Gibson v. F. T. C.
| Decision Date | 13 August 1982 |
| Docket Number | Nos. 80-1743,80-1746,s. 80-1743 |
| Citation | 682 F.2d 554 |
| Parties | 1982-2 Trade Cases 64,971 Herbert R. GIBSON, Jr., Gerald P. Gibson, Gibson's Inc., Gibson's Discount Centers, Inc., Ideal Travel Agency, Inc., Gibson Warehouse, Inc. and Gibson's Products Co., Inc., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent. H. R. GIBSON, Sr., et al., Petitioner, v. FEDERAL TRADE COMMISSION, Respondent, |
| Court | U.S. Court of Appeals — Fifth Circuit |
Robert B. Bain, Dallas, Tex., Robert E. Rader, Jr., Ennis, Tex., for petitioners in No. 80-1743.
Bardwell D. Odum, Dallas, Tex., for petitioners in No. 80-1746.
Ernest Isenstadt, William A. E. Doying, F.T.C., Washington, D.C., for respondent.
Petitions for Review of a Final Order of the Federal Trade Commission.
Before BROWN, COLEMAN and RUBIN, Circuit Judges.
As the curtain rises, the Gibsons appear before us once more for what we hope will be the final act in this almost 15 year drama starring the Gibsons, masters of discount merchandising, and the Federal Trade Commission (FTC). Unlike the earlier scenes in this Court 1, this time we are to arrive at the merits as we review the FTC's final order enjoining the Gibson Petitioners from engaging in assorted trade practices. As the curtain falls, we affirm the order and direct enforcement. 2 No encores please.
In 1958 H. R. Gibson Sr. and his wife Belva founded the first Gibson Discount Center in Abilene, Texas. From this beginning emerged a chain of over 500 retail discount stores operating in 29 states, and several small corporations providing certain support or related services to the retail stores. The scions of the family, H. R. Gibson, Jr., and Gerald P. Gibson, were actively involved in the family business, each owning interests in several of the retail stores, and eventually receiving the ownership interest of their parents.
The Gibson retail discount stores are generally incorporated individually and include not only family owned and operated stores but also stores licensed to use the Gibson name. 3 In the period 1969 to October 31, 1972, Gibson Sr., in addition to licensing various franchisees to use Gibson trade names in the operation of retail stores, operated a private trade show where manufacturers displayed their products to buyers for both Gibson-owned and franchised stores. During this same period, Gibson Sr. and his wife Belva were majority stockholders in several Gibson retail stores and held a minority interest in certain other retail stores. The store managers of the majority owned stores were hired by Gibson, Sr. who left the day-to-day operations largely to the store managers. During this same period, from 1969 to November 1, 1972, both Gibson sons owned retail stores. 4 The Gibson stores, family owned and franchised, collectively did approximately.$1.6 billion in business in 1971.
On November 1, 1972, the Gibson businesses were reorganized so that Gibson, Sr. and his wife Belva disposed of their ownership interest in both the franchising and retailing aspects of the family business, transferring these to their two sons, Gibson, Jr. and Gerald Gibson. Gibson, Sr. sold the Gibson Products Company name to his sons and retained only the trade show business, registered as "The Gibson Trade Show". Gibson's, Inc., wholly owned by Gibson, Jr. and Gerald Gibson, was the corporate entity used to buy Gibson, Sr.'s retail business and continues to hold the stock of the retail stores. Gibson's Discount Centers, Inc., a subsidiary of Gibson's, Inc., actually carries on the retailing and franchise business.
Franchisees of the Gibson trade name are charged a monthly franchise fee and are subject to quality control by the franchisor. 5 Along with the use of the trade name, franchisees receive merchandising advice and most importantly are able to participate in the Gibson Trade Show.
