397 F.2d 530 (7th Cir. 1968), 15900, Knoll Associates, Inc. v. F. T. C.

Docket Nº:15900.
Citation:397 F.2d 530
Party Name:KNOLL ASSOCIATES, INC., a New York corporation, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.
Case Date:June 18, 1968
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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397 F.2d 530 (7th Cir. 1968)

KNOLL ASSOCIATES, INC., a New York corporation, Petitioner,



No. 15900.

United States Court of Appeals, Seventh Circuit.

June 18, 1968

Jacob Imberman, George G. Gallantz, Morton M. Maneker, Lawrence J. Rothenberg, New York City, for petitioner; Proskauer Rose Goetz & Mendelsohn, New York City, of counsel.

J. B. Truly, Asst. Gen. Counsel, E. K. Elkins, Atty., Federal Trade Commission, Washington, D.C., James McI. Henderson, Gen. Counsel, for the Federal Trade Commission.



Knoll Associates, Inc., a New York corporation, petitioner, seeks our review of an order issued on August 2, 1966 by

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the Federal Trade Commission requiring it, directly or through its parent corporation, Art Metal, Inc., or otherwise, in connection with the sale of furniture and furniture products in commerce, to cease and desist from--

Discriminating, directly or indirectly, in the price of such furniture and furniture products of like grade and quality by selling to any purchaser at net prices higher than the net prices charged any other purchaser who competes with the purchaser paying the higher price.

The Commission found a violation of 2(a) of the Clayton Act, as amended 15 U.S.C. § 13(a), which provides in part:

That it shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality * * * where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them * * *.

Certain issues explicitly raised by petitioner refer to the Commission's determination that its purchasers include interior designers, that discriminations may cause injury to competition with favored customers, to the rejection of petitioner's affirmative defense that its discriminations had been made to meet the equally low prices of competitors, and to the fact that the Commission improperly admitted into evidence and relied on documents stolen by one Herbert Prosser, an employee in the Detroit showroom of petitioner's sales representative, Joseph Dworski, and by Prosser sent to counsel for the Commission, as well as other evidence obtained from the stolen documents by Commission counsel.

This proceeding was commenced by the issuance of a complaint on December 27, 1962, charging that Knoll discriminated in price between competing purchasers of its products in violation of 2(a) of the act. Such purchasers were said to include those classified by it as architects, interior designers, contract houses, interior decorators, office furniture dealers, and furniture or department stores. Knoll admitted charging some purchasers list prices less 50% And other purchasers in the same cities list prices less 40%, but denied that the sales to architects, interior designers and interior decorators were for resale by them, that there existed potential competitive injury, and asserted that its 50% Discounts were made in good faith to meet equally low prices of a competitor as permitted by § 2(b).

An examiner held hearings and received evidence offered by the Commission and by Knoll on the issues.

On February 24, 1964, pursuant to a notice of a hearing to be held March 9, 1964 to receive Commission evidence in rebuttal of Knoll's affirmative defense, Knoll was served with a request by the Commission counsel to admit the authenticity of certain documents. These documents later were shown to have been stolen by Herbert Prosser, an employee of Dworski, Knoll's exclusive sales representative in Detroit, from its Detroit showroom. This appeared when Knoll called for the production of all such documents and a full hearing and full disclosure of all the facts as to how the documents were procured. At a hearing held on March 17, 1964, Knoll called several witnesses in support of its motion, including Herbert Prosser, and then sought unsuccessfully to have the Commission counsel testify. Knoll's motion to suppress the documents admittedly taken from its showroom was denied by the examiner and the Commission.

The examiner found inter alia that Knoll is a New York corporation, wholly owned by Art Metal, Inc., 1 manufacturing

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and selling furniture and furniture products throughout the United States; that firms, classified as designers and decorators by Knoll, actually were found to 'buy and sell furniture in addition to their design service' from Knoll and other manufacturers, thus cross-competing with each other and with members of other classes; further that Knoll uses a 10% Price differential among 'customers' who agree to aggressively market Knoll's products and that resulting price discriminations had the requisite proscribed effect upon competition set forth in § 2(a) aforesaid. The examiner further found that, even though Knoll's favored customers received the highest discounts from other manufacturers, Knoll failed to establish a single instance of having met a competitor's price on any identified item of furniture with an equally low price and that Knoll gave its higher discount across the board on all items in its line to its favored customers. On the basis of these findings, he concluded that Knoll's pricing practices violate § 2(a) and are not within the allowed affirmative defense of § 2(b).

Nevertheless we are now required to take cognizance of petitioner's charge that the Commission improperly admitted into the record of this proceeding and relied heavily upon certain documents stolen for that purpose by said Prosser. It is alleged that these documents, as well as other evidence obtained for use by the Commission's counsel, were used in violation of the fourth amendment to the federal constitution. It is also urged that the Commission's counsel improperly intruded upon the privacy of the attorney-client relationship between petitioner and its counsel and upon its defense preparations. In these respects, it is insisted that petitioner's right to counsel was impaired and it was deprived of due process of law as guaranteed by the fifth amendment. In view of the result which we reach in this case, it is not necessary for us to consider this latter contention of petitioner.

1. Kathryn Sanders, a witness for Knoll, testified that on December 9, 1963 she was in the Knoll showroom in Birmingham, Michigan, which was run by Joseph Dworski, and saw Regional Manager Helm, Gary A. Beals, 2 and...

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