Atalanta Trading Corp. v. Federal Trade Com'n, 57

• Decision Date: 28 July 1958
• Docket Number: Docket 24535.,No. 57,57
• Citation: 258 F.2d 365
• Parties: ATALANTA TRADING CORPORATION, a corporation, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Second Circuit

258 F.2d 365 (1958)

ATALANTA TRADING CORPORATION, a corporation, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.

No. 57, Docket 24535.

United States Court of Appeals Second Circuit.

Argued January 16, 1958.

Decided July 28, 1958.

COPYRIGHT MATERIAL OMITTED

Martin A. Fromer, New York City (I. Martin Leavitt, Washington, D. C., on the brief), for petitioner.

E. K. Elkins, Washington, D. C. (Earl W. Kintner, Gen. Counsel, James E. Corkey, Asst. Gen. Counsel, Washington, D. C., on the brief), for respondent.

Before MEDINA and MOORE, Circuit Judges, and GALSTON, District Judge.

MOORE, Circuit Judge.

This is a petition by Atalanta Trading Corporation (referred to as "Atalanta") to set aside a cease and desist order of the Federal Trade Commission based upon a finding that it had violated Section 2(d) of the Robinson-Patman Act, 15 U.S.C.A. § 13(d), which prohibits a seller from granting promotional or advertising allowances on the sale of a product to one customer unless a proportionally equal allowance on the product is made available to other competing customers.

Atalanta is an established distributor of imported meat products and sea food and conducts its operation in a multistate area. In 1954 it made gross sales of approximately $24,000,000. Although, by stipulation, proof was confined in duration to an eighteen-month period, January 1, 1954 to July 1, 1955, and to metropolitan Philadelphia, Baltimore and Washington, D. C., the Commission found that Atalanta had made no advertising allowances on sea food sold in Washington and no advertising allowances on any products sold in Philadelphia or Baltimore. The proof, therefore, was restricted to meat products sold in the Washington area.

Atalanta's business in this area was insubstantial, representing approximately one per cent of its gross sales. The only business of any consequence was with Giant Food Shopping Center, Inc. (a chain store in Washington, referred to as "Giant") which purchased some $250,000 of Atalanta's products in 1954, and $70,000 of such products in the first six months of 1955. Throughout the period involved, Atalanta made sales of meat products to only three other retailers in the Washington area. These sales were small and isolated, the combined total in 1954 being less than $8,000, and in the first six months of 1955 approximately $1,700.

At no time did Atalanta have a systematic or continual policy of granting advertising allowances. However, in July 1954, through Giant as its only customer, it promoted the sale of its pork shoulder picnics for the Fourth of July holiday and gave to Giant a promotional allowance of $500. No prior sales of this product with or without allowances had been made to any other Washington retailer. Over five months later it made a sale, $600 in total amount, of this product to Shirley Food Co., a food retailer in nearby Alexandria, Virginia.

In December 1954 Atalanta granted a $2,000 allowance to Giant to promote the sales of specially packaged gift-wrapped 2¼ and 5 lb. canned hams with recipe booklets for the Christmas holidays. After this allowance it sold no hams to other Washington retailers. However, over eight months prior thereto, in April 1954, Atalanta had "made one sale of this product, but not gift wrapped," viz., $250 of hams to Sanitary Food Store No. 4, also in Alexandria, Virginia. (Pet.App. 36a.)

These two sales, totaling less than $900, constituted the only sales by Atalanta to other customers in the Washington metropolitan area of meat products on which promotional allowances were granted to Giant. Another advertising allowance of $1,000 given to Giant in May 1955 for the promotion of precooked canned Canadian bacon was also relied upon by the Commission as evidence of a violation, although it found that prior to May 1955 Atalanta's Canadian bacon had been sold raw, smoked and sliced and had never been sold to any Washington retailers, including Giant. On the basis of these three small and isolated transactions the Commission entered a sweeping cease and desist order which places Atalanta in jeopardy of contempt if it hereafter violates Section 2(d) in any fashion in any place in the country.

The complaint, containing the sole charge that Atalanta had violated Section 2(d), was founded upon the allegation that Atalanta had given advertising allowances to "some of its customers" (i. e., Giant) without making said advertising allowances available on proportionally equal terms "to all other customers competing in the sale and distribution of respondent's products." These products were defined as "meat products, principally canned hams," sold "under the trade name `Unox.'"

