumminsDiesel engines. The catalog in question notes that enrol1ment in theeourse is restricted to "men who have demonstrated theh' interestin Diesel as a career" and is accordingly limited to persons who

are qualified to take the course either by virtue of employmcnt byCummins Engine Company, in col1ttboration with which respondentsoffer the course , or because the applicant has had mechanical experi-ence , or lws completed preliminary Diesel courses oiIered by rcspond-ents oris employed by owners of Cununins ' equipment.

In further support of their assertion that they should no longerbE', subjected to this proscription , respondents cite the aff(ht\ it ofonc I. 1\1. Percifield :IanageT, Service Deve.Jopmcnt, CnmminsEngine Company, Inc.. 1\11'. PerciIield attests that the ql1aliflcationrequirements for COlll'Se. 3() are adhcred to by Interstate Training

Sr' Tvice.In hort, at knst. a to Course. 302 , it appears that respondent does

rnakc a determination f!S to the snitability of students and the aff-(Irvit oj: :Mr. rerciIielc1 supports the 8.8sertion that the sclrc:- ivityrCfjuirpments a staterl in the cntalog arc being met:

On the basis of t.he forep:oinQ "'Y8 arc persuadec1 as is the Bureauof Decr.;)tivp Pradice , th8.t the pl'ohilJit.ion of on1' original orderlJ'f1_ Y lw. too ri ol'()llS, prc\'entil ' as it r1oc any rcpl'e entation s to

:dedivity md (lrt.crminahon of flualificationc;, On the ot.lwl' hrmd

862 FEDEHAL TRADE CO?LylISSION DECISIONS

Opinion 07 F.

apart from the Course 302 , the supporting data provided by respond-ents that they are exercising a degree of se1ectivity and pre-determination of qualifications is supported only by an assertion inaffdavits of respondent Green and one Fred Fulton , a member of theAccrediting Commission of the XationallIome Study Council , thatsuch a selectivity and qualification program is in force and that thepl'cednres or ITS conform to the standards established by the Na-tional 1-10me Study Counsel Accrediting Comn11581011 , one of whichrequires the enrolJment of only quaJjfied students. This does not,,,arrant excision of the provision in question. It does appear howeverthat Paragraph 1 of our oTC1e1' should be modified to read as follows:

J. That students are selected or accepted on the basis of mechani-cal aptitude or upon the recommendation of respondents ' represent-ntives unless respondents are able to establish that selection is limitedto perSOll3 having" such aptit.ude or recommendation.

In SUPPOlt of its petitioll that Paragraph 2 of the order be setasidc ; respondent has furnished the afTclavit of Earl 11. KrugerDirector of the Diesel Division , Interst.ate Training Service Corpora-tion

, "

who offers the opinion that General Diesel Course 401 (30manua1) m ty indeed be completed , :ithin it period of 1 year withJ or 2 honrs devoted to study. This affdavit by an employee ofrespondent corporation does not of itself \Tarrant a change in the

original pl'ohibi60n, Certainly it contains no new facts \Tarnmtinga. change.

Ho\\-e\- as the Burea.u of Deceptive Prrtctices suggest.s , it \TonIc1

appear that this prohibition might be l'cphrased to permit truthfulTt' presentation as to the period within \vhicl1 a course might be com-pleted an(1 : et provide adequat.e protection against deception. ThefolJowing modified prohibition will aecompJish this end:

2. That respondents ' course of t.raining in the maintenance. repairand o11eration of Diesel engines may be completed in any specifiedtime unless respondents are able to establish either t.hat all personsaccepted pursuant to Paragraph 1 above may complete the trainingin the time specified or that in immediate conjunction with saidrepresentation respondents l1al'B c1earl 7 set forth the conditions

or assnmptjons upon \Thieh said representation is based.Respondents mo\ e that Pnnl,gra ph ;) be stricken on the ground

that they do in fa,ct work closely with manufa.cturers, contractorsand others. In support of their petition they have submitted 2Jaffdavits and supporting exhibits furnished by persons associatedwith manufacturers , contractors, etc. The affdavits in question make

IXTERSTATE TRAL'HXG SERVICE CORP. ET AL. 863

860 Opinion

a strong sho"il1g that respondents should be permitted to represent

trnthfnUy thllt they have II good relationship with snch firms.Accordingly, Paragraph 3 of our order "ill be modified to read

as foUows:3. That respondents "ark closely with or have any other relation-

ship with ma.nufacturers, contractors or others in the Diesel engine

field unless respondents are able to establish the existence of suchrelationship.

In support of their petition for vacating Paragraph 7 , respondentshave furnished the affdavits of H. )1. Percifield , cited above , and ofL. O. Ecbvards , Service Standards Analyst of Cummins EngineCompany. The affdavit of Percifield in this context states only thatgraduates of Interstate Training Service Cummins ' approved HomeStudy Course arc better qualified to make the most of Cumminstraining than they "ould be otherwise. The allda vit further ac-knowledges the nl1ue of Interstate Training Service courses. lr.Percifield also notes that after completion of the Cummins ' approvedDiesel Home Study Course a person of normal ability, initiativeand intelligence " "ill be able to obtain employment as an apprenticeDiesel mechanic" and that his opportunity for imprOl'ement andad'i tLlcement is very high.

The other affdavit , that of L. O. Edwards , indicates only that his8.ssocia.tion v:ith Interst.ate Training Service has been very satisfnc,tory and that Interstate is performing a very valuable service to theindustry.

The short 1111s\\e1' to respondents ' petition in this connection is thatthese two affclnvits provide no justification for amending Paragraph7 of our order.

In rega,rd to PaTa,graph 8, material submitted by respondentsindicates that, by arrangement with the Cummins Engine Company,students meeting certain eligibility requirements may receive factorytraining at the Cummins ' factory traintng center. It "ould appearthat Paragraph 8 should be rephrased to enable respondent in itsacl'iertising t.o note such eligibility. j\.cc.orclingly, Paragraph 8 ofour orcler will be modified to read as follmvs:

8. That students receive resident shop or on-the-job training unlessrcspondents are able to establish that snc.h training is furnished andunless respondents clearly disclose an of the terms and conditionsunder which the training is furnished in immediate conjunction withany such representation.

Fina1Jy, respondents note that the language contained in our orderreferring to "Diesel training" and "training in Diesel engine equip-

864 FEDERAL TRADE COMMISSION DECISIONS

Order GT

ment" is technically incorrect since one does not "train in Dieselengine equipment." Accordingly, the prohibitory preamble of ourorder will be changed to read as follows:

It is o1'de1'd That Conard E. Green and Leon A. Crouch , indi-vidually and as copartners trading under the name of InterstateTraining Service, or trading under any other trade or partnership

name, and their agents , representatives, and c1lployee3 directly or

indirectly, through any corporate or other device, in connection ''liththe sale, offering for sale or distribution of courses of study and in-struction in the operation , maintenance , and repair of Diesel enginesgasoline engines, Rnd heavy equipment in commerce, as :: co1lmerceis defined in the Fcdera.l Trade Commission Act, do forth'\ith ceil,and desist from representing, directly or by implication:

An appropriate order will issue.

ORDBR J\IODIFYING CEASE AND DESIST ORDIm

By order dated August 5, 1964 , the Commission having resc.incledits order of July 31 , 1964 , denying respondents' petition to reopenthis proceeding for modification of the Commission s order of De-

cember 5 , 1950 (47 F. C. 680J, andThe Commission having granted respondents : request for permis-

sion to file rm Amended Petit.ion to Set Aside Cease a.nd Desist OrderandThe Commission having c.onsidered respondent.s ' Amended Peti-

tion to Set Aside Cease and Desist Order filed :'da1'ch 15 , 1965 , andthe answer thereto ficd April 1', 1965, by the Acting Director

Bureau of Deceptive Practices , andThe Commission being of the opinion that its ordcr to cease, and

desist entered in this proc( ecling on December 5 , 1950 , should in thepublic interest be modified

It i.s oTCleTed That the Commission s order of December 5 , 1950

(47 F. C. GSOJ, be, and it hereby is , modifw,d to read as foJlows:It is ordeTed That Conard E. Green and Leon A. Crouch

i:l1clividually and as copartners trading under the narne of Inter-state Training Service , 01' trading under any other trade orpartnership name , ftl1c1 their agents , repre entativcs , nncl employees : directly or indirectly, through any corporate or other devicein connection ,yith the sale: ofrcring lor sale or clistribution of

COUl'ses of stnc1y and instruction in the operat.ion , lllainrenanceand repair of Diesel engines) gasoline eng:ne , nnc1 hea\" ' equip-ment in commerce , as " commerce is defined jn the Federal Trade

INTERSTATE THAINING SERVICE COEr, ET AL. 865

860 Order

Commission Act , do forthwith cease and desist from representingdirectly or by implication:

1. That students are selected or accepted on the ba,sis of me-chanical aptitude or upon the recommendation of respondentsrepresentati ves unless respondents arc nble to establish thatselection is limited to persons having such aptitude or recom-mrnc1ation;

2. That respondents' course of training in the maintenance

repair, and operation of Diesel engines may be completed in anyspeeifiec1 time nnless respondents are able to establish either thatall persons aecopted pursuant to Paragraph 1 above may com-plete the tra,ining in the time specified or that in immediate conjunction 'yith said representation respondent has clearly set forththe conditiolls or assumptions npon which said representation isbased;

3. That respondents work closely with or have any otherrcbJionship with manufacturers , contractors or others in theDiesel engine field unless respondents are able to establish theexistence of sllch relationship;4. That students , Rfter completion of respondents ' course , are

cllmlifiec1 to operate, service, and repair any Diesel equipment

regfU'clless of size or l;;ind , and are able to compile cost estimates;;:1. That students are assured or guaranteed employment after

completion of respondents ' course;. That the placement , consultation , and revision services and

t.llc1ents supplies furnished by respondents arc free;7. That the opportunities for employment , improvement, and

;Hl1,-ancement in the field of Die el equipment operation are un-usual and unlimited for those who ta1::e respondents ' course with-out many years of previous practical experience in that field;

8, That students receive resident shop or on- the-job trainingunless respondents arc able to establish that such tra.ining is-furnished awl unless respondents clear)y disclose all of the termsand conditions under which the tra.ining is furnished in immedi-ate conjunction with n,ny such representation;

D. That respondents : salesmen are vocational advisors or fieldenginecr2 , or that they are othenrise qualified to give prospectivestndents aptitude tests;

10. That the ",Vestern Adjustment Bureau , or any other nameused by respondents , or any of them , for the purpose of collect-ing HlOlley due them , is a. separate or inc1epedent organization.

866 FEDERAL TRADE COMl1ISSION DECISIONS

Order 7 Ij

It is j7ttheT oTde1'ed That Conard E. Green , Leon A. Crouehand acob ",V. Spatz , inc1iyidual1y or as partners , doing businessunder the name of the American Academy of Applied Scienceor any other trade or partnership name, and their agent.s , repre.se.ntatives and employees, directly or indirectly, through anycorporate or other device , in connection with the sale, offeringfor sale , or distribution of courses of study and instruction infigerprinting or fingerprinting science , in commerce , as "C011-mcree" is defined in the Federal Trade Commission Act, doforthwith cease and desist from represcnting, directly or by im-plication:

1. That the opportunities for employment and advancement inthe field of fingerprinting and crime detection are unusual andunlimited for those who take respondents ' course:

2. That the demand for men trained merely in courses suchas respondents ' is great and the supply inadequate:

3. That many fingerprint bureaus are being enlarged andmany more planned;

4. That there is a position to suit every preference in the

figerprinting field or something which will appeal to every

aptitude;5. That salaries in the fmgerprinting field are considc.rably

above the average:

o. That fingerprinting work is filled with excitement and in-trigue or packed with thrills , eolar, or romance;

7. That students are selecte.c by respondents on the basis ofa.ptitude and personality, or that the training is limited to those

applicants 'who can qualify by nature or disposition for thework;

8. That the placement service or the equipment furnished byrespondents is free to t.hose taking the course;

9. That the United States Government is in need of those whotake respondents ' eourse;

10. That respondents employ "field representatives" or "di-vision chiefs" other than sa.lesmen.

It i8 fw.ther ordered That the complaint herein be , and itllereby is , d1smissed as to respondent Interstate Training Servicean Oregon corporatJon , and as to respondents Conard E. Greenand Leon A. Cro11ch solely in their eapacities as offcers of said

corporation.It is further ordered That Paragraph S of said complaint be

and it hereby is. dismissed as to all the respondents.

SUPER Y AH :vARKETS, ETC. 867

Complaint

IN THE :\fATTER OP

THE SUPER MART TRADING ASSUPER YARN fARKETS , ETC.

CONSEKT ORDER, ETC. , IN REG.AHD TO TI-IE ALLEGED VIOLATION OF THE

rEDEHAL TRADE COllUfTSSION AND THE WOOL PRODUCTS LABELING ACTS

Docket C-899. Complwint , JlalJ 1965-.Dcc;sion, Mrry , 19G5

Consent order requiring Los Angeles , Calif. , retailers of \\001 tlln nnd otherwool products to cease misrepresenting the fiber content of Es \Yool yarnby falsely labeling and. advertising certain ynrIs as composed of 100%)Iohair when SllCh yarns contained less l\rolmir than represented and ot11er,"voolen fibers, and failing to disclose the total fllJer weight of iis woolproducts.

CmfPLAINT

Pursuant to the provi :jons of the Federal Trade Commission Actand the 'Vaal Products Labeling Act of 1939 , and by virtue of theauthority vested in it by said Acts , the Federa.l Trade Commissionhaving reason to believe thaJ. The Super l\Iart , a corporation , tradingas Super Yarn iarkets , Super Yarn & Fabric ial'kets , and SuperYarn j\fft:_ , and Irving IIershey Gold , individually and as a.n offcerof the Super fart, hereinafter referred to as responc1ent8 have vio-hted the provisions of the said Acts and the RuJes and Regulationspromulgated under the .Wool Products Labeling Act of 1939 , and itappearing to the Commission that a proceeding by it _in respect

thereof would be in the public interest , hereby issues its complaintstating its charges in that respect as follows:

PARAGRAPH 1. Responde,nt The Super 1Jart, is a corporation orga-nized , existing and doing business under and by virtue of the laws

the State of CaJifornia., and trrlc1cs as Super Yrlrn :Markets, Supe,

Yarn & Fahric Markets , and Super Yarn Mart. Its offce and princi-pal place of business is located at 1233 South Sau Pedro Street, LosAngeles , California.

Individual respondent Irving lIershoy Gold , is an offcer of saidcorporate respondent an(1 formulates , directs and controls the actspolicies and practices of said corporation. His address is the same asthat of said corporation.

Respondents are retailers of \'1 001 products and maintain thirteen(13) branch outlets in addition to the abo\"e stated principal offce.PAR. 2. Subsequent to the effective date of the .Wool Products

Labeling Act of 1939, respondents have introduced into commerce

sold , transported , distributed , delivered for shipment and offered for

868 FEDERAL TRADE COI\:rMISSI0N DECISIONS

Complaint fi71-. 1'.

sale ill commerce as '; comlnCllce is defined in said Act , wool pl'odl1etsas " wool product" is defined therein.

PAR. 3. Certain of said \vool products were mi bralldecl within theintent ,md meoning or Section 4(0) (1) of the ,Yool Products Lahel-ing Act of 1030 and the R.llles and R.egu1ations promulgated there-unc1er in that they \ycrc falsely fmc1 deceptively .tampecl , tagged,

beled or otherwise identjfied with respect to the character andamount of the constituent fibers contained therein.

Among such misbranded wool products, but not limited theretowere certain yarns stamped , tn.ggecl or labeled as containing 100%Nlohair. whereas in truth and in fact said yarns contained substan-

tially less n.fohair than l'epre entec1 and in fl.ldition contained a sub-E=tantial amount of other woolen fibers.

P-,\R. L Certnin of said \\001 products were further misbrande.d inthat they were not stamped , t.aggccl labeled or othenvise identifiedas required under the provisions oJ Section 4-(a) (2) of the 'VaalProducts Lnheling Act of 1\)89 a.nc1 in the. manner a.nd form a.s pre-scribed by the R.ules and Regulations promulgated under said Act.

l:ll1ong such misbranded ,,001 products, but not limited theretoYi"ere certa.in yarns with )a,bels on or affxcd thereto which failed todisclose the percentage of the total iiber \yeight of the wool productxclnsin' . of ornamentation not exceeding 5 per centum of said total

fiber I,eight, of (1) woolen fibers: (2) each fibe, I' other than wool ifaid percent.age by weight of sl1ch fiber is 5 per centum or marc;

and (3) the aggregate of a,l1 other fibers.\TI. 5. Certain of aid wool pro(lncts were misbn"lldec1in vjolation

of t,be ",Vool Products Labeling Act of 1D89 in that they were notlabeled in accordance "ith the Rules o.n(l R,egn1nt.ions promulgatedt.herel1nde.r in th8 follow"jng respe,cts:

(a.) The respective common generic names of fil12l's prese.nt in \Vaalproducts were not used in naming such fibers in required informa-tion. in violation of Rule 8 (a) of the aforesaid Rules a,nd Regula6ons.

Among such misbranded Iyoal products, but not limited thereto,yere c.ert.nln yarns with labels on or affxec1 thereto which describeda port.ion of the fiber content as "Orlan" \yithollt using the commongeneTic. name of sa.id fiber

, "

acrylic.(b) The term "mohair" w tS used in lieu of the word "wool" in

setting forth the required fiber c.ontent information on Ja.he.1s affxed

t.o \yool products when certain o'f the fibers so described were not

SUPER YARN MAHKETS, ETC. 869

Comvlaint

entitled to such designation , in violation of R.ule 19 of the aforesaidRules and Regulations.

PAIL 6. The acts and practiccs of the respondents as set forth above

were in violation of the \V 001 Products Labeling Act of ID:JD and theRules and Regulations promulgated thercunder , a.nd constituted un-:fair and deceptive acts and practices and unfair methods of competi-tion in commerce , within the intent anc1meaning of the FederalTrade Commission Act.

PAR. 7. Respondents arc now tld for some time last past havebeen , engaged in the advertising, oiI'ering 1'01' sale and sale of testileproducts to the genera.l public. In the course and conduct of theirbusiness respondents 11m\' cause and 11nve caused their saiel textileproducts to be offerecl for sale in issues of the Los Angeles Timesa newspaper published in the city of Los Angeles , State of California,and distributed in interstate commerce : which aclver6sernents are. in-tended to induce the sale of said yarn , and have maintained n. sub-stantial course of trade in commerce, as "commerce:' is defined in theFederal Trade Commission Act.

PAR. 8. Among and typicd of the statements and representationscontained in the aforesaid n8\Yspaper adn;rtisem*nts , but not all in-cJ usi ve thereof : is the :following;

100% Italian Mohair Yarn.

PAR. 9. By and through the use of the aioresaid statements andrepresentations of respondents, respondents represented directly or byimplication , that the aforesaid yarn "was composed of 100% 3101H1irvdlercas in truth and in fftct the yarn contained fibers other thfmMohair fibers.

Tberefore, the statements ancl n pl'esentations as set forth in

Paragntphs Seven and Eight, 1yore and are fals8 , misleading andc1ecepti ve.

P.'i.R. 10. The use by respondents of the a.foresaid false, misleadingand deceptive statements , representations and practices bas had theca;Jacity and tendency to Inisleftcl members of the purcha,sing publicinto the erroneous and mistaken belief that said statements andrepresentations \ven and are true and into the purchase of snustantialquantities of respondents ' products by reason of said erroneous mis-la,ken belief.

PAR. 11. The aforesaid acts and practices of responclent as hm.'cin

alleged, were all to the prejudice Hnd injury of the public and. ofrespondents : competitors and constitutrc1 unfair anc1 deceptiye acts

870 FEDERAL TRADE COMl\IISSION DECISIONS

Decision and Order G7 P.

and practices in commerce within the intent and meaning of theFederal Trade Commission Act.

DECISIOX AND ORDER

The Commission having heretofore det.ermined to issue its com-plaint charging the respondents named in the caption hereof withviolation of the Federal Trade Commission Act and the 'Wool Prod-ucts Labeling Act of 1939, and the respondents having been served

with notice of said determination and with a copy of the complaintthe Commission intended to issue, together with a proposed fonn oforder; and

The respondents and counsel for the Commission having thereaftBTexecuted an agreement containing a consent order, an admission byrespondents of a11 the jurisdictional facts set forth in the complaintto issue herein , a statement that the signing of said agreement is forsettlement purposes only and does not constitute an adlnission byrespondents that the law has been violated as set forth in such com-

plaint, and waivers and provisions as required by the Conunissionrules; andThe COImnission, having considered the agreement, hereby accepts

same , issues its complaint in the form contemplated by said agree-ment, makes the following jurisdictional findings, and enters thefollowing order:

1. Respondent The Super :l\art is a corporation organized , exist-

ing and doing business under and by virtue of the laws of the Stateof California , and trades a.s Super Yarn Iarkets Super Yarn :Fabric :Markets , and Super Yarn j\fart, ,,,ith its offce and principalplace of business locatad at 1233 South San Pedro Street, LosAngeles, California.

Respondent Irving Hershey Gold is an offcer of said corporationand his address is the same as that of said corporation.

2. The Fedcral Tradc Commission has jurisdiction of the subjectmatter of this proceeding and of the respondents and the proceedingis in the public interest.

ORDER

It i8 ordered That respondents The Super :31art, a corporationtrading as Super Yarn Markets, Super Yarn & Fabric Markets , andSuper Yarn Mart, or under any other trade name or names , and its

SUPER YARN MARKETS, ETC. 871

867 Decision and Order

offcers and Irving Hershey Gold , individually and as an offcer ofThe Super !\art, and respondents ' representatives , agents and em-ployees , directly or through any corporate or other device , do forth-w'ith cease and desist from introducing into commerce, or offering forsale , selling, transporting, distributing or delivering for shipment inGommerce, wool yarn or other wool pToducts, a,s "c01nmerce" andwool product" are defined in the 'W 001 Products Labeling Act of

1030 :

1. -Which are falsely or deceptively stamped , tagged , labeled orotherwise identified as to the character or amount of the constitu-ent fibers contained therein.

2. Unless such product has securely affxed thereto or placedthereon a stamp, tag, label 01' other means of identification;

(a) Correctly showing in a clear and conspicuous mannereach element of information required to be disclosed bySection 4(a) (2) of the Wool Products Labeling Act of 1930.

(b) Setting forth the common generic name of fibers inthe required information on labels , tags or other means ofidentification attached to wool products.

3. Which has affxed thereto a label which uses the term "mo-

hair" in lieu of the word "wool" in setting forth the requiredinformation on 1abe1s affxed to wo01 products unJes3 the fibersdescribed as mohair are ent.itJed to such designation and arepresent in at least the amount stated.

It i8 further ol'del'ed That l'espondents The Super :\fart, a cor-poration , trading as Super Ya1'11 JIarkets , Super YaTn & Fabric1farkets , and Super Y ftrn J\1:art, or under any other trade namc ornames, and its offcers , and Irving Hershey Gold , individually andas an offcer of The Super l\Iart, and respondents ' representativesagents a,nel employees (1irectly or through any corporate or otherdevice, in connection with t.he oil'ering for sale , sale or distribution of.yarn or any other textile products in commerce, as "C01TI1CrCe" is

defined in the FedoTal TTade Commission Act, do forthwith ceaseand desist from misrepresenting the charadeT or amount of constitu-ent fibers contained in yarn or any otheT textile products in adver-tiscments applicable thereto or in any other manner.

It i8 further ordeTed That the respondents herein shaJJ , withinsixty (60) days aftel' service upon them of this order, fie with theCommission a. report in writing setting forth in detail the mannerand form in which they have complied with this order.

872 FEDERAL TRADE COMMISSION DECISIONS

Complaint fiT l:'l'.

IN THE J\fA TTER OF

WHITEHILL SYSTEMS , INC. , ET AL.

CONSENT ORDER, ETC. , IX REG \RD TO THE ALLEGED VIOLATIO:X OF '

:FEDERAL TK\DE CO DnSSION ACT

Docket C-900. Complaint , Ma.y 1965-Decision , Jlay 2iJ 1f)5

Consent order requiring New York City sellers of business record keepingsystems and tax services for small businesses through franchised dis-tributors, to cease misrepresenting in advertisem*nts in newspapers and inbrochures, to induce the purchase of distributorships , the earr:in;;'s andprofits , permanency of ownerships, recovery of initial investment , tr::liningexpenses, and the nature of business opportunit . being offered.

IPLATNT

Pursuant to the provisions of the Federal Trade Commission Actand by virtue of the authority vested in it by said Act , the FederalTrade Commission having reason to believe that ,Vhitehill SystemsInc., a corporation, and Louis "\Veisberg, indiddmtlly and as anoffcer of said corporation, hereinafter referred to as respondents

have violated the provisions of said Act, and it appearing to theCommission that a proceeding by it in respect thereof would be inthe public interest , hereby issues its complaint stat.ing it.s cha:rges inthat respect as follows:

PARAGRAPH 1. Respondent "\Vhitehill Systems , Inc. , is a corporationorganized, existing and doing business under and by virtue of thelaws of the State of Xew York , with its principal offce and place ofbusiness located at 71 Fifth Avenue , N ew York 3 , ~ ew York.

Respondent Louis ,Veisberg is an offcer of the corporate respond-ent. He formulates , directs and controls the acts and practices of thecorporate respondent , including the acts and practices hereinafter setforth. His address is the same as that of the corporate respondent.

PAR. 2. . Respondents are now, and for some time last past have

been , engaged in the advertising, offering for sale , sale and distribu-tion through franchised distributors, of a bookkeeping system andtax service for small businesses. The record keeping system consistsof a loose leaf bincler calleel ",Yhitchill Taxkeeping Systemswhich cOJ1ta.ins forms and instructions for keeping records of thebusiness. The tax service undertakes to furnish purchasers withincome tax bulletins, answers their inquiries regarding income taxesand , upon re.quest, prepares the purchascr s income tax return at theend of the year from a summary of figures furnished by him. The

'VHJTEHILL SYSTEMS TC., ET AL. 873

872 Complaint

bookkeeping systern and tax service is for a two-year period and

seDs for $119. 50.PAR. 3. In the course and conduct or their business, re ponclents

now cause , and ror some time last past have caused , their said prod-uc.s:1nd services , when sold , to be shipped from their place or busi-

s in the State or Ne York to purchasers thereor located in vari-ous other States or the United States , and maintain , and at all timesmentioned herein have maintained , a substantial course or tracle insaid products a.nel senTices in commerce as "commerce" is definedin the Federal Trade Commission Act.

PAR. 4. In the conduct or their business, at all times lllentioned

herein , respondents have been and are in substantial competitionin commerce with corporations , firms and individuals in the sale orprocluds and services or the same general kind and nature a.s thosesoJel by respondents.

PAH. 5. In the furtherance or t.he sale or their products and serv-ices psponc1ents grant to distributors the exclusive right to sellsuch products and services in an exclusive territory ror an initialterm or two years in consideration of the purchase by dist.ributorscovering the first yc , of an invcntory consisting of said boold eep-ing systems and various supplies ror the amount of $7500 , and thepurchase each year thereafter of at least 25 Taxkccping Systems

during each calendar quarter. The agreement states that it shall beautomatically exte,nded for two year terms provided arter the initialperiod the undertakings assumed by tllC distributor are faithfullyperformed. For the purpose or inducing the purchase of said dis-tributorships , respondents have made various statements in adver-tisem*nts in lle\YSpapers of national circulation and in broc.hures

respecting prospective earnings from said distributorships , the per-tlenc:y of ol'.-ership or said distributorships and the association

with respondents, the recovery or the initial investment, the train-ing or the distributor at the. respondents ' expense , and the nature

or the opportunity being offered.Typical , but not all inclusive, of such statements and representfl-

tions are the following:I-en s '\hat a 'Whitehil franchise cOHId llean .Schedule oJ Cost and Potential Profit"

Figure it out for yourself any way you want to

No matter how you figure, this is a sound , highly profitable lJUsiness.

'" * " investment * ' ' " secured by inventory

* " "

, investmEnt" '" * guaranteed by inventory" " a lifetime of security * " *

.:' " * for a man who wants a Jifetime business of his own,Ye train you "

r, '" at our own expense

LSec atrnchecl

3i9- 71--

874 FEDERAL THADE COM1\IISSIo: .r DECISIO

Complaint

hul1ile of cost and potent-ial pmfit

67 F,

Cost todistributor

Cast todealer

Cast touser

\Vhitchil t(lxkeeping system-- _--_---------- $44. 50 S39.

The follo","ing wil give ..ou SOlne idea of the poten-

tial income with dealers including yourself:Just co.."ering t.he territory by yourself and

making an avcrage of 4 sales per ,veek, at a

profit, of S5. 00 per sale (weekly total) - - - - - -- -- - - - 220. 00Yearly totaL-

_____- -

1 Subdist.ribntor (your i'alesrnan or dealer),making 3 sales per week , at YO\1r o\"erridc of

$15.00 each-

-- - - - -- -- - -- - - - - -- - - - - - - --

Plus yonI' personal sales of 4 sales pel' weekat a profit of S55. 00 pel' salc-

----

$!JU. ;)0

440.

45.

220. 00

Weekly totaLu_u___

---- - --

265.Yearly totaL - u - - n U - - - U - - - -- U - -- - - - u-- --

2 Sllbdj tributors (your salesmen or des.lers),each making 3 sales per week , or a. tota.l of 6sales per week at your override of 815.

each- -

------ - -----------------

Plus your personal sales of 4 sales per weekat a profit of S55. 00 per salc--_--_---

-----

1:1. 780.

DO. 00

220. 00

\Veekly totaL_- - - - - -- -

- - - -- - - - - - - --

Yearly totaL_

__---------------

310.

------ ---

, 120. 00

ON YOLR O,y:\T nLT KOT ALONE!

\Yauld you like to reap the benefits of self-employment'? Do you want abusine-ss of your o,Yll-

y\-

ith the backing of a 20-year establishf'd i\Tationalcompany? Complete X.Y. home offce ::md field training provided. if yonqualify.

S7500 iUYl?stmcnt required pl'Oric1es il1yentory requiring $12 000 plusCO::UPAXY FIKAKCIKG A YAILABLE. Ton wil O,'\11 a business which hasbeen endorsed by thonsands of small businessmen and featured in tradejournals throughout the country. Scores of men , with little or no experiencein Ollf field-Business ::l:lln.gement Controls-- haye achieved success. In-Yf'stment usually recovered in less t.han a year plus a subst.antial profit.No rOY;llt:v fees. For complete information write today, including briefresume, phone number, and territory preference.Box 000, Wall Street .Tournal , 44 Broad St. , r--ew York 4 , N.

PAH. 6. Through the use of the aforesaid statements and repre-sentations set out in Paragraph Five , above , respondents have repre-seJ1ted directly or by implication:

1. That distributors generally realize annual net profits solelyfrom the sale of respondents ' record keeping system of from 811 000

WHITEHILL SYSTE:\fS INC. ) ET AL. 875

S72 Complaint

to $12 000, if working alone, or of from $13 000 to $14 000, if they

employ the services of one sub-distributor or of from $16 000 to$17 000 if they employ the services of two sub-distributors and thatall prospective franchise purchasers could expect to realize equallyhigh net profits.

2. That the majority of distributors develop businesses whichrequire the employment of one or more sub-distributors and that amajority of prospective distributors could expect to develop busi-

nesses of such size as to require the employment of one or more

sub-distributors.3. That distributors generally will be able to recover their in-

vestment in less than one year and in addition thereto Inake a sub-

stantial profit.4. That the initial investment of distributors is secured or guar-

flnteed by the inventory.3. That distributors acquire a perma,nent, lifetime business.6. That distributors are trained wholly at respondents' expense.

I. That respondents are affording the opportunity of investingin and managing a business engaged primarily in the installationof business record systems.

PAR. 7. In truth and in fact:

1. Distributors do not generally realize annual net profits solelyfrom the sale of respondents ' record keeping system of from $11 000

to $12 000 , if working alone, or of from $13 000 to $14 000 if they

employ the services of one sub-distributor or of from $16 000 to$17 000 , if they employ two sub-distributors and prospective dis-tributors could not expect to reaji*ze equally high net profits.

2. The majority of distributors do not develop businesses which

require the employment of one or nlOre sub-distributors nor couldthe majority of prospective distributors expect to develop businesses

of such size as to require the employment of one or more subdistributors.

3. Distributors ,,,ill rare1y, if ever, be able to recover their in-vestment in less than one year a,nd in addition thereto make a sub-stantial profit.

4. The initial investment of distributors is not secured 01' guaran-

t.eed by the inventory. Distributors who discontinue the businesscan liquidatB their inventory only at a fraction of the originalinvestment.

5. Distributors do not acquire a permanent lifetime business.The continuance of such business is dependent upon the distributorcunlo1111ancc with the terms and conditions of the franchiseagreement.

876 FEDERAL TRADE COMMISSION DECISIO

Decision fwd Or(:el' G7 F.

6. Distributors arc not trained wholJy at respondents : expense.

Part of the distributor s initial investment is used for training costs.7. Itesponclcnts are not affording the opportunity of inyesting in

and managing a business engaged primarily in the installation business record systems. Suc.h business opportunity as may be affordedis exclusively that of direct selJing of a bookkeeping system to smallbusinesses.

Therefore the statements and representations referred to in Para-graphs Five and Six hereof were and are false , misleading and de-ceptive.

PAn. B. The use by respondents of the aforesaid false , misleadingand deceptive statements , representations and practices has had , andnmv has, the tendency and capacity to mislead members of thepurchasing public into the erroneous and mistaken belief that saidf-tat.ements and representations \yore tnd are true and into thepU1' hase of substantial quantities of respondents : products

services by reason of said erroneous and mistaken belief.PAR. V. The afore,said acts and pra,ctices of respondents , as herein

alleged , were , and are, all to the prejudice and injury of the publicand of respondents ' competitors and constituted , and now consti-tute : unfair methods of competition in commerce and unfair andcleceptive acts and practices in commerce in violation of Section,j of the Federal Trade Commission Act.

DECISIOX AND ORDER

The Federal Trade Commission having initiated an investigationof certain acts and practices of the respondents l1ftmcd in the cap-

tion hereof , and the respondents having been furnished thereafterwith a copy of a draft of complaint which the Bureau of DeceptivePractices proposed to prescnt to the Commission for its consideration and "\vhich , if issued by the Commission , would charge respond-ents with violation of the Federal Trade Commission Act; and

The respondents and counsel for the Commission having there-after executed an agreement conta.ining a, consent order, an admis-sion by the respondents of all the jurisdictional facts set forthin the aforesaid draft of complaint, a statement that the signing

of said agreement is for sett1ement purposes only a,nd does not con-stitute an admission by the respondents that the law has been vio-lated as alleged in such complaint, and \vaivers and provisions asrequired by the Commission s rules; a,

The Commission, having reason to believe that the respondents

have violated the Federal Trade Commission Act, and having de-

'\.

UITF:HILL SYSTEMS, IXC. ) ET AL. 877

01.. Decision and Order

terminec1 that complaint should issue stating its charges in thatrespect , hereby issues its complaint, accepts said agreement, makesthe iollmving jurisdictional findings and enters the following order:

1. Respondent ,Vhitehill Systems, Inc. , is a corporation organizedexisting and doing business uncler and by virtue of the laws of the

State of .K cw York with its oilce and principal place of businesslocated at 71 Fifth Avenue, in the city of ~ew York, State of

~eY, York.R.espondent Louis 'Yeisberg, is an offcer of said corporation and

his address is the same as that of said corporation.

2. The Federal Trade Commission has jurisdiction of the subjectmatter of this proceeding and of the respondents and the proceedingis in the public interest.

OHDER

Iti.s oTdeped That respondents ,Vhitehill Systems , Inc. , a co1'po-ntt1on , and its offcers , and Louis ,Veisberg, individually and as

offcer of saiel corporation, and respondents ' agents , representativesand employees, directly or through any corporate or other devicein c01 nection with the offering for sale , saJe or clistribution of busi-ness rec.orel keeping systems and tax services or any other products01' services in commerce as "commerce :' is defined in the FederalTrade COllmi sion Act , do forth-.vith cease and desist from:

1. Representing, directly or indirectly, that distributors or pros-pectin' : distributors of respondents : bookkeeping system gencralJyrealize or may expect to realize annual net profit solely from thesale 01 said systems of from $11 000 to $12 000 if working alone , orof from $13 000 to $14 000 if they employ one sub-distributor, orof from 816 000 to S17 000 if they employ t'lYO sub-distributorsor thflt distributors or prospective distributors realize or may expectto realize net profits from the sale of said systems in excess of theprofit for t given period reaji*zed by a. ma.jOl'ity of respondentsdistributors.