The Gibson Trade Show, an essential element in both the Gibson franchises and in the FTC complaint, is a private trade show produced by Gibson, Sr. The show, held approximately four times a year, is basically restricted to buyers for Gibson-owned and franchised stores. The show is the vehicle through which representatives of various suppliers can exhibit their products and attempt to obtain orders from various Gibson stores. A supplier or representative allowed booth space in the show in effect has authorization to sell his products to Gibson retailers but no guarantee that the franchisees will buy his products. Gibson, Sr. employs "merchandise managers" or "trade show buyers" to operate the show. The trade show buyers recruit manufacturers to participate in the show, discuss product lines, billing terms and prices with suppliers, and negotiate with suppliers to get the best possible deal on the products that are to be shown. These buyers basically determine what suppliers are allowed to participate in the show as well as what products can be displayed. An integral part of the trade show operation is the show sheet (an order form and price list) which is filled out by the buyer after negotiations and indicates the price and terms for each product. These sheets, which are the exclusive order form used at the shows, are headlined "Ship to Gibson Products Company," followed by blank lines for the address of a particular store. In addition, they contain a notation instructing manufacturers not to ship at prices higher than those listed or a deduction will be taken. In return for the privilege of participating in the trade show, suppliers pay for booth rental, related service fees and show fees. Show fees are generally based on a percentage of sales made at the Gibson Trade Show although some suppliers pay a flat fee. Suppliers who refused to pay show fees were generally not permitted to participate in the trade show.
Although the FTC made a cameo appearance as early as 1967 when it first began investigating the Gibsons, it was not until February 1975 that it obtained star billing by issuing a three-count complaint alleging violations of the Federal Trade Commission Act and the Robinson-Patman Act against several Gibson-owned corporations, Gibson, Sr., his wife, and sons, Herbert and Gerald. Count I charged the petitioners with inducing suppliers to pay promotional allowances in connection with the Gibson Trade Show which were not proportionately available to other customers of the suppliers, violating Section 5 of the FTC Act, 15 U.S.C. § 45(a). Count II, also alleging violation of Section 5, concerned the boycott of suppliers who did not grant the promotional allowances charged in Count I. This count focused on the experience of three different suppliers, Toastmaster, Tucker Manufacturing Co., and Jeannette Glass Company. Count III alleged the payment of illegal brokerage in violation of Section 2(c) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. § 13(c). 6 The focus of Count III was on brokerage paid to Gibson Sr. by two brokers, Barshell, Inc. and Al Cohen Associates, Inc., which successively represented Ray-O-Vac in sales to the Gibson stores. 7 After extensive pretrial proceedings and a ten-month trial, the ALJ issued a 235 page opinion, accompanied by a two and one-half page order. The ALJ dismissed Count I. Under Count II, the boycott of suppliers, the ALJ issued an order against all respondents except Gibson's, Inc. Under Count III, the ALJ issued an order only against Gibson, Sr.
Both parties appealed the ALJ's decision to the Commission. The Commission affirmed the dismissal of Count I. It extended the order as to Count II to include Gibson's, Inc., finding that the boycott continued after November 1, 1972 under the management of Gibson's, Inc. and that it was proper and necessary to include Gibson's, Inc. in the order as the successor to the operations of a corporation found to be guilty of unfair trade practices. As to Count III, the Commission extended the provisions of the order concerning illegal brokerage to all Gibson family and corporate respondents on the basis of their complete interdependence and common control during the period of the violations. The Commission's decision and accompanying order issued on April 30, 1980. The petitioners filed motions for reconsideration in mid-June 1980, challenging certain aspects of the order. In addition, the respondents argued that certain actions taken by the Commission during periods of allegedly lapsed appropriations violated the Antideficiency Act, 31 U.S.C. § 665(a), and thus required dismissal or remand of the case. The third ground for reconsideration, and the only one pursued beyond the Commission, is based on the alleged disqualification of the ALJ, von Brand, based on his earlier service as an attorney-advisor to former Commissioner MacIntyre. The petitioners allege that in light of the opinion of the Ninth Circuit in Grolier, Inc. v. FTC, 615 F.2d 1215 (9th Cir. 1980), von Brand should have been disqualified from serving as an ALJ and thus dismissal or remand of the case was necessary. The Commission issued a further opinion and order denying the majority of the relief sought.
In seeking to have the FTC order set aside the Gibsons raise several challenges, not only to the specific proceedings and order in their case, but to the general administrative system developed by the FTC. In addition, they contend there is insufficient evidence on both the Count II boycott charge and the Count III Robinson-Patman charge. Although the arguments in both cases, that against Gibson, Sr. and his wife and that against the Gibson sons and Gibson corporations, are, like their briefs, almost identical, the Gibson sons and corporations also maintain that there is no evidence to connect them, as opposed to Gibson, Sr., with the allegations.
For openers, the Gibsons lead with their weakest argument,...
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