The Commission adopted all of the findings made by the hearing examiner except two which contained only conclusions of law. The facts as found, so far as material to the decision, may be considered as virtually undisputed. The legal conclusions to be drawn therefrom, however, present the real problem.

Although the scope of Section 2(d) is yet to be precisely delineated, the decision by the Commissioner here constitutes a radical departure from prior applications of Section 2(d). The Commission has concluded that giving spot promotional allowances on these products, namely, canned hams, pork shoulder picnics and pre-cooked Canadian bacon, requires the seller to offer similar allowances on its entire line of products — here meat products. The Commission stated:

"* * * Section 2(d) is not limited to sales of identical products. That construction would make the section very easy of evasion. It is the real competitive situation which is to be considered. See In the Matter of Luxor, Ltd., 31 F.T.C. 658. Commission Exhibit 7(a) lists the meat products upon which respondent was paying promotional allowances in 1954 and 1955.¹ They were all pork products, namely hams of varying sizes, `picnics\' (pork shoulders), loin roll, cottage butts, and chopped ham. With apparently one exception, they were all sold under the trade name Unox. In the general field of pork products, they were in competition with each other."

The hearing examiner was more terse and dogmatic but reached the identical conclusion, stating that "All of these products were pork, and to the hearing examiner, ham is ham * * *"

We cannot accept the Commission's expansive interpretation of Section 2(d), namely, that after showing a supplier has sold a general line of products in a given area and has granted allowances to only one customer, it is immaterial whether or not a product of like grade and quality to the one on which the allowance was made was ever sold to any other customers in that area.

Section 2(d) provides:

"It shall be unlawful for any person engaged in commerce to pay or contract for the payment of anything of value to or for the benefit of a customer of such person in the course of such commerce as compensation or in consideration for any services or facilities furnished by or through such customer in connection with the processing, handling, sale, or offering for sale of any products or commodities manufactured, sold, or offered for sale by such person, unless such payment or consideration is available on proportionally equal terms to all other customers competing in the distribution of such products or commodities."

The crucial issue is the meaning of the term "products or commodities" in the phrases "sale of any products or commodities" and "customers competing in the distribution of such products or commodities."

The Commission itself has interpreted "products or commodities" to mean products and commodities "of like grade and quality." The reasonableness of this interpretation has been well stated by Cyrus Austin in his article, "Price Discrimination and Related Problems Under the Robinson-Patman Act" (Rev. Ed. Ann.Law Inst., Nov. 1953) p. 118:

"Section 2(a) prohibits price discrimination `between different purchasers of commodities of like grade and quality.\' This limitation is not contained either in 2(d) or in 2(e). Products which differ to some extent in grade or quality are very commonly competitive at a differential. Nevertheless, since section 2(a) does not regulate the prices charged purchasers of goods of different grade or quality, it is improbable that 2(d) and 2(e) were intended to have a broader application as to merchandising allowances and services even where such goods are resold in competition. If so construed the result would be to require a manufacturer desiring to launch a promotional campaign for one line or product to extend the promotional benefits to all customers competing in the resale of any other competitive product. The words `such products or commodities\' at the end of Section 2(d) have been construed by the Commission as referring to goods of like grade and quality, and the same limitation will no doubt be read into Section 2(e)."

In Matter of Golf Ball Mfrs. Ass'n, 26 F.T.C. 824, 851, (1938), the underlying factual basis which supported the Commission's finding of a violation was that the golf balls on which no allowances were given were "of like quality" to the golf balls stamped with the label "PGA." Likewise in Henry Rosenfeld, Inc. (F.T.C. Docket No. 6212, decided June 29, 1956), the Commission did not conclude that a supplier had to use as a yardstick for determining the legality of his promotional allowances the entire line of women's wearing apparel; to the contrary it recognized the rights of suppliers to differentiate for purposes of promotional allowances between three separate categories of dresses and concluded with this accurate summation of the law, saying that it "imposes no requirements that a seller give advertising allowances on all his products if he elects to accord them on one or more articles. When granting any promotional payments, however, the law requires that he make them available on proportionally equal terms to other resellers of that article or articles who...