2. :.!isrepresenting in any nmnner the profits or other,vhich arc reaji*zec1 by respondents ' distributors or whichexpected to be rea.l1zec1 by prospective distributors.

3. Representing, directly or indirectly, that the majority of dis-tribl1tors or prospective distributors develop, or may expect to de-velop, businesses whic.h require the employment of one or more sub-c1istri butors.

4. Representing, directly or indirectly, that distributors will beable t.o recover their investment and in a.dc1ition earn a substan-

benefitsmay be

878 FEDERAL TRADE COl\IMISSIOK DECISIONS

Syl1abus 67 F. 'l.

tial profit in less than one year j or misrepresenting in any mannerthe time within which distributors wil be able to recover their in-estment or earn a substantial profit.5. R.eprcsenting, directly or indirectly, that the distributor s initial

investment is secured or guaranteed by inventory; or representing

in any other manner that there is no risk or loss of the distributorinvestment.

G. using the words permanent, lifetime, or any other worc1similar import or meaning in reference to the business to be ac-quired by distributors without clearly and conspicuously revealing

in immediate connection therewith that the continuation of the busi-ness is dependent upon conformance with the franchise agreemententered into by and between respondents and the distributor.

7. Representing, direetJy or indirectly, that distributors are trainedwholly at respondents ' expense or misrepresenting in any mannerthe amount or kind of contribution made by respondents to the train-ing of distributors.

8. Representing, directly or indirectly, that the business oppor-

tunity afforded by respondents is that of investing in and managinga business engaged primarily in the installation of business recordsystems; or misrepresenting in any manner the type of businessfor which franchises are being offered.

It is hi1,theT o?'dcred That the respondents herein shaJJ , withinsixty (60) days after service upon them of this order, file with theCommission a report in writing setting forth in detail the mannerand form in \\-hich they have complied with this order.

T THE )IATTER OF

FRUEHAUF TRAILER CO IPANY

OHDER \ OPIXIOX , ETC. , IN HF.GARD TO THE .\T.LEGED YIOL.ATIOX OE' SEe. '; OF

THE CLAYTON ACT AXD THE FEDEHAL TRADE COl\LlnSSIOX ACT

Docket GGOS. Complaint

, .

17/.g. 1'''!. 19.5C';' Decisiol1 , JIaJ! g8. 1.95''''

Order requiring the Xation s dominate m:1nnf8.dnrer of tJ'llck trailpl's 1ocatf'd

in Detroit , :\Iich., to divest itsp1f 'within a period of Ont' yenr of two majorcompetitors which it ucquired: (1) Hobh ::Iamlfnctlll'ing Co. , FOlt WorthTexas , and Hohbs 'l' l'fli1er ana Eqllipl11Pnt Co.. DaJlas, Tex,' . fH'fjuiredNovember 1 , HJ55. and (2) The Strick Co. , Fhiladelvl1ia. PH.. and Strick

"Reported as amended by order of Heal'inl' Exnminer (1ater1 AIlg'. 22. .1 058, h;: n(1din sub-parag-raph o. (6) to Paragraph Five of Count I , wb ch pal"l!:rrnph i also incorporatN1

' rpfpJ"rnce in Connt II.HPetitioD for reconsideration (lenied. .Tlll;f 15 , 1965.

FRUEHAUF TRAILER CO. 879

S7S Complaint

Plastic Corp. , Perkasie , Pa. , acquired January 1, 1956, and requiring the

t,,' o acquired firms be recreated as effectiy€ competitors in the truck-trailerindustry.

:IPLAINT

The Federal Trade Commission , having reason to believe that theparty respondent llamed in the caption hereof and hereinafter moreparticularly designated and described, has violated and is now vio.Jating the provisions of Section 7 of the Clayton Act (U. , Title

, Sec. 18) and the provisions of Section 5 of the Federal TradeCommission Act (D. S. , Title 15 , Sec. 45) and it appearing to theCommission that a proceeding by it in respect thereof would be tothe interest of the Pllb1ic , hereby issues its complaint pursuant to itsauthority thereunder and charging as follolfs:

COUNT I

PAR"\GRAPH 1. Respondent Fruehauf Trailer Company (herein-after referred to as Frlleha,llf) is a corporation organized and exist-ing under the laws of the State of ).fchigan, ,,,ith principal offcelocated at 10940 Harper Avenue, Detroit 32 , :\Iichigan. Fruehaufis now and at all times relevant herein has been engaged in themanufacture, sale and distribution of truck-trailers, truck bodiesaccessories and service parts in commerce, as "commerce is defined

in the Clayton Act and the Federal Trade Commission Act.Fruehauf, prior to and following the acquisitions hereina.fter set

forth , was and is the world's largest and the Kat-ion s dominant

t.ruck-trailer manufacturing, sales and service organization. Frue-hauf produces , services and sells, numerous different types of truck-trailers of various body and chassis de.signs and varying load ca-pacities, including van, refrigeration platform, tank, cable dumpand heavy-dnty flat deck or carryall trailers. Van-type trailersproduced include lines of stainless steel and aluminum constructionas "ell as the standard steel models.

In addition to foreign plant and branch operations and in con-

junction with its principal manufacturing facilities widely locatedwithin the United States, Fruehauf maintains factory sales andservice branches in some 70 different cities. In addition to these

Fruehauf factory sales and service branches, there are some 30 ormore distributors selling and servicing Fruehauf's products in vari-ous cities throughout the United States. All the sales and servicebranches of the Fruehauf Trailer Company are equipped to servicetruck- trailers produced by Fruehauf as ell as other manufacturers.

880 FED RAL TRADE COMMISSION DECISIOXS

Complaint 67 F.

The Fruehauf Trailer Company in 1955 ha.d commercial sales (notinc.luding $11 491)19 in government sales and $1 277 j605 so-caD eel

rent received on trai1er leases to customers) of $228 120 789. In 1955

the volume of sales made through Fruehauf bra,nehes in the UnitedStates of service parts , accessories and serviee labor alone amountedto approximately $29 000 000.

\R. 2. The lUttion s trllck- tra,ilcr manufacturing industry com-prises f'ome 100 odd in number of different manufacturcrs variouslylocated throughout the United States. ' With but few exceptions allare comparatively small business concerns of limited capital and

erecl*t responsibility, manufacturing and selling their various prod-ucts on a more or less localized or limiteel regiona,1 basis, Few , if anymannfacture, sell and distribute a full line of the various vehicle

types f1J1d material constructions made by Fruehauf, and many areable to produce and selJ onJy a small counterpart of the completeFl'uehauf line sold , distributed, serviced and financed by Frl1ehon n. nat.ional basis. The greflt majority by number of these smallmanufacturers have been and are now able to account for only

minol' percentage of the total annual sale. s of new truck-trailers bythe industry, which for 1955 amounted to $371 413 000.

SC"" truck- t.railers are cust.omarily sold by the industry on it 3 t.o5 year t.ime-payment basis and used truck-trailers on a lesser basis\fith substantial down payments required from the purchaser. Thec10'Yll payment may take the form of cash the h'arlr,- 111 of a usedvchi('1c or be other,,-ise secured usually by the purchaser s ownershipin othpr trailers. X umerOllS purchasers of trailer equipment aretrucking finns or corporations operating fleets of such trailers andan equipment turnover or fleet expansion win in many insta.nccsconcern transactions involving many thousands of dollars,

The substantial majority of the industry s truck-trailer sales winrequire. these as well as other purchasers of such vehicles to seekfinanc.irll aid in the transactions. The purchasers may attempt to dealdirEctlT with local banking or other lending institutions solely ontheir Q'Yll credit responsibility, or may require the vehicle manufac-turer or distributor to provide or arra.nge for the iinancing necessaryto the proposed sales transactions. In these latter situations the

amount involved and the extent of the credit responsibility to beallo\fecL the particular vehicle manufacturer or distributor con-cern8(1 , directly or on a recourse basis , will often determine the bankor lenrling institution s decision as to the financing of the proposedtransactions.

FRUEHAUF 'l'AILER CO. 881

878 Complaint

PAR. 3. A 111atter of major importance to most purchasers of truek-trailers and in many instances goyerning the purchaser s choice of

the competitive vehicle manufacturer or distributor selected, are thefinancing terms of the proposed sales transactions. Exemplificationof this is found in an appreciable segment of the market among

others for the industry s sale of truck-trailers, occupied by pur-chasers engaged in the class 1 motor carrier inter-city transportationof freight. The substantial industry sales made in this particnlarsegment of the market primarily involve van- type trailers. During1955 the industry sales of new van-type truck-trailers made of steelor aluminum totalled $249 359 000.

Van-type trailers made of aluminum , as opposed to steel , are beingincreasingly used, partly because State highway laws establishingmaximum road-weight al10wances place a premium on lighter "eighttrailers which can carry greater pa.y-Ioads within the weight limita-tions. ew aluminum ,'ehicle designs in the industry of increasedcubic capacity have also , in company with fleet expansions , tendedto accelcrate the turnover bv the motor carrier of the more or Jessobsolete older equipment and the purchase of this new equipment. In1954 the total industry sales of new aluminum van-type truck-trailersamounted to $87 859 000 and by year end 1955 they reached a total of$172 672 000.

The competitive terms of sale and fiancing extended or able to heprovided for by the different manufacturers and distributors inthe industry of such trailers with relation to different interest ratesthe appraisal va.lucs accorded used trade- in trailers, the lesser amountsof down payment required , if any, and the longer length of the loanperiods offered, will often dictate the motor carrier s choice of a

particular seneI' or distributor and especially so , under circ*mstanceswherein the motor carrier is in financial difficulties or where its avail-able working capital and banking credit is limited, or otherwise in-

volved or additionally needed for further equipment expansion

terminal improvements or acquisitions , or related purposes.PAR. 4. The Fruehauf Trai1er Company uses its wholly owned cor-

porate subsidiary, the Fruehauf Trailer Finance Company, as bothn" controlled finnncing outlet and a major sales aid in the obtainingnd holding of customers. Fruehauf has the further advantage of

receiving payments for its trailers when its customers ' installmentnotes are sold to its Fina.nee Company without recourse, of havingno legal liabi1ity thereafter, contingent or otherwise, for collectionof the installment note.s. The Fruehauf Trailer Company is accord-ingJy not subject to a. limitation on its credit responsibility on such

882 FEDERAL TRADE C01-1JVIISSIO DECISIONS

Complaint 67 F.

basis , as would normally be a competitor trai1er manufacturer or itsdistributor seeking the fiancing aid of a banking or lending institu-tion '\ith any such contingent debt Jiabilities outstanding.

The Fruehauf Trailer Finance Company in turn can borro'\ alllJ8Cessnry monies at commercial banking rates and charge FruehaufC'l1stome.rs competitive retail fmance rates, or higher or lower fiancenJtes than the prevailing competitive rates as deemed expedient.Fruehauf nationaJly advertises to the trade that it has and can makeavailabJe '\Jmt is termed the Fruehauf exeJusive 7-O'ear finance plan.Approximately 60% of al1 Fruehauf commercial truck-trailer salesfLrc made on time payment contracts under which the buyer paymentsarc secured by retention or title under conditional sale , lease withoption to purchp.se, or by chattel mortgage. The Fruehauf TrailerCompany in 1954 sold $67 576 372 in equipment installment notes tothe Fruehauf Trailer Finance Company as compared to $128 176 144in HH5;) , I'm 89.68% :increase by Fruehauf in the time financing ofsales.

The Fruehauf Trailer Finance Company at year-end 1955 had$162.817347 installment equipment notes outstanding, $75 277 864insta.llment equipment notes liquidated, and finance revenue earned

(luring 1055 in the amount of 88 371 580. Sald finance company dur-ing 1955 paid the parent trailer company dividends and interest inthe sum of $1.600 000. In early 1956 the Fruehauf Trailer FinanceCompany was enabled to negotiate with various fiancial sources andsecure fnrt11cr credit f1ccommodations in the aggregate amount of8235.000.000.PAR. 5. Fruehauf Trailer Company, acting in commerce as afore-

deseribe, has been and is nOT\ engaged in a pattern of acquisitions of

the stock : assets and facilities of other corporations also acting insnch commerce and engaged in or in supplying the X ation s truck-trailer manufacturing industry, the effect of which acquisitionssingJy or cumulatively by Fruehauf, may be to substantially lessencompetition or tend to create. a monopoly in the whole or in appreci-able parts of the saiel industry, in the line or lines of commerce inwhlch the said corporations aud Fruehauf were and are engaged.

Among other of such corporate acquisitions by Fruehauf are thefollowing:

(1) Carter Manufacturing Company, Inc., and Carter, Inc.:Memphis, Tennessee, acquired during 1947. Ca.rter produced analuminum van-type truck-trailer not at that time included in theFruehauf line.

FRUEHAUF TRAILER CO. 883

S7S Complaint

(2) Brown Equipment & Manufacturing Company, Westfieldl\lass. , an eastern producer of aluminum van-type truck-trailers ac-quired during 1953.

(3) Hobbs Ianufacturing Company, Fort .Worth, Texas, andHobbs Trailer and Equipment Company, Danas , Texas , acquired inOctober 1955. Hobbs produced various type truck-trailers includingaluminum van-type truck-traiJers and a patented dump-truck trailerused in highway eonstruction.

(4) Strick Plastic Corporation , Perkasie, Pennsylvania, and StrickCorporation, Philadelphia , Pennsylvania, acquired in January 1956.Strick, the third largest nlanufacturer in total amount of annualcales in the Nation s truck-trailer industry, specialized in the produc-tion of aluminum van-type truek-trailers sold and distributed on anational basis. Strick was acquired in exchange for 228 028 shares ofFruehauf common stock valued at 810 831 330, which was admittedly

000 000 in excess of the fair value of the net assets of Strick (otherthan goochrill) aequired by Fruehauf.

(5) Independent Metal Products Co. Omaha, Nebr. , acquired for780 500 of Fruehauf common stock in April 1956. Assets acquired

included a tank-trailer manufacturing plant, machinery, a two-storyoffce building, and a 15-ac1'e sit.e. Independent was a former supplierto Fruehauf of tank shells for mounting on a Fruehauf chassis whichthen became Fruehauf tank-trailers.

(6) The truck-trailer manufacturing facilities and other assets ofthe Hyde Corporation located at Cleburne , Texas. This acquisition byFruehauf TrrLiler Company occurred on or about l\1:ay 23 , 1958 , not-\Yithstancling the pendency of this proceeding.

PAn. 6. Fruehauf Trailer Company and its Carter, Brown, Hobbsand Strick bcilities acquired as aforedescribed, sold $181 053 942 ofthe industry total of $371 413 000 or 48.75% of the national marketfor new truck-trai1ers, based on Bureau of Census, United StatesDepartment of Commerce total figures for the year 1955. Compara-tive data. on used truck-trailer sales is not available.

Fruehauf Trailer Company (including Carter) but exclusive ofthe sales by the other said acquired facilities, sold $138 845 919 ofthe industry total of $371 413 000 or 37.38% of the said market. Thecombined Brmm , Hobbs and Strick facilities (separate Carter datanot available) sold $42 208 023 of the remaining balance of the in-dustry sales of $232 567 081 or 18.15% of the remaining market.

Frueha,uf Trailer Company thus increased its share of the nationalmarket for new truck-trailer sales from 37.38% to 48.75%, or 11.37%

\dded by amendment of Hearing Examiner s order of August 22, 1958.

884 FEDERAL THADE CQNlMISSIOK DECISIO

Complaint 6j F.

as a result of said acquisitions , and thereby also eliminated from theformer remaining balance of the seller market, 18.15% of actualand potential competitors ' sales. In so doing it thereby also fore-closed to former and potential purchasers fr0111 Carter, BrownHobbs and Strick, the opportunity of purchasing comparable truck-trailers from said supply sources on a competitive sales basis withthose offered for sale by Fruehauf.

Fruehauf Trailer Company and the acquired Brown and Strickfacilities (Hobbs sales data not available) in appreciable parts ofthe industry market , for example, that of the sale of new aluminumconstructed van-type insulated , refrigerated , closed (excluding furni-ture vans), and open top truck- trailers, sold $87 554 456 of the indus-

try total of $171 788 000, 01' 50.97% of the industry market for 1955.Fruehauf Trailer Company (including Carter) but exclusive of

the sales by the other said acquired facilities , sold $52 355 352 of theindustry total of $171 788 000, or 30.48% of the said market. Thecombined Brown and Strick facilities sold $35 199 104 of the remain-ing balance of the industry saJes of $119 432 648 , or 29.47% of theremaining market (not including Hobbs sales).

Fruehauf Trailer Company to mch extent increased its share of thetotal in this appreciable part of the market for new aluminum truck-trailers from 30.48% to 50.97%, or 20.49% as a result of said acquisi-tions , and thereby also eliminated from the former remaining bal-ance of this particubr market, 29.47% of actual and potential com-petitors ' sales of such trailers.

Fruchauf TraiJer Company during 1955 sold $2 365 400 of the

industry total of $8 757 000 , 01' 27. 01 % of the industry saJes of dump-tmilers. The acquired Hobbs facilities soJd $1 714 859, or 19.58% oft118 said industry total. Fruehauf thus increased its market share onthis particular item from 27.01 % to 46. 59% or an increase of 19. 58%.In so doing it eliminated Sl 714 859 from the fanner remaining bal-ance of this market of $6 391 600, or 26.83% of actual and potentialcompetitors ' sales or such trailers.

PAR. 7. The foregoing acquisitions , acts and practices of rcspond-fnL as hereinbefoTe alleged n,nd set forth , constitute a violation ofSection 7 of the Clnyton A. ct (15 T;. , Sec. 18).

COUNT 11

in. 1. Paragraphs One through e,ix of Count I of this c.omplaintaTC hercv;-ith incorpol'ate,d by refcrenee. and made pfLrt of this para-graph of Comit II of the complaint as if herein :3et forth in full text.

FRUEHAUF TRAILER CO. 885

Si8 Complaint

PAR. 2.. The single or the cumulative acquisitions or the stock

assets or racilities of other corporations so engaged in or in supplyingthe Nation s truck-trailer manufacturing industry, by FruehaufTrailer Company, the largest and the dominant manufacturing, salesand service organization engaged in said industry, have been andmay be as set rorth in Paragraph One above, to the prejudice andinjury of the pub1ic: and consHtut.e unfair methods or competitionand unfair acts and practices in commerce within the intent andmeaning of Section 5 of the Federal Trade COlnmission Act, and anyfuture similar acquisitions by the Fruehauf Trailer Company willfurther increase its dominant and monopolistic position in the saidindustry.

PAR. 3. Fruehauf Trailer Company, the largest and the dominantseJ1er in the Kation s truck-trailer manuracturing industry, acting inconjunction with it.s wholly o'Wned and controlled Fruehauf TrailerFinance Company as hereinberore and hereinafter described, hasbeen and is now able to exercise a potential monopoly power both tofrustrate the sales growth of its small business competitors in theindustry and to eliminate their opportunities for business survival.

Fruehauf in the offering ror sale and the sale or new and usedtruck-trailers and related products to the trade, has been and is nowemploying certain pricing, financing, down payment, leasing andused vehicle purchasing and trade-in methods and practices , includ-ing loa,Ds or loan commitments to its own and its competitors ' actualor potential customers , which have had and now have the capacity,tendency and effect of unduly hindering and lessening competitionand nnfairly diverting trade to Fruehauf from its competitors, andof creating a monopoly in Fruehaur.

The. Fruehauf Tmiler Company during 1955 had assets of $188657 414 , working capital of $52 091 782 , and net earnings of $8 658045. It was able to carry and had in inventory $22 658 569 in newtrailers, $5 891 595 in used trailers, and $7 603 552 in servce parts.It had outstanding $4 915 102 in trailers leased to customers for1955 as compared to $1 151 146 for 1954. Commercial sales increasedfrom $127 114 324 in 1954 to $223 120 789 in 1955, or 75.53%.

Fruehauf's total assets rose from $118 859 082 in 1954 to $188 657414 in 1955. At the end of the first quarter, :YIarch 31 , 1956 , they hadI'e.acl1ec1 82;"53.555,800. This represents an increase rrom December 311H54 , to "Tarch 31 , 1956 , of 113.32% in total assets. The FruehaufTrailer Company in 1954 sold $67 :"576 372 in equipment -installmentnotes to the Frnehauf Trailer Finance Company as compared to

886 FEDERAL TRADE COJVBIISSION DECISIO:.S

Complg.int (;7 F.

8128 176 144 in 1955 , an 89.68% increase in the time fiancing ofsales.Fruehauf acting in conjunction with the Fruehauf Trailer

Finance Company has offered to fumnce and has fianced, the sale

of truck-trailers all terms which Fruehauf cOlnpetitors with 11101'6

Emited resources have been unable to meet, and as a result saidcompetitors have lost potential sales of such vehicles in substantialdoJ1ar amounts to Fruehauf. The Fruehauf so-cal1ed exclusive 7-yearfinance plan, for example, is a more advantageous longer-than-normal loan period which Fruehauf's small businessmen competitorsaxe unable to obtain or furnish to prospective customers. This plan

win permit Fruehauf customers to pay for Fruehauf equipment as

it depreciates and its earnings while working can exceed the cost oft.he borrowings. Trucking concerns have thus been led to purchaseadditional Fruehauf equipment in the expectation of increased reve-llues as a result.

Illustrative of some of the saJes , loan and fiancing methods andpractices used by Fruehauf against its competitors , ror example, is

that in connection with the 1954 reorganization and combination ofa group of freight trucking companies, Fruehauf proceeded toguarantee bank loans of $1 100 000 and hold notes of $498 974 sub-ordinate to the bank loans , and nonvoting 5% preferred stock of8500 000. The reorganized company as a result or Fruehauf loan

assistance beca,me indebted to Fruehauf Trailer Finance Companyon installment equipment notes for the purchase of new trailers fromFruehauf in the approximate amount of $4 775 000.

Fruehauf further entered into an arrangement with another buyerduring 1954-- , which provided that Fruehauf would purchase 917llsed trailer units at a mutually agreed upon appraisal value of

060 000 and in turn would sell the buyer 1 300 new trailer units ata negotiated sales price of $7 532 682. The arrangement provided rorft chattel mortga.ge on the new equipment, a 7-yea1' finance phnand a down payment by the buyer of 20% or $1 506 536. It was also

then provided that the buyer would execute a bil of sale to Fruehaufcovering the 1 300 sets of tires on the new vehicles and that the tiresin turn would be included in the chattel mortgage and their $1 012700 value credited towards the buyer s 20% down payment.

The net effect of this arrangement was to furnish the buyer $8 54538:2 in new equipment on a 7-year financing plan , with a down pay-ment of bnt 5.78%, or only $493 836. Further, this down payment of849:3 836 in cOlnparison with the $3 060 000 agreed upon purchase

FRUEHA1;F TRAILER CO. 887

S7S Comp1aint

price by Fruehauf for the buyer s old equipment, would leave a cashdifference of $2 566 164 advanced for the buyer s use.

For another example among others, Fruehauf in late 1955 arrangedto purchase 47 used trailers for the agreed upon lump sum appraisalof $127 176.13 and in turn sell the buyer 42 new units for $316 761.32on a five-year finance plan with fL 10% c1mvn payment of 831 676. 13.The buyer in this transaction could not obtain other than a three-yearfinance plan from local lending institutions. The sum of $127 176.advanced the buyer by Fruehauf on the used trade-in equipmenta!lowed the buyer to payoff an indebtedness owed on such equipmentof appmximately $63 000 , make the down payment of $31 676.13 toFruehauf on the new equipment, and stil left the buyer with a cashba.lnce suffcient to pay Fruehauf the first six monthly payments ofsome $32 000 principal and financing charges clue on the new equip-Hlcnt.

Fruehauf, in addition to such financing, is also entering into llewtrailer "leases" as well as extending preferential and more advantage-ous tha,n normnl pricing to some purchasers of its truck trailers toseeure and hold their patronage as against its seneI' competitors. Foran example among others, Fruehauf entered into an arrangementduring 1053 with a buyer which provided for the purchase from

Fruehauf by such buyer of 600 traiJers at a speeial1y negotiatedsales price of $2 681 611.68 accompanied by an agreement that thebuyer would further purchase from Fruehauf at least 80% of itsequipment Tequirements for the ensuing ten-year period, upon condi-tion that Fruehauf would also furnish preferential and special1ylc1justcd factory prices to the buyer on such equipment. Fruehaufalso entered into lea,se arrangements with this buyer which providedthat at the Bnll of the so-eallec1rental pcriod the buyer could exercise

he option of purchasing the vehicles for a mere $1 each.

PAR. 4. The Fruehauf Trailer Company's aforedescribed acts andpractices as the dominant seller in the nation s truck-tra,iler manufac-turing industry, involving certain truck-tra,iIer pricing, financing,down payment , leasing, and used vehicle purchasing and trade-methods and practices , employed by it in the offering for sale andthe sale of said products to the trade, including its loans or Joancommitments to its 0"'11 and its competitors ' actual or potential cus-

tomers , have been and may be to the prejudice and injury of thepl1b1ic have the capacity and a dangerous tendency to create amonopoly in respondent , undnly hinder and lessen competition andunfairly divert trade to respondent from its competitors , and consti-tute unfair methods of competition and unfair acts and practices in

888 FEDERAL TRADE COMMISSIOX DECISIONS

Initial Decision H7 F.

commerce within the intent and meaning of Section 5 of the FederalTrade Commission Act.

Ul. 5. The foregoing acquisitions , acts and practices of respondentas hereinbefore alleged and set forth, constitute a violation of Section5 of the Federal Trade Commission Act (D. S. , Title 15 , Sec. 45).

11fT. Thomas A. J1untsinqel' , flfT. Charles R. Levin and lvlr. U"gh.J. J( elly for the Commission.

Da"'ies , Richberg, Tydings , Landa

D"ff by 11r. Alfons Landa1111. .James T. Welch and 11fr. Shelby Fitze of Washington , D. C. andllh. Ernest L. Rllshl1W1' of Detroit, :Mich. , for respondent.

lXITL-\L DECISIOK BY ROBERT L. PIPER) HEARING EX_-LlIDECKV1BER 20 , 1963

TABLE OF CONTENTS

PRELDllX.-\HY ST. IE='T_

- - - - - - -- - - - -

FIXDI GS OF FACT -

- -- - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - -

I. Corporate Organizatiol1____--------

----- ---

II. Interstate Commerce and Competitiol1

___ ----------- ---

III. The Unlawful Practices-

-- -

A. The IS5ue5__--

B. Relevant Considerations_

- -

1. Line of Commercc--

--- ---

2. Section of the Country3. Probable Effect-- - - - -- - -- -- --4. Competition Kat Compet.itoF- -5. Industry ConditioD_

___-----_._

6. l\larkct Substantialit

7. Share of the l\Iarket_

- -

8. Future EfTect_

__---- ------ --- -- -

9. Evidence Concerning Lack of EffecL - -10. Cert.ain Acquisitions ot In 'Tiolatioll--

C. The Industry__

1. Dc;;cl'iptiolL -- - - - - - -

- - - - - - - - - - - - - -

2. Extent of Concentratioll--

3. Trend in :.'lrket Shares-

- - - - - - - -

4. Access to Suppliers and Buyers_--_5. Ease of Entry__

6. Conclusions_

- - -

D. The Lines of Commeree--1. All Trailer Product.s_

2. \'an Trailers_

_----- ---

3. .AJuminum \' an TraileJ's- - -4. Dump Trailcrs- -3. Platform Trailers-6. Tank TraileTs-

- -

i. Detachable Trailer -Van Bodics-- -

. - - _.- -- - -- ---

E. The Scc:ioll of the Countr r - - - - - - -

----.---

Pfl

8S9891891891892892,92893893895895895896S96897S9889S89989989990090290390490490490;'906908J(S908900909

FRUEHAUF TRAII-,ER CO.

878 Initial Decision

FD:DIKG,S OF F. \.CT Continll('dIII. The Cnlawful Practj( e'3- Cont.jnued

F. The A( q\li6ition,: Share of d:"rkct1. CarteL - - -2. BrO\nL

\cquired , and EffcC'L - --

3. Hobb,_

-- -

,1. StricL- -

. --

;"j. Independent ;\TH,all)roduct",-6. H:-'de_

-- -- - -

G. AlJeged Unfair :\Jethod... of Compctiion_1. The .' cqHi"itjon,

- - -

2. Competitive Sale Practices__a. Finuncing_

- --

b. Down T' nnenh-

- - . - - - -

c. Trade in," and r. ed Vehicl(' Pnrch.',:ing;-d. Pricing__

c. LCflsing_

f. Loa.n':_

g. Conclusion.

-- - ----

CIX lO':S OF L.-\\L__-ORDER- - --

-----.- --------.-- ----

PRELL'YIIX ARY STA'lE):IENT

On August 17, 1956 , the Federal Trade Commission issued itscomplaint against Fruehauf Trailer Company, a corporation (here-inafter called Fruehauf), chaTging Fruehauf with a violation ofSection 7 of the Cbyton Act , as amended (hereinafter caJ1ed theChlyton Act), 15 D. C. 19 et 8eq. by reason of five al1eged acquisi-t.ions, and a violation of Section 5 of the Federal Trade CommissionAct (hereinafter called the Act), 15 D. C. 41 et 8eq. by reason ofsaid acquisitions and certain allege,cl financing and competit.ive prflC-tices. Copies of said complaint together with a notice of hearing wereduly served on Fruehauf.Fruehauf appeared by counsel and Jied answer admitting the

corporate and commerce a.Jegations of the compIa.int and certa.inother factual allegations therein , including the acquisitions , but deny-ing al1 of the alleged violations. The complaint was modified bymeans of a bill of particulars filed before answer, and was subsequentlymnended 'by the addition of another alleged acquisition by Frue-hauf in 1958 , with appropriate amendment of the answer.

At the conelusion of the case- in-chicf , counsel for Frucha,uf movedto dismiss the complaint for want of proof and legal insuffciency.After the submission of briefs pro and can , said motion was deniedwith the exception of the first acquisition al1eged to be in violationof Section 7, which counsel supporting the complaint conceded was

X79-702--71--

SS9

PW!f

9100109\0911913915917919919920920

924025923926926927928

890 FEDERAI TRADE COl\:IMISSION DECISIO

Initial Decision G7 F.

not because it was an assets acquisition occurring prior to the 1950

amendment of Section 7. Thereafter the defense and rebuttal wereheard. Hearings were held at various times and places throughout

the united States, concluding on May 21 , 1962.

Both parties were represented by connscJ , participated in the hear-ings and were afforded full opportunity to be heard, to examine

and cross-examine the witne,s8es, to introduce evidence pertinent tothe issues, and to fie proposed findings of fact, conclusions of lawand orc1cl's togethl'T 1'1th reasons in snppo:::t thcrco1. Bot.h parties

filed proposed findings of fact, conclusions of law and orders, to-gether with reasons in support thereof and replies thereto.'

In conjunction with such proposals, counsel supporting the com-

plaint attached thereto certain appendices, described by them asexhibits :' which consisted of tabulations based upon certain docu-

mentary evidenee in the record , some of which appendices they sub-mitted in camera because certain portions of the documents relied

upon had been received in camera. Counsel supporting the complaint

moved that the tabulations submitted in ca'mera namely, A , B , C , D

F and P , be received in the open record because the in came7' infor-

mation incorporated in them was both of a minor nature and not of

the type which was the basis for the reception in came7Yt oT the

exhibits , and because of the present age of such information. Thismotion \TriS opposed b:V counsel fOT respondent. This motion is granted"yith l' spec. to Tabulations A , B , C , D and F , which aTe tabulfl-tions of various trailer shipments and sales for the year 1955 , by typeand manufacturer , and include minor items of such in carrwra

information.,Vith respcct to Tabulation P, which concerns Fruehauf' s annual

dolliLr sales of trailers by cJ ass of customer for the years 1053 through1950 , no proposed findings were oiIerecl in connection therewith) no

particular relevancy is apparent (said ta,bula.tion as well as severalothers , such as N, 0 and Q, apparcntly relate primarily to Count IIconcerning which no proposals were made by counsel supporting the.complaint), and all of Fruehauf's total shipments both in units anddollars are contained in the record in open exhibits related to uni-

1 Coun el supporting the complaint fied proposals 'wbich did Dut include :lny pro-posed findings or conclusions upon several of the most substantial issues. For example

they filed no proposals with respect to two of the 1l1leged acquisitions, none ,..itb respectto the effect of the large t acquisition (Strick), and none with respect to any of theallegations of Count II, which dealt with unfair methods of competition under Section, nor any proposed order. As stated by counsel supporting the complaint in their pro-

posals: "A' number of major egments of the proposals, nnfinished at the time of tbis

submission , regretfully are absent from the pages tbat foil ow. Many portions of "batIs herewitb submitted are unavoidably fibbreviated or incomplete.

FRUEHAuF TRAILER CO. 891

878 Initial Decj jon

1;e7' Se fig'ures also in the record from the Bureau of Census, encom-passing the years 1953 through 1961," and cousidered hereinafter.Accordingly, the motion with respect to the tabulation entitledExhibit P is denied. All the findings of fact and conclusions of lawproposed by the parties, respectively, not hereinafter specific"llyfound or concluded are herewith spccifically l'ejected.

l:pon the entire record in the case and from his observation of thewitnesses , the undersigned makes the following:

FIXDn.. GS OF :FACT

I. Corporate Organization

Fruehauf is a corporation organized and existing under and byvirtue of the la'ys of the State of l\fichigan, with its principal offc6

located at 10940 Harper Avenue , Detroit 32 , Michigan. (Answer.

II. Interstate Commerce and Compctition

FruehRuf is now and at an times relevant herein has been engagedin the manufacture, sale, installment sales financing, distribution

servicing and repairing of truck-trailers , truck-trailer chassis, truckbodies, and service parts and accessories , and the leasing of truck-trailers , in commerce, as "coIi1merce" is defined in the Act and in theClayton Act. (Answer.

Fruehauf , prior to and following the acquisitions involved in thisproceeding, was and is the world' s lr..rgest truck-trailer Inanufa.ctur-ing, sales tnd service organization , having a world-wide network ofmanufacturing, sales , and service facilities , producing, selling, leas-ing, financing the sale of, and servicing a wide variety of truck-trailer types haIling various body and chassis designs and capacitiesincluding steel ancl aluminum vans , and platform , tank, and dumptraiIers. (Answer.

In 195:1, Fruehauf had 8 manufacturing plants in the UnitedStates and OTIe in Canada , together 'Ivith 71 factory sales and servicebmnches in the United States and six in Canada (CX 489 and 490).

In 1961 Fruehnul had 16 manufact.uring plants and 82 factori'branches in the l:nited States , as "ell as 10 distributors and 76 deal-ers in stmtegic locations (CX 493 , p. 26; CX 494 , p. 25). Respond-

nx 338, 337 and 339, and ex 473 , 474 , 465- 25-27. 'rbe following ahlJ,eviatioIlare used thrO\Jg-bOllt this decision: Tr. (transcript); CX (CommissiOD e:1hibit): HX(Respondent exhibit); C. Tab (Commission talmlation); R. crab (Re IJondent tab1l1atinIJ

31' 111' reconl IJcrdn consists of 8.000 tJi1P"f'S of tranSCI' ipr. Cj1H1 morc tl1,11 900 exl1ibitconsisting of m ' thousands of pages TIle proposed finejjugs of fact of resllomlenjalone contain 904 separate proposals.

892 FEDERAL TRADE COll,L\nsSIO DECISIONS

In.itial )),,('sion F.T.

ent' s bctory branches are fully equipped production units (CX 484487 , and 489), situated on strategic commercial transportation routesa.nd in cities that serve as important transportation centers. Theycontribute to Fruehaurs volume in the production or new trailersin the reconditioning for sa.le or used trailers , and in promoting newtrailer sales (CX 1 , pp. 5-6; CX 402, pp. 6-7; CX 489, p. 17; CX490, p. 36; CX 491 , p. 6; CX 494, p. 9). In 1955 their sales in the

United States or service parts , accessories and labor alone a,mountedto appl'ximately $29 000 000 (Answer).

In 1955 Fruehauf's total commercial saJes (excluding GoveI1mentand leases) of all products and service amounted to $223 120 789.

ruehauf sells most or its installment sale or fiancing paper, gen-erally known as customer paper, to Fruehauf Trailer Finance Com-pany, a wholly owned corporate subsidiary, organized for suchpurpose (Answer).

III. The Unlawful Practices

A. The IssuesCount I of the compla.int , as amended , alleges six acquisitions, five

of competitors (horizontal) and one of a supplier (vertical), all ofwhich as hereinafter found were asset rather than stock acquisitions.

Count II of the complaint, as amended , alleges that the aforesaidacquisitions, singly or cumulatively, violate Section 5 of the -, , bothas a violation of Section 7 of the Clayton Act and independentlythereof , and further aHeges that Fruehauf engaged in unfair meth-ods of competition in violation of Section 5 by certain pricing, filanc-ing, down pa.ymcnt, leasing, used vehicle purchasing and trade-anc11enc1ing practices in connection with its sale of truck-trailers andrelated products.

