FTC v. Consolidated Foods Corporation

• Decision Date: 21 May 1975
• Docket Number: No. 74 Civ. 3094.,74 Civ. 3094.
• Parties: FEDERAL TRADE COMMISSION, Plaintiff, v. CONSOLIDATED FOODS CORPORATION, a corporation, Defendant.
• Court: U.S. District Court — Southern District of New York

396 F. Supp. 1353

FEDERAL TRADE COMMISSION, Plaintiff, v. CONSOLIDATED FOODS CORPORATION, a corporation, Defendant.

No. 74 Civ. 3094.

United States District Court, S. D. New York.

May 21, 1975.

COPYRIGHT MATERIAL OMITTED

Joseph J. Gercke, Asst. Director for Compliance, Bureau of Competition, Federal Trade Commission, Washington, D. C. by Salvatore F. Sangiorgi, New York City, R. Baylor Rowe, Washington, D. C., of counsel, for plaintiff.

J. Wallace Adair, Ray S. Bolze, Howrey, Simon, Baker & Murchison, Washington, D. C., George H. Colin, Baer & Marks, New York City, for defendant.

MEMORANDUM AND ORDER

WHITMAN KNAPP, District Judge.

On December 16, 1974, this Court on plaintiff's motion for partial summary judgment found defendant "to have been in violation of the Federal Trade Commission order between November 26, 1973 and March 1, 1974." 396 F.Supp. 1344 at 1352 (S.D.N.Y.1974). Having determined liability, the issue of penalties remains. Plaintiff seeks civil penalties of at least $250,000 and an injunction commanding obedience to its Order. Defendant has requested a hearing on the issue, at which it proposes to demonstrate that only nominal penalties in the amount of $1.00 should be assessed and that no injunction is warranted.

The applicable statutes¹ entrust to the Court's discretion — within the upper limit of $5,000 for each violation² — the amount of the civil penalties to be imposed for noncompliance with final FTC orders. United States v. Ancorp National Services, Inc. (2d Cir. 1975) 516 F.2d 198, at 202; United States v. J. B. Williams Company, Inc. (2d Cir. 1974) 498 F.2d 414, 438. Section 11(l) of the Clayton Act, 15 U.S.C. § 21(l), provides as follows:

"Any person who violates any order issued by the commission or board under subsection (b) after such order has become final, and while such order is in effect, shall forfeit and pay to the United States a civil penalty of not more than $5,000 for each violation, which shall accrue to the United States and may be recovered in a civil action brought by the United States. Each separate violation of any such order shall be a separate offense, except that in the case of a violation through continuing failure or neglect to obey a final order of the commission or board each day of continuance of such failure or neglect shall be deemed a separate offense."

It is the plaintiff's position that substantial penalties are warranted by defendant's alleged "continuing failure or neglect to obey" its final order. It argues that this Court's finding — on the motion for partial summary judgment — that defendant was "in violation of the order between November 26, 1973 and March 1, 1974" was tantamount to a finding that defendant was in violation of the order for each of the 94 days of that time period.³ Such was not our intention. Our focus on the motion for summary judgment was on whether there was any question of fact as to whether defendants had taken necessary steps to comply between November 1, 1973 and March 1, 1974, whereas now we must determine how many specific violations were committed. Moreover, the very language of the "continuing" violation provision and the interpretation given thereto by the courts preclude its application to the facts of this case. As the Supreme Court recently observed in United States v. ITT Continental Baking Co. (1975) 420 U.S. 223, 95 S.Ct. 926, 43 L.Ed.2d 148, this provision

". . . intended to assure that the penalty provisions would provide a meaningful deterrence against violations whose effect is continuing and whose detrimental effect could be terminated or minimized by the violator at some time after initiating the violation." (emphasis in original)

As examples of behavior intended to be covered by this provision, the court listed continuing conspiracies to fix prices or control production, maintenance of a billboard in defiance of an order prohibiting false advertising, failure to dissolve an unlawful merger, failure to eliminate an interlocking directorate and the acquisition of assets of other companies in violation of an order. Id. at 95 S.Ct. 926. Each of these types of violation necessarily continue on a day-to-day basis until a specific act is taken in abatement. On the other hand, in a situation involving price discrimination by means of illegal discounts — which by definition are individual in nature — each discriminatory transaction or sale must be the measure, since the granting of each illegal discount is a wholly independent and separately identifiable act which ends as soon as the specific transaction is consummated.

Having concluded that penalties cannot be assessed on a "continuing" violation basis we turn now to the question whether or not to hold a hearing as to how many separate violations of the order defendant committed and how much of a penalty to impose for each of those violations. Although ordinarily such a hearing would be necessary, in light of the peculiar circumstances of this case, I have determined not to schedule one. On the basis of defendant's own affidavits, the court can take judicial notice that there was a continuing pattern of violation which necessarily gave rise to a sufficient number of individual incidents to justify the penalty which it has determined to assess.

In mitigation, defendant has raised the very interesting but belated argument that since the FTC order became final, not only was Conso faced with new competition from existing competitors but it was also faced with new competitors offering new and lower prices to its customers. As a result, defendant argues, it was forced to continue to grant discounts to its customers in an effort to retain their business in the face of the competition from new sources. Although evidence of such events was obviously not "available" to defendant prior to the entry of the FTC order see F.T.C. v. Ruberoid Co. (1952) 343 U.S. 470, 476, 72 S.Ct. 800, 96 L.Ed. 1081, that is not the end of our inquiry. The Court very carefully...