Modern Marketing Service v. Federal Trade Commission

• Decision Date: 13 June 1945
• Docket Number: 8484.,No. 8483,8483
• Parties: MODERN MARKETING SERVICE, Inc., et al. v. FEDERAL TRADE COMMISSION. RED & WHITE CORPORATION et al. v. SAME.
• Court: U.S. Court of Appeals — Seventh Circuit

149 F.2d 970 (1945)

MODERN MARKETING SERVICE, Inc., et al. v. FEDERAL TRADE COMMISSION.

RED & WHITE CORPORATION et al. v. SAME.

Nos. 8483, 8484.

Circuit Court of Appeals, Seventh Circuit.

June 13, 1945.

Franklin D. L. Stowe, of Buffalo, N. Y., John T. Chadwell, of Chicago, Ill., Jos. C. Dinsmore, of Cincinnati, Ohio, John W. Ogren, L. McBride, Wm. D. McKenzie, and James M. Best, all of Chicago, Ill., Lawrence B. Murdock, of St. Louis, Mo., and Louis L. Rosen, of New Orleans, La., for petitioner Modern Marketing Service.

Dana B. Hellings, of Buffalo, N. Y., for petitioner Red & White Corporation.

Joseph J. Smith, Jr., and John T. Haslett, Asst. Chief Counsel, both of Washington, D. C., for respondent.

Before EVANS, MAJOR, and KERNER, Circuit Judges.

MAJOR, Circuit Judge.

These are petitions to review and set aside a cease and desist order issued by the Federal Trade Commission, for alleged violation of Sec. 2 (c) of the Clayton Act, as amended June 19, 1936 by the Robinson-Patman Act, 15 U.S.C.A. § 13 (c). Petitioners also ask leave to adduce additional evidence in the event their petitions for review are denied. The Commission has filed a cross-petition for enforcement of its order. The petitioners in No. 8483 are Modern Marketing Service, Inc., hereinafter referred to as Modern Marketing; The Diamond Match Company, Morton Salt Company, The Quaker Oats Company, Ralston Purina Company, Wesson Oil & Snowdrift Sales Company, and the Proctor and Gamble Distributing Company, hereinafter referred to as sellers. The petitioners in No. 8484 are Red and White Corporation, hereinafter referred to as Red and White; S. M. Flickinger Company, Inc., Juillard Cockcroft Corporation, Laurans Brothers, Inc., West Coast Grocery Company, H. O. Wooten Grocery Company, and Nash-Finch Company, hereinafter referred to as buyers.

The complaint was issued by the Commission on May 6, 1939, and alleged that Modern Marketing, an Illinois corporation, was engaged in the business of providing purchasing and other services for the buyers, maintaining its principal office and place of business in Chicago, Illinois, with branch purchasing offices in Buffalo, New York and San Francisco, California. The complaint also alleged that Red and White up to October 1, 1936, which was the date of the formation of Modern Marketing, furnished purchasing and other services for the same buyers, with its principal office and place of business in Chicago, Illinois, with branch offices in Buffalo, New York and San Francisco, California; that the sellers named in No. 8483 were engaged in the business of manufacturing, packing and selling groceries, food commodities and allied products in interstate commerce, and that said sellers are fairly typical and representative of a large group or class of manufacturers, processors and producers, engaged in the practice of selling a substantial portion of their commodities to buyers who purchase through Modern Marketing as an intermediary for buyers; and that the buyers named in No. 8484 were engaged in the wholesale grocery business and are stockholders of Red and White. The buyers are representative of a group or class of a large number of wholesale grocers, each of which is a stockholder in Red and White.

The complaint alleged that Red and White was organized on December 27, 1927, and from that period up until October 1, 1936 engaged in the business of providing purchasing and other services for the buyers; that during this period it received orders from its various stockholders to purchase commodities, particularly groceries and foodstuffs, and transmitted such orders as agent of said buyers to sellers, and as a result thereof goods, wares and merchandise were by the sellers shipped to the buyers and the sellers paid brokerage to Red and White on such purchases. It was alleged that Red and White furnished advertising and promotional services to the buyers and their retail affiliated food stores, and that the cost of such services performed by Red and White for the buyers and their retail stores prior to October 1, 1936 was defrayed from funds derived from brokerage fees paid by sellers upon such purchases.