B. Relevant ConsiderationsThe Supreme Court has established that a necessary predicate to a

determination of a violation under Section 7 is the ascertainment ofthe relevant product market (line of commerce) and the relevantgeographic Inarket (section of the country), in order to evaluate theprobahle effect of the acquisition within the area of effective com-petition.' For example , in B,' own Shoe the Court held:

The ' \:tl'f'a of effcctin C:OlU1Jctition" must be (letcnnined \)y referenceto a product market CtJ,e "line 0:: commerce ) aml a geographic IJatket (thesection of the country

. United States v. du Pont (General :\Iotors), 35:: U. S. 5SG (1857); Brown Shor Cov. United SUItes, 370 U. S. 294 (19G2); ano United St( tes v. PhiZadelp7tia NationalBank 3H U. S. 321 (1963). See also, Standaj"d Oil Co. v. United States (Standard Sta-tions), 337 U. S. 293 (1949), DIH1 Tampa. Electric Co. v. J.rL lli;iUe Crml Co. 36G U.320 (J9B!).

5 Footnote 4 sup1

FRL"EI-AUF THAILER CO. 893

878 Initial Decision

1. Line of CommerceThe Supreme Court has delineated the requisite tests to determine

tho relevant line of commerce. In the du Pont General Motors) case 6

the Court stated:.' 'I' .. Substantiality can be determined only in terms of the market nffected.

The reconl shows that automobile finishes and fabrics have sutlcient peculiarcharacteristics and uses to constitute them products suffciently distinct fromall other finishes alld fabrics to make them a "line of commerce" within themeaning of the Clayton Act.

In Tampa Elect?ic,' the Court held:

, ,

First the line of commerce the type of goods, ,val' , or merchand-ise, etc. , involved lIust De determined, where it is in controversy, on tile basis

of tile facts peculiar to the case. * .. *Following these pronouncements , the Court in BT01Vn Shoe , 8uprl'a

enumerat.ed seven relevant factor:: (practical indicia) to ascertain

the line of commerce:The Product Market.

The outer boulldaries of a product market are determined by t.he reasonableinterclwng' eaJJilty of nse or the cross-elasticity of demand between the productit*elf and su1Jstitutes fol' it. CFootnote omitted. J However, within this broadmarket well-defined snLnnarkets may exist which, in themselves, constitute

product mal'l;:ets for antitrust purposes. United States v. E. 1. d.1/. Pont deNenwurs

Co. 353 U. S. 5Sa, 5B3-585. The boundaries of such a sulJmal'ketmay be determined oy examining snell practical indicia as industry or publicrecognition of the submarl(et as a separate ('conomic entity, the product'peculiar clmracteristics and uses, unique production facilties, distinct cus-

t.omers, distinct prices, sensitivity to price changes, and specialized vendors.(Foot.note omitted. ) Because 7 of the Clayton Act prohibits any merger whichilBy suhstantial1y lessen competition " in any line of commerce" (emphasis

supplied by the ConrtJ, it is necessary to examine the effects of a mergerin each such economkally significant snbmrlJ'ket to determine if there is areasonable probabilty that the merger wil substantial1y lessen competition.

If such a pl'obabi1ty is found to exist , the merger is proscribed. (Footnoteomitted.

2. Section of the Country'Vith respect t.o a c('rtajning the appropriate

try, in Standard StatiO'l8 the Court sa.id:section of the ('OUJ1-

It 1S cleur, of course , thnt the "line of commerce " affected ncpd not lli2 na-tioTI\yic1e, at least Khere the purchasers cannot, 08 (f practicn,f ma.tte,.. turnto 81Ippli('1'S onts-ide their own area. "' " '" Although the effect on competition,,"il be rjlwntitativcly the sam(' if a given ,olume of ilJ? industry s business

is assumed to be covered, whetlllr OJ' not the Rfiected .sourcE'S of S11pp1:- :LTe

those of the industry 8.8 fI ".bole or onlY those of a fRrticnlar rc!!ion. a purelyOUf1ntitativc men sure of this effect is inadequah; bcc:luse tbe llUTO\ycr the

;rca of I'ompetition , the ;rpatcr the COITlj!flriltin' f'ifeer on the a1'e: s comr'f'tiror

-..-

Footnote 4 SllpnLT Footnote 1 s1Ipra.

894 FEDERAL TRADE COM nssIO:\ DECISIO:\S

Initial Decision 67 F.

Since it is the prcservation of competition which is at stake, the significant

proportion of coverage is that within the area of effective competition. " '" '"(Emphasis supplied. Standa.rd Oil Co. v. United States 337 U. S. 293, 299

n. 5 (1948).

In Tampa Electric , supra the Court stated:* I/ * Second, the area of effective competition in the known line of com

rncrce must be charted by careful selection of the market area in whichthe seHer operates , anel to wbich the purchaser can practicably turD for sup-plies. In short, the threatened foreclosure of competiton must be in relationto the market affected. * '" '"

In Brown Shoe , supra, the Court said:'" " * The deletion of the word " community" in the original Act's descrip-

tion of the rele'lant geograpl1ic market is anotl1er ilustration of Congressdesire to indicate that its concern was with the adverse effects of a givenmerger on competition only in an economically significant " section" of theconTltry.

'" '" *

.i " "' '" The reference to "trade area" was deleted as redundant, "hen it be-

CflIlW clear that the "section" of tl1e country to which the Act was to apply,referred not to a definite geographic area of the country, but rather the geo.

graphic area of effective competition in the relevant line of commerce. SeeS. HeRrings on II.H. 2734 , at : S-6 ! 60-8'1 , 101-.102, 132, 133, 144 , 145: n.Rep. No. 1191 , 81st Cong. , 1st Sess. 8; S. Rep. No. 17i5, 81st Cong. , 2d Sess.

, 5-6. Tl1e Senate Report cited with approval the definition of tl1c marketemployed by the Court in Sia-ndard Oil Co. of California v. Untte(Z States

337 U. S. 293, 298 n. 5.

The Court further stated in Brown Shoe:The Geographic Market.

"lVe agree with the parties aDd the District COUlt that insofar as the "!r-

tical aspect of this merger is concerned, the relevant geographic market is

the entire Xation. The l'elationships of product valuc , bulk, \veight and can.

SlimeI' demand enable manufacturers to distribute their shoes on a nation.wide lJasis, as Bro,vn and Kinney, in fact , clo. The anticompetitiye effects oftbc merger a1'e to be measured within this range of distribution.

In its mostabove cases:

recont pronouncement S the Court cited a.1 three of the

* ,

* Therefol'c. since as we recf'ntly said in a related context tbe " areaof efIectivr competition in the Imown line of commerce must be cbarted byC.'reful s,'lpctlon of t11e market aren. in which the seHer operates anrI to '/chichthe j))!)'clu!scl' cun IjraCUcaoly t'lIJ"nfor S1111pNf8 " 'Tamp(1 Elec. Co. "!ushvWeCoal Co. B65 l),S, 320, 327 Iemphasis supplied by the CourtJ; see SfandardOil Co. fhUtc(l Sia, i(,8 337 U. S. 293, 299 and 300 , n. 5, the four-county areain which appellees ' offces are 10cated "ould seem to be the l'e1evant geo-gl'avJ1icaJ market. Ct. BroH n Shoe Co. , supra at 338-339. '" * '" lFoo1 notes

omitted.

Unitea States -v. Phi!ruleZp"hia Nati01'rrJ Bank footnote 4 Bupra.

FRUEHAUF TRAILER CO. 895

878 Initial Decision

3. Probable Effect

Having determined the relevant line of commerce and section the country, the area of effective competition, the next considera-tion is to ascertain the probable effect of the acquisition upon com-petition. In this connection the test is one of reasonable probability,rather than actual effect or, conversely, mere possibility, that theacquisition will substantially lessen competition. In Brown Shoe

8upra the Court stated:* ,r. , Congress used the words uwy tend substantially to lessen compe-

titon" (emphasis supplied by the Court), to indicate that its concern was withprobabilties, not certainties. (Footnote omitted. ) Statutes existed for dealing

with clear-cut menaces to competition; no statute was sougbt for dealingwitl) ephemeral possibilties. ::fergers with a probable anticompetitive effectwere to be proscribed by this Act.

4. Competition, Not CompetitorsThe Court stated in Brown Shoe 8'llpra:

" "' '" Taken as a whole , the legislative history illuminates congressional

concern with the protection of com.petition, not competitors and its desire torestrain mergers only to the extent that such combinations may tend to lessencompetition. (Emphasis supplied by the Court.

In Philadelphia National Bank , 8npm at n. 43 , the Court stated:43 *' '" The test of a competitive market is not only whether small com-

petitors flourish but also 'tvhether consumers are well served. See UnitedStatcs Bethlehem Steel Corp. 168 F. Supp. 576. 588, 592 (D.C. S.D. N.

19J5). " (C)ongressional concern (was) with the protection of competition,not compcHtoT8. " BTou;n 8hoe Co. . Sapl'l at 3

5. Industry ConditionIn analyzing the probable effect , the Court has made clear that

except in de rnin7:rnis or neaT monopoly situations it is necessary toevaluate the economic condition of the relevant industry rather than

only the share of market acquired or foreclosed. In this connectionthe Court stated in B1' o'Wn Shoe , SUJJ?,(/:

Beti1een these extremes , in cases such as the one before us, in ",'llich theforeclosure is neitl1er of monopoly nor de 1Hinfnl1s proportions, the percentageof tllc market foreclosed by the vertical arrangement cannot itself be decisive. In such eases, it becomes necessary to undertake an examination ofvm' ions economic and historical factors in ordcr to determine whether thearrangement under review is of the t;,'pe Congn ss sought to proscribe. (Foot-note omitted.

The Court , deline8..ting such economic and historical factors furtherstated :

'" * * while proyiding no definite quantitative or (Jl1a1iative tests by whichenforcement agf'ncips could gauge the efLects of a gh"Cll merger to determine

896 FEDERAL TnADEC01'r:\lISSIO DECISIO

Initial Dedsio1J 07 F.

w11elhel' it may ;;substantially " lessen cOllpetition or tend towal'd monopoly,

Congress indicated plainly that a merger hall to be functionally ' lie'ied , in thecontext or its particular industry. (Footnote omitted. J That is , whether tillconsolidation ,\"s to take place in an industry that was fragmented ratherthan concentrated, that had seen a recent trend toward domination by a fe\\leaders or bad remained fairly consistent in its distribution of market sharesamong the participating COIU!1anies, that had experienced easy access to mar-

kets by suppliers and easy access to suppliers by buyers 01' llad witnessed fore-closure of business , that had witnessed the ready entry of new competitionor tIle erection of barriers to prospective entrants, all 'vere aspects , varying-

in importance, \vith the merger under consideration, wbich would properlybe taken into account.

3S Subsequent to the adoption of the 1950 amendments, both the Federal

Trade Commission and the courts bave, in the light of Congress' expresse(1intent , recognized the rele,ance and importance of economic data that placesany gi\'en merger under cOllsidera tion within an industry framework almostinevitably unique in every case. Statistics reflecting the shares of the marketcontrolled by tIle industry leaders and the parties to the merger are , of coursethe primary index of market po\'er; uut only a further examination of the

particular market-its structure, I)istoJ'Y and probable future-can providethe appropriate setting for judging the probable anticompetiti\'e effect ofthe merger. * '"

6. hrket SubstantialityThe market in which the e.ffect is evaluated must be

The Court stated in rln Pont (General JJ Ot07'8) snpra:sub,;tantial.

Tbe mnrket affectE'c1 must hesnbsiantial.H01/.strm Co. 258 U.S. 346 , 357. ':' " "

And again in BT010n Shoe sllpJ'a the Court said:

Stan(lard Fash-ion Co. .iJa(l'i'aIle-

" '" " Section 7 of the Cla;don Act , prior to its amendment, focused uponthis flspect of horizontal combinfltions by proscribing acquisitoHf', 'which might

resu1t in a lessening of competition between the acquiring ana t11e acquired

companies. (Footnote omitted. ) The 1950 amendments made plain Congress

intent that the validity of snch combinations "as to be gauged on a broadersCHle: their effect on competition g-enerally in an cconomica/.y , i.rnificant

market." (Emphasis supplied.

7. Share or the MarketKecessarily, in view of the statutory recp.tisite that the ",.ired may

be to 81lbstanNally lessen competition , the shrue of the market flC-

quired or forec1osec1 is all important element in mak1ng such adeterminat1on.

"\Vith respect to share of the, ma.rket. the Court in Brmcn Shoe.n. 38 supra stated:

Statisticsdm:tl'Y If'lders andof Hlarket llo,\'pr:

reilecti!1,! theOle parties to

sl!Hres of Ole market cont.rcllNl b;\ tl f' in-

the merger are , of conI's\' the prln1:l';\ index

* *

FRUEHAUF TRAILER CO. 897

878 Initial Decision

The Court further said:Since the diminution of the vigor of competiton which may stem from a

vertical arrangement results primarily from a foreclosure of a share of themarket othenvise open to competitors, an important consideration in deter-mining whether the effed of a vertical arrangement "may be substantially tolessen competition , or to tend to create a monopoly" is the size of the share ofthe market fOreclosed. However, this factor ,vil seldom be determinative.If the share of the market foreclosed is so large that it approaches monopolyproportions, the Clayton Act ,,- , of course , 118.1'8 been violated; but tl1e ar-nmgement ,1m also have Tun afoul of the Sherman Act. (Footnote omitted.\nel the legislative history of 7 indicates clearly that the tests for measuringtl'.e legality of any particular economic arrangement under the Clayton Actare to be less stringent than those nsed in applying the Sherman Act. (Foot-note omitted. J On the other hand , forcclosure of a (te 1ninimn8 sharc of the

market wil not tend "substantially to lessen competition.

And later:The market share \Tl1ich companies may control by mcrging is one of the

most important factors to be considcred when determining the probable effectsof the combination on effective competition in the relevant market. (Footnote

omitted.

In Philadelphia National Bank , supra the Court said:lYe noted in Drown Shop Co. , supra at 315 , tbat " (tJhe dominant theme

pervading congres!'ional consideration of the 1950 amendments Ita 7J W::S

a fear of wbat "as considered to be a rising tide of economic concrmtrati()!in the Ameriean economy." This intense congressional concern with the trend

to\Tard concentration 'varrants clispensir:g, in certain cases, witT) clnborateproof of marl;:et structure, market behavior, or probable flnticomprtitin'effrctR. Specifically, 'we think that. a merger which produces a firm controllngan undue percentage share of the relevant market, and results in a signifi-

cant increase in the concentration of firms in that market, is so inherentlyIil;;ely to lessen competHion substantially that it. must be enjoinpd in t1w ab-

sencE' of evidence cll'arly shO\ving that t1Je merger is not likely to have such\Tt1competitiYe effects. ,

* '"

8. Future EffectHaving a certainec1 t.he economic. condition of the industry and

share of C-the m trket involved, it be.comes neceSSfLTY 1'0 ascerta5n the

probable future effect of the acquisition. As the Court said in B7' own

Shoe , .supra.:

" * ;' the very ording of 7 requires a

e!'i pct of the merger. (Emphasis supplied by

prognosis of t.he probahle ii/hirethe Court.: footnote omitted.

The Court lso stated in Philadelphia Nati01101 Bank. 8upra:

Having- determined the relevant mfHket, we come to the nltmate question

nmler 7: whether the effect of the merg;er "may he sulJRtantially to lessenromprtitioJj" in thp reln-;mt market. Clearly, t11is is !Jot the kind of question,yhkh je; 8l1SCC'ptibJe of a ready and precise answer in most cases. It rertuires

898 FEDERAL 'fRADE COM::lISSIOK DECISIO

Initial Decision 67 F.

not merely an appraisal of the immediate impact of the merger upon compe-

tition , but a prediction of its impact upon competitive conditions in the future;this is \vhat is meant when it is said that the amended 7 was intended toarrest anticompetitive tendencies in their "incipiency." See Brown Shoe Co.supra at 317, 322.

9. Evidence Concerning Lack of EffectThe Court has stated that evidence with respect to lack of adverse

effect is relevant. In Philadelphia National Bank , supra the Court

said:. ". * Specifically, we think that a merger which produces a firm controllng

an undue percentage share of the relevant market, and results in a significantincrease in the concentration of firms in that market, is so inherently liwlyto lessen competition substantially that it must be enjoined in the absence of

evidence clearly show-inn that the merger 'is not likely to have such anti-competitive effects. * * * (Emphasis supplied.

And again:There is nothing in the record of this case to rebut the inherently anti-

competitive tendency manifested by these percentages. There was, to be sure,testimony by bank offcers to the effect that competition among hanks inPhiladelphia was vigorous and would continue to be vigorous after the merger."Te think, however, that the District Court's reliance on such evidence wasmisplaced. This lay evidence on so complex an economic-legal problem as thesubstantiality of the effect of this merger upon competition was entited tolittle weight, in view of the witnesses' failure to give concrete reasons fortheir conclusions. (Emphasis supplied. ) IFootnote omitted.

10. Certain Acquisitions Not In ViolationThe Court has pointed out that certain acquisitions are not in

yiolation of Section 7; for example, the acquisi60n of a failing com-pany, the merger of two small companies to enable them to compete

more effectively with larger corporations , and acquisitions involvingde minimis share of the market, In Brown Shoe , 81!Jpra the Court

said:Tl:e importance which Congress attached to economic purpose is further

demonstrated by the Senate and House Reports on H.R. 2734, which evincean intention to preserve the "failng company " doctrine of International Shoe

Co. v. Federal Trade C'omTil 280 CS. 291. (Footnote omitted." '" * When concern as to the Act' s breadth was expressed, supporters of

the amendments indicated that it would not impede, for example, a mergerbetween two small companies to enahle the combination to compete more effec-tively with larger corporations dominatil1g the relevant. marJ;;et, nor a merger

bet\"\een a corporation which is financially healthy and a failng one whichno longer can be a vital competitive factor in the market. LFootnote omitted.

'" '" ,. the legislative history of 7 indicates clearly that the tests for measur-ing the legality of any particular economic arrangement under tbe Clayton

Act are to be less stringent than those used in applying the Sherman Act.

FRUEHAUF TRAILER CO. 899

878 Initial Decision

(Footnote omitted. ) On the other hand, foreclosure of a de mi1iirnu8 share ofthe market wil not tend ;'substantially to lessen competition.

C. The Industry1. DescriptionTruck-trailer manufacturing and the firms and companies engaged

therein constitute a separate and distinct industry in the UnitedStates. The industry in 1959 was composed of approximately 239manufacturers (Tl'. 5819), as compared with about 150 in 1953 (CX488 , p. 9; 489 , p. 10). Seventy-eight of them , who in 1955 accountedfor about 95% of the industry s total production and sales , testifiedin this proceeding (C. Tabs A , B , C , D , E , F; d. RX 271 , p. 4), Theindustry for the most. part is composed of manufacturers producingand selling on a regional, several state, or local basis. FruehaufTrailmobile, Brown (Clark), Hig'hway, Dorsey, Gindy, Utility,Great Dane, Kentucky, Heil , Miler, Kingham, American and Martinsell nationally or semi-nationally (manufacturers 1\ho have pene-

trated 25 or more states) (RX 271 , p. 9 and RX 276).2. Extent of Concentration

Fruehauf, the largest manufacturer in the industry, during theperiod 1953 through 1958 shipped from 34 to 43.4% 9 in units and32.4 to 46.1 % in valne of the industry s total shipments of allproducts '" (RX 272 , p. 107 and R. Tabs 7 and 8 , derived from RX336 , 337 and 339 and CX 473 , 474, 465-68). During the period 1955through 1959 , Fruehauf's sha,re of total trailer registrations rangedfrom 34. 6 to 47% (RX 271 , p. 4) Y Both its shipments and registra-tions steadily declined during the post-aC(luisitiOl:S periocl. The nextlargest company, Trailmobile , during- the period IH53 through 1958shipped from 13. 9 to 16.5% in units and 13. 5 to 16.2% in value of

PTlIroughout , 1111 percentage figures are rOUD(led to the nearest 1;10 (.001).10 As pointed out by the Bureau of Census, U. S. DelJartment of Commerce, its 1953

figures inch1ded sales of 34 891 " other" trailers to the Government (CX 472 B), whichmade tlle 1953 figures not comparable with other yerus (CX 472- and 473-A). Frue.hl1uf sold 29 357 of these, for $23 394 000, to the Government (CX 481). A pro ratareduction in percentages of units and value for 1953 results in percentages snbstantlallybelo1'' the above highs.

11 nx 271 is 11 group of tabulations prepared from n. L. Poll. & Co. data (HX 275, 276aDd 277). Polk tabulates all new commercial truck.tmiIer registrations (as well as auto-mobiles aDd trucks: . from reports froIn the :-Iotor Vehicle Departments of aJI 50 Stnte"and tlJe District of Columbia, e:lccpt Maine ('11'. 5951). Such registratioD8 do not in-clude governmental, export, and " off-highway" purchases , because the v are not registered(Tr. 6084, 6001). Such Polk data is pl1rcllased and relied upon b;y the industries in-'Volved (Tr. 5956 , 6044). RX 272 is a group of tabulations prepared from Bureau 01'Ct!DSUS data cOlering- shipments. in units and in 'Value , by types of trailer, for the indus-try (CX 465 to 469 , inelmive, nnd 473-74). data from monthly reports to CeDsus 0.1surveyed manufacturers, and data in vidence from Trai1mobile and Fruehauf (RX 296,336, 337 339). Despite conceptual differences , Polk and Censns data reveal substantii1llysimilar patterns and results.

900 FEDERAL TRADE COMMISSIOX DECISIOXS

Initial Decision OJ F. 1'.

said total, and its share of registrations, from 1955 through 1D59ranged from 16.6 to 18.9%, also declining in the latter years. Of theremaining manufacturers who made up the industry no other com-pany shipped in excess of 6.7% in units and 5.1% in value or excecde.c 5. 5% in registrations during the same periods. After the first, no manufacturer accounted for as much as 2% in either value or

nnits (RX 272 , p. 107; RX 271 , p. 4).3. Trend in Market SharesOf the 20 largest manufacturers (based on 1059 registrations , RX

271 , p. 5), Fl'eha uf in 1955 had 39. 1 % of the overall registrationsTrailmobile 18.8% and the othor 18 companies combined 22. 6%,leaving 12.6% accounted for by all other manufacturers except I-Iobbsand Strick. Even though Fruehauf increased its overall percentage

9% to a total of 4690 at the beginning of 195G , as a result of theStrick and Hobbs acquisitions considered hereinafter, neverthelessin 1959 Fruehauf declined to 34. 6%, Trailmobile declined to 17.9%,the other 18 inc.reased their combined share to 32%, and the combinedchaTe of all other manufacturers increased to 15.5% (RX 271 , Pl'. 4and 60).

1Vith the exception of FrueJmllf and Trailmobilc , all of the; twentylargest manufa.cturers changed rank in 1959, as opposed to 1955othcr than Dunham JIanu:facturing Company, and Timptc BrothersInc. Dunham , a ncwcomQY in the business in 1958 , 1'ose :from twenty-seventh place in 1D58 , to ejghteenth place in 1959: n,ncl Timpte rosefrom forty- sixth place in 1956 to t"entieth place in 1959 (RX 271p. 5).

There rras no change in the number or States penetrated by Frue-hauf and Trailmobile. in 1950 , as opposed to 1D;'55. Of the next eight-8en largest truck-1.rgiler manufacturers in the industry, fifteen in-creased the number or States penetrated c1nrinr; that period , and onlythree showed an)' decline. in the number of States penetrated (RX271 pp. 8-0). EaeJ1 of the fifteen companies tl1flt shmycd an increasedpenetration. as 'ivell as one that did not , also show( d an increase blmarket share (RX 271 , p. 4).

\Vith respect to overall shipments , based upon Bureau of Censusdata, a tabulation of 16 of the above 20 manu-f tcturers (includingthe largest) reveals that in 1935 Frnehauf had 30.1% of the totalTrailmobile 15.8% and the 14 other manui'acturm' s combined 18. 6%,leaying 20.3% accounted for by all other manufacturers except Hobbsand Striek. :Even though Fruehauf increased its overall percentage

2% to a totaJ of 45.3% at the beginning of ID56 , as a result of the12 This computation assumes Great Dane s 1955 percentage, not available, to hw.e

been the same os in 195G, namely, 2%, hased 1JpOn Its substantially identical percentagesof registrations fOT the 2 en.s (RX 271 , p, 4).

878 Initial Decision

FRUEHAUF TRAILER CO. 901

Strick and Hobbs acquisitions , nevertheless in 1958 Fruchaurs sharedeclined to 34%, Trailmobile declined to 14.3%, tho. other 14 in-ereascd their combined share to 25. 5% and the combined share of allother manufacturers increased to 26. 270 (RX 272, p. 107). In addi-

tion to the above facts , Fruehauf's share of the overall shipmentsfurther declined to 33.5% in 1961, leaving a bahmce of 66.5% ac-eounted for by the rest of the industry (R Tab 7 , based on RX 336137 and 339, ex 465- , 473- , 525-7).

The fol1owing bvo tables show the changes in market shares , basedon registrations (Polk) from 1955 through 1959 , of the 20 largestmanufacturers , and based on units shipped (Bureau of Census), from1953 through 1958 , of the 16 of the 20 for whom data is availabletogether 'with the shares of a.ll other manufactul'crs combined. (Strickand Hobbs were acquired by Fruehauf at the end of 1955.

fIn perccntl

iv1 arkel share , un-its , Polk reg1:slralions (RX 271

pp.

.4 Qnd 60)

:\lar:ufac ureJ 1955

Fruehauf_

____-- -----. ---- - -

Strick (acql1irccl)--

- -

Hobbs (acquired)-- - ---u_----------

Trailmobile

- - - ---

Highway - - -- - -- - u - - - -

- -.. - -

- u -- --Brown (Clark) - - -- -

- -- - -- - -- - -- - -- --

Dorsey_

___- ---_._- ------ -- --_.

Gindy_--_

_-- - - ----_. ---

L'tility -

-- - -- -- -- -- - - - -- - - - - -

Great. Dane

___._ - - --------

Kentucky - - - - - -

- - - - - -- - -- - - - -

Lufkin- - - -- -- -

- - - - - - -- -- - - - - - - --

Ohio_____------

------

lleil

___ ------- - - ---- ---

Miller -- - .. - - - - - - - -- - - - - - - - -

- - - -.. - - - - --

Kinghar.L_

_- --- - - ---

)Jabors--

___. - - - - ----

AmeriearL_

.._ - - ---- ---

WilsoD_

- - ---. --

Dunham____

- - -. ----- ----- ----

l\IartiD-- -- u_-- --

-__

Timptc--

-- - - - - - - - - --

39. 1 4701. 9

1!J5f, 1\157 19,'j9

43. 4 38

1958

34.

*4618. 17.

---

17. 9

--.

18. 9 16.

1. 2

---

1. 4

3. ()

1. 41. 3

1.11.11.1

--- ---

Total 18 largcst after :Frllehauf andTmilmobile

- - - - -- - - - -- - - - - - - - -- --

All others- - - - - --

-------

22. 6 22. 9 22. 30. 2

l:?G 12. 4 14. 9 15.

ost acqujEjtions.

15.

902 FEDERAL TRADE COMM:ISSION DECISIONS

Initial Decision 67 F.

Market share, units, census (RX 272 p. 107)

ManufactuIer 1953 1954 1955 1956 1957 1958

Fruehauf - - - - - - - - - - - - - - -

- - - - - - -- -

38. 39. 43. 36.Strick

___--- -------------------

Frobbs- - - - --- -- --- --

-------------

*45.Trailmobilc_- - - - -

- - - ----- ---------

13. 15. 16. 14.,0.

1)orsey - - - - - - - - - - - - - - - - - - - - - - - - - - -Highway - - -- -- - - - - -

- ----- -- - -- ---

Brown (Clark) - - - -- - - -

-- - ---- ----

Great Dane___

------ ------------

Gindy--__

_--------- -------- ----

Kingham_

- -- --- -- - - - - - - -- ----- -- -

Utility_

------ -------------- ---

Lufkin__

--- ---- --------------

abors_

- --- -- - - - - - -- ----- -- -- --

Kentucky - -- - -- --- -- --- - --

- ------

Heil

____--- ------------ --------

Amcrican- - - - - - - - - -

- - - - - - - - - - - - - - -

I\.filCL______

---------- ----------

Timptc_--- - -- --- -- - -

-- ----- -----

Total , 14 companies (dataavailabJe) from prior tabJe----

___---------

AU others- - - -- -------------

- - ------ ----

18.20.

23. 7 25. 5

23. 8 26. 2

13 See footnote 10 , supra.H See footnot , supra.1'ost :ic(;lljsition

YA=:- ot flv2.ilflble.

4. Access to Suppliers and Buyers.The rnanuf:Jcturer of tra.ilers basically consists of the assembly of

many separate and distinct component parts, either as purchased orafter varying degrees of fabrication prior to assembly, at the choice

of each manufacturer (Tr. 3037, 3102 , 5606 and 5837).SubstantialJy all of the component parts which make up the var-

ious types of trailers manufactured by the industry are readilyavailable from numerous suppliers thereof. J\iany trailer manufacturers testified to this effect (Tr. 901, 2746, 3102 , 3870 , 4816 , 5564

5598 7714 and 7731). In addition , the record reveals that there areat least several hundred available suppliGl's of component part.s (R.232 and 312). This was further corroborated by a survey of manu-facturers of component parts , ,yhich Dlanufacturers wm:e derivr,from Thomas ' Register of American M:anufacturers , Moody s Indus-

FRUEHAUF TRAILER CO. 903

878 Initial Dccision

trial Manual, Truck Trailer Manufacturers Association Directory,and suppliers to Fruehauf (HX 271 , pp. 86-96), as well as by theavailability of all aluminum parts and components from Alcoa,Kaiser and Reynolds (Tr. 2745 , RX 309 , 310, 311 , 352 and 354).

The record amply demonstrates the ready access to purchasers bytrailer manufacturers. The steadily increasing number of manufac-turers in the industry, as found hereinabove under Part pInstheir steadily expanding share of the market, demonstrated in thetables set forth above in Part evidence an easy access to marketsby suppliers. The record contains no evidence of any exclusive deal-ing, requirements, tying or other unreasonable vertical arrangenlentsbetween either suppliers and manufacturers or manufacturers andpurchasers.

5. Ease of EntryAs fonnd hereinabove, the number of mannfacturers in the indus-

try increased from approximateJy 150 in 1955 to about 239 in 1959.

In addition, using 1955 as a point of reference, Polk registrations

reveaJ a cumnlative total of 104 new companies entering the industryeluring the 1956 1959 period. In 1059 these 104 new companies

acconnted for 4,.6% of the national totaJ of all units registered (RX, pp. 78-82), a not insubstantiaJ share of the market.

Some recent new entrants have become among the largest man-facturcrs in the industry. Dunham, a new entry in 1957 which

manufactures only dump trailers (Tr. 5301), showed great increasesin saJes , 352 units in 1958 and 449 units in 1959 (RX 216), becomingin 1958 the second Jargest seller of dump traiJers in the country(RX 272, p. 114), and , although only manufacturing one type oftrailer, ranking eighteenth in national production of all units in1959 (PoJk tabJe s,"pm). C1ement-Braswell, which began manufac-turing dump trai1ers in 1951 (Tr. 1707), by 1958 became the thirdJargest se1Jer of dump traiJers in the Nation (RX 272, p. 114), withDunham, not ShOWR on said table, ranked as number two. Gindy, anew entrant in 1948 or 1949 (Tr. 3735) and primarily a manu-facturer of aJuminum vans (Tr. 362), by 1958 ranked seventhnationa1Jy in production of a1J units and by 1959, sixth in overa1J

registrations (P01k and Census tab1es s,"pTa).

As :found hereinabove, the manu:facture of traile,rs consists basi-cany of the assembly of component pa.J1:s which arE', readily available

to anyone , and henc.e requires no extensive Imow-hO\v, engineering

or meehanieaJ skilJ. Ko patents are required (Tr. 902, 2831, 30753344, 4178 , 5323). ""0 speciaJ equipment or specialized 1abor isrequired (Tr. 1850 , 2893 , 3101 , 3143 , 5168 , 7713; 2738 , 3036- , 3145

904 FEDERAL TRADE COMMISSIOK DECISIOKS

Inital Decision G7 F.

4751 7720). A Bum.beT of llRllUfacturers testified that readily avail-

able metal or mechanical \'mrkers ca, n assemble or make any type oftrailer, and that only a small amount of capital is needed to startmanufacturing (Tr. 1657, 2120, 2860 , 3454- , 3870 , 5591 , 7713).

6. Conclusions

From the foregoing facts found herein in Part C, it is concludedand found that, while Fruehauf is substantially the largest manu-facturer , the industry does not evidence a trend toward or a highdegree of concentration but appears to be increasingly fragmentedit has not seen a recent trend toward domination by a fe'iv leadersand it has not only remained fairly consistent in its distribution

of market shares among the participating companies, but has ex-

perienced a steadily increasing share on the part of the smaller

companies and an increasingly d:im:ill:ishing share by Fruehauf.It is further concluded and found that the industry has experienced

easy access to markets by suppliers and easy access to suppliers bybuyers rather than foreclosure of business, and has witnessed the

ready entry of new competit:ioll with no erection of barriers toprospective entrants.

D. The Lines of CommerceThe complaint a11eges the relevant product markets or lines of

commerce to be (1) a11 truck- trailers , (2) van trailers , (3) aluminumvan trailers, (4) dump trailers, (5) pJatform trailers , and (6) tanktrailers.

1. A11 Trailer Products

A truck-trailer is a non-automotive property carry:ing vehiclcclra,wn by a truck- tractor designed for heftvy or long distance haulingand hn"ving one or more axles with a rat:ing of 10 000 pounds ormore per axle (CX 471- , 472- , 476-A). A semi-trailer is a truck-trailer having one or more axlcs with wheels at the rear but noneat the front, so designed that the fOl'ward end of the trailer restsupon the rear of the tractor by which it is toweel (Tr. 5566 , 5580).The semi-trailer is used throughout the United States and has sub-stantia11y replaced the so-ca11eel full trailer, which had front wheels

and was attached with a tongue and pu1Jed like a wagon (Tr. 5089

5567, 5580).Fruehauf originally a.1eged in :its anSWCT that the relcnmt line of

cornmerce should encom.pass all equipment use,cl for transportingcommodities , including trucks, but in its proposed findings and briefin support thereof, Fruehauf now proposes that the relevant lineof commerce be defuled as all trailer products manufactured by the

FRUEHAUF TRAILER CO. 905

878 Initial Decision

industry. In any event, the record establishes that trailers are dis-

tillct from trucks and other types of transportation equipment , andthat t.he latter in general a.re not competitive with trailers , primarilybecause of the factors of weight and capacity \\'hich as a. practicalnmttcr are dictated by State weight-pcl'-axle laws (1'1'. 24- 460 17122287 2835 3273 5522). Counsel supporting the complaint agree that

all trailer products should be one of the rele,-ant lines of commerce.It is concluded and found that all trailer products manufactured the industry arc one of the relevant lines of eommerce herein.

2. Van TrailersCounsel supporting the complaint also contend that aluminum

van trailers , steel yall trailers, dump trailers, platform trailers, tanktrailers and detachable traiJer van bodies constitute appropriate sub-markets and relevant lines of commerce. The allegations in the com-pJaint made no reference to steeJ van trailers or detachable traiJervan bodies as lines of commerce. In their brief in opposition to the

motion to dismiss the complaint at the conclusion of the case-in-chiefcounsel supporting the complaint made no reference to any suchEnes of commerce, nor did the order denying said motion. The com-plaint , said brief and said order did refer to and the Jatter found'i'an trailers to be a relevant line of commerce.

:Fruehauf contends an trailer products, rather than the differenttypes , are the onJy reJevant product market, because of the cross-elasticity of production facilities , relying upon the concurring opin-ion of .fr. Justice lIarlan in the Bl'o'Wn Shoe case 8upTa andfootnote 42 of the majority opinion s definition of the relevant

product market. There can be no quostion but that the record estab-lishes the cross-elasticity of production facilities in this industry.Substantially any manufacturer of any type of trailer is able, withthe same machinery, equipment, and personnel , to manufacture anyother type of trailer (Tr. 901 , 1086, 1302, 2749, 2861 , 3037, 3103

3146).The Supreme Court in Brown Shoe , 8Upl'a delineated eve.n practi-

cal indicia for determining the relevant product ma.rket or markets.They are (1) iudustry or public recognition of the submarket asa separate economic entity, (2) the products ' peculiar charactel'isticsand uses, (3) unique production facilities, (4) distinct customers

(5) distinct prices , (6) sensitivity to price changes, aud (7) speciaJ-ized vendors. In footnote 42 the Court said: "The cross-elasticity of

production facilities may also be an important factor in defining aproduct market within ,,'hich a vertica.! merger is to be viewed.It will be noted that unique production faeilitie.s are but. one or the

B79-702--71--

906 FEDERAL TRADE COMMISSION DECISIONS

Initial Decision 07 F.

seven indicia to be applied. Certainly the other indicia must beconsidered.

