Consolidated Foods Corporation v. FTC
| Decision Date | 24 March 1964 |
| Docket Number | No. 14197.,14197. |
| Citation | 329 F.2d 623 |
| Parties | CONSOLIDATED FOODS CORPORATION, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Daniel Walker, Anderson A. Owen, Chicago, Ill., Samuel H. Horne, Washington, D. C., William I. Goldberg, Hopkins, Sutter, Owen, Mulroy & Wentz, Chicago, Ill., for petitioner.
J. B. Truly, Asst. Gen. Counsel, Gerald Harwood, Atty., James McI. Henderson, Gen. Counsel, Frederick H. Mayer, Atty., F. T. C., Washington, D. C., for respondent.
Before KNOCH and CASTLE, Circuit Judges, and MERCER, District Judge.
This case is before the Court on the petition of Consolidated Foods Corporation (hereinafter referred to as Consolidated) for review of an order of divestiture issued by the Federal Trade Commission following an administrative hearing upon a complaint charging that Consolidated's acquisition of Gentry, Incorporated, violates Section 7 of the Clayton Act.1
Consolidated was incorporated in 1941 as a wholesale grocery house. Subsequently, it expanded by mergers to encompass a wide variety of food industry enterprises. As of December 31, 1958,2 it operated eight manufacturing divisions or subsidiaries engaged in processing canned soups, pickles, dressing, fruits, bakery goods, frozen foods, beet sugar, dehydrated onion, dehydrated garlic, and capsicum spices in plants located in eleven different states scattered across the country. In addition, it sold food products at wholesale through twelve units in an equal number of states, and at retail through three units, including the Piggly-Wiggly Midwest Co. and Klein Supermarkets, Inc., chains.
Consolidated acquired Gentry, Incorporated, on April 30, 1951. Both before and since that date Gentry has been a manufacturer of dehydrated onion and garlic and of assorted capsicum spices.3 At the time of acquisition Gentry operated two plants and had assets valued at $1,600,000. Consolidated's assets were then approximately $60,000,000. Consolidated has exhibited a capacity for vigorous growth. By 1956 its assets exceeded $99,000,000 and its annual net sales of all products had risen to $286,252,695.
Dehydrated onion and garlic are sold primarily to food processors, and also to "institutional" users consisting of large restaurants, commissaries, steamship and large food servicing organizations, to distributors which resell to food processors and institutional users, to spice grinders and repackagers which package spices for sale through retail stores, and to the government.
At the time of the challenged acquisition the industry consisted of only three domestic producers of both dehydrated onion and garlic. They were Gentry, Basic Vegetable Products, Inc., (Basic) and Puccinelli Packing Company (Puccinelli). One other concern, J. R. Simplot Company (Simplot) produced only dehydrated onion. Since that time Simplot has left the field for reasons having no bearing on the issues here involved. And, Gilroy Foods, Inc., which entered the field in 1959 was acquired in 1961 by McCormick Foods, Inc., whose requirements exceed Gilroy's output. In 1961 California Vegetable Concentrates, Inc., a wholly-owned subsidiary of General Foods Corporation (whose annual sales of a variety of food products exceed one billion dollars) announced plans to build a plant to process dehydrated onions, scheduled for completion late in 1961.
The trend toward ever increasing use of table-ready foods such as dehydrated soups, and the increasing acceptance of dehydrated onion and garlic as a substitute for fresh onion and garlic because of economy and quality control, are among the factors which have contributed to the significant growth in industry sales since 1950. For a period of eleven years Gentry and Basic have accounted for better than 85% of total industry sales. Immediately prior to the Consolidated-Gentry merger, Basic accounted for 60% and Gentry 28% of dehydrated onion sales. By 1958, these figures were 57% and 35%, respectively. In dehydrated garlic sales, Basic had 36% of the market in 1950 and 50% in 1958, while Gentry's shares were 51% and 39% for the same years.
As a wholesaler and retailer of food products, Consolidated buys from many food processors. A substantial number of these processors require dehydrated onion and garlic in packing their products.
There is evidence that in a number of instances Consolidated overtly attempted to use its purchasing power as a device to obtain business for its Gentry division — to make sales of dehydrated onion and garlic to food processors from which Consolidated made purchases in connection with its wholesale and retail operations. But the record also reveals that this was not a matter of across-the-board company policy and that Consolidated recognized that for practical purposes the "I will buy from you if you will buy from me" reciprocity technique, in the setting here involved, had its limitations and that:
"* * * each situation has to be met individually as we certainly are in a better position to tell a private label supplier that he should use our raw materials, and by the same token we cannot tell a national supplier, such as Campbell Soup, as an...
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14 95 Federal Trade Commission v. Consolidated Foods Corporation
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