The complaint further alleged that Modern Marketing was organized and incorporated on or about October 1, 1936 by former employees of Red and White for the purpose of having it act as the purchasing agent for the stockholders of Red and White, to collect a brokerage fee from sellers and to furnish advertising services for such stockholders; that on or about October 1, 1936, Red and White entered into an agreement with Modern Marketing whereby the brands, trademarks and trade names owned or controlled by Red and White were leased to Modern Marketing for a consideration of $30,000 per year. Also, pursuant to its obligations under the leasing agreement, Modern Marketing thereafter performed the same services for and in behalf of the buyers which were performed for the buyers by Red and White prior to October 1, 1936.

It was also charged that in all the buying and selling transactions the brokerage fees or commissions were paid and transmitted by sellers to and accepted and received by Modern Marketing upon the purchases of buyers while Modern Marketing was subject to the control of Red and White, and was acting in fact for and in behalf of the buyers; and that the brokerage fees and commissions paid to Modern Marketing as intermediary upon the purchases of the buyers were transmitted to and accepted and received by the buyers in the form of services performed by Modern Marketing and Red and White for and in behalf of said buyers.

It was charged that the transmission and payment of such brokerage fees and commissions by sellers to Modern Marketing upon the purchases of buyers while acting for the buyers and under the control of Red and White, and the receipt and acceptance thereof by Modern Marketing, Red and White and the buyers, were in violation of the provisions of Sec. 2 (c), which reads as follows:

"That it shall be unlawful for any person engaged in commerce, in the course of such commerce, to pay or grant, or to receive or accept, anything of value as a commission, brokerage, or other compensation, or any allowance or discount in lieu thereof, except for services rendered in connection with the sale or purchase of goods, wares, or merchandise, either to the other party to such transaction or to an agent, representative, or other intermediary therein where such intermediary is acting in fact for or in behalf, or is subject to the direct or indirect control, of any party to such transaction other than the person by whom such compensation is so granted or paid."

Modern Marketing in its answer denied, among other things, that it acts for or in behalf of buyers or that it is subject to the direct or indirect control of Red and White or the buyers, or that it passes on to Red and White or the buyers any of the brokerage fees it collects from sellers upon the purchases of buyers.

Red and White in its answer denied, among other things, that prior to June 19, 1936 (the effective date of the amended Act), it was the purchasing agent for its stockholders. It denied that the receipt of the $30,000 from Modern Marketing was the distribution of brokerage collected by Modern Marketing upon the purchases of its stockholders. Both Modern Marketing and Red and White in their answers alleged that the provision charged to have been violated was unconstitutional.

The sellers filed separate answers, disclaiming knowledge of the facts surrounding the organization and functions of Modern Marketing. They all admitted that upon the purchases of Red and White buyers, they had paid Modern Marketing brokerage fees and commissions, and prior to the passage of Sec. 2 (c) they had paid brokerage to Red and White upon the purchases of its stockholders. They also alleged that the brokerage fees paid were for valuable services rendered to them.

The buyers filed answers in substantially the same form as that filed by Red and White, except buyer Nash-Finch Company. This buyer admitted that it had placed orders for its requirements of Red and White branded products, prior to the formation of Modern Marketing, through Red and White, and subsequent thereto through Modern Marketing. It alleged, however, that neither Modern Marketing nor Red and White was its agent and denied that it had received brokerage fees from Modern Marketing or Red and White upon its purchases, either directly or indirectly.

Extended hearings were held before a Trial Examiner for the Commission. 5,487 pages of typewritten testimony were taken, and 1,099 exhibits introduced. The Trial Examiner filed his report June 20, 1941. The case was presented to the Commission on briefs and oral argument May 24, 1943, and the Commission on September 8, 1943 issued its findings, conclusions and the cease and desist order now sought to be reviewed.

As is apparent, the record is voluminous. The same observation may be made as to the briefs which have been filed in this court by the parties in support of their respective contentions. Even to summarize the testimony contained in the record or the numerous theories and contentions advanced before this court would require an almost endless discussion. Furthermore, such a discussion would serve no useful purpose as the findings of the Commission are conclusive if supported by substantial evidence. Federal Trade Commission v. Standard Education Society, 302 U.S. 112, 117, 58 S.Ct. 113, 82 L.Ed. 141, Federal Trade Commission v. Algoma Lumber Co., 291 U.S. 67, 73, 54 S.Ct. 315, 78 L. Ed. 655. Also, the weight to be given to proven facts and circumstances, as well as the inferences reasonably to be drawn therefrom, are for the Commission. Federal Trade Commission v. Pacific States Paper Trade Assn., 273 U.S. 52, 63, 47 S.Ct. 255, 71 L.Ed. 534.

At this point, it is sufficient to observe that all or at any rate substantially all...