A van trailer is essentially a box on wheels, with a cJosed or opentop, normally designed for hauling dry, general freight requiringprotection from the weather (Tr. 126, 403 , 1479). It, as a1l tbeother types, is a semi-trailer coupled to and hauJed by a tractor bymeans of a so-called fifth wheel (D- 8"pm). Vans represent byfar the largest percentage of all types of trailers manufactured bythe industry (CX 465-69).

A pplying the seven practical indicia delineated by the SupremeCourt, there can be little doubt that vans constitute a line of com-merce separate and distinct from the other types of trailers , whichcannot be used for the same purposes and are not competitive with

vans. There is no interchangeability of use between van and plat-form, dump and tank trailers in view of the loads canied, thetrailer designs and their purposes (CX 403, pp. 19 and 25) . Vansare used for carrying enclosed , non liquic1 cargo in brge quantitiesover the highway, for which purposes a platform , dump or tanktrailer obviously could not be used. Clearly the product has peculiarcharacteristics and uses.

Carriers engaged in hauling freight cro::.s-country by van clearlyrecognize t.hat product as a separa.te economic entity and wouldnot switch to the use of a. tank , dump or platform trailer for suchpurpose (Tr. 3092). Public recognition of the submarket as aseparate economic entity is appare,nt from the fact that the Burea.uof Cen2us in its inc1ustI,y reports classifies van trailers separatelyfrom all of the other types (CX 465-74). Vans have distinct cus-t.omers (supl'a), nc1 distinct and different prices from the othertypes of trailers (CX 465-74). .While as found above uuique produc-tion facilities are not required , specialized vendors are present in theindustry. The record establishes that a number of manufacturersproduce vans primarily or exclusiveJy (Tr. 362 , 696 , 2186 , 3887). Itis concluded and found that va,n trailers constitute a relevant lineof commerce herein.

3. AJuminum Van Trailers)U1 aluminum -n1n traiJcr is a I'a.n trailer having a body normally

constrncted entirely of nJuminum , although its lmdercarriage may beconstructed entirely or principally of steel (Tr. 403 , 457, 1090 , 15171375 , 1035). On the other hand a steel van trailer , the other type, is

normally constructed entirely of steel , a.lthough minor parts , suchas wheels or the floor, may occasional1y be made of aluminum(CX 30 , pp. J- , K- , I I, N-l: Tr. 1364). In addition to contend-

FRUEHAUF TRAILER CO. 907

878 Initial Decision

ing that the only relevant market should be all trailer products

Fruehauf also contends that aluminum van trailers cannot be aproduct market distinct from steel van trailers, primarily because ofthe presence of some steel 111 the aluminum van trailer and some

discrepancies by manufacturers in thc reporting of the two types to

the Bureau of Census. However, on the contrary respondent proposesnumerous fidings which include the specific delineation of alumimmlvans as distinct from steel vans (e.g. RPF 198 , 222, 345 , 721 , 875

878 , etc.

The record establishes that aluminum vans have substantiallyreplaced steel vans for long distance hauling, primarily because ofthe factors of weight, payload and State weight-per-axle laws (Tr.750 789 818 834 860 861 1019 1169 1364 1480 1518). They repre-sent by far the largest percentage of vans manufactured by the in-dustry, increasing from 49.40/0 of all vans in 1952 to 74.3% in 1961(CX 473, 527). Aluminum vans command a substantially higherprice than steel vans (CX 465-74), yet the carriers arc wiling topay this higher price because of the factors of weight and . payload(Tr. 834 861 1019 1363 2235).In addition, for a number of years the Bureau of Census has

recognized the two categories and required the reporting of aluminumvans and steel vans separately (CX 465-74). A number of the manu-facturers in the industry make aluminmn vans either exclusively orprimarily (Tr. 119 , 124, 362 , 696). Thus , although no 1l1l1flUe pro-

duction facilities are needed to make aluminum vans a c1istingllishec1

from steel vans , the factors of industry and public recognition ofthe submarkct as a separate economic entity, the procluct s peculiar

('.

haracteristics and uses , distinct customers , distinct prices and spe-cialized vendors aTe present. It is concluded and found tl1aL aluminumvan trailers constitute a relevant line of commerce herein.

Although cOUllsel supporting the compbjnt urges a separate lineof commerce for steel van trailers , inasnluch as the complaint alleges"an trailers as a separate relevant market, which 11a.S been found

hereinabove, and aluminum vans have been found as a distinct sub-market, no particular purpose would appear to be served by alsodeJinea6ng steel vans as a relevant line of commerce. The acquisitionsconsidered hereinftfter concern four companies alleged to have beenengaged in the all1minmTI van market and other markets. No ac-quired company was alleged to hp ve been engaged i1J the steel van

market. Analysis hereinafter of the overall van market necessarilyincludes steel vallS together 'with aluminruTI vans.

908 FEDERAL THADE CO:YDHSSION DECISIONS

Initial Decision 67 ..T.

4. Dump TraiJersA dump trailer is a heavy, open-topped container with \yhcels de-

signed principally to carry loose materials, s11ch as coal , 01'8 andaggregates , generally loaded through the top, and unloaded at theback (the end dump), or through the bottom (the bottom or centerdump) (Tr. 1712, 2113 , 3071; CX 315). As found hereinabove, theend use of a dump trailer is entirely distinct and different from anothe.r trailers , which are not interchangeable or competitive with it.The Bureau of Census classifies and requires the reporting of clumptrailers by the manufacturers as a separate and distinct category(CX 465). The record demonstrates industry and pubEc recognition01 the product as a separate economic entity, its peculiar character-istics and uses, and its distinct customers , distinct prices and special-ized vendors (Tr. 2108 , 2350 , 5264 , 5287; CX 465-71). It is eoncludedand found that dump trailers constitute a relevant line of commerceherein.

5. Platform TraiJers

The platform trailer is essentially a flat cleek or floor on wheelssometimes equipped with removable sides, designed to carry loadsoften of concentrated weight, such as bricks , fabricated steel and ironproducts. Such loads do not have to be enclosed by sides or protectedfrom the weather. Those platform trailers equipped with removablestakes 01" sides aTe used to haul grain and cattle (Tr. 126, 845, 8871088 , 147D 6072). Platform trailers arc the easiest type to manufac-ture and the lea.st expensive (Tr. 3335; CX 465). As iounel abovetheir use is not interchangea.ble with the other types , and hence theyare not competitive with them. The Bureau of Census requires thatthey be reported as a separate chssification (CX 465). Thus there arepresent the factors of industry and public recognition of the sub-

market as a separate economic entity, the, product's peculia.r charac-teristics and 11ses, distinct customers and distinct prices. It is eon-

eluded and found that platform trailers constitute a relev tnt line of

commerce herein.

6. Tank TraiJersThe tank trailer is an enclosed vehic1e genera1Jy designed to carry

bulk liquid freight , either under or not under pressure , such as rni1k

pet.roleum products, chemicals and liquifiecl gases (Tr. 4142 , 4800;

CX 294-310 , 471; RX 273-74). A tank tmiJer is the most expensiveof the types Rnel takes the longest time to manufacture (CX 465; Tr.3235 , 3274, 3460). As found above, the other types of traiJers are notjnterchangeable with tank trailers , cannot be used for the same pur-

FRUEHAUF TRAILER CO. 909

878 lnitial Decision

pose, and are not competitive with them. A number of manufac-turcrs make tank trailcrs exclusively or primarily (Tr. 2002 , 2290 , 4123

4140 4461 4658). The Bureau of Census requires their reporting asa separate classification (CX 465). It is concluded and found thattank trai1ers constitute a relevant line of commerce herein.

7. Detaclmble Trailer Van BodiesA detachable trailer van body is a closed , detachable body or box

designed to be used with a trailer chassis, which may be detachedand carried separately on rail cars , planes or ships (CX 471-'11'. 2787- , 3139). They are a.1so refcrred to in the record as cargoconta, iners. ",Vhile neither the complaint., the brief in opposition tothe motion to dismiss after the case-in-chief , nor the order denyingsaid motion made any reference to cletachable van bodies either asa line of commerce or in any other respect, counsel supporting thecomplaint now propose that they be so found in connection with theStrick aequisition. As a matter of fact they were practically non-existent at that time , which "vas January 1 , 1956. Fruehauf did notmake them , nor did any other mrl1ufacturer except Strick (Tr. 128),,rhich in 1955 , out of 3 207 units, made 25 detachable van bodies(ron-oils) (CX 29). The Bureau of Census did not recognize theirexistence until 1958 , when for the first time they were designated asa separate category of traiJer clata (Cf. CX 467 and 468). TheSupreme Court has held that the market affected must be substantialand economically significant (8'tlpTrl). Such a market was neithersubstantial nor economically significant , nor ,,-as there any area ofcHective corn petition. It is concluded and found that detach-able trailer yan bodies do not constitute a relevant line of commerceherein.

E. The Section of the CountryThe complaint alleges and the answer admits the relevant section

of the c.ountl'Y to be nationwide with respect to the various acquisi-tions ancl Jiues of commerce alleged. .With respect to the Strickacquisition , the parties agree that the relevant geographic market isthe continental United States. However , with respect to the BrownJ-lobbs , and Hyde acqujsitions , counsel supporting the complaint nowurge various sectional areas "There such companies sold the majorityof their products. .With respect to Brown, counsel refers to the

northeastern regional market " not defined or in the Tecord. ,Vith

respect to I-Iobbs, counscl refe-rs to the "southwest regional market."The record estab1ishes that Hobbs sold national1y, in 43 states , the

910 FEDEHAL TRADE COJ,L\nssIO DECISIONS

Initial Decision G7 p.-

same number as Strick (RX 276). vVith respect to Hyde, counselrefers to Texas , ~ ew Mexico , Oklahoma and Louisiana.

The record establishes, as found above, that all types of trailersare sold nationally by a number of manufacturers (Part

8IlJ)j' a). In addition, there has been a steady 8xpa.nsio11 illto new andadditional states by many of the other manufacturers (Part sup"a). The Supreme Court, in Philadelphia National Bank , B,.mcnShoe , rampa Electric and Standard Stations , supra has held thatthe relevant section of the country, or geographic market, must becharted by careful selection of the market area in which the sellersoperate and to which the purchaser can practicably turn for sup-plies." It is concludcd and found that the continental United Statesis the relevant section of the country with respect to all of the line3,of commerce herein.

F. The Acquisitions , Share of Market Acquired , and Effect1. Carter

On February 28 , 1947 , Fruehauf acquired certain trailer manu-facturing assets from Carter J\.fanufactul'ing Company, Inc. , andCarter, Inc. for 24 286 shares of Fruehauf stock (CX 3). Carterwas engaged in commerce within the meaning of the Clayton Act and

the Act (An81ve1'). At the conclusion of the ease- in-chief, counselsupporting the complaint conceded that this acquisition was not inviolation or Section 7 , because it was an assets acquisition occurringprior to the amendment or Section 7 in 1850, at w:hich time suchacquisitions were not prohibited thereby. 1;;

Aceordingly the motion

to dismiss sue;) aIIegation was granted at the conclusion or the case-in-chief.

2. Brown

On April 1 , 1953 , Fruehauf acquired certain trailer manufacturingassets from Brown Equipment & ::fanufacturing Company, a who1lyowned subsidiary of Associated Transport, Inc., a large inter :tatecarrier , for $1 300 000 plus certain additional amounts for invent.ory.The assets acquired included Brown s plant at vVestfield , IYIassa-

chusetts , and certain unspecified machinery, tools , dies and patternsrequired for trailer production (CX 6). Brown '"as engagecl in com-merce within the meaning of the Clayton Act and the Act (Answer).Brown manufactured only aluminum van trailers (CX 172-176)and was never a substantial factor in that product Dlarket because

C. Y. Westel" Meat Co. 272 U. S. 55'! (1926); Arrow-Hart d: Hegeman Co.

291 S. 587 (1934).

FRUEHAl:F TRAILER CO. 911

878 Initial Decision

of its limited production , nearJy haU of ",hich it soJd to its parentcompany, Associated (CX 177).

Brown was also engaged in the business of repairing the transpor-tation equipment of its parent, Associated , and of distributing auto-motive parts, and continued in such businesses subsequent to theacquisition (Tr. 1256 , 1279). Associated wanted to dispose of Bro",ntraiJer manufacturing assets because Associated iu effect had becomea captive purchaser, since it had to take a11 of the trailers ",hiehBrown could not sell , until it "had trailers sticking out of our earsthat we don t need." (Tr. 1268 , 1281).

ImmediateJy after the acquisition Fruehauf in April 1953 soJd thereal estate acquired from Broml to the Mutual Benefit Life Insur-ance Company of Newark , N e", Jersey, with a lease-back for a 25-year period beginning JuJy 1 , 1953 (Tr. 6263). In 1959 Fruehaufassigned such Jease-hold rights and benefits to Savage Arms Com-pany and Fruehauf has not occupied any portion of the pJant sincethat date (Tr. 6264).

The total national sales of aluminum van traiJers in 1952 , the yearpreceding the acquisition, were 12 194 (CX 472). In 1952 in elevenmonths Brown sold 342 aluminum vans, 152 of which went to Asso-ciated (CX 177). Projecting such sales to tweJve months, Brownsold 373 aluminum vans , 166 to Associated and 207 to other pur-chasers. Brown s total projected saJes to the public (non-captivepurchasers) for that year amounted to 1.7% of the national saJes.COlilsel supporting the complaint ouered no proof with respect toFruehauf' s share of the market in almninum VfLllS in 1952. In 1953Fruehauf' s share of the national market in aluminum vans was23.9% (RX 336). In a market evidencing increased competition andlack of concentration , Brown s percentage would not appear substan-tial. In addition, for the reasons discussed more fu11y hereinafter

:in connection -with the Strick acquisition , six years of post-acquisitiondata thereafter reveal a steadily declining share on the part ofFruehauf and a correspondingly increasing share on the part or allother manufacturers. It is concluded and found that there is noreasonable probability of a substa.ntial lessening of competition 15n

in the relevant line of commerce, aluminum va,ll trailers , as a resultof the Brown acquisition.

3. Hobbs

On November 1 , 1955 , Fruehauf acquired certain trailer manufac-turing assets from Hobbs Manufacturing Company and Hobbs Trailerand Equipment Company, Texas corporations (hereinafter co1-

no Throughout this oecision, the phrase " snbstfmtllll les;;enlng of competition " In-cludes "or tendency toward mOIJopoly,

912 FEDERAL TRADE CO:\:'nSSION DECISIONS

Initial Decision Gj F,'T.

lectively called Hobbs), for 84 872 898 (CX 2 , p. 8). Hobbs wasngaged in commerce ,yithin the meaning of the Clayton Act and

the Act (Answer). The ",sets acquired included Hobbs ' manufac-turing plant at Fort l,Vart.h , Texas, five factory branches in Texasan organization of 40 distributors located throughout the UnitedStates, and machinery, equipment, inventory designs and patents(C'X 1. pp. 5 and 28 , 2, p. 10, 11 , 12, 249; Tr. 258, , G268, G28G).The patents were of no particular value. No patents \Vere necessaryto manufacture any kind of tmiler (Part C' ujJ1' a). They includeda certain t.ype of cable dump tl'ailer, but the record establishes thathydraulic dump trailers are superior to and arc replacing cabledump trailers ('fl'. 52.81). Included in the ac.quisition \Vas the transferof certain key personnel to Fruehauf (CX 1 , p. 5; 10- and 12-C).

Hobbs \Vas engaged primarily in t.he manufacture of dump andplatform t.railers and to a limited degree in the manufacture of va.trailers and aluminum ,,an trailers (CX 26 , 27 and 32.). In 1955Hobbs total van production represented only .5% a.nc1 its totaluminum 1 an production only . % of the national totals (R. TabI and B.X 337; ex 463 and HX 337). As found hereinabove , I-Tobbssold nationany.

"\Vith respect to the relevant line of commerce consist.ing of alltrailer products, in 1035 Hobbs had 2.1 % of all unit.s shipped andranked sixth nationally: and had 20/0 of national registrations , rank-ing eighth. In both units shipped and registrations : Fruehauf rankedX o. 1. and had 39.1 % of the national market (corroborating thesimilar results 01 Polk and Censlls data) (Polk and Census TablesPnl't. C' -0. 8UPt' Cl).

In 1955 IIobbs had 22.2% of the national market for dump trailersand ranked number t.\\-o. Fruehauf had 28.7% a.nd ranked numberone. As a result of the acquisition Fruehauf increased its share ofthe. natiomtl market to 50.0%. As noted hereinabove, the record Cf)n-

tains market share data for the various lines of commerce through1861 (R. Tab 7 and 9: EX 272 , pp. 107-114). The foJ1owing tabJeillustrates the share of the dump trailer market aequired from Hobbsin 1035, and the 5ha1'8 of the market possessed by Fruehauf in 1055an(1 caell year thereafter through 1901:

rTIl percentl

19.'j6 195, 1955 195() 1960 19G1

Frl1ph: llf -Hobbs-

----

. -- 28. 7 44. 422.

J6. 31.;) 24. 21. t: 30.

- - --- -.--

TotaL

------

.so. 9

FRL"EHAUF TRAILER CO. 913

STS Initial Decision

\Vhile Fruehauf's slmre of the dump trailer market declined sub-stantial1y ("0.1 less percent) from its post-acquisition share, it wi1be noted that in 1861 Fruehauf stiJ1 held a greater share of the mar-ket than it had prior to the acquisition. Clearly the acquisition of"2.2% of a market by the number one company resulting' in a totalexceeding 50% of the market brought about a very substantial degreeof concentration in that market.

In 1955 Hobbs shipped 778 platform trailers accounting for 7.of the national market and ranking fourth. Fruehauf accounted for28.8% and ranked first (R. Tab 9 , C. Tab D and RX 27" , PI" 11"-113). As a result of this acquisition (and .4% acquired from Stricknext considered), Fruehauf increased its share of the national marketto 36.5%. The foJ1owing table jl1ustrates the share of the platformtrailer market acquired from Hobbs in 1955 and the share of themarket possessed by Fruehauf in 1955 and in each year theTeafterthrough 1961 (R. Tab 9 , RX 272, PI'. 11Q-113)

(Tn percent:u_---

19.). 19;,6 Iq57 1\151: lat!! g GO EIGI

Fruehauf - -Hobbs__

-----. ----

Strick

28. 30. 2 30. 2 '--1 \ G

TotaL- - 36.

. -

It will be noted that in 1961 Fruehauf stil held a substantial1ygreater share of the platform trailer market than it had prior totbe acquisition and that its share had declined only slightly, .9%,from its total post-acquisition share.

It is concluded and found that the record demonstrates a reason-able probability of a substantial lessening of competition in violationof Section 7 in the relevant lines of commerce, dump trailers andplatform trailers , as a result of the Hobbs acquisition.

4. Strick

On January 1 , 1956 , Fl'ueha,uf acquired certain trailer manufactur-ing assets from The Strick Company and Strick Plastics CorporationPennsy1vania corporations (hereinafter collectively called Strick), inexchange for Fruehauf common stock yalued at 810 831 :300 (CX 2

, p.

36). Strick was engaged in commerce within the meaning of theClayton Act and the Act (Answer). The assets acquired includedall of Strick's trailer manufacturing facilities , including plants inPhibc1f'lphia , Chicago and tsro smaller Pennsylntnia plants , good-wiJl and the transfer of certain personnel (CX 1 , PI'. 5 , 15).

914 FEDERAL TRADE COMMISSION DECISIOXS

Initial Decision 07 F.

Strick sold nationally, was the third largest manufacturer in theindustry, and was engaged primarily in the manufacture of alumi-num van trailers (Answer). It made a few platform trailers , account-ing for, as noted above

, .

4% of that market in 1955 (RX 272 , p. 112C. Tab D).

With respect to the relevant line of commerce consisting of antrailer products , in 1955 Strick had 4.1% of all units shipped and

9% of national registrations, ranking third in both. Fruehaufranked number one and had 39.1 % of both (Polk and Census tablesPart , supra).

In 1955 Strick had 10. % of the national market for aluminumvan trailers, in which ma.rket it also ranked third. Fruehauf, numberone in all product markets , had 42.3%, and as a result of the acquisi-tion (plus .2% from Hobbs supm) increased its share of the nationalmarket to 52. 6% (C. Tab A , RX 336 , 339 , CX 465). In 1955 Fme-hauf had 46.8% of the national market for van trailers and Strickhad 6.7% (R. Tab 7, RX 339 , RX 272, p. 111). As a result of the ac-quisition (plus .5% acquired from Hobbs supra), Fruehauf in-creased its share of the national market to 54%.

In all of these relevant product markets , in terms of registrationsshipments and dollar value , Fruehauf's share declined substantiallyin the years fol1owing the Strick and Hobbs acquisitions, in eachinst.ance to the point where Fruehallf' s share of the market wasubstantial1:v Ie,58 tha,n not only its total share as a result of such

acquisitions but its share of the ma.rket prior to both acquisitions.

national registrations , Fruehauf's share was 39.1 % before the ac-quisitions and 46% as a result of them (PoJk tabJe, Part , supra).By 1959, Fruehauf's share of such registrations had declined to34. 60/ (RX 271 , Pl'. 4 and 60). In overall national shipments , Frue-hauf's share of 45.3% as a resnlt of the acquisitions (Census tablePart C- , supra) declined to ;:3.5% in 1961 , as against its pre-acquisition share of 39.1 % in 1955 (R Tab 7). In share measuredby c10lhr value , the same shipments decliued from a 41.6% pre-aClJnisition share in 1955 to 32.1 % in 1961 (R. Tab 8).

With respect to van trai1ers Fruehauf's share dec1ined to 35.in 18Gl sl1bstantiaJly less than its pre- acquisition share of 46.8% in19,05 and its share of 54% as a result of such acquisitions (R. Tab 7).Ieasured in value Fruehauf s share of the van market likewise

decJined substantiall:' from its pre-acljuisition share of 49% in 1955to 3".4% in 1961 (R. Tab 8). In the aluminum van trailer marketFruehauf' s share of 52.6% as a rcsult of the acquisition deelined to

FRUEHAUF TRAILER CO. 915

SiS Initial Decision

36. 60/ in 1961 , substautially less than its pre-acquisition percentageof 42. 30/ in 1955 (RX 336 , 337, 339; CX 465- , 527 529-C).

Thus , although at the time of the Strick acquisition Fruehaufacquired ",hat might be considered a substantial share of the relevantproduct markets , particularly with respect to aluminum van trailersthe record establishes that Fruehauf' s share of such markets declinedsteadily and substantially during the six years following the acquisi-

tion , to the point where Fruehauf had a substantially smaller shareof the re.spective markets than it had prior to the acquisition. Asfound hereinabove, this share lost by Fruehauf has been acquired by,on the one hand , the group made up of the 18 next largest trailermanufacturers in the industry after Fruehauf and Trailmobile, andon the othBr hand , by the group made up of all of the other andsmaller manufacturers. The six post-acquisition years reveal enhancedcompetition and Jcss concentration in the rclevant product lines inthe industry.

The Supreme Court stated in the Brown Shoe case supra that:The very wording of S 7 requires a prognosis of the probable

juI1O' effect of the merger." The Court further observed in thisT8garrl in its subsequent Philadelphia National Banl decision supra:It require.s not merely an appraisal of the immediate impact of the

merg' er 11pon competit.ion, but a predjction of it.s impact upon com-petitive c.onditions in t.he future." The Court there further stated:Specifically, we think that a merger which produces !l nrm controllng anunduE' percentage share of the relevant market, and J'esults ia IJ signific:mtincrease in the concentration of firms in that market, is so inherently likelyto lessen competition substantially that it must be enjoined in the absence

01 evidence clea,rly showi.nO that the m.erqcr is not lIkclU to have such anti-competiti' vc effects, (Emphasis supplied,

In this same connection the Court also stated: "There is nothing inthe record of this case to rebut the inherently anti competitive tend-

ency manifested by these percentages.It is concluded and found that the record herein does not demon-

st.rflt.e, a, reasonable probability of a substantial lessening of com-petition in the relevant lines of commerce as a result of the StrickaCl .lisition.

5. Independent ),rcta1 ProductsOn Apl'il 10 1956, Frl1elmuf acquired certain tank (not trailer)

!lan:.lfa tnring assets from Independent :Metal Products Companyfor 83.387 442 (CX 285-87). The assets acquired incJudcd a tankmn::ndacturing pJant, machinery, a. two-story offce building a.nd a15- acre site (Al1slIcr). Independent ,vas engaged in the mannfacture

91G FEDEHAL THADE COM1JISSION DECISIONS

Initial Decision 67 F.

of ta.nks for trucks, E:toragB and trailers and with respect to the latter.Fruehauf was its only customer for many years, although Fruehaufbought such tanks from other suppliers (Tr. 2060 and 2085). Frue-hauf took delivery of the tanks from Independent at its plant andassembled them with chassis made by Fruehauf to produce tanktrailers (Tr. 2060-65). Independent was a supplier to Fruehauf andnot a. competing ImLllufa.cturer of trailers, and hence this was avertical rathcl' than (1. horizontaJ acquisition.Because Fruehauf took deliv81'J of the tanks at Independent'

plant in Omaha , none of these sales to Fruehauf were in interstatecommerce. However, Independent did sell truck tanks in interstatecommerce (Tr. 2060), and thus was enga.ged in conuerce within themeaning of the Clayton Act and the Act. Fruehauf contends that thisacquisition does not fall within the purview of Section because

the tanks made by Indepenclcnt and bought by Fruehauf were notsold in interstate commerce and the relevant line of commerce hereconcerned is tank tra, ile,rs. The Commission has held to the contraryin its FOTemost decision, finding that it is not necessary that theacquired corporation be engaged in interstate commerce in the sameline of commerce as that affected by the acquisition,

From 1940 to 1956 , Independent was primarily engaged in themanufacture of trailer tanks, with Fruehauf being its sale customerfor such tanks since 1935 (Tr. 2101-03). There is no evidence in the

record that Carter, Brown , Hobbs or Strick ever manufactured anytank trailers. Independent has continued to supply tanks for trucksto the one customer which it hRd prior to the acquisition (Tr. 2087

4318). The record reveals that there are many manufacturers of tanksfor trailers available , and also that many manufacturers of tanktraiiers make their own tanks (Tr. 2002 , 4534, 4598 , 5083 , 5611). Therecord reveals no shortage or diffculty of procurement of tanks. Thecquisition of Independent could have had no effect upon the avail-able supply of tanks for other tank trailer manufacturers , becauseFruehauf had been Independent's sale customer for such tanks formore than twenty years (Tr. 2101). There are no patents involvedin the manufacture of tank trailers and any manufacturer couldbuild one if he so desired (Tr. 5323).

There is no evidence thnt the acquisition of the tank manufacturingfeciJities of Independent by Fruehauf had any effect upon othermanui'rLCt.urers of tank tra,i1ors. In If155, Fruehauf had 33.9% of thenrdional tank t.railer market. By 1961. Fruehauf' s share of the tank

lfiPafC1n06' Dairies Inc. 60 P, C. D44 , Docket ::0. Ei485 (lD()2), at p. 3() !p. 10T7

10TSJ.

FRUEHAUF TRAILER CO. 917

878 Initial Del'sioll

trailer market had declined to 32. 1% (C. Tab F; R. Tab 9). It isconcluded and found that there is no reasonable probability of asnbstantiallessening of competition in the relevant line of commercetank trailers, as a resu1t of the Independent acquisition.

6. HydeOn "'lay 23 , 1958, during the pendency of this proceeding, Frue-

hauf acquired certain truck body (not trailer) manufacturing assetsfrom Hyde Corporation and Hyde Realty Company, Texas corpora-tions (hcreinaftcr collectively called Hyde), for $112 501 (CX 420).The assets acquired included a manufacturing plant at Cleburne

Texas a 30- :ycar lease interest in the land on which it was locatedand the machinery, equipment and inventory used in the plant

manufactnre "rrydepak:) garbage disposal bodies for mounting ontrncks (CX c120): (EX 237-;)8). The Jonse and plant werc aeqniredfrom Hyde Realty Company, which was not engaged in interstateeommerce (Tr. 5459), whereas the materials equjpmcnt and otherassets transferred were sold by Hyde Corporation (CX 420), whichwas eng'aged jn interstate commerce (Tr. 5429). 110I\c'\or , both cor-porations were substantial1y owned and controJled by Mr. I-Iyc1e(1'1'. 54:j0-(0). It is concluded and Immel tlwt I-Iyc1e was engaged incommerce within tlw meaning of the Clayton Act and the Act.

The complaint here-in was amended shortly after the acquisition.Contrary to counsel supporting the complaint's contentioll no trucktrailer manufacturing facilities were acquired from Hyde. The facili-ties acquilwl had nothing to do with any of the relevant productmarkets involved in t.l1is proceed,ing. An attorney's memorandu1l1 ofthe first negotiations stated , with respcct to the assets to be acquiredby Fruehauf: ":: 0 trailer parts , no trailers, no trailer accessories

fixtures , jigs , dies , etc." (Tr. 5502). The contract between Fruehauf,md Hyde specifically Jists the Hydepak truck body manufacturingfacilities sold to Fruehauf, and also states: "It is the intention hereofthat Hydc is not agreeing to sell , and Fruehauf is not agreeing tobuy any trailers, semi-trailers, vans or \Yagons, or parts or rawmatcria.l or work in process applicable to or involving trailers , semi-traiJers, vans or wagons , this agreement being limited expressly toth8 propmiies elsewhere defined herein. " (CX 420 p. 5; RX 237-38.Other than common hardware items which can be used in many typesof manufacturc, none of the items specifically listed in the a.gree-mcnt can be used in the manufacture of trailers (Tr. 5489).

Hyde wa,s a) so engaged in the manufacture of trailers, primarilyplatform and van trailers , both prior to and after the acquisition (1'1'.

918 FEDERAL TTlADE CQl\nnSSTOX DEClSIO:LS

Initifll Decision (;7 F.

5429-30). It formerly had manufactured trailers at its Cleburneplant, but had discontinued manufacturing them there Oll iYlarch 11958 , prior to any discussion with Fruehauf of the acquisition (Tr.5430). Hyde had manufactured trailers at another plant in FortWorth for over thirty years, and continued to manufacture themthere in quaJ,tlties as great as or greater than its total productionwas at the time of the acquisition herein (Tr. 5429-30). .While itmight be considered that Hyde s trailer production capacity had

been reduced by the sale oT the Cleburnc plant, even though :Hydehad discontinued the manufacture 01 trailers there prior to initi tingthis sale to Fruehauf, nevertheless Hyde continued to produce asmany or more trailers overall as it did in the year prior to theacquisition.IIydc manufactured the Hyc1epnk garbage disposal trnck bodies

at the Clebul'ne plant under a patent license from one Balbi (II'.54.5'1 57). In the 1atter part of 1955 Hyde was sued by one Huffnesfor infringement of his patent covcring the I-Iydepak typc of refuse

body (Tl' 5454). I-Inffnes won the suit and flftcr l appeals wereexhar:sted ) induding deniaJ of a petition for certiorari b T the Su-preme Conrt seclll'E'c1 a. rr:l'mfllient. illjnnci--ioll f1g tin::t IIyc1e togetherith chmages amounting to about $50 000 (Tr. 5478).

IIyc1c was in other fInancia.l difEcultjes. It owed an insurance company $250 000 secured by real estate including the Cleburne plantflnct fI bnnk more than 8200 000 on an open note. The bank was press-ing for payment (Tr. 5463-68). Mr. Hyde was in il health (he diedin 105:')) and "wanted to liquidate, particularly because of having beenenjoined from mannfacturing Hydepak bodiee (Tr. 5517). HydeCOlll f),ded Fruehauf with respect to the sale of its facilities : inc1udingits FOlt .Worth plant and its trailer manufacturing facilities (Tr.0516). Fruehauf advised I-Iyde that it would not discuss the Fort'\V orth property or any trailer facilities , but was willing to discllssthe, Hydcpak faeilities if the patent prohlems couJd be resolved ('11'.5517). A reJease was obtained from Huffines and license.s secnredfrom Huffnes and Ralbi to manufacture Hydepak hodies under theirpatents (Tr. 5502). Subsequent to the acquisition , in addition tomam:facturing Hydepak bodies for trucks, Fruehauf later developedit Hydepak dump tmiler (Tr. 5493-95).The. relevant market al1eged here is platform tmilers, whieh

constituted the major portion of Hyde s trailer production. Com-plaint eonnsel offered no evidence with respect to Hyde s trailerproduction in 1957 or 1958. The record does contain an exhibit show.ing that Hyde manufactured 258 trai1er units in 1955 , almost three

FHUEHAUF TRAILER CO. 919

878 Initial Decision

years before the acquisition , but it is not broken ao"Wn according totypes (C:X:: 254). Even a,ssuming the relevancy of such data, it wouldamollnt to only 30/0 of the total national production of trailer prod-ucts (eX 465). .Moreover the acquisition price , compared with thoseor the other acquisitions considered herein , reveals the de minimis

nature of the transaction.

As Iound above, Fruehauf acquired no trailer manufacturingfacilities or equipment from Hyde. Clearly this acquisition couldhave no effect upon any of the relevant product markets foundherein. In addition , the acquisition of the Cleburne plant could wellbe considered as coming \\'ithin the failing company doctrine esta,Eshed by the Supreme Court 17 inasmuch as Fly de had been perma,

nently enjoined from manufacturing the Hydepak bodies , was inserious iimmcial diffculties and il health, and hence was compelledto dispose of the Cleburne facilities. It is concluded and found thatthere is no reasonable probability of a substantial lessening of compe-tition in any relevant line of commerce as a result of the Hydeacquisition.

G. Alleged Unfair Methods of Competition

1. The AcquisitionsCount II of the C01:1p la-int alJegcd that the acquisitions considered

nbove, singly 01' cnmul2.tivelY1 a.re uwEa,:ir methods of compet:ition :inviolation of Section 5 or the Act , both as violations of Section 7 andindependently thereof. It is of eourse ".ell settled thl1t violations ofthe Clayton Act are unfair rnethods of competition in violation ofSection 5/ and accordinglYj it :is concluded and found that theTIobhs acquisition discussed above is in violation of Section 5 of the

Act. It has been found that the rEcord demonstrates no reasonable

probability of adverse competitive effects with respect to the otheracquisitions. The Commission in its 17 OTenwst decision held that an

acquisition could not be found in viobtion of Section :5 because it'inlS one of a cumulative series , when the particula.r acquisition underconsideration did not have the adveTse effect on competition requiredby Section 7. The Supreme Conrt in B1'o'Wn Shoe , supra stated:It is trne , of course, that the statute prohibits a given merger only

if the e- ect of that merger may be substantially t.o 1828en comDetition." It is concluded and found thnt the above acquisitions thert.l1an I-Tobbs weTe not in violation of Section 5 of the Act.

1. Intenw,tional Shoe Company 280 U, S. 201 (1930); aml Bj' oH;n Shoe, SlfjJl'a.IBP. C. v. Cement Institute 333 U. S. 68R (1948).0Foremost Dairies, Inc. 60 F. C. 944 , Docket o. G495 (1962). at p. 52 (P, 1091).

920 FEDERAL TRADE COMMISSION DECISIONS

Initial Decision (iT

2. Compctiti SnIp PracticesCount II of the complaint further alleged that Fruehauf engaged

in unfair methods of competition in violation of Section 5 by certainpricing, financing, down payment , leasing, used vehicle purchasingand trade- , and lending pTfLCtiecs , which its competitors were unableto meet and which had the cRpacity, tendency and effect of undulylessening competition , diverting trade to Fruehauf and creating amonopoly. As alleged therein and not disputed , the relevant marketin connection with this charge is the national sale of all trailerprod 11 ds.

FruehallrS ans\Yel' while aclm.itting ecrtain specific factual ex-amples of sale and financing arra.ngements, denied that its competi-

tors were unable to meet its terms of sale, as well as denyil1g anyadverse competitive effects as a result of any of the alleged com-

petitive selling practices and any unfair methods of competition.(t. l?inan ing

The complaint alleged that Frueha.uf a,nel its finanee companyfinanced the saJe of trailer products : upon more advantageous termsthan its competitors \fore able to grant, by giving customers seven

years time to pay instf1l1ments under their sales contracts. Fruehaufndmittcd tl f1t. it ftranted 5;even year terms of payout to on1P cus-tomers , alleging' snch to be in Hccord '\vith sOllnd financing practice(Answer). The complaint then a11egec1 that "this plan will permitFruchauf:s customers to pay for Fruehauf equipment as it depreci-ates ar:d its earninp:s while working mm exceed the cost of the bor-owings, Trucking concerns have thus been led to purchase additionalFrueha.uf equipment. in the expectation of increased revenues as a

result, :' Fruehauf not only admitted this but espoused it, logicallypointing out that if ft, purchaser was not able to pay for equipmentfLS it depreciated fLnd earn more than the cost of the borrowings

3U(',11 purchase \fonlcl br, financially unsound (Answer). The recordestab1ishps that se;' en ye.ar terms \fould be competitively and eco-nomically unsound if the Tmrchasel' C0111d not earn enough to exceedthe cost of the borrowings and the equjpment a,s it depreciates (Tr.2002, 3494- , 3928).

Only a. small percenta,gr, or Fruehauf's Joans are for seven yearsthe great majority, 97 to 99%, maturing in five years or less (RXa16; Tr. 63(4). Fruehauf fI11ances more tha,n 95% of its time salec.ontracts flnc1leases through its Fruehauf Trailer Finance Company.The finance company in turn borrows substantial sums of monev forthe purpose of financing the instalIment sales of Fruehauf. " The

FRUEHAUF TRAILER CO. 921

878 Initial Decision

tinance company s loan agreements with the Metropolitan , Prudentialand Aetna insurance companies, entered into in 1956 , a11 provide thatit may not use funds borrowed from them to fiance installmentpaper, if the aggregate of a11 installments of contracts held by itfa11ing due beyond 61 months at anyone time exceeds 7%% of a11

the money borrowed by the finance company for such purpose (RX322, 323 , 332-35). Under its prior loau agreement with The NationalBank of Detroit, superseded by the above, the limitation as toinsta11ment sales contracts beyond 61 months was 1112% of the aggre-

gate principal amount owing at any time on a11 insta11ments salescontracts purchased from Fruehauf (RX 321).

These contracts contained other substantial limitations upon theuse of such borrowed funds, including requirements that net earningsavailable for fixed charges must average yearly not less than 1%times Fruehauf's average annual fixed charges, that insta11ment

sales contracts for used tmilers be limited to 25% of the total out-standing, that the time of payment of any insta11ment could not beextended more than three months , with one such extension per yearand no more than two during the entire period of the contract notto aggregate more than three months, that loans with respect to

leases be limited to $15 000 000 and leases of no more than 61 monthsand that the total amount owing by anyone customer and his affli-ates under instaJJment sales contracts and leases not exceed 2% ofthe principal amount of all outstanding contracts and leases (RX321-23) .

The trucking industry has been faced with the problem of financ-ing its new equipment requirements at least since 1944 (Tr. 79). Thetime of payment then was from 18 to 36 months (Tr. 80). By 1956

the time of payment had been extended to about five years (Tr.105). In 1956 the American Trucking Association and responsiblemembers of the financial community concluded that fiancing thepurchase of trailers on an 8-year basis was appropriate and desirable(Tr. 95).Prior to 1950 , the fimUlcial institutions of America were not in-

t.ercsted in financing the. purchase of ( quipment by motor carriers(Tr. 3 )95). From 1954 through 1960 financing by financial institu-tions , such as banks , grew at a tremendous rate (R.X ':18; 1'1'. 3641:1470- 3498). The policy of The First ~ational City Bank of ~ewYork ,vith respect to finaneing the purchase of trailer equipment isrelated (0 the period over which the cost of the equipment may bereeaptured by deprec1ation which in the case of truck trailers isabout eight years (Tr. 3600). The bank follows the reeommendation

379-702--71--

922 FEDERAL TRADE CO:vMISSIQ:- DECISIQ:-S

Initial Decision G7 F.

of the Interstate Commerce Commission as to a useful life of trailersof eight years (Tr. 3619). Trailers have a useful life substantiallyin excess of an eight-year depreciation (Tr. 784, 4084, 4086). Theoutstanding loans of The First Kational City Bank of Kew Yorkas of :\Iay 31 , 1960, to credit worthy truck-traiJer operators involvedloans with terms ranging from fIve to eight years on a revolvingbasis (RX 46 and 47; Tr. 3611, 3626-27).

The First K ationaJ Bank of Boston is another of the large fiancialinstitutions interested, on a nation wic1e basis , in fmancing the equip-ment requirements of transportation companies (Tr. 3470). Since

1952 the bank's term of payout has grown from three to five yearsand with respect to better credit risks, equipment wiJ be fmaneedfor such periods as are determined by the book depreciation of theequipment. If the borrmving arrangement is terminated , a 60-monthpayment of the then existing balance becomes appJicabJe (Tr. 3478-80). Thus, the financing of equipment may be for an initial five-

year term plus five years with respect to any unpaid balance follow-ing termination of the borrmving arrangement or the depreciable lifeof the equipment, whichever period is shorter. The earning power ofthe equipment is significant in determining whether the bank willundertake such financing (Tr. 3493). Such financing ha,s been ex-tended by the bank and participating b nlks throughout the "Cnited

States , including all makes of trailer equipment, and is available tofill competitors of Frnehauf (Tr. 3515 and 3523). The bank alsofinances the purchase of trailers for lease purposes, generally for aperiod of 60 months (Tr. :3550-53).

The experience of iinnncial instit.utions throughout America hasbeen simiJfir to that of The First X ational Citv Rank of Now Yorkand The First ?lationaJ Bank of Boston. In the earJy 1950's relativeJylong-term financing of such transportation equipment \\as not avail:.able. In the later 1950' , 100% financing of tra,ilers up to eO-monthperiods of time became sbndard ('11'. 3013 and 3917), and was fivail-abJe to all manufactmers and nsers (Tr. 3917-24). The credit cri-terion used is applicable to individual as well as fleet operators oftmileTs and "pp1ies to any make of tra.iler (Tr. 3939). The samegenera.l financing terms existed among financial institutions in thePhiladelphia are" (TT. 3654-58), in the mid-\Vcst generally (Tr.4221), and in the Denver area (Tr. H03). On the \Vest Coast bankfinancing has been available on the basis of 72-month terms (Tr.4721-38).

Financing the purchase of troilers by banks is to be distinguishedfrom snch financing by lln.nufactnrel's. The bank's objective is to

FRUEHAUF TRAILER CO. 923

878 Initial Decision

receive a fair rate of return

, \\-

hereas manufacturers havc an addi-tional incentive in the.ir margin of profit on the product sold andt!lUU1ced (Tr. 3G07). The financing of trailers by manufacturers asdistinguished from financial institutions for a period of as much asseven years is sound practice (Tr. 3928). "While the record establishesthat most other manufacturcl'S do Hot grant seven-year payout termsit also establishes that some of them do and that others could do soif they chose. Other manufacturers also operate their own financecompanies (RX 288 , p. 5 , RX 272, p. 129 , RX 293-94; Tr. 567 , 50163709, 1942, 2014 , 3054). Both parties concede that many commoncarriers arc uncleI' capitalized a.nd short of cash. Thus, t.hey are

necessarily interested in the financing terms they can secure. On theother ha, , there are many carriers and other purchasers who pur-chase for cash , are not interested in financing, and buy what theyconsider the best ecruipmcnt at the best prices (Tr. 417 , 477, 760 , 7711054 , 1145 , 35li2).

There cnn he no donbt b1: that the record establishes that Fruehanfgrant.s sc;ven-yeal' terms more frecruently than most of the otherllfllUfactlirers but , a.s found hereinabove as a result of the loan

agl'emncnts bch'1cen Fruehallf: s finance company and its lenderssuch terms are limited to a small perc.entage of all of Fruehanf:

nnnnc.ing. The vast majority of all instaJlment financing engaged in

by Frne,hanf during the period l!lj l t.hrough 1959 involved maturitieswith GO months 01' less ('II' 63;"0 6361 , C3()4 and RX 316). The

s esperience rat.io is one of the. mo.st signific.ant factors used tomeasnre gOQ(l mnnnge11cnt of installmcnt sa.les finance companies.Snch ratio is the, nctnal experienced J053 in collccting- time paymentse.xpre'3 :e(l a ; a percentage of thc tot.al Jiqllic1ations (Tr. 4821). Frllc-Jwnrs 1m;s to lirplicbtion rntio (luring' the perlo(l 1934 through 1960rangocl from . :)6%, to 1. 5;)%. . "ith an an;rage of .9% (RX 318). Thiswns better than the composite experienc.e of the major instflJ1mentalcs finance companies in --lmcl'ica for t.he same period of time : whose

10,s to li ni(lation Tntio ronged from 1.18% to 1.71 % (RX 181 , Pl'.22, and 25), 8.11(1 constituted nne pcrformanc.e in the opinion of tho

vice president of The First Xational Bank of Chicago (Tr. 4D36).This JO: 5 expericnce. ,yas nlso superior to tJUlt of Frnehaurs major

cOlnpet.tor. Trni1mobile. ,yhjc.l expexiencec1 an average loss ratio of

1.2fF:;:;j (lllriwl' the period 1834 through 1958 , as against Fruchauf's91 \(; (EX 307, 318). It ITfiS also better than the experience of the

nnancp. company of 15rO"\" (CJa,.k) for the period 1958 through 1960(the onJ)" il1,"ilab1e elata- RX 181). Emlnated from the vie""pointofdc1inquent payments, Fruehauf's instaJ1mcnt collection experience

924 FEDERAL TRADE COl\L\fISSION" DECISIO:XS

Initial Decision G7 :W.

also 'vas excellent. From 1954 through 1959 , the percentage of in-stallments which were more than 60 days past due ranged from ouly16% to .42% (RX 320).

It is concluded and found that Fruehauf' s financing terms of pay-out were not more advantageous than its competitors were able tomeet, and in any event , were in accordance with sound fiancingpractices.

b. Down PaymentsThe comp1nint also made reference to Fruehauf accepting more

advantageous lower , down payments than its competitors. Inthis connection the record estRblishes that Fruehauf and the othermanufacturers had varying requirements for down payments and inmany instances. depending upon the credit of the borrower, requiredno ciown paym nt (RX 272 , p. 128; RX 293-95; Tr. 668 , 5587). Int.he earlier ye,ars of financing prior to 1950, down payments werew:mally 331j3% (Tr. 80). By ID;)6 the American Trucking Associtioll -was able to obtain financing of trailers for its members withbetter eredit ratings with no down payment required (Tr. 105). Thefinancing developed by The First National City Bank of K ew Yorkand The First Kletional Bank of Boston resulted in 100% financing

of new trai1er equipment (Tr. 3550 , 3611- , 3917-24). The net worthof the equipment determined by depreciation and the credit standingof the purchaser were the relevant factors in extending such credit(Tr. 3914, 3932). As found hereinabove, many of the other manu-facturers also had their own finance companies.During the years 1956 through 1959, Fruehauf required down

payment.s of 20% or more with respect to 580/0 of its contracts in

195Ci lend 1957 , 64% in 1958 and 69% in 1959. Instal1ment sales withdown payments of 10% or less for the year 1956 were 7%, for theyear 19,,7, 5%, and for the years 1958 and 1959 , 4%, of aU contracts(RX 317; Tr. 637Ci). It is concluded and found that Fruehauf's downpayment requirements 'vere not more advantageous than its com-pet.itors were able to meet and were in accordance with sound financ-ing practices.

c. Trade-ins and Used Vehicle PU1'chasingThe compla.int. alleged that on some oecasions Fruehauf bought its

purchasers ' llsed trailers for cash instead of crediting such a lOuntus a trade-in against the new purchases, and in connection therewithcollected a down payment on the ne,w trailers from the purchaser ofless than the amount paid to the purchaser for his used equipment.

FRl;EHAUFTRAILER co. 925

878 Initial Decision

As found hereinabove, those carriers whieh were undercapitalizednecessarily ,vcre interested in securing tho best terms available, in-

cluding down payment, length of payout time, and purchase of theirused equipment instead of treating it as a trade-in. This was a com-mon practice in the industry. 1:any manufacturers purchased such

used equipment from their purchasers at a total price exceeding thedown payment required on the new trailers (Tr. 470, 1196 , 1359

2750, 2920 , 4409-71).Such practice was regarded as quite sound by financial institutions

(Tr. 3939). Many purchasers l,referred to have the manufacturcrpurchase the used eqllipn1Pnt from them rather than taking it as atrade- in on the new equipment, because such sales of used equipmentare treated as capital gains for tax purposes , whereas a trade-offset is not and in n,ddition reduces the purchase price of the newtrailer for depreciation purposes (Tr. 5Mo and 5662). The largcrcarriers \Vho ordcr large numbers of trailers of necessity must disposeof their used equipment, and for both reasons they can trade only

with the larger manufacturers, who can handle the amount of usedequipment involved and make delivery on the large number of newtrailers required (Tr. 773 1038). There is nothjng inherently illegaJor unfa,ir about Fruehauf's practice , common to the industry, ofpurclmsing used equipment in connection with the sale of new trailers.

d. PricingWhile Count II of the complaint refers in general to Fruehauf'

pricing pnwtices , there is no evidence in the record that Fruehauf'pricing was any different than the rest of the industry. The record

tablishes that there are no published or established prices for

trailers, but instead they are negotiated in connection with eachtransaction (Tr. 409, 566 , 900, 1119 , 1127, 2749, 2754, 2859, 2934

3110). Price-wise , the trailers produced by all manufacturers werecompetitive (Tr. 409, 1055 , 1403 , 5088). Clearly this is a funda-mental area of competition.

e. Leibsing

Count II maims reference to the admitted fact that Fruehauf leasestrailers with an option to purchase at the end of the rental periodfor an insignificant runount of money, such as $1 (Answer). This

practice also is comrnon to the industry, and amounts in effect to aconditional sales contmct, the "rental" for the period being equal tothe amount of the purchase price of the trailers (Tr. 1817 , 1541 , 21792453 , 2764, 4180 , 5134; RX 193).

926 FEDERAL TRADE COMMISSIOK DBCISIOKS

Initial Decision G7 Ij

j. Loans

Count II makes reference to the fact that upon occasion Fruehauf,entered into purchase a.rrangemcnts which included loans to itspurchasers. One of the methocls by which this 'vas accomplishedconsisted of what is knO\"11 in the industry as an 'iovcr-lay," whichconsists of allmving more for the used trailers than their market

valuc and correspondingly increasing the price of the new trailers.If the price of the used equipment exceeds the required down pay-ment this 1'e8u1 t.s in the purchaser ree-ei ving more cash than he wouldhftve othenyise , which or course is repaid with interest under thefinancing contract. It results in a bLX saving to the purchaser inas-much as the saJe of the used equipment is a capital gain \Vith amaximnm tax of 25%, while the, depreciation or the new equipmentis a. deduction from corporate income which has a tax rate of 52%.Snch O\-el'- lays are a general practice in the industry (Tr. 1359 , 1369

T,J4 and 2922).

fl. ConclusionsThe examples or sale and financing arrangements set forth in

Connt II of the compbint constitnted unusual exceptions. Suchfjmmcillg h:::rangements comprls::c1 Jess than 1%. of rlll the install-1Tlent financing engaged in by Fruehauf for the period under reviewand hence as neither substantial nor frequent (R.X 317; Tr. 6376).In nddition , eluring the relevant period, the total ftl10unt of sales

financed by Fruehauf declined from approximatc1" 60% to 50%(RX 316 and CX 494, p. 24). It is concluded and found that theterms and conditions offered by Fruehauf in connection with thesale of its trailers ,vere avaibble to and offered by other manu-facturers , "ere not more advantageous than its competitors ere able

to meet and that Fl'uellaur's financing was in accordance 'ivith soundbusiness and financial practices.

In addition to the foregoing :facts. Frue.1auf' s share of the relevantma.rket , all trailer products declined substantially during the relevantpCTiod , a.s found 110reinabove (Polk and Census Tables, Part C-38nIW(! and R. Tab 7). It is apparent that Fruehauf's competitivesales practices or terms had no adverse effect upon competition duringan of the years encompassed by the record , including six years afterthe issnance of the complaint, because the, Test of the industry cap-tmwl the share of the market lost by Fruehauf, corresponding1y in-creasing their 'share of the market.

E"\en assumjng, contrary to the facts found herein , tl1at Fruehauf'

nnallcinp:, dOlYD pfLymen1: , pr. eing, leasing trade-in and used v,ehicle

purchasing, and lending practices were more advantageous to pur-

FRUEHAUF 'fRAILER CO. 927

878 Initial Decision

chasers than its competitors and resulted in increased sales by Frue-hauf, as alleged in the complaint, they constituted terms of sale justas do price and quality, and as such constitute competition whichthe antitrust laws are designed to encourage and protect.

Competition has been defined by the Supreme Court as a con-flict for advantage. " As the court in United States v. Alcoa statedcompetition is the endeavor of two or more persons to obtain thebusiness of others "by means of various appeals including the offerof more attra,ctive terms or superior merchandise." 21 Kecessarily

only one seller can make a particular sale. The Court of Appealsstated in the Sinclair case: "Competition * * * is a battle for something that only one c.an get; one competitor must necessarily lose." 22

Clearly the competitive sales practices or terms of sale engagedin herein by Fruehauf \Vere not contrary to good morals becausecharacterized by deception , bad faith , fraud or oppression, nor werethey accompanied by any purpose or power to acquire unlawfulmonopoly. The Supreme Court stated in its Sinclair' decision: 23

Certainly the practice is not opposed to good llora1s because characterized

by deception , had faith, fraud , or oppression. Federal '1' nHle Commission

Gratz 2;'3 U. S. 421, 427. It has been openlY adopted by many competing con-cerns. * "' " ),' 0 purpose or lJOWer to HC(jl ire lmla,yIu1 ilOlJOJJoly hns been dis-closed , and the record does not show tl1a t the vrobab1e effect of the llracticewil be unduly to Jessen competition

,:' '" .

Tl1e pO\vcrs of the Commission are 1imited by the str-tutes. It has no genal authority to compel competitors to a common leyel, to interfere 'with

ordinary bnsiness methods, or to prescrihe arbitrary standinGS for those

engaged in the conflict for aclvantag.e caned ('ompetiLion. The g-reat purposeof hoth statutes was to advance the public interest by secl1l'J.ug fail' oppor-tnnity for the play of the contt'nrling forct's ordinarily engendercd IJY anhonest desire for gain. And to this enel it is essential that those "\,.110 ad-venture tlwil' time , skill , and capital should haye large freedom of action inthe com1uct of their own affairs.

It is conr1uc1ecl ancl found that FrueJ1allf's terms or sn.le, or corn-

petjtive selling practices , as alleged in Count II and hereinabovefound , are not unfair methods of competition in violation of Section5 of the Act.

CONCLUSIONS OF LAW

1. The acquisition or asset.s by Fruehauf from I-Iobbs was inviolation or Section 7 of the Clayton Act, and was an unfairmethoel of competition in vioJation of Section 5 of the Act.

f" 'l' C. Sinclair Refining CompnJ1Y, 261 L.S. 463 (1923).21 United State!' v. A lumhmm Company of L!.nerica 91 F. Supp. 333

Sinclair Refining Company v. 276 F. 686 (C.A. 7 1921).23 Footnote 20 81lpra.

(S.D. K.Y. 19(0).

928 FEDERAL TRADE COMMISSION DECISIONS

Initial Decision H7 P.

2. The acquisitions of assets by Fruehauf from Carter, BrownStrick, Independent Metals, and Hyde were not in violation ofSection 7 of the Clayton Act or Section 5 of the Act.

3. Other than the acqnisition from Hobbs, Fruehauf has not en-gaged in unfair methods of competition in violation of Section 5of the Act, as aJ1eged in Count II of the complaint.

ORDER

It ,is ordel' That respondent, Fruehauf Trailer Company, corporation, and its offcers, directors, agents, representatives, and

employees, sJmIl, "ithin one (1) year from the date this order be-comes fil1al , divest itself absolutely, in good bith, of aJ1 assets, prop-erties, rights and privileges , tangible and intangible, including butnot limited to all plants, machinery, equipment, contract rights

patents, licenses, trade names , tradema.rks and good will acquiredby said respondent as a result of its acquisition of assets frmnHobbs Ianufacturing Company and Hobbs Trailer and EquipmentCompany (hereinafter called Hobbs), together with so mnch ofthe plants, machinery, buildings, improvements, equipment, and

other property of -whatever description which h LVC been added

to the property of Hobbs as may be necessary to restore Hobbs asa going concern in all the lines of commerce in which it was en-gaged, and in substantially the basic operating form in which itexisted, at and immediately prior to the time of the acquisition byrespondent.

Pending divestiture , Fruehauf Trailer Company shaJl not makeany changes in any of the above-mentioned p1rtnts, machinery, build-ings, equipment or other property of whatever description , which8ha.11 impair their present rated production capacity or their marketvalue, unless said capacity or value is restored prior to divestiture.

It i8 furthel' ol'dered That in such divestitnre no property above

mentioned to be divested shall be sold or transferred, directJy or

indirectJy, to anyone who at the time of the divestiture is a stoek-holder, offcer, director, representative, employee, or agent of, orotherwise direetly or indirectJy conneeted with or under the controJor djrcction of, respondent or any of respondent's subsidiary or

affliated companies, or to anyone who is not approved as a pur-chaser in advance by the Federal Trade Commission.

It i8 further ordered That the aJJegations of the complaint with

respect to the Carter, Brown, Striek, Indepcndent Metals, and

Hyde acqnisitions and the allegations with respect to unfair methods

FRUEHAUF RAILER CO. 929

878 Opinion

of competition , other than the acquisition of Hobbs, be and herebyare dismissed.

It is further ordered That respondent Fruehauf Trailer Companyshall , within such time as may be fixed by order of the FederalTrade Commission, submit in writing for the considcration and ap-

proval of the Commission , its plan for compliance with this order.

OPI:.ION OF THE COMMISSION

)\!AY 28 , 1965

By ELMAN OommissioW3r:

This matter is before the Commission on cross-appeals from thehearing examiner s initial decision. Complaint counsel have ap-pealed from the examiner s fiding that respondent's acquisition

in 1956 of The Strick Company did not violate Scction 7 of theClayton Act, as amended , 15 D. C. , which proscribes mergcrsand other corporate acquisitions where "the enect

* * *

may be sub-stantially to lessen competition, or to tend to create a monopoly. " 1

Respondent has appealed from the examiner s finding that its ac-

quisition in 1955 of Hobbs .Manufacturing Company did violatethe statutc.

Merger cases often involve diffcnlt and novel issues. This onedoes not. The mergers at issue here are conventional "horizontal"mergers mergers between firms which prior to the merger werein competition with each other. The law as to such mergers is nowwell settled , as a result of a number of Suprcme Court decisionsin recent years, and our only task in this case is to apply estab-

lished principles to the particular facts. On its facts, the casepresents a clear violation of Section 7; it is not even close to the

borderline of legality.

From the ear1iest days of the truck-trailer industry, fifty yearsago, to 1961 , the last year for which there is evidence in this recordrespondent has at all times been the nation s leading manufacturerof truck trailers , and by a substantial margin. In no year in theperiod (1953-1961) for which detailed statistics may be found inthis record has respondent accounted for less than 30% of the indus-

1 Complaint counsel have also appealed from the examiner s finding that respondent'

1953 acquisition of Brown Equipment 'I Ianufacturing Company was not unlawful.

However, since complaint counsel seck no relief with respect to that acquisition , we donot need to decide its lawfulness.

930 FEDERAL TRADE COM:ISSJON DECISJONS

Opinion G71"

try s total sales. .With one other large firm , Trailmobile , it has con-sistently accounteel for more than onc-half of the industry's sales;a.nd tIle remaining seners are all very much smaller than eitherrespondent or Trailmobilc.

At the time of the acquisitions in question , Strick and Hohbswere both healthy and strong competitors of respondent. Strickwas the third la.rgest seller of truck trailers , with 4-5% of the hl-clustry s total sales , and Hobbs was the sixth largest, with 2%.These perccntages, hUY1ever, understate the competitive position ofthe acquircd firms.. Strick was very strong in the importfl1t a,1u-

ml11um-van submarket 2 with 12% of total sales. Strick, inde,eel , hadpioneered the c1cyclopmcnt of the aluminum nUl , and its vans werewidely considered by customers the finest made. lIobbs was thesecond largest producer of dump trailers, with 22% of that snb-market , and a leading producer of platform trailers , ,yith 7%. :Hobbs,vas a part.icubl'ly weJl-managed firm; sometime aft.er the mergerwith respondent, an offccr of the pre-ac:quisition 1-1obbs becamepresident or respondent. Respondent was at all times for \Vhicllthere is evidence in the record the largest seller in each aT these

submarkets (aluminl1l1 vans , dump trailcrs , and platform trailers),just as it ,,,as the largest seller in the overall truck-traDer market.

Conditions in the truck-trailer industry strongly favor the largeseller 01'01' the small. ,Vhile the manufacture of truek trailers basi-cally involY8s no more than the assembly of parts prodl1ce.l byother manufacturers, and while it may be true , as respondent assertsthat anyone with mecha.nical skill ean fabricate a truck trailer in

his back yard , there is far more to becoming a signiIica,nt competitorthan the asselnbly of part.s. The most important customers for trucktrailers are the large motor common carriers. They typica1Jy orderin bulk- , 200, eyen 1200 units at a time; and to fil such ordersa sizable plant is required. That is ,yh:v the large common cal'rie.rsusually accept bids from only a handful of lu.rge firms. 1\10reovero compete for these fleet flCCOl1nts a seUrI' must. b( ahh: to accept.

the trade- ins of old truck trallers offered by these purchasers whenthey place an order, and f8\V producers h8,V8 tho facilities forrcfitting and l'escJling these trade- ins. So , too , to operate cifectivelyin this industry requires maintaining elaborate servicing facilities.

For tlwsc and other reasons, despite wl1at respondent claims isa complete absence of baTriers to entry, a handful of large firms

2 The bearing examine)', nppl;dng the test declared by the Supreme COll!'t in l"oiLn

Shoe Co. v. Unitr;( States 370 U. S. 294 , 325. correctly found tl1nt f11nmjn 1l1 'lf1ns, plnt-form traHen, and (lump trailers, among others, were appropriate prodnct markets

which to apprajse the competitivt! effects of the acquisitions, as ,'\ell as truck trailersgenerally.

FRUEHAL'F TRAILER CO. 931

878 Opinion

led by respondent, have managed to obtain the vast bulk of thetruek- tra, ilel' business , relegating the remaining producers to a strictlyImLl'ginal role. In 1059 , for exa,mple, the eight largest pl'odncershad a combined market share or about 74%, and the balance was

di \Tided among some 230 other producers, only six of Ivho11 hadas much as a 1 % market share. That large firms have definite com-petitive advantages in this industry is also suggested by the largenumber of mergers \\"hich have taken place in recent years , at leflst

one of which (Bl'O\Yll Trailers- Clark Equipment) was avowedlyintended to strengthen the merging fir11s vis-a-vis their hugercompetitors.

IIIRespondenfs principal argument on this appcal is that irrespec-

tive of ,yhethel' its acquisitions appeared to be ilJegal in 105;) r.nrl195G, actlml ml:,rket events since these acquisitions conclusivelydemonstrate that in fact they did not have the effect of subst.an-

tially lessening competition or tending to create a monopoly. In support of tbs argument, respondent points to the fact that between

lUG:; (the ye'lr in ,,,hieh it made the Hobbs acquisition) and lU61its share of the overall trl1ck- tra.ile.r market dcclinetl from 30.to 33.5%, and its shflre of the aluminum-van market , in which Strickwas an iruportant factor, deelined from 42. % to 36.4%. In thedump-trailer market , in which I-Iobbs was a significant factor, re-spondent argues that ,ybile it and I-Iobbs ' combined H)Gl marketshare was no less than that they enjo:yec1 prior to the acquisition(:28. 7%) , it was significantly less than their comhined market sharejust after the acquisition of I-Iobbs, since there ,yas a decline from44.': in 103G to S% in IDGl. Fina11)-j respondcnt nrg"ues thntt.he absence of any nnticompetitive eiTects from its aCCJuisitiOl13 is

further demonstrated by the fact that some 104 new companiesentered the indnstry after it acquired Hobbs and Strick.

Respondent's itrgnments fail to refute, and indeed do not even

come to grips with , the, bnsic nnticompetitive features of the chal-lenged acquisitions. c\.s pointed out above respondent is and alwayshas been the single dominant firm in the truck-trailer industr)' as itwhole rmc1 in each of its submrnkets. The fact that responclent:

mnrket share in the overall l1wrket as \ven as in the submal'kets de-clined during the 1D;'")5-1061 period in no way afiected either itsabsolute dominant industry position, or its relative position of

dominance vis- -vis its nearest competitors in these markets. Thusbot.h prior to and after the acquisitions , respondent remained theleader not only in the overall truck-trailer markets but in both the

932 FEDERAL TRADE CD:1MISSION DECISIONS

Opinion G7 F.

dump- traner and aluminum-van markets, accounting for marc tha.n30% of truck-trailer sales and 30.8% and 36.6%, I'spectively, ofdump-trailer and aluminum-van sales in 1961.In the overall truck-trailer industry, Trailmobile, respondent'

nearest competitor, in the relevant period narrowed somewhat thegap that previously existed between its share of the market andthat of Fruehauf; but Trailmobile s market share was still lessthan half that of Fruehauf in 1958. The balance of that marketcontinued in 1958 (the last year for which data are complete), as

in 1955 , to be divided among more than 200 smaller producers, only11 of which accounted for more than 1% of the market , with butone of these having more than a 5% market share (Appendix Ap. 937 infra). Thus, the entry into the market of 104 new companiesafter the acquisitions in no ,yay altered the basic market structurewhich remained as totally dominated by respondent as it has beenprior to the acquisitions. The total market share captured by these104 companies amounted to only 4.6% of the market in 1959 , withno one of them having more than .5% of the market.

The new entrants have not replaced the substantial competitionrepresented by the larger, and more aggressive , Hobbs and Strick.1\T one of them was able to tap that segment of the buyers ' illclustrywhich couJd , practically speaking, look only to Fruehauf aud theother larger industry members to fill its requirements; in no sensecould these new entrants be assumed to be able to offer efIectivecompetition to Fruehauf in serving the large and important com-mon-cnrrier customers. ?\one ,yas able to challenge in any meaning-ful ,yay the dominant position of Fruehauf and their entrance intothe market did not offset the anti competitive effects of the chal-lenged acquisitions.

Under the standards laid down by the Supreme Court , the Strickand Hobbs acquisitions are clearly unlawful. The Court has statedthat " ( wJhcre * '" * the merging companies arc major competitivefactors in a relevant market, the elimination of significant competi-tion between them constitutes a violation of 8 1 of the ShermanAct United Stcttes v. First Nal'ional Bank d1 7""81 Co. oj Lexington376 D. S. 665 , 672- 3 "without reference to the strength or weak-!less of whatever competition remainlsJ." ld. at 670:

J And a fortiori Ii 'tioIation of Section 7 of the amended Clayton Act. Cf. UnitedStates v. Penn- Olin Cliemica,l (.0. 378 U.S. 158, 170-71.

. For example , if General Motors were to acquire Ford. the elimination of competitionbetween the merging firms wonld not be off et by the fact that Chrysler eontinued tooffer competition to tbe merged entity.

FRUEHAUF TRAILER CO. 933

878 Opinion

The acquiring and acquired firms in this case were "major com-petitive factors" in the relevant ma.rkets. The Court has noted theimportance, in a concentrated market, of prc;;;erving the independ-ence of even a 1 % factor. United States v. AlU1ninum 00. of AmeT-'lea 377 U. S. 271 , 280-81. Strick and Hobbs "ere considerably morethan that. The importance of their competition is enhanced by the

fact that, as pointcd out earlier, the,re are so few producers capableof offering real competition to respondent for the patronage ofthe very important fleet buyers. In addition , the competition offeredrespondent by Strick and Hobbs was qualitatively as well as quan-titatively important. They ,verB aggressive, we.1J-mn.nagec1 , 'Successful

and grO'yjllg companies- prototype.(sJ of the small (only by eompari-son with the market leaders , respondent and TrailmobileJ inde-pendent that Congress aimed to preserve by ld. at 281.

It is fLIso clear that the acquisitions permanently e1iminated allcompetition between respondent and the acquired firms. '\Ve haveconsidered the post-acquisition evidence in the record; but respond-

ent gives it too much -veight. Respondent a.rgues that after 1956its maxket share declined steeply. '\Ve think the evidence is hope.lessJy p,ql1ivocal on this 8eore. But eyen if there vas such a dedineit diclnot restore competition between respondent and the acquiredfirms the focus under the Lexington Bank test. And , so far as ap-pears , rl'spondent diel not lose the bnsiness the acquired firms en-joyed; the market share of the Strick Division of respondent, for

example, has a.etually increased since the acquisition.In addition to eEminating ': significant competition" between "ma-

jor competitive factors :) the Strick and J-Iobbs acquisitions havecreated a reasonable probabi1ity thnt competition generally in the

truck-trailer industry rLnc1 the relevant submal'kets will be le.ssened

subst.antially. As noted earlier, most truck trailer producers do notI;T1Je jJoint of r.ep t\Jj"e for respom1ent' s ar,z\;ment tbat its ale eleclineu teeply

after lfi5G is tl1e "ery high percentng:e of shi pments in the rele,ant l!HlIkets it enjoyed

in 1955. prior to the Strick and Hobbs aC(jl.i\'ition , Howeyer, tl1e U) ):) figures I'e notreliable iljcIie.'tor of JlflrJ;et shares becf\l1se the:. inclmle intr con1pany shipment;; , vdliell",yerc nlhstantial in that . (1"01" examj)le, n' sllontIent shippen fill clllmp tr.'ilers but

oJcl onl ' 4\14.) With \'e !Je('t to the Striek I1c(JJ1isition , the recoru l1()WS that respond-

ent' s share of total hipme!Jts of nl\11lim;m ya:lS wns 21.7% in If)5. , 42.2% in 1955

GO,?c in 1950. and 33.1% in 1\157. Howcyer , in 1'J55 respondent Wf\S bnlluim:: 11'(J inyen.

ton' nd o) lli(J))ing more tl);1,1 it " o:elling, ,,' hDe in 1!);j6 nc1 1!)57 , when re pondr_1Jt

,Vf!S li(juidating illyentoo' , its bilJment went C10,Yll. T kiDg lD;'J3 r ther than 19.')5 as

the base e:1!. r(' pon(lent' s "ales of ;ll,lmiJJnm "lf1ns incref\secJ rntllel' than decreasedreflecting the f\(,rlition Df Strick' s m rkct sklre. 'nle (lecllne bet"lyeen 1()53 Tlc1 1037

thus nJn ' J)nt rf'!iNt nn)' aetual l lpc:liHe ill !'e p"ude1\t' al..;; J'e1ath' e to it ce'l1jwtitor;c'Yith respect to tlle I-oblJ f!r:Quisitjo1J. the eSfiminer fom:Hl tllat l'espoJ1(lent.s mnrketslwl'e in 110111 jJlatf(ll'll trnilers find (Illmp tlnJJrrs increase(1 , l'atl1el' tJJfln elec1inc(l, Of'-

1wt'en 1!)ii:) IIne1 1!)(J1, .\cc:orrlin::' . ,ylJflt 1)a\' snid l.bont tlle so-calle(l decline t.-)

respondent' s aJ\iminum-yan market "IMrf' npl)lie;; el fortiori to thf' otJler reJe nnt. SliL'.

markets.

934 FEDERAL 'TRADE COM:\IISSION DECISIONS

Opinion G7 F.

have the strength to compete cJj'ectively "ith respondent for thecream of the inc1llstris business-sales to the largercomrnon carrierfleet accounts. The absorption by respondent of two of the handfulof substantia.l firms capable of competing 'with it for these accountsis surely 1ikel:y t.o diminish the vigor of competjt,ion in this industrysubstantially and increase "the likelihood that parallel policies ofmutual advantage , not competition , will emerge.

Alu7nin'tl'l Co. ofl-nwl'ica , 8UPU( at 280.

This probabi1ity is not negated by the asserted decline II re-spondent' s market share subsequent to the Strick and I-Iobbs acqui-sitions. Assuming such n. decline has actnally taken place (but seenote 5 supra), the record ail'orcls no ba,sis for inferring therefromtlmt the strnetul'O of the industry is becoming morc competitive.The change in respondent s market share , so far as appears, reflects

:::ir::lpJy 11 trmBitory ren(ljnstn;(' nt ,-UilO.ilg the m,n'l;:('t le",c1en. , Jor there.s IJecll no shO\\'ing of ill:. snh'-'LlJlt.ial inJusion 01 nCI\' competiti,-

igol' (:-e8 pp. ODo-DDG in. /J' a). The do\Yl1'iil.::d trend of :L'c. ponc1-pur.s nW. rkct. sltilrc may ..dready be :: thing of t.he pa::t, The l'' COl'c!

shows thnt in IDOl (the last year for ' hich there is evidence) re-

spondent' s mtl.l'ket shRre increased m-er the previous year in Somesuljmarkets and , o\' el'all \nlS .'3111)stantially tho same as its 1960 share.

This much, at least , seems clear, and is enough to conrlenm theseacquisitions: The truck- trailer industry and its submarkcts ,,-ouldprobably be substrilltirtlly morc competitive in strneture but for theacquisitions." In IDM), for exallple the aluminum-van market \'asclomintltecl by two firms, respondent and Trailmobilc , having 38.and 18.4% of tot.al shipments TespcctiV( ly. J-Ind respondent not ac-quired Strick, it is like.Jy that a m::nket structure ,youlc1 haveemerged in \Vhich respondent had only a 2:12% sharc, TrailmobiJeIS. l%j anclStrick LLI %.7 The Strick acqui ition , thus, Ivbether

or not it increased the margin of responclent:s c1omilltnCe, seemsto J101\'e retarded the crnel'gence of a market structure in which tbltdominance y,ould have been significantly le.'s find the prospects forcompetit.ion correspondingly greater. Respondent maintained itsctominnnce after the e acquisitions , and thus the fact tlw.t its mar-

B 0re Scott l'apC/' Co. C. Dor r.et 6:1:10 (Opinion on P.ema))r1 . Dec. 2G. lUGS. (G3r:r.c. 2240J, Ct. Unitrr! Stale. v, Phi!adcljJllia National Ban!: 3.'1 U. S. ;;21, 3G3 , J1. 4:;;Et(lIu/o).t/ Oil Ca, Y. Unitcr! Stutes :':-7 U. S, 2Q3 , ::OS-OD.

o The li.c'.ll'c for Strick repl'eser.ts shipments frrnn the Strick fncilities of rf' pon(lent,al1\1 giye :t g:pj)(,l'al inr1iCfltion of what Strick' s mal'l,et share jJrolJf!Jl;v wO\llf1 have beeujf it hnil l'rmninul indepcmlent, Of cuur , wc ('ilnDot rc,,)J? hlO", '\- 11,1t the fate of theflC'luirecl or :IC(jlliring iirn;s woI1)(1 have In' ,,n !J::t for the merger. nnt we haye no rcnSC1l:ro t10nbt tl1nt the shipnwnts of respoJ)(icol' S StricJ;: D:vision iCII!11o"imate Ihe 11lob;lljlem:nl-ct sh: re Striri;: would haye enjo erl but for Ell" aCfjuisit!un , or t11n1: re jJ()llrlent'IJfll'krt sh,\ e wuuld h:Lye been s\1bstantiaE . sllnJler bnt for the flcqnisjtioT!

R The same jlHJgment is rcadlcd with rcsped to the Hobb:: ar;qlli"JJian, there bei!Jg

no bnsie (Jissindlarity in the facts,

FRUEHAUF TRAILER CO. 935

S78 Opinion

ket share declined after the acquisitions in no way lessens or elim-

inates their capacity to lcssen competition. See note 6 supra.

short , there call be no doubt from the entire record , including thepost acquisition evidence, that the effect of these acquisitions was

and probably will be

, "

substantially to lessen competition.

Respondent' s final contention-that the truck-trailer industry andits submarkcts arc uniquely immune to the anticompetitive effectsof undue concentration , beca,use there are no entry barriers andlarge firms have no competitive advantage. over smaJI-is far-reachingin its implications. If accepted, it would mean that no acquisitionof a competitor in this industry could ever be illegal; it w.ould meanthat respondcnt would be free to acquire Trailmobile and, for thatmatter, all the other leading producers, since by hypothesis thesnudl members of the industry or even new entrants could rapidlygrow a,nel replace the absorbed firms. ,Yithout pausing to explorethe many problems raised by this theory (see EkeD Pl'OduCt8 Co.

C. Docket 8122 (decided June 30 , 1D64), p. 6 L65 F. C. 1163

120Tj), we find it to be without factual support in tbis record.As previow,1y noted, competitive conditions in the truck-trailer

industry strongly favor the large seller over the small. ,Vhilc manyfirms may be able to enter the industry on a very small scale, fewindeed can attain a position substantial enough to offer a lneaning-ful chaJlenge to respondent. The avera,ge market share enjoyed bythe ne,,, entrants shown on this record is a miniscule 0.04%. Sofar as appears , only one firm that entered the truck-trailer industrysubsequent to the challenged acquisitions ha.s managed to breakinto the ranks of the 20 largest firms , and it ranks at the very bot-tom of the top 20 with a market share (1959) of only .5%. Indeedbetween 19G5 and 1959 , only one fir:m not a.nong the top 20 (apartfrom the new entrant just ment1oned) managed to break into thetop 20, and it too nlnks at the very bOtt0111 with 50/0 marketshare. The record also shows that while it may theoretically be pos-sible for small firms to compete with large, the fact is that in allyeaTs for which e.vidence was introduced the vast bulk of the truck-

trailer industry was controlled by a very small number of largefinns. The eight largest firms had virtually the same combinedmarket share in 1859 as they had had in 1855-nearly 75%. Andfully half of the industry s total saJes has consistently been ac-

countcct for by the same two very large firms , Fruehauf and Trail-mobile.

IJest there be any misunderstanding, we rcpeat that the post-acquisition evidcnce or record in this case has been fully considered

936 FEDERAL THADE COMMISSION DECISIOKS

Opinion G711

by the Commission and given the probative weight due it. SeeO. v. OonsoUdated Foods Oorp. 380 U.S. 592, 598 (1965). As

the Supreme Court has stated , such evidence should not be "givenconclusive weight or * * * allowed to override all probabilities. Of.United States v. Oontinental Oan 00. 378 U.S. 441 , 463. The Courtin Oon olidated Foods 380 U.S. at 599 , quoted approvingly the fol-lowing language from the Commission s opinion in that case:

If reciprocal buying creates for Gentry a protected market, \vhich others cannot penetrate despite superiority of price, quality, or service, competition is

lessened wbether or not Gentry can expand its marl et share. * '" * It is forthis reason that we reject respondent's argument that the decline in its shareof the garlic market proves the ine:Iecti,eness of reciprocity. 'Ve do not knowthat its share would not have fallen stil farther, had it not been for the in-fluence of reciprocal lJuying. This loss of sales fails to refute the likelibood

that Consolidated's reciprocity power, which it has shown a wilingness to

exploit to the full, wil not immunize a substantial seg-ment of the garlicmarket from normal quality, price and service competition." 62 :H. C. 959

960.

The last three sentences were a footnote to the first sentence.

This reasoning is applicable to the facts of the present case. Heretoo

, "

,Ve do not know that * * * (responaent'sJ share would nothave fallen still farther " had respondent not acquired two of itslargest compctitors. And here , too , nothing in the limited post-acqui-sition history of the relevant markets (including such loss of re-spondent' s sales as the record reflects) "refute(sJ the likelihood" thatthe mergers eliminated competition between the industry s domi-

nant seller and two major competitors.Indeed, the post-acquisition history confirms our judgment that

the probable effect of the Strick and Hobbs acquisitions wil be tolessen competition substantially. It indicates that respondent, de-

spite fluctnations in its market share, is likely for the foreseeable

future to retain its position as the Jargest seller in a highly concen-trated market and that the truck-trailer industry and its submarketsare likely to remain substantially as concentrated as at the time ofthe challenged acquisitions , despite some new entry and some lnarket-share increases by smaller firms. The post-acquisition history affords

no basis for rejecting the conclusion , compelled by the entire recordthat in this industry and its submarkets the elimination of sub-

stant.ial n.nd important independent competitors snch as Strick andHobbs did , and probably wil, substantially lessen competition.

On the record as a whoJe, and with due consideration for all ofthe evidence for the entire period covered, we conclude that the

Strick and Hobbs acquisitions were made in violation of Section

FRUEHAUF TRAILER CO. 937

878 Final Order

, and that divestiture, which as a general rule is necessary audappropriate to remedy such violations (see United States v. E. 1.

duPont de N emoun 00. 366 U. S. 316), is required here.

ApPENDIX A

ManufacturerMarket Share

1955 1958

Percent PeTcent

39. 1 34.

45.2. 1

15. 14.3. 1

1. 8 3. 1

. 91. 3 1. 71. 4

1. 31. 2. 9 1. 0

Fruehauf - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - - - - - - - - - --

Strick__

___ ------ ------- ------------

Hobbs__

_------ ------ ---------- --- -----

Trailmobilc

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - --

J)orsey - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - -

Highway - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - --

Brown (Clark) - - -- -- - -- -

-- - -- - -- - - - - --- - - - -- - - - - --- - - --

Great Dane

- - -- -- - --- - - - - - - -- - -- - -- - - - - - - --- --- - -

Gindy_____---

--------- -------- ------

Kingham- - --- - -

- - - - - - - - - - - - - - - - - - - -- - -- - -- - - - - - -- - ---

Utility_

___- ------ ---------- ----------

J,ufkin_

__- ------- -------- -------

Nabo

- ---- - - --- --- --- - -- - -- --- -- - - - - - - - -- - - -- - - - -

Kentucky - - - -

---- --- -- - --- --- -- - - - - - - - ---- - - - - - --

Jleil

- - - - -------- ----------- ---------- --------

FINDINGS OF FACT; CONCLUSIONS; FINAL ORDER

FINDINGS OF FACT

The Conlll1ission adopts the findings of fact contained in pp, 889-

910 (with the exception of the paragraphs on p. 904 captioned "

Conclusions

D11 (beginning "3. Hobbs ) to 914 (not including thelast two paragraphs on p. 914) of the hearing examiner s initial deci-

sion as its own findings of fact. The Commission s other findings offact are set forth in the accompanying opinion.'

CaNCL DSIONS

1. The Commission has jurisdiction of the suhject-matter of thisproceeding and of the respondent.

2. Section 7 of the Clayton Act, as amended , prohibits any mergeror corporate acquisition where the effect in any line of commerce inany sectiou of the country may be substautia11y to lesseu competi-tion or to tend to create a monopoly.

*No findings have been made with respect to those chnrges of the complaint thatthe examiner dismissed as to which complaint counsel did not appeal. We intimate noview on the correctness of the examiner s findings with respect to those charges.

370-702--71--

938 FEDERAL TRADE CO nlISSIO DECISIO

mnal Order G7 F.

3. The effect of the acquisition of the assets of the Strick Com-pany and Strick Plastics Corporation by Fruehauf Trailer Com-pany may be substantially to Jessen competition in the domesticproductio:l and ale of truck trailers and of ahllninum vans in viola-tion of Section 7" of the Clayton Act, as amended.

4. The eirect of the acquisition of the assets of the Hobbs Manu-facturing Company and Hobbs Trailer and Equipment Companymay bc substantially to Jessen competition in the domestic productionand sale of truck trailers , dump trailers and platform trailers in vio-lation of Scction 7 of the Clayton Act , as amended.

5. Divestiture of the acquired assets is necessary and appropriateto remedy the anticompetitive eHeets or the unlawful acquisitions.

FINAL ORDER

It is ordered That:

(A) I-esponc1ent Fruehauf Trailer Company, a corporation, andits offcers, directors, agents, representatives, and employees, shall

within one (1) year from the date this order becomes final, divest

itself absolutely, in good faith , of a!J assets acquired by said re-spondent from 110bbs :Manufac.uring Company and 1-Iobbs Trailerand Equipment C0l11pany (hereinafter ca!Jed Hobbs), togcther withso much of the plants , machinery, buildings, improvements, equip-

ment and other property of whatever description that have beenadded to or phlced npon the premises formerly owned by Hobbsas may be neces3ary to restore :Hobbs as a going concern and effectivecompetitor in all the lines of comme:1'ce in which it was engaged

immediately prior to its acquisition by respondent.As used in this order

, ;'

asse.ts 'J shall include any propcrt1es , rightsamI privileges , ta,ngible and intangible, including but not limited

to all phnts machinery, equipment, contract rights, patents

lieenses, trade names, trademarks, flnd good win of \-vhatevcr

description.(B) Pending divestiture, Fruehauf Trailer Company sha11 not

D1flkc any changes in any of the above-mentioned assets whieh im-pair their present capacity for the production , distribution , sale

or fmancing of truck trailers , 01' impair their market value, unless

said capacit.y or value is restored prior to divestiture.(C) Respondent in such divestiture shall not seJ! or transfer

direct1)' or indirectly, any of the assets to be divested to anyonewho at the time of the divestiture is a stockholder, ofIcer, directorrepresentative , employee , or agent of, or uncleI' the control or direc-

FRUEHAUF TRAILER CO. 939

878 FInal Order

tion respondent or any of respondent's subsidiary or affliatedcompanies, or to anjTone who is not approved as a purchaser in ad-vance by the Federal Trade Commission.

(D) If respondent divests the assets, properties, rights and privi-.leges, described in paragraph A of this order, to a lley\! corporation01' corporations , the stock of each of which is whol1y owned byFruehauf Trailer Company, and if l'e-'ipondent then distributes allof the stock in said corporation or corporations to the stockholders

of Fruehauf Trailer Company, in proportion to their holdings orFruehauf Trailer Company stock, then paragraph (C) of this order

shal1 he inapplicable , and the fol1owing paragraphs (E) and (F)shall ta.ke force and enect in its stead.

(E) o person who is an oiEeer, director or executive employeeof Fruehauf Trailer Company, or who owns or controls, directly orindirectly, more than one (1) percent of the stoc.k of FruehaufTrailer Company, slu*tH be an offcer director or executi'.Tc employeeof any Hew corporation or corporations described in paragraph (D)or shan own or control , directJ:y or indirectly, more thfln one (1) per-cent of the stock of any new corporation or corporations described

in paragraph (D).

(F) Any person W1-1O must sell or dispose of a, stock interest inFruehauf Trailer Company or the new corporation or corpOl'atioDsdescribed in paragra.ph (D) in oreleT t.o comply iTjth paragraph(E) of this order may do so within six (6) months after the dateon which distribution of the stock of the said eorpomtion or cor-porations is Jlftcle to stockholders of Fruehauf Trailer Company.

(A) Respondent, Fruehauf TmilBr Company, a corporation , andits offcers, directors, agents, representatives, and employees shaH

within on8 (l) year from the date this order becomes final , divestit*elf absoluteJy, in good faith, of all assets of its Strick Trailers

Division and such other assets as may be necessary to restore TheSt.rick Company and Strick Plastics Corp*rntion as a going con-cern and effective, cOlnpetit,or in all the lines of commerce in -whichit '0 flS engaged immediately prior to its acquisition by respondent.

As used in this order

, "

sets" shall include any properties , rightsand privileges, tangible and intangible , including but not limited toall pla.nts, machinery; equipment, contract rights , patents, licensestrade lUlmE'-S , trademarks , and good will of whatever description.

(B) Pending divestiture, respondent. shall not make any chrmges

940 FEDERAL TRADE COMMISSION DECISIONS

Final Order GT

in any or the above-mentioned assets which impair their presentcapacity for the production , distribution, sale or financing of truck-trailers , or impair their market value, unless such capacity or valueis restored prior to divestitnre.

(C) Respondent in such divestiture shaD not seD or transrer, di-rectly or indirectly, any of the assets to be divested to anyone who atthe time or divestiture is a stockholder, offcer, director, representa-tive , employee or agent of, or under the control , influence or dire,tion of respondent or any or respondent's subsidiary or affliatedcompanies, or to anyone who is not approved in advance by the-Federal Trade Commission.

(D) If rcspondent divests the assets, properties, rights and privi-leges , described in paragraph A or this order, to a new corporationor corporations, the stock or each or which is whoDy owned byFruehaur Trailer Company, and ir respondent then distributes allor the stock in said corporation or corporations to the stockholders ofFruehaur Trailer Company, in proportion to their holding or Frue-hauf Trailer Company stock, then paragraph (C) of this order shaDbe inapplicable , and the roD owing paragraphs (E) and (F) shaHtake force and effect in its stead.

(E) No person who is an offcer, director or executive employee orFruehauf Trailer Company, or who owns or eontrols , directly or in-directly, more than one (1) percent of the stock of Fruehauf TrailerCompany, shall be an offcer, director or executive employee of anynew corporation or corporations described in paragraph (D) or shaDown or control , directly or indirectly, more than one (1) percent orthe stock of a.ny new corporation or eorporations described in para-graph (D).

(F) Any person who must sell or dispose of a stock interest inFruehaur Trailer Company or the new corporation or corporationsdescribed in paragraph (D) in order to comply with paragraph (E)of this order may do so within six (6) months arter the date onwhich distribution of the stock of the said corporation or corpora-tions is made to stockholders of Fruehauf Trailer Company.

IIIRespondent Fruehaur shaD , within sixty (60) days from the date

this order shall become final , and every ninety (90) days thereafteruntil divestiture is fully effected , submit to the Commission a detailedwritten report of its actions, plans , and progress in complying withthe provisions or this order.

HUMBLE OIL & REFINING CO. 941

878 Complaint

J t is further ordered That the charges of Count I of the complaintwith respect to the Carter, Brown , Independent Metals, and Hydellcquisitions and the charges of Count II of the complaint be, andthey hereby are, dismissed.

IN THE MATTER OF

HUMBLE OIL & REFINING COMPANY

ORDEH ETC. , IK nEGAHD TO TIlE ALLEGED vrOLATIOX OF SEC. 2 (a) OF THE

CLAYTON ACT

Docket 8514. Compla,il1t, Nov. 1962-Decision, Ma.y , 1965

-Grder dismissing complaint charging a Texas oil and renning company withilegally discriminating in price bebveen competing resellcrs of lls gasolinein certain areas of l\Tew York and Soutb Carolina.

C07\rPI,AIKT

The Federal Trade Commission , having reason to believe that therespondent named in the caption hereof , and more particularly desig-JHlted and described hereinafter, has violated and is llOW violatingthe provisions of Section 2 (a) of the Clayton Act (U. S. Title 15

Section 13), as amended, hereby issues its complaint , stating itsharg' cs wjth respect thereto as follows:

PARAGRAPH 1. Respondent HumbJe Oil & Refiing Company is eorporation organizecl existing and doing business under and byvirtue of the Jaws of the State of DeJaware with its offce and prin-eipaJ pJace of business Joeated at 1216 Main Street, Houston , Texas.

PAR. 2. Respondent is now , and for severaJ years last past has beena.mong ot.her things , engaged in the offering for sale, sale and dis-tribution of gasoline and various other petroleum products through-out some forty-five States of the United States and the District ofColumbia.

PATI. 3. The Respondent Humble OiJ & Refining Company, in themarketing of its gasoJine and other petroleum products, operatesthrough Central , Eastern Esso , Southwest and Southeast Esso Re-gions and sens within each of the areas of said regions gasoline underbrand names carrying the designation ': Esso

" "

Humble" or "Enco.Specifical1y, for exampJe, in the eastern parts of the country, therespondent operates through the Eastern Esso Region and South-emt Esso Region and seDs its gasoline under the brand designated

Esso. " Respondent markets its gasoJine and other petroleum prod-

942 FEDERAL TRADE CO:\H.USSION DECISIONS

Complaint 07 F.

ucts in the aforementioned forty-five State area and the District ofColumb1fL through its own company-owned and operated stationsas well as under contracts with independent dealers and independentlessee-dealer stations. In the Intte,r two eategories, respondent hasentered into dealer contracts now in force and effect with service sta.-

tion clea.lrs , pnrsuant to the provisions of which respondent sellsand delivers to sneh deaIers their respective requirements of respond-ent' s brands of gasoline eluring the terms of such contracts.

PAR. 4. For the purposB of supplying said customers , and in mak-ing delivery thereto , respondent ships or otherwise transports, or

en,uses to be s11ippec1 or otherwise tn"tllsported , gasolines from its ownrefineries , locaterlin various States ftcross State lines to bulk stationsnTHl other distributing points wit.hin the forty-five State area, andthe District of Columbia , in which it docs business , from which saidgasolincs thence are sold and distributed to denIers sening the gaso-

Jines at retail under the Esso, Humble or Enco bmndnames. Thereis now and hn.s been at all times mentioned herein a continuousstream of trade and commerce , as "commerce" is defined in the Clay-ton Act of said gfLso1ines betwecn respondent's terminals , bl1lk sta-tions or other distribution centers and said retail denIers purchasing:lic1 gasoline in tl1c fort !lve States c"nel the District of Columbia.

AJI of said purchases by said retail dealers and sales by respondentto snch dealers are and have been in the course of snch commerce.Sa,ic1 gasoline,s. after transportation and delivery into the forty- five

State area and the District of ColumlJin, arc then offered for resale

to motorists and others in the pforemcntionec1 area.

\T. 5. In tl1e course and conduct of its said business in commercerespondent IImnble Oil & Refining Company has sold, and now sellsits gasolin8s fl,n(l various other petroleum products to purchasersthere,of. some of ",ham have been and nOlI' aTe in competition witheach other in tl1C resale and distribution of such products.

PAR. 6. Respondent , in the course and conrluct of its business, hasdiscriminated in price between different purchasers of its gasoline oflike grade and qualjt , by selling- sueh gasolines to certain of its cus-tomers at higl1er prices thnn it did to other of its customers. Com-mencing on or about l\1:ay 1960 , respondent has sold and is crmtinningto sell gasolines to certain clealers Jocntcd within the ::1re l of the

Southeast Esso R.cgion , among others , at prices lmver tha.n the pricesehargec1 by the respondent to 5ts other retftil pnrchasers lor gasolinesof the sa.me grade and quality in the same competitive ma.rket area.For example , certain dealers located in l\Ior-'cn and RockinghamNorth Carolina; Chesterfield , Ruby, and PageJand , South Carolina

HUMBLE OIL & REFI::ING CO. 943

941 Initial Decision

within the Southeast Esso Region , were charged a lower price bythe respondent than wa,s charged to competing purchasers of gaso-

lines of the same grade and quality.PAR. 7. The effect of the aforesaid discriminations , or any appreci-

"bJe part thereof, h"s been or may be substantially to lessen competi-tion or to destroy or prevent competition with those retail dealersof respondent's gasolines who received the lower prices, in the resaleof such gasolines at Tetail in the States of Korth Carolina and SouthCarolina and other areas.

PAR. 8. The discriminations in price as hereinbefore alleged are in

vio1ation of the provislons of Section 2 of the Clayton Act, asamended by the Robinson-Patman Act.

3fT. Rujru8 E. lVih'on. 311'. Anthony Zabieq(llski

: ,

Ii'.. .lIi" JJa)'()

Bmndt andlir. John F. Reilly supporting the compJaint.

Jl?' TVlUi(!n Shnon Jh' J. lVallace Adaii' and ill?'. A. DuncanTVhita1ceT of HO'WTey, Si1non , BaJ,':eJ' ilfw' chison "\lIashington

ill1\ CaTleton II. E'nden?JITLn anc1jli?' RooeTt T. Tate Xew York, and 1111'. Robert B. Jenni1?f)S, New Orleans, Ln., for the

respondent.

INITIAL DECISIOX BY HAnny R.. HINKES. I-IEATUNG EXAMINER

FILED MARCil 31 , 1965

ST)\TE:.IENT OF TIlE CASE

The complaint in this procceding issued November 5 , 1962 , chargedthat respondent sold gasoline to certain dcakrs located within thearea of the Southeast Esso Region , among at11e1's , beginning on orabout 1ffLY 1960, at prices Imver thfm it charged other competing

retail purchasers in violation of Section 2 (a) of the amended ClaytonAct (15 D. C. Section 13(a)). In the months that followed the

issuance of the complaint, pretrial procedures resulted in the dis-closure of specific incidents of alleged price discrimination in fiveseparate areas: three in the Carolinas and two in :N ow York.

Hearings were held in N cw York City and Charlotte, North Caro-lina, and concJuded on Noyember 2, 1964. Briefs "Iere submitted bythe parties , as well as proposed fiudings. To the extent that the fid-ings below arc inconsistent with those proposed by counsel, snchproposed findings are deemed rejected as not supported by therecord , or immaterial. Both parties have moved to strike certainevidence and/or reinstate rejected evidence. These motions are denied.

944 FEDERAL TRADE COMMISSIOK DECISIONS

Initial Decision 67 F.

During the trial of the case, the five areas of alleged price dis-

crimination were reduced to four. The State Line Grocery-Pagelandcase involved alleged price discrimination at various times in 1961

between "favored" State Line Grocery, purchasing gasoline not fromrespondent but from a jobber-customer of respondent, and two "dis-favored" Esso stations in Pageland, South Carolina. Respondent

moved to strike evidence olTered by complaint counsel in support ofthis portion of the price discrimination suit on the ground that StateLine Grocery was not a purchaser from respondent within the mean-ing of Section 2(a) of the Robinson-Patman Act. The hearingexaminer s Opinion and Order of October 3 , 1963 , upheld the posi-tion of the respondent in this respect.' Consequently, the four pricediscrimination cases for disposition at this time are:

1. The Cheraw-Bennettsvile case, alleging price discrimination

during the last half of 1961 between certain "favored" Esso dealers

in Chesterfield and Cheraw, South Caro1ina , and certain "disfavored"Esso dealers in Bennettsville, South Carolina.

2. The Rock Hi1-York case , alleging price discrimination duringthe same period between certain "favored" Esso dealers in Rock HillSouth Carolina , and certain "disfavored" Esso dealers in York, Hick-ory Grove, and Blacksburg, South CaroEna.

3. The Fromberg case, alleging price discrimination during 1960

and 1961 between "favorccF 1:sso dealer Fromberg and certain "dis-favored" Esso dealers on Long Island , New York.

4. The l\ierry Twi.ns case, alleging price discrimination between

May 1960 and June 1962 between " favored" Esso dealer MerryTwins and certain "disfavored" E.sso dealers in Queens , New YarkCity.

FINDIXGS OF FACT

1. The Respondent

1. Respondent IIumble Oil & Refining Company is a corporationorganized , existing, and doing business under and by virtue of thelaws of the State of Dela,,-are with its offce and principal placc ofbusiness Ioeated at 800 Bell Avenue , Houston , Texas (Admitted inAnswer at p. 1).

2. From January 1 , 1960 , to the date of the complaint, respondentengaged in the distribution, offering for saJe, and sale of ga.soline in

the District of Columbia and various States of the United States.

1 Complaint counsel' s request for reconsideration of the hearing examiner s ruling on

this Issue is denied.

HUMBLE OIL & REFINING CO. 945

941 Inital Decision

With the opening in 1960 of service stations in Ohio, OklahomaUtah , Nevada, and California , respondent was marketing its gasolinein 40 States (CX 3 , at Pl" 15 , 16). In 1961 , respondent entered thefive southeastern States of Georgia, Alabama, :Mississippi , Floridaand Kentucky (CX 4, at p. 3; Stipulation , Tr. 36) and thns expandedits gasoline retail marketing operations into 45 States of the UnitedStates and the District of Columbia (CX 4, p. 7; CX 5 , p. 8).

3. Respondent, in the marketing nf its gasoline and other petroleumproducts, operates through Eastern Esso, Southeast Esso, Central

and South v-,rest regions and sells within each of the areas of said re-gions gasoline under the Esso or Enco brand na,mes. In addition tose1ling its gasoline under the Esso and Enco brand na,mes , respondent

sold gaso1ine in certain States of the Lnited States under the HumbleCarter, Oklahoma , and Pate brand names (Stipulation, Tr. 36 , 37).

4. Service stations selling products of respondent have identifica-tion signs using the word Humble (Answer to Complaint, p. 2).

5. Respondent markets its gasoline and other petroleum productsin the aforementioned forty-five State area. and the District of Co-lumbia. through company-owned and operated sta.tions (Admittednot denied in Answer) a.s well a.s dea.lers a.ndlessee-dealers. Respond-

ent utilizes various types of agreements with its customers includingequipment lea.ses (CX 9 A , B; CX 18 A, B), motor fuel sales con-

tracts (CX 10), and leases (CX 11 A , B , C , D; CX 12 A, E , C, D;CX 19 A , 13 , C; CX 281 A E; and CX 283 A, B C).

6. Eespondent sells motor fuel of like grade and quality to its cus-tomers in the areas where it markets its motor fuels (Answer, p. 4;Response to Request for Admissions , dated June 10 , 1963, PI'. 1

Hespondent' s Response to Request for Admissions , dated August 51963 , PI'. 1-2).

7. Respondent produces motor gasoline at its refineries located inBaton H.ouge , Louisiana; Everett, 2\fassachusetts; Billings , Ivlontana;Bayway, New Jersey; and Bay town , Texas (Stipulation, Tr. 36).

Respondent ships or otherwise transports, or causes to be shipped orotherwise transported , ga.soJine from its refieries across State linesto terminals , bulk stations , and other distributing points (Answer toComplaint , p. 3). From its terminals , bulk stations, and other dis-tribnting points located in the States within which it does business

including N ew York, N orih Carolina, and South Carolina , respond-ent distributes and sells said gasolines at retail under the Esso brandalong the eastern seaboard and the southeast, including the States

of New York, North Carolina , and South Carolina (Answer to Com-plaint, p. 3; Stipulation, Tr. 36 37). Said gasolines, after transporta-

946 FEDERAL TRADE CO:'"nSSIO"f DECISIO"fS

Initial Decision 671'. 1'.

tion and delivery into the forty-five State area and the District ofColumbia, are offered for resale to motorists and others in the forty-Jive State area and the District of Columbia (CX 5 , p. 8) ineludingthe States of N ew York, Korth Carolina, and South Carolina (An-swer to Complaint, p. 3).

II. The Chesterfield-Cheraw-BennettsviJe Case

8. From i\hy 10, 1960, to July 14, 1961 , the respondent chargedthe mme prices and granted the same allowances to its dealers locatedin Chcsterfield , Cheraw, and Bennettsvi1e, South Carolina. Duringthe last half of 1961 , the Esso dealers in Chesterfield and Cherawpurchased gasoline from respondent at lower prices than the respond-cnth deale.rs in Bennettsvil1c.

The fo11owing table shows the allowances in effect to respondent'dealers in these towns. To arrive at the dealer s cost, the specified

allowance in effect at a particular date is deducted from his tank-vmgon cost of 15. 8 cent per gaHon , exclusive of taxes.

\BLE A!lowance.s in effect 10 espandeni' s denio's in named lowns

Clleo ert.el,l CllCrs,\\'dealers (leelrrs

Pp, iod Days Cjj(",irr- Cberaw Benne(.s- foxored f::n:-Olcd:telll vile over OV81

Bcnnctts,jlle Ber::ncttsvilledea;e dealers

.--

June 1961.____- 1. 6.TUDC 20- 19GL_---- 3. aJnne 30, HJ6L - -- -- - --Jnly 1961

_____ - --

1. 6 1. 6July 4-. 19, 196L--

__--

;3. 1. 7Oct. 1961.--

" "

o. c-,

ov. 18- 1961.J\Tov. 2.5- 1961. 1. G

Nov. 28, HJ6L_

__-----

5. .

Nov. 29- 1961.

__-

1. 6Dec. 1961.__ 8. 9 10.Dec. 0 , 1961._-- 10.Dec. 106L_

--__

10. :1.

TotrtJ__

(CX

9. Generally speaking, when the gasoline dealers in ChesterfieldCheraw, and BeunettsviJle received an allowance they would droptheir "posted" (retail) price at their pumps. Thus, with a 3.3 cent

HUMBLE OIL & HEFIXIXG CO. 947

941 Initial Decision

ailowance , the dealer would usually reduce his pump price by fourcents (Tr. 424-25 , 453 , 482 , 510- , 576).

10. Chesterfield, Cheraw, and Bennettsville are located on StateHigl-nnlY SC 9. Bennet.tsville is approximately 15 miles east Cheraw. Chesterfield is approximately 12 miles west of Cheraw. SC 9originates in the western part of South Carolina, travels east to

Bennettsville, then southeast to the Atlantie coast (CX 21 , 1464 B;Tr. 435 , 454 , 483).

11. According to the United States Census for 1960, the populationof Cl1eral',- i.'3 .5)71; of Chesterfield , 1 332. ; a,nel of BenncttsviJle, 6 063.

12. The.T. P. Stevcns Company's Delta Finishing Plant in Cherawemploys about a thousand pcople, several hundred of which live inor around Bennettsville and Chesterfield. This plant is located twoor three miles northeast of Cheraw , at the intersection of US 1 andSC 9. The Esso stations in the Chcraw area are located in downtownChel'aw or west of town , at least three miles from the Delta plantand in the opposite direction from Bennettsville. Commuters fromBennettsville to the Delta, plant wouldl1ot pass any "favored" Essostatiou in Cheraw unless they went out of thcir way (Tr. 515). There'fere a number of stations selling other brands of gasoline along theljonaal commuting route of such travelers (1'1'. 4285 , 4287, 4553

4538). It was unlikely for such comnluters to drive from the plant

t.o do\\ntown Cheraw before or after work for the sale purpose ofbuying gaso1ine because of the congested traffc crossing the only

bridge. connecting the two a.reas (Tr. 4755).13. Thp, only other 1arge enlployer in Cheraw was the James

Fabrics plant emp10ying about 500 people in 1961 (Tr. 480). This

pbnt was located wcst of Cheraw on SC 9. BennettsvilJe commuters

,,'

ould pass the Hurst aud Kimrey Esso stations (Tr. 451 , 481).H. Cheppell Hurst , a "favored" dealer in Cheraw , testified that

70 percent of his business was transient, originating fr01TI Bennetts-

viJle, Chesterfield , Pageland , ~ ew York, and "on up there in theKorth" (Tr. 451). Similarly, Leon Chest.nut, another "favored" deal-er in Cheraw , testified that 50 percent of his business is transient(Tr. 421). B. B. Sanders III a "disfavored" dealer in Bennettsville

tified that 25 percent of his business is transient , but that duringthe smm11er 40 percent is transient. B. B. Sanders, Jr. , the other

disfavored" Esso dealer in Bennettsvile, stated that 35 to 40 percentof his husiness was with transients (Tr. 502 , 558).

15. According to Mr. Hurst , if Benncttsville dealers posted retailprices of four cents below his price in Cheraw , it would "be beginning

948 FEDERAL TRADE COMMISSION DECISIONS

Initial Decision 67

to tell on us" (Tr. 471). But his posted prices were lower than thoseor BennettsviIe dealers. He admitted that he noted no difference inthe number of his Bennettsville customers when hi8 posteel priceswere lower than the Bennettsvile prices (Tr. 457). Mr. Chestnut

testified that a rour-cent differential would necessitate assistance(Tr. 448). Robert Kimrey, another "favored" dealer in Chemwthought that a three-cent differential , fifteen miles away in Bennetts-ville , would have "very little" effect, that " iaybe five cents , maybe

'd have some reflection , but certainly smaner I don t believe

(Tr. 496).

16. The "iffy,

" "

maybe" testimony of the "favored" dealers haslittle probative value in determining whether BennettsviIe dealerswere hurt by the lower prices in Cheraw.

17. Turning to the two "disfavorcd" dealers in BennettsvilleSanders III stated that a price differential of more than three centsaffected his business (Tr. 510) : Sanders Jr. lost gas sales if the dif-rerence was more than two cents (Tr. 562). Both claimed to haveJost business to Chemw dealers because of the low price in Chemw(Tr. 505- , 560). But between June 15 and Kovember 28, 1961respondent' s allowances to deaJers in Chcraw did not exceed thosegiven Bennettsville dealers by more than 1.7 cents , except ror twodays in October. Between November 28 and December 26 , the whole-sale price differences between Bennettsville and Cheraw exceeded 3.cents on only rour days (See Table I 8"pra). Sanders III statedquite positively that he did not know or losing any gasoline sales toESBO dealers in Chemw in 1961 because or Jower price (Tr. 505). Infact , he could name only two customers who told him they had everbought any brand of gasoline in t.he vicin1:ty of Cheraw because ofJower prices. Neit.her the st.ation nor t.he year of purchase was ident.i-fied (Tr. 505). ~or did Sanders Jr. know or a single customer whoJlad purchased ga.soline at a.ny station in Cheraw beca.nse of price in1961 , but only that they "could have" (Tr. 561 , 571 , 588). Sanders Jr.testified that a 1\Ir. Herndon had bought gasoline in a neighboringtown at a lower price. He ha,cl shown Sanders his Esso credit cardor purchase (Tr. 564). This testimony was contradicted by !VI'.I-fernc1on himself \\"ho stated that he once bought at an America,

Oil station and then only 9. 5 gal10ns or gasoline (Tr. 4114). SandersJr. also testified that two school teachers bought some brand of gaso-line from a nearby town instead of from him because of lower pricesthere (Tr. 567). The teachers themselves , however, testified that they

HUMBLE OIL & REFIKING CO. 949

(Hl Initial Decision

neve?' bought gasoline from anyone other than Sanders Jr. exceptwhen about to run dry (Tr. 411U-22).

18. The Sanders ' testimony of loss of business is further watereddown. A witness for the respondent testified that Sanders III boughtan average of 8 000 gallons per month during the first 11 months of1U61 , but 20 000 gallons in December 1961 (Tr. 4208). Similarly, theaverage monthly purchases of Sanders Jr. was 3 400 gaUons, butduring December he purchased 5 899 gallons (Tr. 4208). This testi-mony was not contradicted.

19. The testimony of these witnesses as to their allegcd injury

not strengthened by the rest of their testimony which exhibits a cer-tain unreliability. Thus, Sanders III disclosed that he purchased hisgasoline from respondent and two other oil companies. Ilis gasolinesales , hmvever, from an Esso pump, were made without disclosingthe fact that the gasoline might not be the Esso brand (Tr. 533).Sanders Jr. stated that he purchased both Esso and Pure gasolinebut claimed that his 1961 purchases of Pure gasoline were less than

000 gaHons (Tr. 612). Pure Oil Company records , however, indicatethat his 1961 purchases of Pure gasoline totaled 323 091 gaHons

(RX 77).20. The only other evidence possibly indicative of the effect of

price differentials upon sales volumes of Chera w dealers vis-a.-visthe BennettsviHe dealers is the statement of Mr. Hurst of Cheraw tothe effect that his average monthly sales of gasoline in 1961 wereonly 32 500 gaUons (Tr. 458), but his December 1961 purchascs werBover 50 000 gallons (CX 1). In view of the apparBnt increase ingallonage experienced by Sanders III and Sanders Jr. in December1961 , it is not reasonable to conclude that the increase expericnced byHurst was at the expense of the "disfavored" dcalers in Benncttsvile.

21. Nor is complaint eounsel's case helped much by Mr. Smith.That witness , caned by complaint counsel in rebuttal , was an Essodealer in Che,sterfield. lIe testified that if he \':ere receiving anal10wance of eight cents per gallon as against Bennettsville dealers

27 mi1es away, get6ng 1. 6 cents per gallon , he "thought I had annr1vantage over them.

. .

that people that was going somewhere

7IUlybe they would be looking at prices along the road; maybe wherethey would turn , wen , naturaJJy, it would be convenient to pun upat one place where the gas was lower. . . I think I would; probablyin a small way you would probably have sorne advantage (Tr. 4876).

950 FEDERAL TRADE COM lISSIO DECISIONS

Initial Decision 67 P.

2. :\Iotorists and other retail gasoline customers are price consciousand will take advantage or lower gasoline prices. That, however, isnot their only consideration-station facilities, station location , serv-ice, and the accident or emergency also contribute to their choice(Tr. 425 56).

23. It is , therefore, concluded and found that the price differentialsimposed upon the respondent's dealers in Cheraw and Bennettsville'''81'e intermittent and brier when they were meaningful; that therecord is deficient in demonstrating a Joss or business on the partof the alleged "dis-favorec1" dealers of Bennettsvile, and that the

dealers or Cheraw were not in significant competition with the deal-ers o-f Bennettsvi1e because of the distance between them, which

madc trips from Bcnncttsvile to Chemw soleJy for the purpose ofbuying the cheaper gasoline, uneconomical and because of the spas-modic nature of the price differentia1s which mode it un1ikely thatmotorists visiting Chent'i\' for other reasons would purcl1a.se gasoline"hi1c there. Even BennettsvDle residents working in Cheruw did notnecessarily find it convenient to deal with the Esso dealers inChsraw. The traffc between these tmvns 011 the part of the motoristsoing to the beach during the summer, which might account for

80m8 significant price shopping, as argued by complaint counselcarrie3 little weight 1181'e since significant price differentials did notdevelop until November 1961 when obviously there 'vas little beachtraffc. Thus , the record is deficient in showing that motorists gen-era.)ly did shift their business to the Cheraw Esso dea.lers duringperiods of substantiaJ price differences. The record is similm'ly defi-cient in proving t11at they would hrwc done so.

III. The Rock HiD-Hickory Groye-York msc

24. During the period beginning :Tfay 10 , 1960 , through June 15.19tH , the respondent's dealer-customers located in York, I-rickoryGrove, and Rock Hil , South Carolina , were charged the same pricesby the respondent (CX 1465). From July 4, 1961, throngh Decem-

ber 1961 Hnmble soM its gasoline to Esso deaJers in York and Hick-or:v Grove at substantia.lly 11igher prices than t110se chal'gec1l'espond-ent' s cllstomers in Rock Hil1.

2:3. The -following table shows the allowances in effect to respond-ent's dealers in these towns. To arrive at the dealers' cost, thespecified al1mnmce in effect at a particular time is deducted fromthe tanlnva.gon cost of 15. 8 cents per ga.1lon , exclusive of taxes.

941

HUMBLE OIL & REFI"e.w CO.

Initial Decision

951

TATILE Price allowances (TVA's) in effect dw"ing Pa1't of 1961 in cities of

Rock Hill, York, and Ihckory Grove , S.

Period DaysRockHil York

IIickoryGrove

RockHil(ayored over

York andHickory

Gruve

July 4- , 196L____-------

------

July 7- , 196L----_----_--

----

July 13-18, 196L--_____---

-----

July 18- , 196L__

_-- _--------

July 27-Aug. 3 196L

--------

Aug. 3- , 196L_----__

_---------

Aug. 19- , 19Ej1--_--_

--------

Aug. 26- , 196L_--__--_-------Aug. ;10, 196L__

___ ----------

Aug. 31-Sept. OJ 196L

----_----_

Sept. 13 Oct. 4 , 196L------_--Oct. 13- , 196L--

__--------

Nov. 25- , 196L--------_--

Nov. 28- , 196L_

___---------

ov. 30- Dec. 7 , 196L__

_-- _---

Dec. 7- , 196L_

--_ -----------

Total_

------------

Cent,

11.;)II 3

Cenls

9. :i

II. 3

Cen!.

11.

Cent8

I. 0

3. G

112

*2.

T4.

.- "

0. ,)

. 38. g

8. 9

*City.tOutsidp.No TVA' s in effect in above areas dming ba;ance December 19G1.fAll infQrmation taken :rom ex l.J

26. Generally speabng, when the gaso1ine dealers in York, RockHil , and Hickory Grove received an allowance they would droptheir "posted" (retail) price at their pumps. Thus, with a 3.3 centallowance the dealer would usually reduce his pump price by fourcents (Tr. 79, 127, 150 , 1115).

27. Rock I-rill , South Carolina, is an industrial city with a popula-tion of more than 29 000 (RX 49). The largest single employer thereis Rock Hill Printing and Finishing Co. employing three to four

thousand persons during 1961 (Tr. 41 , 103 4270). Many residents ofYork and Hickory Grove are employed in Rock Hill (Tr. 116 , 11094901) .

28. York, South Carolina, is thirteen miles west of Rock Hi1J viaState Highway 5 (Tr. 64, 104, 1103, CX 21). Its population in 1961was 4 700 (RX 49).

952 FEDERAL TRADE COM:\fISSIOK DECISIONS

Initial Decision 67 F.

29. Hickory Grove , South Carolina , is 25 miles west of Rock Hilvia State Highways 5 , and 211 (Tr. 115). Its population in 1961

was between two and three hundred persons (Tr. 130; RX 49).30. Sewell Brown was an Esso station operator in York during

the last half of 1961 (Tr. 1087). His employee, Carl M. Green , testi-fied that customers of that station worked and shopped in Rock Hilduring 1961 (Tr. 4901). Mr. Green also stated that travelers fromYork to Rock Hil "would naturally buy their gas there in Rock

HiIJ" (Tr. 4902). At no point , however, did he indicate that such cus-tomers patronized any Esso station in Rock Hil1. In fact, the stationsin Rock Hill most frequently patronized by Green s customers work-ing at the printing plant were Sinclair and Texaco stations whichcustomarily posted prices below the prevailing Rock I-Iill retail prices(Tr. 4919-22). Moreover, ES50 prices were usually last to go downand first to go up (Tr. 4923). )11'. Brown himself was not askedwhether he lost gasoline customers in 1961 because of lower pricesin Rock Hill. He could not recall whether any customer even toldhim that his prices were higher (Tr. 1111). When asked specifically!1bout 1961 , he "was not paying !1ttention to the prices of g!1solinethen" (Tr. 1135); he "might" hrLVc requested price assistance onceduring the last Imlf of 1961 , and if he did , he received it within aday or two (Tr. 1112 , 1115). Nor did Mr. Brown notice any declinein his gasoline sales during the last half of 1961 other than the nor-mal fluctn!1tion from month to month (Tr. 1111).

31. In sum , therdore, it cannot be found that Brown s station in

York suffered competitive injury by the loss of business to Rock HilEsso stations purchasing gasoline at a lower cost from therespondent.

32. Leon Bratton , an allegedly "disfavored" Esso dealer in HickoryGrove , testified that abont 100 of his regular customers worked inRock Hil and that some of them complained to him during 1961becanse his prices were substantialJy higher than those in Rock Hil(Tr. 116 , 138) ; some of his customers would be attracted to Rock Hillif the price differential were four cents or over (Tr. 125) ; some of

his customers would be attracted to grocery stores sellng gasolineand located between York and Rock Hil if the differential were onlytwo cents (Tr. 147). Nevertheless, his galJonage throughont 1961

remained fairly constant at about 11 000 gallons per month-anincrease of 500 g!1lJons per month over the last half of 1960 (Tr. 130).He conld not, however, identify any customer whose purchases he

HU:YIBLE OIL & REFINING CO. 953

Inital Decision

iost to Rock Hil Esso deaJers in 1961 (Tr. 133), nor did he knowthat they actuaJJy purchased in Rock Hil (Tr. 117, 122, 138), let

alone at any Esso station. As he explRined

, "

It could have been manyother hrnnds as wel!" ('11'. 117).

33. Three "favored" dealers in Rock 1-1i11 testified. One of themClarence E. Tl'ead'imy, testified that p( ople from York who workedat the printing company stopped at his station and bought gasoline(T1'. , 43 , 54). He further testified that his lower prices during1961 were the reason for much of his saJes (Tr. 57). His mouthly

n11ona e in 1961 , however, averaged between 8 and 9 thousand gal-Jon" which he described as a "smaH volume" (Tr. 50).

34. SpecificaIJy, however, 1\1'. Treadway couJd not answer whetherhe ntt,meted gasoline business from York deaJers because of his lowerprices (T1'. 40 , 41). He couJd 1'ecaIJ only one customer from York infl11 of 19G1 even mentioning fL retail price difference between Yorkand Rock HiJJ (Tr. 47).

35. Another " favored" Esso dealer in Rock Hil1 , Herbert R. Boydtified that he could remember " rL few" people from York who

bonght his gaso1ine because the p1'i('es were lower in Rock JIillITr. 105). He was not asked abont the voJume of his gasoline saJesin 19(-;1. Eighty percent of his business came from local people livingin Rock IIin (Tr. 10'2 , 103). The tmnsient business involved in theother 20 percent incJuded tourists and salesmen who bought fromhim primarily because. they needed gasoline while in his area (Tr.107).

36. The third " favored" Rock Hin dealer, Harold EJJiott, wasthe, one identified by Jr. Green ns the station to which he lost gasoline oales during 1961 (Tr. 4915). "fr. EJJiott knew that "a lot" ofhis g:asoline customers lived in York and worked in Rock Trill andthnt. he att.racted sales from York dealers during 1961 because of hisImver prices (Tr. 66, 82). Ilis gal10nagc which had been decliningtheretofore continued to decline in 1961. lIe could not, however

"'in"te the 1eveJ of his sales "jth the 1eveJ of gasoJine prices (Tr. 93).

Dnring 1961 , his gallonnge was adversely affected by the terminationof his tnHling sta.mp program , as well as by the elimination of per-onal-cre(lit customers "who formerly accounted Tor 25 percent of hisbusiness (Tr. S5 87). The record cloes not enable one to determinehow much, 1f an:v of his sales decline in 1961 could reasonabl:v be

con.':,idered ofi'set b:v increased sa.les clue to his lower prices.

7f1- 7()::-71-

954 FEDEHAL TRADE CO:'dl\llSSIO DECISIO

Initial Decision (:7 F/l'.

37. Ir. E1liott was able to name only one customer (a Mr. Posey)"\yho lived in Yark and ,yho allegedly bought from Elliott because ofE1liott' s lo,, el' prices. Mr. E11iott did not know , however, whether:Jf 1". Posey bought gasoline at another Esso station. lIe thought thatlr. Posey t.raded with a GuU Oil st.at.ion (Tr. 67 71). Mr. Posey,

however, stated that he bought gasoline in Rock Hill 0111y if heEeecled gasoline while therc , ancl did not know whether Elliott'prices \Tere higher or lower (Tr. 4201).

38. It is , therefore, concl ueloel that the record evidence is inadequateto pl'O\"O tbat the pric.l c1i1lcl'ence imposed by the respondent npon thet1cltlel'S in Rock 1Iill , as agaill t. those dealers in York a,nc1 HickOl'

Gl'oye , resnlted in compe.titi,-e injury to the " c1isfnnn' ecP dealers ofYork alHll-ickoJ'Y Gron or cOlnpetitive adnlntage of any sigl1ifica.llccto the al1egedly " fannw1" dealers of Rock Hil1. :'01' does the rceorclpermit 11 finding of probable competitive injury to the "disfavored"dealers, neither of 'whom experienced a loss of gallonage during theprice war or e' en exhibited much concern about it.

39. Compla.int counsel also offered evidence with respect to price

discrimination between respondent' s Rock Hill dealers and respondent s dealer in Blacksburg, South CaroLina. The Blacksburg dealerPaul GalIuey, testified that his gasoline sales during 1961 remainedconstant (Tr. 194). 1-Ie knew of no customer who purchased gasolineat any Esso station in Rock Hi1l in 1061 (Tr. 173). Customers , comp bining of lower prices "do\Tn the road " were referring not toHlfljOl' Lranc1s , of which Esso is one but "They were mostly inde-pellclcnts

, * . " '''

(Tr. 173-(9). Complaint counsel has not submitted

proposed findings ,yith respect to price discl'ilnination practicedagn. inst ::J1'. Gaffney.

TV. The Frornbcrg Case

4-0. Leo I' romberg operated n retail gasoline sen'lce station at2:2;)-02 .Ja.maicfl Avenue on the sout.heast corner of 2.2;"5th Street andJamaica, Avenue in Nassan County, Xew York, just over the countyJ-nc bet\\ een Que.ens and Xassau COllnties (Tr. 884--99). .Jamaica\.n'mlC becomes Jericho Turnpike as jt goes through Nassau County.Bct\yppn l\Iay 1 and Xovcmbel' 1. IDGO , flnd lJet'Teen Iarch landDCC'Pnlbel' , 19(-1 , F'romberg paid the following" prices per gal10nfor gasoline purchased irom l'espollcle.nt:

Hl::)1BLE OIL & REFlXl:\TG CO, 955

1Hl Initial DecisioJl

TABLE III

---

eJ'iod

- - - - - - -

Esso Extra C;ol(i

16. 1R.

12. 17.11. J'1. 4 lG.

17. ), 4J . lei. :20.

1:J. I(i. IS.16. J9. 21.

16. JR. 4

. \)

13. J7.18. 20.Ii. 4 la.

1;). 18,

It!. 17. . 4

16. lS.lei. 18.

leiJ" 16. '1

l.j IS. O. -1

. '1

l-. 16. lS.1,). IS. :20

--..- -. -

1960,:.ln :.Ja - 17

_--

:.1ay IS- :.Iny :2(--

:.lay 27- :.Ia - ;3L_

- - ---- -----

.Junc I- Jnly 16-

July 27- Allg. 1

AHg. l\J- Uct. ;)--Oct. 6- Get. 31-

IDoL.:lar. I-Apr. 11.--

_-- -- ----

Apr. 12-Julle L_Junc 2- .Jul - J--

----

July tJ-J Hl;.' 27 - - - - -Jul \' 28- Aug. F;--Allg. 4- Al!g. LJ_

_..

ug, 16-Sep1. 2;3-

- --

Sept.. 26- ()ct. ;L--Oct. 4-0ct. 16-

--_

Oct. J 7-0ct. l

- - - -

Oct. 19-Xo\'. 9_

l\o\'. lO- o\.:;0\' , IO- Dec. :!(L-1)ec. 27- 1)ec. :-11._-

-- - -----------. - - - - - - - - --. - - -.--

(ExcludillfUUl'C'X

n, During the t1me 16 months of 1060 a,nd 1961 , l'espondellt. soldEsso gasoline to t.hree of its dealers in Queens County at 1G. 2 centspel' gallon for regular , 18.7 cents per gaJlon for Extra , and 20. centsper gallon for Golclel1 aD exclusive of taxes (Respondent's Responseto Request for Admissions , dated August 5 , 1963, page 2). These

t.luee dealers , a.lleg.edly "disfavored " were the Dellncona station

located at 2.:11-13 I-Iillsi(lE Avenue , less than a mile from Frombcl'g;the Cohen station, at Hi11side Avenue and 21Sth Street. a180 Jessthan it mile from Frombel'g, and the I-Iaggerty station , at HillsideA ' enne a.nd 20;1d Street , about bvo miles from Fl'omberg (Com-Plaint c.ounseFs Second ::101'e Definite Statement, datcd )Iarc.h 119G,1: CX 242 , 231- 1; RX 11).42. During 19GO andlOG1 , Kew York City, which includes Queens

County, Imd in ciIert a three percent sales tax con?ring ret,'lll g' ,1S0-

line saJes. ~assau County had no such tax (Tr. 928- 041). The

956 FEDERAL TRADE CO::L'VlISSION DECISIOKS

Initifll LJedsioJl OJ F. 1'.

effect of sllch tax was to raise the price of gasoline in Queens Countyby approximately one cent per ga11an, everyt.hing else be.ing equa1.

43. Queens anel assau Counties are similar in that they both

contain some of the Blost densely populated areas in the unitedStates. The bulk of traffc, which is very heavy, ilows from east andr'. t on the main arteries and expressways leading in flnc1 out of?lIonlwttan (Tr. 1D59- , 2296, 2301- , 2317, 2381). In an area

approximately SeTel! miJes by ten miles there are about G25 servic.estations (RX ll).

44.. Quecns clea.1ers' price sig'ns are limited in size by b n' and arehot cliscernible from even across the street. In many areas of NassauCounty 11Ow(,1'e1' , signs as 1a.rge as 10 feet by 19 feet in size, advertisethe prices at the station (Tr. 9H , 968 , 978 , 1987 , 3974 , 4012). Iore-over. a strong dealer organization exists in Queens

, "

with stabjji*zingeHeet on prices. )LS a. result., the ret.ail prices of gasoline are stabilizedrelatively high in Queens , with 70 pereent of the stations chargingbet"een 29.9 aml 81.9 cents pel' g,,110n (RX 41 A). In Nassau Conn-

. T:) percent of the stations pm;;ted prices ranging heh"een 27.9 and29.9 cents pcr gallon (RX 42 A).

h3. .\ccording to ;\11'. Fromberp.. , Jaw prices originflte at four sta-timE, l:111e of t.l1cm E8S0 stations , along Lakeville H.oad just northof the .Jericho Turnpike , more than two rniles from the FrombergFtation (Tr. 027-30). A Sinclair station , a little more t.han a mileemJ. of Fromberg on the Jericho Turnpike

, -

would also be among thefirst to Jower price. These 10"\,\7er prices would extend west alongTericho Turnpike to Tn1ip A vomle (Tr. 962 , 3977). Only when theseJO"\\f'l prices moved west of TuEp Avenue did From1Jcrg feel any('ompe(jtive effect (Tr. 9R3).

4G. Fromberg t.estified that he. dre,v more than 90 percent of hishn:;ine s from an area stretching about seven blocks eflst and westalong .Tamaica A venue, a.nd three to five blocks north and south ont.he ::ide, strpe.ts (1'1'. 938 4040). Complaint counsel t1isputes thisstatement., citing Tl'. 950 where Fromberg stated that lube eustomers01 llis bought ga:;n1ine at a station 2\' miles away. This testimony,

hmn2\- , is not necessarily evidence t.llat motorists lrflycl long dis-lances to take advanta.ge of low gasoline prices. For an we knowthese enstomers may have lived near the sta60n from which theybought t.heir gasoline and traveled 21j2 miles to have the lube workdone on their cars by Fromberg.

HU).IBLE OIL & REFINTIG CO. 957

941 Initial Decision

47. Fl'omberg considered himself competitive ,,,ith the gasolinestations on Jmnaicn, Avenue between his station and Tulip Avenue(Tr. 926). He denied that he was in competition with Dellaeona

(Tr. 940, 972). The two stations are on different arterial highways.There is no main route that connects the Dellacona station directly

,,-

ith the Frombcrg station ('11'. 982- 84). Dellacona s business islnainly repair \'ork- gasoJine is secondary (Tr. 1031 , 224:4). His1960 gasoline sales averaged about 30 000 gallons pCI' month, and

his average monthly sales in 1961 'vere about the same as in 1960.During 1D61 he closed his station on Sundays, losing about 5 000

galJoue per month as a result (Tr. 1026). His sales did not decline

until 1962 , " yea1' after the relcvant time period ('11' 1016).48. forem- there is considerable doubt of any eausal connection

between dcliverie to Fromberg and Dellacona and their respectivepurchase prices. Thus Fromberg s purchase price declined from

J0. 6 cents in 1IIay 1960 to 11.9 cents by June 1960 , while Dellaeonac1e1iveries increased and when Fromberg s purehase price increased

during the month of August 1960 to 15.6 cents, Dellacona s deliveriesdeclined (CX 242 251 , 254). Deliveries, in any event, are not areliable in(licator of sales by the stat1on. Deliveries made at the endof one month ,,"ould exaggerate the sales for that month , since thegasoline delin 'l'eel would presumably have been sold the followingmonth rather than in the month of deliveries.4n. Although Del1acona kne" of Fr01nberg s lmver prices, there i

doubt that. he bclie,ved himseIf competitivel:,' a1TectPd, lIe tc,-tifip.c1

that the great maiority of his bus npss came from a five-block ril(Ensof his station (Tr. 1009-12), which did not impinge 11pon the arefL

from ,,,hich Frmnberg (lre,v his bllsine, sEi. fol'eO\. er. the fnet that

))el1ncona wa dosed on Sunday ,vould rcmlel' t.he c.alculation ofgallona e loss (lue to C'ompetition with Frombcl'g excccclingJ pec1l1a-

ti,-e (Tl'. In2(;, 2244). Delbcol1H di(l not claim to lw\-e In, t anyImsiness to Fl'omberg. Actually, it appefLl'S that J)f'JJacona 'V,1S not

too intel'psled in asoljne prices. 1mt 'VfIS man', concerned ,yith h1Srepair business (Tr. 10B1 , 224::). TIe was not a,vare that annther

o rlenlt'l' 111 Qll('ell . J-Taggert . n110111- t,vo miles ,yest. on I--il1s1(le

Avenne , 'V,lS posting a price 011( cent belmv his and t.hat allothel'1;needa. abont one mile ,yest of IT:U:2'Q'erty Imt on .Tnm:lirn A n nlle.i1as h"lo cents n11der J1is price, (Tr. 1023-28). Tllf price assistaJlce t1wtDE'JJacoJla reque 1ed froJn the J'' t-P01H1Pllt" jn )f)(:;0 rmd 10(11 \Vi13 Jor

the purpose of ;;l)()osting :: his gallonage in order to "nwke (\ lwtler

958 :FEDERAL 'lHADE COl\BlISSIO:' DECISIO:'.'-"

Initial Decision ti7 F. T.C.

(leal on f1 llC\Y gas cOlltl'act a.nd to meet. competition from XaS'3mlConnty slotions , bnt no spceiflC station (Tr. 1008-14).

CiO. , therefore , cannot be concluded that DellacolUl suffered a lossin ga.llonage att.ributable to responclent's lowpr prices charged Fl'om-berg, or that there \vas ej'en any significant competition heh\ecllthese hvo stations.

:51. )11'. Cohen , who operated the E so station at H, illside and218th St.reet~ t.estified that his customers told him that prices werelmvp)' ;It Fromberg s (Tr. 1044, 1048-tD), and that if his cost lVere Jow as Fl'ombcrg , he could have lowered his l'ehlil price and in-C:l'ea Hl his Imsincss ('11'. 1051- ;'5:2). I-Ie also testified , hO\\"ever, thatXaSSflll County stations "don t mean Hn:ything to llS because they arenot ('ompe,tition to us" (Tr. 10G )), that 7;) pC'l'cent of his gaso1inehll::lnt' 3 comes from the "neighborhood" of his station (1'1'. 1047-4810Gtl-Cifi), nnd that. he did not compete with at least three other sta-tions on J3l'nddoc.k A venue ,vhich ,Tere bebveen his stntion and From-be, s nnd '1"hich posted lower prices than he ('11'. 1038). Nor did heknow of a sing'le customer who evcr left his tntiUll to go to l rom-berg .' ('II'. 103:\). Although Cohen iTas one mile closer to theJ-Ta,ggerty and rneeda stations than Del1n.cona was : he paid ':attention " to them ('1r. 1054, 1061).

;'):2. Cohen s deliveries between Jay and October 1960 \Vere 169)lDgal1on:3: for the same period in 1061 , his deliY\?ries inc.reased to

18, 2ri,t (CX :2;53). In -fn.ct , his sales have incrcased every ear since

JDfiD (Tr. 10:;3). Fromberg s gal10nage decreased during this period

chopping 11101'8 than 3LOOO gallons in 1961 helmv tll;t of 1\)60 for thelJEe 3lx-month pe,rioc1 (C-251).

1. It is impossible to conclude from this ,stnt.e of the reeord thatCOhe-ll and Fromberg- ,vere in competition ,vitlt each other : or thatjf t.hey iTere in competition, Cohen sufl'el'erl competiti,-e ini..11'Y dueto the Jmyel' pricE's charged Fromberg b? the responrlent.

;")4, Haggerty, t.he third "c1isfaTol'pcF rh' alel' in Qneens County, didnot. tC'c;tif . Coml11j sion Exhibit 2:")2 lnrl1c:ltes that hphypen :.18.1'('h

and December ID61 thp pel'iml of allegerl c1iscl'imin:1t\01l. JlaggertY:scle)in' l'ies irJcl'easerl from 13 000 gallons to nnn g:111ons per month.

Iol'eo\ the lIag-p"er!:\' stl1l.ion is more than f\yo miles frolll From-lJe1'12. , on a dift'cl'ent- ea ,yest artery. ane1 sPIKtl'a1ed hy more than 12

rlsolilH' sbtions (HX 11, 14). A Cl1st,oHler \Yitne.:s :.11' Rot.hberg,("aIled 1,:,- complaint cOllnse1. testified that he Iwcl been a regular)nsoline cllstomer of Fromherg for man par antI that when

I-l;1.'" pJTt s st.ation opened in 1DG1 : hp heg.an purchasing gl'etlse and

HL"l\fBLE OIL & REFIXING CO. 959

941 Initial Decision

oil from J-Iaggerty but continued buying gasoline from Fromberg('11'. 1068- 70). Ioreover , Mr. Rothberg testifiecl that even if thei1soline prices '-vel'e the same at Haggert, s and Fromberg , he

would buy frOln Fromberg because it. 'YRS closer to him. (Tr. 1082).55. I-Icre: too , the state, of the record does not permit a conc.usion

of a meaningful competition beh\" en Ifa*ggerty and Fromberg, or

any compet1tiyc injury attriblltable to respondent s lower pricescharged From berg.

56. It is, therefore, concluded and found that there is inadequate

proof of compet.ition between the al1egedly " wored" and "dis-favored" dealers in the Fl'omberg case , or of any c.ompetitive injuryincurred or likely to be inc.urred by the "disfa.vorccF dealers, or C.0l1l-

pet.itiye aclnmtage enjoyed or likely to be enjoyed by Fromberg byreason of the lower price,s eha.rgecl Fromberg by I-Iumble. Since thelmyer prices c.harged Fromberg were accOlnpanied by equivalent re-(111ct.ions in his seIJing price (Tr. 94:3-44), Fromberg s only COIl-

pPtiti\-e advant.age ",vould arise if his business increased in "olume.This conclnsion is effeet.jyely negated by his record of decreasing,not il1creasing, gallonage.

V. The :Jlerry T,\-ins Case

'IT. The Sussmall urothers cnvn a gasoline service station known asthe :Jlprry Twins , Jocatec1 at 178-12 IIoracp Harding- BOllleva.rdFlushing, ew York. This is in Queens County of New York City~at the corner of Fresh :JIeac1ow Lane. Horace Harding is the serviceroad of the Long Island Expres~way, and the station is located on thesouth side of that service rOil(1. The station was first-, opened in 1950alHl has always sold products purchased from the respondent (Tr.1);30-;'55). The I\ierry Twins station lwcl 24 pumps and storage forl:LOOO gal1()ls of gasoline (Tr. 11;')7). Since ew York City limitsthe size of the gasoline clelivery trucks to 3 000 gallons~ the :MerryT,-vin ~t.ation reC'eived two to fonr deliveries of gasoJine a cl LY fromthe respondent during 1960-1962 ('11' 1158).

;);

::. ",Villiam Sns~man testified that the area from which he drawsiness is bonn(1 on the north b:v the Long Is1anc1 Express,nty, on

the sonth by 73(1 '-\ venue Uld on the east by Peck Avenue (Tr. 1164).A 1thongh some customers come from as far sont.h as TTnion Turnpikeftncl 20me as far ",vest as 167t11 St. he majority of the Cllst,olllel'S

come from the Fresh l\:Ieadmys housing development (Tr. 1213).The Fresh ?\leac1m-vs housing c1eve10pment is a large resir1entia.l

960 FEDERAL TRADE CO JMISSION DECISIONS

Initial Decision 67 r.

c.ommunity, O\yncd and operated by the Kew York Life Insul'clJlc.e

Compa,ny, and bec.ame operational in 1949. It has a population ofabout 13 000 people , and has stores banks , and a then,ter (1'1' 136J-(5) .

). Competing ,,,ith :Merry Twins and serving the same tradingarea , are tvlO ::Vlobil st.ations, t,,-o Shell stations hro Sun stationsand a Chevron station , all clustered \vithin a two block area ('11'

1227). Sussman t.estiIied that these ,yere the only stations with v, hichhe competes ('11'1228).

60. The closest Esso station to l\ferry Twins is the Van Pollstation at 184th Street and Horace Harding Boulevard (RX 11:Tr. J1(7). Although that J84th Street station was named as a "die-favorecr' dealer in the original Iol'e Definite Statement of com-

plaint counsel, no evidence , c1oc.umentary or oth( nyise, was otIcl'cclto shmy any adverse effect upon it.

01. The next close~t E.sso station ,vas t.he

enion Tllrnpike~ just east of T topia Park,yay

there is no evidence of any adverse effect.62. Eight service stations ,vere specified as "clisfavorecF VIS-fl-V13

:Merry Tw' ins in the Second ::JtH'e Definite Statement filed by COI1-

pbint counsel. Four of these sho\\ed incrensec1 a.verage monthlygallonage from 1950 through 1962 , despite retail prices two to fOllrcents per ga.1lon higher tha,n J\le1'ry T,v1ns (IlX 44; Tr. 1006-7).

Fischler station on

(RXll). Here , too

BLE 1V

Annual P.on'-hlr gallOll?1

Dealerl!1D!1 1%0 1!!0l 1\"

1. E. po,.ito__

-----

2. Hocchi_

----

3. I3rf'ttler

* - -- - - - - - - - - - - - -

4. Bay,,ide

** -- -- - - - - -- -- - - - --

3:3J

, 9;

2;\ :S60

2\ 69-

36. 17'2

6.50

'27 42;), 28S

;30 , 113, 19:,

, ql.30. ,')87

;);:',

462

':,

02c)') 700

.Brett1er frO:-11 Fe I)' ,ry 1!!60 wIlen 11e beea:ue R customer.BoysidlC from April tl1rough .Tu,y 1959 only. amI AjJril HI60 tlJrough 1%:' (nX 44).

(j3. As to the fifth of these 81ght ';c1isfavorecF stations. theBernllzo station nt 77-02 Parsons Bouleva.rd , complaint counst'l

legccl the discriminat.ory period to be May-September 1960 (YloreDefinite Statement). Commission Exhibit 150G D , however hmYs

its average monthly gallonage to have been more than 25 000 forthat, period compared to an average of less thnn 2, 000 for .Trmnary

HUMBLE OIL & REFn..::G CO. 961

U41 Initial Decision

through April 1960. No inference of adverse competitive effect canbe c1ntwn simply from this evidence coneerning the five st.ationsenumerated above.

fj4. The sixth of t.he eight allegedly "disfavored" dealers was t.heSelzer station at 161-01 ruion Turnpike. The onJy evidenee in the

reco1'1 concerning Selzer s experience is in the form of gallonagercconls whieh show a lnaintained increase in gallonage from 19(-;0

through 1963 , despite a retail price two cents higher than 1\1erryT,yins (See Table IT, below) (CX 1507 B; 245). In fRet, the Fischlerstat.ion , less t.han one mile east of Selzer on the same turnpike, postedn. price of 34.9 cents per galJon~ fh' e cents higher than Selzer a,ncl

seH'n cents higher than 1\lerry Twins , yet its monthly sales averag€'d000 gallons higher than Selzer s ('11'. 2123- 2221).fie). The seventh a.llegedly "disfavored" dealer was Jenik , operating

a ::tation at 42-05 Lflwrence Ayenlle, I-Tere, as in the case of Selzerthe only evidence is a tabulation of ,Tenik' s deliyeries (CX 246).Although .Jenik posted a price two cents higher than Selzer andfonl' cents higher than Ierry T,'dns, his deliveries declined 50me-

"\dwt. during the first haH of 1961 , but stabjlizecl and rose thereafterin %1 and 19(2 (See Table IT , below).

66. The Jast of the eight allegedly "disfavored" deaJers was theBurke &. Piras station on 164th Street, just north of the Union Turn-pjl

1\-11'. Burke complained about losing business to the 1\fcrryT"\vins station and requested allowances from the respondent during1900, 1961 , and 1962 (1'1'. J367- , 1363). He described his businessarea as bounded on the ,vest by PfI.Tsons Roulevard on the east by

Utopia Parkway, on the south by Grand Central Parlnvay and on

the, north by Long Island Expressway, and testified that 75 to 80percent of his business came from that area~ which would , of course

erlnp some of the area from which Ierry Twins drew business(Tr. 1370). Between 1959 and 19fJ2 , t.he average monthly gallonageat the Burke & Piras station dropped from 43 000 gallons to 28 000

gaJlons (RX 4": CX 247). During this time, its posted pricc forgll o1inf' was 29. 9 cents , or two cents higher than the price posted atMerry Twins (See Table IT , below). 11' Burke testified that he andhis partner concentrated their e:fIort,s prima.rily on repair work , whichaccounted for approximately two-thirds of their profits (Tr. J 378).The station cmpJoyed eight meeh Lnics~ but only one front nutn to

pnmp gasoline (Tr. 1388).

962 FFDEnAL TRADE COMMISSION DECISIO:

JJlitlal 1)f':i::iol! (j7 F.

fJ7. In n. mailing list order form prepared by the Burke, &: Pintsstation , the a.rea selected by that station for circularization of aclvel'-ti::ements fell fa.r short of the area 01 business described by Ir.Burke, extending only for some 5E', \'en 01' eight blocks around thestation (eX 1480).

68. J\1oreover , 1\11'. Burke testified that when his station openedin ID37 his posted price ,vas 30. n ccnts , com parcel to Ieny Twinsposted price of 2G. cents. Despite this four-cent cliiferel1tial atretail , the Burke & Piras gallonage increased signifieantly tram1058 to 105D (RX 4:' , 1374--7G), indicating that Iel'ry 'f,vins : 10\'\"e1'

prices werc not hurting Burke &. Pil'as thell.69. Although Burke testified that he lost business to )Ierl'Y Tw ills

because of the lower price a.t IelTY TYfins (supi'a): and his gal10nnge

deli veries corroborate the alJegecl loss or business (See Tclble V he-low)~ the loss or business nttrilmtahle to lhe difference in price

charged these t,,-o stations by the respondent ((J. S cent) is cloubrfnl.1\11'. Burke testified that now (IDe);) his price is 27.D eents while,that or l\1crry Twills is 2CUJ cents : and that " for all pl'lcticfl,l pur-poses" he would :;m,y that "tllat's the sfUne ' (Tr. 1422). Again

Tr. 1392 , )11'. Burke did not be1ie\- e that t onc-cent price di1lel'E'ncebetween his station and J\Ierry T,\"ins ,vOllld 11(\\-e any competitiveig:nifica.nce on his business.70. l\Ir. Burke identified four cnstomers who switched from him

to ::ier1'Y 'l\yins because of 10"I'c1' price ('Ii' );jD8 , 1401). One or themJ\fr. Apt, hm\ever : testified that. hc stopped doing business ,\"irhBurke &: Pil'as because of a dispute on service , not bpcause or price(Tl'. 1448). The second of t.he fOllr customers, a :M1'. Hosellhll111testified that he had not s,yitchccl i'roll Burkc &, Pints, but lUlcl. illfact , switched froni Jcrry T,,-ins to I3urke &: Pints (Tr. 1471), Thethird customer was rUl employee of the Super Glass CompaJl:- . Atabulation of the Esso credit card pun hases by the company :3ho\yshmvever , that this customer did not switch to l\:fcl'ry T,yins but to athird station, Selzer , 1\'hose prices ,yere the same as Burke & Pinls(RX 43). According to Burke the fourth cnstOlnel' , SchneideT~ wa;;lost in JD5iJ or J9(iO ('II' 1403). It is doubtful , therefore, tJmt thistook pla,ce within the period of the complaint. Schneider s c.ri?ditcard purchases do not strengthen Burke s testimony for they 311m\"

only two $3 purchases in IDGO and nOlle there,aftcr (HX 5;;).71. In nddition to the c1g-ht al1egec1ly "c1isfavorec1" servicp sta-

tions , c.omp1a1nt cOltllsel introduced PTj(lence concerni1lg the, bl1 in('

HL::\JBLE OIL & nEJ;" G CO. 963

9-n Inital Dp(jsioll

expcrie.nces 01 Esso gelsoline outlets ,yithin t.he Fresh lVIeaclmys hous-ing dl'\OelolJment. Three of these outlets \yere storage g-nrages oiYlledand operated by t118 i\Tew York Life, Insurance, Company. The. :fourthwas a. garage. suble,l ec1 to a. Ir. :Nixon. The posted price for gasolinea.t all four ol1tlcE \ytlS 31. ecnts- four cents higher than the ;.dcrryTwins price.

72. 1\f1'. Xixon testified that his c:ustomers told him they pUl'clwsec1gasoline at ::UelTY Twills beca.use the price \Vas Imycr there (T1'1271), The gaJ1nnng'c records corroborate the c.aime(1103s 01 lmsincss

behyeen l )S and 1DG2 (See Tnb1e V, belOlv). The three gf1rages(J\vned and opC'l'tlte(l by the Ne\v York Life InsurancE' Companyceased selling g:Eolille in J\JaJ'ch 1861. Xixon stopped by the end ofEJC:2 ('11' l ti;: , Fi"i:2. ). Xixon s businpss, howc\- el' , dec.inell -frollID61 to 19n:2 (See Table V. be1mv) e\'Cll though the bnsine3s ofthe three otIlt:'1' E o oHUets at Fresh J\Ieadows who \'\en' his immccE-ate competitors mi;:dlt logiea11y have been expp,ctcd to Hmv to him.

1. IVhen qw:stionecl nbo11t. the etlect of a price diHel'entinl uponhis b11sjlle 1J1' . 2\ixon stateod that H. reduction b \' him of 0lH' CC11t.pel' gallon \\"onld not bring him more business ('11', J20:1). rr. ixollnamed fin' cll:-i(il:ltl'S \yho comphined to him of 1myp1' retai! pricesat. J\ierry T\,in . The first, J\f1' ,Yal'Hntz : \Yas a cnstOll1er 01 ixnnon1y rare1y: a1 H)11t once fl year. T-lis regular supplier ,,' as not n Esso

station , but a ()lWCO sbltion (1'1' 14S4), Ko1' c1id :\11'. ,Varantz knOll"whether the price at :Jlcl'J''y Twins \yas higher 01' Iml"er than at. ()therE:: :o stations (Tl', 1-18(-). ::11' :\i:-on ac1mitted t;lat the second. :JIl',

Stern , titoppeej Imying from him because. of an ontstnnc1ing bill(1'1' 13;"):2). :\11' \ixoll tcstiftec1 that the thircl ~ II :Mr. Kahn. h('cnmchis c1Istomer in 1 :\1 \yhen :\ixon llsed hill an insll'allce broker.Xo speeine lird" \\ ;1: mentioned whe11 Mr. KalIn hong-lIt froll :.lE'lTTwins. It cannot he inferred from this that :'11', -Kahn s\yitd1Pd to1\1E'rry Twills 11'1' 1:1JD). _As to the fourth , a J\Il'. Sepler~ Xixon aid1101. kno\y tl1at J1' Seplel' had bought any gasolinc from Iel'YTwin.s , 0)' for fLat matter ,yhere 1\11' Sepler bought gasoline (T1'13;')0). Finally, the fifth customer, a 1\Ir. Spe.yel'~ \'\88 not a J':g' l1bJ'customer of Xix on, and his complaint about lower prices eH JlerrT,vins ,yas ,\E':ll'-S before the c.omplaint period ill,-01ved 1lPJ'' . :.1n10GO- .T UJl' 1fJG:2 (Tl' 1;jJ2 J, X at OlJ of these 11 n ('us! onH-l'S \H)111dJwve bought mor8 gasoline. froll KixOll if he hnd reduced his priceby one cent 11 (l11011 ('11' l:jJ;

)).

964 FEDETIAL TRADE CO:\n..ISSIO DLCISIOXS

Initial Decision (i7 F.

74. Shown below a.re the Esso stat.ioJl clii3cns ccl alJoH'

costs , prjces , and ga.Ilonage where known (CX 243-50) :wjth their

TABLE V

CostPriceperllJon

YearC;alloI1Jg-e (in tllonsanrl

- -

-\ vnclge :olltlily Tornl for lHlliye:1!

I\.Jf'IT:;

T\yjm - - ;\ 4 27. !1 19SR1959lQ601961HJD:?

248:31;1

:3:2;)

--- -----

Bmkl&Pim

- --

:?G. :20.

NixOl1_

___

- ::6 31. \1

19.

)g,

')n

19601961196219;)819,19601\)61

----

:2S

19. 6 ---17. :: -

---

14.

14. +SS+8J

SpJZE'L - 26. 29. 9

10621960lYoJ

12. S

4:2

----

JClliL--_- 26. 31. 9

196219601961

4:J

246247260

:34

-------------

H)62 3:2

- -- - -- _--

\Iol1 Jlly plinn,\iY

-----

lhO lilGj

---

:\Jay JUll July Aug. Sepl 0(- 0\- l', Jfm. Feb.

._-- - - - - - - - -

"Fre", 2G. 31.-;lcactO\Yc' 2G. 31.

(i\ ",ta

(j.

:H,tiom).

.,.

:2, J,

- -- - -

1 "Exclusiy€. of mont.IJ-end flllowance.Exc' pt for j!15S, when tJIC price per i'alloll was 30.

In!ol!J,,j:ol1 frow ex 1507 n , :!4.i

, :!. , ::.

, 2,j8 , ::50 1517 B . '243, j4' B: Rx .j.

HlI),lBLE OIL & REFI?\IXG CO. 965

941 Initial Dedsion

As we1l be ecn from the table above , t.he price charged 1ferl'YT,vins by the respondent was .8 cent lower than the price chargedother Esso denIers. The price charged by ?tIerr,\ Twins) howeverwas two to fonI' cents per gal10n below the price charged uy theother Esso ' c1eil1l'T . )Ierry T,VI11S gallonage increased sharply from

OOO gallons monthly to 32. 000 ga, l1011s. The Durke & IJiras galluwlge , as well as the Xix on and Fresh :.reaclO\y ga.llonage deereasecl.

hat is lacking jJl the record of this pl'oceecliug, hmye,- , is ehc1encet.hat snch c1eCl'eil e ill gnllonnge WHS (lue to the .S cent 10lV81' pricecharge,d :.Iel'Y Tn- by the respondent. That. the c1ecl'cnse. in gal-lonage was due in pnl't. to the t,vo to foul' cent 10\," e1' prices chargedby )Ierry T,,-illS is pos;ible amI perhaps prolxlble. The recore! , how-ever, does not 8hmv the respondent's responsibility for the, two orfour cent clifferentinl ill posted retttil price. The only responsibilityit ,you1d appear resting upon the respondent was that w-hich couldreasonably be nttrilmted to the .8 cent pel' ga.llon allowance given3Ierry Twins

, ,,

llich in turll \yould presumably enable :\Ierry T,,'insto post a price 10\\-er lhrlll those other stations by OIle ccnt. pergallon. Such a cl*tlen-'l1ce of ODe cent per gallon in retl1,i! po::teclprice , hO\\-eYPL ,'ifl of no significance to the (lenlel's qHe tjoned con-cerning jt ('II' 1282. 18D:2) 1422).

75. It is concluded .'nd found , therefore , that the diffel'ence inpric.e charged :Ue1'1':'- T\'ilns by rC ipondent. amOtlJtjng to . 8 cent pergallon , in effect 1'1'oro H ) to 1062 snlS not , an(l cOlllclnot be , reason-ably causative of ftn:i- ig-nificant or substa,ntial competit.ive injnl'Y to

the Esso stations allegedly competitiye with ::lerl'Y Twills ill QueensCounty, K el'l York.

VI. .

.:.

ffl' mativc Defens

76, Hespondent o11pl'hl C'onsic1erflble testimony and dO('llmentarye1'idence on seH' l'nl nftirnwtin', defenses. Ina m11ch a Jny rlispo:-irionof this ('ase : In 'd npcn complaint connseFs fail!LJ' C' to dPTC'lop jli'/-mafucie evidenc(' of '( iobtion of the n,obinson- Pnrmnn \.ct , makes adetailed analysi of rhe ninl'l1mtive defenses ml1Pc(, S;1l'Y: 110 conclu-sions ,\'ill be reached OIl them ill this decision. It is nen:'l't!leless,desirabJe t.hat somp comment be nwcle inasmuch as the iS311C ofaffrmative c1efe1l3e

not free from doubt.

A. The JIeetin 'I Compctitiun Defe'nsc77. In connection ,yjth the :.Jel'l'Y Twins case, :\11'. S11SSJll:11l j an

owner of tJ1Ot. St:tiolL titlE'd that he W;1;: forced io 10ll' Pi' his p03ted

966 FEDERAL THADE CO?B:ISSION DECISIO

Initial Decision (;7 F.

price to meet the lowe.r price posted at a neighboring Shell statiOl),operatecl by " 1IIr. Kaplan ('1r. 2180 , 12(4). 1111'. Snssman thereuponrequested all allmva,nce from the respondent stating t.hat :.11' ICaplan'vas receiving an allowance from his snpplier , Shell (UX 18). Ir.Sussman further stated that Kaplan had toJ(l hirn t.hat lre (Kaplan)ltful recci,-ecl such an allowance from Shell. An offcial of the respond-ent testified that a salesman of t.he responclpnt, ft I!' . ,Vi bon , m-pl'-heard Kftplan s eonversatioll with Sussman (1'1' : !)47-4S) and that-haying satisfied himself that Kaplan 'vas in fact l'E'cei' ing" slIch ann.ll(rwance~ the orTicinJ negotiated the 0.8 Cf'llt. ailow:lJlce to ::Jel'l'YT\yins (Tr. 2190- , 2653 , 3060).

78. Salesman ,Vilson did not testify, nor did )h' . l npha or flnShc1l represe!1tat.'- concerning the alleged al1o\Y;lIIC(' g'lH'll 1\11'

I\c1plnn.70. ..\bsent such cOlTobora60n , there remains ('on iderable doubt

of respondent's claimed good faith in meetillp: Shell's c0l1petitiY8

allowance to I(aplan. ICaplan s lower po,'3ted price , in and of itself,'ilS not suffcient to justify such a cOllcJusion since at least one otherHmnblc c1ea.le.r posted the ame, price as Kaplan \', 'ithollt getting

sistmlce from I-Imnhle ('11'. 26(9).SO. In connect.ion with the Frombcrg ca c. :\Ir. Fj'umbel'g had

cmnp1ained to the respondent of price cutting in his fll'Pll (1"l' j98L4057 , 4083). An ofIcial of the respondent t:e tified that it was com-pany policy to obta.in proof of assist.ance granted to n dealer s com-petitors from their respective suppliers before allowing any assista.nceto the complaining (lpaler (Tr. 3004). X a documenhllY proof of suchcompetitive price allo,vance affeet,ing Fromberg was otfered i11 ed-(lence~ nor did respondent call to the stnnd its sale::mea wh(J im-esh-gated the competitiye situatieJls affecting Fromlw.rg :lud who "'ereresponsible for the conelllsion that Frombel'g: s competitors were

rcel, ing assistance.81. Here , too, the jsslle is not frec from doubt \\it:hout the COlTOb-

orating proof that could haye been ofi'

D. The Cost Just/fication j)efC1l.,S:? This particular rdfirmative de.feuse is impossihlp of analysis

an(l c1et,erminat.ion ,vithollt an extensive discussion. Thl' ma.ior partof the evidence in this ease, both oral a.nd tlocnllC'l1tary. inn)lves1:1i;; 1ssnc. The Appendix filed by complaint. cO

, ,\.

hich cletaiJstheir position in this rpspect , is nctna)1y longer til:\ l the propo::ecl

findillgs ~ ('on('lll;ions order, arl(1 reply to n:spnnc1(' !lfs proposed Iincl-ill!_.!'; eOlnhinecl. Tn vie,\ of ths l:mited tiJle a \' flib,hk tn Jnc for the\Yl'itlJg of tlJ1S decision , and in "ic:," of the upel'flni!y of a c1etennina-

HUlvlBLE OIL & HEFIKL\TG CO. 967

Initial DpC"isioll

tion of this defense , only a mention of certain doubts in c.onnection

\\-

ith this cost justification defense '1'i11 be made.8:3. ::11'. Field , a partner in t.he accounting firm of Price \Vatel'-

hOl1 Co. , \ras retained by t.he respondent to make a cost st.udy tocletermine the savings in cost inc.lIned by the respondent in its salesto :J181'1')' Twins , as against the Burke & Piras station and elelTotlwl' Ilumble stations in the general area ~ which had been llalled bycomplaint conllsel as '; disfavol'ecr: c.m:tome.lS ('11'. 180:2 332D). Threeentegories of expense ,vere identified: (1) Joaned cleliyery equipmentexpense , ,yhic.h includes depreciation as,vell as nmintenanc.e andrepairs on delivery equipme,nt: (2) district sale expense, w-hic.h in-c111cles salaries and expenses of salesmen concerned ,,,ith service ta-tion actj\'itie~ , fUHl (3) area marketing expense \\-hic.h includes sal-aries 1nc1 expenses of persoHnel at tho area offce lo\-el who super1'ithe activities of the District aJes oIEre. H.espoJldenfs Exhibit. ;")6 Afound t hcse costs to he:

:\leny T\\iJlS 12 Dealcl" Bmk & r:m

LO:llH',l cldi\"lTY equipmellt eXjJl'I!c'l'Dic'trjct sale. expen"e-

___

Are:1 'l rketil1g exppn"f'

so. (JOjO

. OOO

. 0001

Dollrn.'per qnl/rm

so. 0042. (lO:?1

0007

so. 004f:

. OO;?I)

a007

TotaL -

---

0013 0070 . ()07;

8-4. Subsequently, RX :'"G 13 WH:J ofTel'ec1 , snppJa.nting nx 3(- A byec1ueing the Joanec1 c1e1ivery eqnipment expPllse for the 12 c1eaJers

from 0042 to 8.00-41 , thus lowering the total for snch 12 dealers

from 8.0070 to 8.0060 (Tr. 0906-08). Thereafter , responclent oileredHX 56 C , supplanting H.X 56 B. Respondent Exhi.bit 56 C waEO J'C-

cfiycd in C\- ic1ence and R.X 56 13 \HIS thcn rejected (Tr. i390D-I0).3. In R.X 5G C, the total cost for :J1erry Twins, the 12 dealers

and Burke & Pints remain at $.0013 , 8.0069 , and S.0075 ~ respe(', tiyc1y,as rat.c1 in RX 56 B. The total Burke & Pints cost of $. 0075 , how-PH' l' is increa,se(l b

y $.

0040 for sales expense aml by $. OOOS for de-lin' - cXlwllse, lor a tota1 of 8.01:23. The tot.al 1:2-station cost ofnnCiD is incre.asec1 by $.001G for cle1i\Tel''y expense , for n, total ofnO:S5. 'Thr e last additions ill costs :Co!' the 12 st ltions~ as well as for

nnrke &, Piras , were fulc1e.d to RX ;")6 C lJy :J11' Field , baf'ed UpCll

t;w testimony of :.11'. COllrt-ney ccncerning additional sHying's. TIlPrlc1diriOlwl sil\. ings. hO'H' , Iyere not reflected in the rC'spondent's

1;001-:-' amI records. )11'. Courtney simply h:stifie,d that such savings

968 FEDERAL TRADE COMMISSION DECISIONS

Initial Decision G7 F.

accrued in their normal operations and because of the diflerence ineffort and time expended with these stations in these respects ('11'3(;85-89). At another point, h01ye\' , Mr. Field stated

, "

If I hadno evidence. of a cost c1illerential from the original books and reGordsit ,vauld be my conclusion that they should not be inserted into thiscost study as a differential" (Tr. 3881).

86. There is , therefore , c.onsiderable doubt that the cost difI'ercn-tinls added to HX 3(; C by M1' Field and based upon the testimonyof ::11'. Courtney call be accepted.

87. There is also some doubt that RX 56 C, even exclusive of theConttney-adcled djfIel'entiaJs ~ is ac.ceptablc.

88. The 12 stations used in the cost study and ,vhose costs -n- Cl'C

averaged in HX D6 C varied greatly in their sales volume, as well astheir total expense. The sales volume ranged from a 10\', of 13 3:20

gallons to it high of 1,lc1-8 OOO ga,llons. The expe,11ses ranged from ,l-

low of .43 c.ent pel' ga.llon to a high of 5.69 cents per gallon. 1\e-sponc1ent Exhibit rj6 C merely sho\'s the. total of n 381 282 gallon:;at an ft\'erage cost of 60 cent per gal10n (CX 971 A-I). Such averag-ing of gnllonage and costs may be questionable when e.nployed 1'01"

dealers ha\"ing such extreme differing experiences (See 8. v. BordenCo.. 370 FS. 460 (1962)).

SD. Respondent Exhibit 5G C also mingles flctual costs wit.h HY-t:l'age costs. The Burke &, Pinls equipment depreciation is nctual sincel1ch company-owne(l station costs are maintained on that basis byImnble. The j\'1er1'Y Twins station and ten of the 12 stations innx 56 C , hO\'ever , are noncompany-ownecl stntion~. I, or such sta-tions , 1\11'. Field used equipment deprecia.tion calculated on an ayer-age unit cost of both ne\v and used loaned delivery equipment.:\1 r. Field admitted this cost to be 10\ve1' than the actual cost \\ hic:l''as used for the eompany- m'lnec1 stations ('Ir. 3331- , 3340- , 33:3(j

)70 j;J7;) , 3378- , 3633 , 3880~ 3891). Sillce )lerry 'l\vins was not

a company-owned station , but senne of the 12 stations (including

Burke &: Pinls) \yere , this \youl(l lUl\-e the efIect of raising de.precla-tion costs for the 12.

no. A\Jthough the j\lerry T,vins station 'VflS engaged in the s111e ofgasoJine a Imost to the exclusion of all other business , the Burke liras statjon~ as \\ell as the 11 others in the stu(ly, dillere.d in that

they dcriyed l sllbstantiaJ part of their business from acti\- it.ies othel'than the sale of gflso1ine. As a eonseql1encc~ these. stations hac11ofllll'l1

equipment from l'esponc1cllt snell as ljft eOlnpre sors, lube ill1d

kerosene outfits , an(l Flannery sy tems 011 \yhich eql!ipment depre-

ciation \V lS charged \yhich entered into re pOllc1l'Jl! S cost of d()ill

HUMBLE OIL & REFIKI)W CO. 969

941 Initial Decision

business with snch stations. The Jerl'Y Twins station IHHI EO f:llCllf:quipment , but was nevertheless an admittedly highly succe.s3i'ul gasstation. As the, basic comparison bebyeen JUerry T\vins and the 1:2

disfavorecP srations concerns responclent:s cust of selling ga olilleto these stations (not oil , kerosene, or lubricating services), there lHHY

be some doubt that the equipment which :.feny Twins founel Ull-necessary to its successful sa.le of gasoline should be includell in ,lcomparison of costs. Eliminating the deprccintion of such equipment.,\"hich ,,-as charged to the 1:2 " disfavored:: stations~ ,yo1l1c1~ of cour.oe

substantially minimize the higher cost of selling to them.01. Included in the respondenVs cost of doing busiJlPSS with tile

:;2 "disfnTore(F stations W(1,S the cost of dismantling flJlc1 rpmm- iJlgequipment at the three Fresh JIeaclows garages which ,vent out ofbusiness during the period of study involvecl. There is considerable,

doubt that such extraordinary and nonrecurring costs are properlyincluclable for purposes of determining the respondent:s cost of sell-ing gasoline. Exdnding such costs ,youlc1 lWTe recluced the respond-cnes cost of doing business \Vith these three stations by about. 50

percent (CX 971 A- , E , E- , and E-17).92. 'Vith respect to the district sales expense and area, ma.rketing

expense categories of cost, it appears that certflin allocations a.Jlcl

a::sig11ments in arriving at the figures allocable to each of the sta-tions inyolved yere determinecl on t.he bn. sis of a so-called Bi11n SllJ'-

"Py. :JJr. Binn , an employee of the respondent , not othel',vise identi-lied , macIe a hHly of fOllr 01 the en' ll salesmen invoh' ecl and titetime spent by them in their various ftctiyities in 10;57. ,Vhether thesefour we, re sufIiciently n present.ative of all is nnknmY11. J11'. Binn didnot testi-:y: although he is still employed by t.he rcspondent. Tlwb:lsis for his selection is unkno\\n. ,Yithout s11ch background infor-mation : it is impossible to assess the va)icl*ty of the Binn survey usedby :.11". Field (Tr. 4968-73).

GB. FinaJly, tIH:. pel'ioc1usecI by respondent for the cost stucly Ulaybe questionable. i\Il' Fie.l(ll1sec1 the 2cJ-- rnonth period t.llting July l.ID60. The . 8 cent nllowance by the rcspondent io )'le1'1'Y T,vins com-mencec1 nine months earlier, Oll October 1 ~ 1D3D. Det,veen October

j ));')(1 and tTnl)' ID(-;2 , the gallonage at. Burke 8: Pil'flS declined sig-J1iii('l.llt1 T "dli1e that of ::Iel'ry T,\"ins skyrocketed c1l'amatieall

(Table Y 811pi'(). Since the total co::t of doing husjlle::s with each ofthese stations W, lS cli,' ic1ec1 hy its galloJ1nge , o)mne to al'.'i,"e at :1-

iotn1 cost. pOl' p:nllon fol' eneh , the net erred of using the 2 month

rC'rjOll enc1ing .July In(E , WilS to diminish the cost or doing lHlsinrso:with )Ierry T,viH ;. Thus : although the ndditionn.l cost 01 clojng bu;;i-

11--

970 FEDERAL TRADE CO L\IISSION DECISIO)jS

Initinl DI!cisioJl liT F.

nes:: \yith 13urke & Piras during the selected 24-month period,nllOl1lted to .G2 cent pel' gallon ac.c.ording to HX :36 C" the c1ifi'ercnce\voldd have been only .26 cent had only the year 1050 been used , 01'

j,ci+ cent. pel' gaJlon had the 2-l-rnonth pcriod ending .T uly 10Gl been1bCd ( ee Ti1bJo XIII 01 COlnplaint Conn ers Proposed Fin(lingH could be argued t.hat the use of the 24-111ont11 period ending .TulyH)G tends to .iustify the alleged di cl'illillatioll by the fruits or thedi::, llinatioll-that is ~ the change ill gallonage bronght nbont

(: c1illerenee in price.

C. ('o1iunls8io'/ Pi; ecedentPerhaps the most pel'snasin'

, (:

a-mrmative defellsP al'gl1ec1 by thepon(lent is the nttitmle of t.he Commissi01l as pnh1icly declared

jn Anwi'ican on 0mpcmy v. Federal TiYlcle Commission 325 F. 2d

WI (Tth Cir. J 8m)) cert. den. 377 U.S. D;34 (lD6+), and the IOllr oilPure Oil C()1npru)?!: Docket Xo. ()6 JO eGG F. C. 1336J, The

TCcm8 Company, Docket Xo. OS98 (06 F. C. 1330J, Standard OilCompany (IndiClna), Docket No. 7;367 COG F. C. 133GJ, and ShellOil Cmnpany, Docket 1\0. 8537 (6(-5 F. C. 133GJ. In these four oi1

cnscs : the Commission dismissed the respective complaints that hadIJepll issned. A1t.hol1gh the reasons for the clismis:,m1s are not neces-arily apropos , t.he conclusion of the Commission in these four cnses

may be. The Commisoion he1d (66 F. C. 1488J:

Tbe Commission 11D tbis (late announcf:ll the i11itiation of a broad iUQnil'Yi!Ha the prohlems of competition ill the marketing of gasoline, Orders to cease\11(1 desist entered against a few oil companies-orders which would pl"ohalJl;;not l1ecome finBl , if at all. until completion of lengthy reYie\y proceedings iJlthe Federal COlll'ts of Appeals fllld the Supreme Court-COllhl Ilot vrm- it1ecamIllel!" or effediye solution to Uw competitin, problems of tllL ,

::-

n::Oline in-lln::tr;;. It ,,-auld rlllpf'Br to lw marc desirable , from the standpoint of effectiye;)llministration of the law . that the COllllllis,,:ion concentrate its 1Jece"sftri1ylimited l'eSOnl'ces on a compl'chensiye industry-wiele approach to the problem.of competition in 1he llHl'keting of gasoline.

In the American Oil Company case, Upy' U, the Comrnlssion had

snec1 fl cease fl1(l desist Ol'c1e1', Commissioner Elman dissenting., Onappeal , the. 7th Circuit COl11'1, of Appen1s revel'sed. The Commissionthen petitione(l for a "Tit of cCl'tion1li. In the, peiition. the Com-rnj ion listed the instant. case as pending beforE' the hearing exam-iner n.n(l flS one of seyeTfll cases " in\' olving pricr? discriminations'lo"\ying out 01 retail gasoline price. "\yftrs cnl'rent 1

- , : , : ,

, a l1wiol'

11fll't of t.he Commission 5 Pllfol'CClnent actl,cit ies lmc1er Section :2 (:1)nf the. ChytOll \ct. " The Commission identified tl11' ce snch " form:d(,:I e::. :: one heing t,Jl( instant proceeding an(l tl1c other hyo beingthe 1'P, "I'(18 anc1 Sli!?Z7 cases refclTcc1 io abon.'. It declared that t.hese

HU::rBLE OIL & REFIKn G CO. 971

I-n Initial lkdsioll

(':l e.s are ';al1 based 011 the same the,ory of injury to eompetitionthnt. i inn)l\Tec1 in the prpsent case (the AlIwf'ican Oil easeJ . ~: Itpuinted out that these '" rcspondents .

. . . .

. all do business in the

5p\'enth Circuit :' that "Reyiew of any orders the Commission mayenter in those cases is almo t certain to be sought ill the Seyenth

Circuit," that "that court , fo!lo\':ing its decision ill the present ease\.llerican Oi1) ~ '\yould undoubtedly set aside any on1ers " and that

The de.cision beloY'i , if allowed to stand

, '

wi11 become the definitivejndicial ruling,

,Yirh the denial of the petition for writ. of certiorft, , it 'Y01l1c1

nppenr that the COHunission has confessed its inability to issne accase a.nd desist order in these cases. Indeed, as pointed out abovcthe t\TO other ca.ses , mentioned by llalle in the petition , have alreadybeen dismissed by the Commis ion.'1Jw hearil1g examiner recognizes that a dismissal upon these

gl'onnds is more appropriately ,,- it-hin the jurisdiction of the Com-JlJ.ission tkm of the hearing examiner. No opinion, t.herefore, ispxpressed ,,-ith rE'specJ to the propriety of sneh action hcre.

THE ,,\PPLIC.A!_"LE LAW

The Hobinson-Pnhllan Act makes it unla"\vfnl for any pel'son todiscriminate in price uet,vce.n competing purchase.rs of like goods

,,-

here the effect of such disc.l'iminntion may be to Jessen Gompetihonsllb tantia1Jy or fend to crente a monopoJy ill any line of commerce(151 S. Section 13(a)). To establish a

7wima facie iolation of hwin this proc.eec1ing, in,'olying a sec.ondary line (buyer) injury, it inecessary to prove: (1) sales by respondent of gasoline of like grade

and qua,lity to two or more competing dealer Cl1stomE'l'S at c1ifl' erentpriers, (2) actlml or probab1e substant- in.l ndW'1'5e efi' ect 11pon compe-titioll and (3) the price rlifFcl'ences ,yel'e t11e canse of the adversecornpetitiye efI'ect.

Complaint counsel stl' ess the language of FHlo' a1 Ti'(de C'onunis-.'ion v. JI01'ton Salt Co. 334 U. S. 3i (1048)

It wouhl !:!TentJ ' haJllicap pffpetin' enforcpllent of t!w Act to l'rqnil'e tesli-mon:- 10 .sho\': that which \\ e !ip!i(,'e to 11(' l'lf- e,. j(lp1l1, w:mpl." tlwt ther!'s il " l'ensonaI1Jf' JX)SsiJ1i1iir " t11:1t (.ompl'1iti()1l m(l - 11( 11(1\e,'se1:\. nffected :l j'i':ldic(' 11J1(11;1' ' \'11ie-1t 1l'1lnf9e1nn' s ilnd proclw'pl'.' sell i- hpil' p:oorls toSO;J1' ellstamp)".S snl1:-t mtii111 \- eJlPi:jJPl' tl1il!1 th('

\ .

'll Jj1;e , OOClfO to the COll-rJ(t i1ol' " af these C'usi"mlPl's. Tl1i." sJJawin;:' in i!s('lf is snfIe-ipJJt to jl!,stjf ' (J1l"

("Ollc!lJS10n tllilt 1!1t' COJlmis:,ion ", finding's of iJl inl' - tn C'ull!wtitioll f1l(' adf'-

(In:1t\ - H1P11ortNI by cyid n("2.

If. hmH'YCr, the. llnn';('li:' Oil (lerl i(Jll. SI' pi' , ns,

connsel han :ta!ed, '; thc dcnlliii,-e :imlici:11 ru1illg,COJjlJn issioll

l'C:J rnen t

972 FEDERAL TRADE C01\IJ\lISSIO DECISIONS

Initial Dt'cision G7 If.

of the 111orton Salt language in the light of the American Oil de-

cision is arranted. In the American Oil case the Court of AppealsfJuotecl AnhC1l8el' J-U8Ch Inc. v. Federal Trade C0'imi88ion 28D F. :2cl

835 (7th Cir. , IDGI), "\\"here the court ruled that price discriminationcloes not. , per con::titute it yiOlatiOll of Scction 2(a). The pricedis('rimination ~ en n if slibsUllltiaL mnst be capable of raising an-' asonflble probability of substantially lcsspning the ability to COlll-

te. The court in the AmCi'lCan Oil e. ",'cnt on to point out t.ut

the Jlol'to'l Salt decision illyohe(1 a discriminatory pricing SY2tell

which ga\'e buyers of large quantities a ;; lmilt- , routine and per-

mnIllnt price advantage oyer smaller l'i\- aL:. The court concluded

that " there llU;;t. be omething 11101'2 than 8n essentially temponnyminimal impact 011 competition and probatiye analysis must reveifl cflusal relation behveen the price discrimination an(l an actual 01'

l'esonabl:y probable injury to corn petition in the context of the factualsituation inyohed.

In the Cal'olinas~ the price difi'cl'ences created by the re, sponc1eJ1t

mong its dealel's ~ assuming they "vere competitive , "yen: not part 01

it continuing discriminatory system ~ hut \\-ere intermittent and usual-

1:v of insignificant prOpOl't1ons. rlHlel' these ('il'cnmstanc(' ~ it "Y,lS not

sl..fficient to prm-p a ima facie violation of Sl ction 2(a) t.o Inerely

hmY t.hat a price di11ercnce existed. Competitive injury could notbe inierre(l from thaL fact alone. The additional facts brought outin connection ,v1th the Carolina dealers negated any rea Olhl1Jle

proLmbility of competiti,-e :ll ury.In Nc'\v York , the situat.ion appea.rs to 1w somewhat c1ifrere,nt, In

the, CilS8 of Fr01nbcrg, the price diJIcn:ntials V;Cl'C during much

Inng r and uninterrupted pel'iods of time than in the Carolinas. Inthe ca e. of :Me,l'ry T'\vin: ~ the pl'ice clificl'ences were continuous formore than t,,"o ye:n's. For the::;e e'\v York stations , it appears rt',-l-sonable to a,pply the. rnling of J/ol'ton Sf/U. Bnt even hel'c ~ the. bare

price, c1itrel'ence is insuiIcient. The court in that. case, found that tIlemanllfacturer price discrimination res1.1ted in " price. c1iffcl'enria1s

bet,\Yf'en competing pllre11:lSE'rS 8ufficie,nt to ill,i'uu/ce thciT F'da(r;

lJiice. In :JIerry Twins, hmve,,- , the price cliiTerence of .S cent pel'

gallon "' as not sh()'vn to be the cause or the itlel'::Y T\vins~ l'e 11t

pricE , which was two 1:0 four cents pel' gallon Imve.r th8.ll their COli1-

pe.titors. In(leecl , the . 8 cent cost differenc.e could be , presmnalJl:

the cause of a one eent dit1el'cntial in retail price" But. sueh H retail

price difierential vms not deemed suflicie,nt to nfrect competiti

ac.cording to thos,e very dealers '\vho "vere allegedly 111nt. X or did 1

HU:\IBLE OIL &; REFl IYG CO. 973

;\4.1 Dechio))

clill'erenc.e in retail price diyert bnsiJles fl'Oln the :Merry T\Vins('(jmpetitors as far as this record indicates.

SimihlTly in the FrombeI'g case, 110 antieompetitive efIects we,

lw'Yn. In fact , the record estab1i::hec1 during the case- in-chief dem-onstrates the contrar,v, "with Fl'omberg s s;lles declining flnd those ofit.-- ( ollpetiiors rising.

SOl' can it be argued that the nJJegcclly " fnn)rc(P dealers profitedby the price, difiel'cnces. Sinc.e the '; fnvorecr' dealer received thepreference in pl'ic,e only to enable him to 10\yel' his posted price , he

no bE'tter off wit.h the receipt of snch preferential pl'iee than he'0, :2 witJlOUL In -fact , his margin pCI' gallon was usually less underthe prefercntial price treatment sillee an .8 cent preference resultedin ; onE' (',ent reduction in his posted price, and a 3.3 cent pl'eferenc.ert.':11ltecl in a four cent l'ecllletion in his posted price. The onlyhEnefit tlHlt the rcripie.nt of such preferE'lltial price tl'eatme,nt eouldpossibly ha H', ,voulcl be as a result of increased gallonage due tohi" Jmvered posted price. This , how('\"el' did not oecur -in the From-l'1rg case. Although it did occur in the ~Icrry Twins case , the evi.

rlPECe. is lacking that. it caIne at the expense of the "c1isfavorecr' Essodealers , 01' that it was due t.o the . 8 cent price preference ns dis-t-inznishccl frOln the two to fonr cent pump price c1ifl'prentiaJ in effect.

ORDEH

is on1('' That, the complaint De, and the

cli-.nlissecl.same 11E'l'eh:v is

DECISfON OF THE CO::DrISSION

The lH:,aring rxnminer on l\Jarch :-H. 1065 filed his initial decision

cincl order dismissing the, c.omplaint. The, effective date of t.he initialrler'i.sion 'vas .

"j-

ayed b:v t.he Commission s order of April 30, 1865.The, Commissiol1 has now considered the mnt.er and determined

tll1H, the initin.. decision should be. modified and adopted as amended.\.cc.on1ing1:v, It 'i8 oTde.l'ed That the initial deeision be modif1e.d by'iking therefrom thot f'cHon on pnge DG5 beginning ,yith the phrase

;; As will be pen " Hnd eneling- with the phrase " to the dealers questionedroncerning it. (1'1'. 1:29:2 , 130:2. 12:2)' and that. portion of the initialc1eeision hcg-inning on page. D70 ,yith tIll lwading " C. e()Tn llr;. 8'imj

Precedenr ancl e.JlcliJJ t on p:lge 07: with the phrase " differential in

effect. "It is f1/1'tl1e1' 01'deTf'rl. That. the initiciJ cl('('jsion \ as modified , he, and

el'e.hy i . adopted a:: tllf, deeision of the. Commission.

ERICA RETAIL BOARD OF TRADE, INC....respect, hereby issues its complaint, accepts sa,id agreement, makes the following jurisdictional findings ancl enters the following order: 1. R.espondent - [PDF Document] (2024)

References