Shreveport Macaroni Manufacturing Company v. FTC, 19578.

• Citation: 321 F.2d 404
• Decision Date: 18 July 1963
• Docket Number: No. 19578.,19578.
• Parties: SHREVEPORT MACARONI MANUFACTURING COMPANY, Inc., Petitioner v. FEDERAL TRADE COMMISSION, Respondent.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

321 F.2d 404 (1963)

SHREVEPORT MACARONI MANUFACTURING COMPANY, Inc., Petitioner v. FEDERAL TRADE COMMISSION, Respondent.

No. 19578.

United States Court of Appeals Fifth Circuit.

July 18, 1963.

Robert G. Pugh, Shreveport, La., for petitioner.

J. B. Truly, Asst. General Counsel, F. T. C., Charles C. Moore, Jr., Atty., James McI. Henderson, Gen. Counsel, J. Lane Morthland, Atty., F. T. C., Washington, D. C., for respondent.

Before RIVES, LEWIS,^* and BELL, Circuit Judges.

GRIFFIN B. BELL, Circuit Judge.

Petitioner seeks to set aside a cease and desist order entered against it by the Federal Trade Commission in the proceeding entitled In the Matter of Shreveport Macaroni Manufacturing Company, Inc., Docket No. 7719, before the Federal Trade Commission. Our jurisdiction is based on 15 U.S.C.A. § 21(c) and 15 U.S.C.A. § 45(c).

The complaint of the Commission commencing the proceeding alleged in paragraphs 1, 2, and 3 that Shreveport Macaroni was a corporation organized, existing and doing business under and by virtue of the laws of the State of Louisiana with its principal place of business in Shreveport, Louisiana; that it was engaged in manufacturing and selling noodles, spaghetti, macaroni, and related items to retail chain store organizations, independent grocery stores, and wholesalers in the States of Louisiana, Texas, Arkansas, Mississippi, Tennessee and Oklahoma with sales exceeding $240,000 during the year 1958; and that in the course and conduct of its business it had engaged in commerce as that term is defined in the Clayton Act, as amended, in that its products were sold and transported from Louisiana to customers located in other states of the United States. These allegations were admitted.

Paragraphs 4, 5, and 6 of the complaint were denied. These, in substance, charged that Shreveport Macaroni in the course and conduct of its business in commerce made payments to some of its customers for services furnished by them in connection with their sale of products sold to them by Shreveport Macaroni, and that such payments were not made available on proportionally equal terms to all other customers competing in the sale and distribution of these products. In specifics it was alleged that during 1958 Shreveport Macaroni paid Childs Big Chain of Shreveport, a division of the Kroger Company, $1,900 as compensation or as an allowance for advertising or other services of facilities furnished by or through Childs in connection with its sale of products sold to it by Shreveport Macaroni, and that such compensation was not offered or otherwise made available to other customers competing with Childs in the sale and distribution of products of like grade and quality purchased from Shreveport Macaroni, and that these acts and practices violated § 2(d) of the Clayton Act, as amended by the Robinson-Patman Act. 15 U.S.C.A. § 13(d).¹

Shreveport Macaroni also plead affirmatively that the allowances it had made available to its customers were made in good faith to meet allowances furnished by a competitor, cf. 15 U.S. C.A. § 13(d), but this defense was not pursued.² On the hearing, the Commission introduced its evidence and Shreveport Macaroni, choosing to rely on the contention that the Commission had not made out a prima facie case, offered no evidence and moved for dismissal. The motion was overruled and the hearing closed.

The case comes to us from the final order of the Commission adopting the decision of the Hearing Examiner that § 2(d) of the Act was violated in 1958 and 1959 by payments to two customers, Childs Big Chain and J. Weingarten, Inc., when such payments were not made available on equally proportionally terms to other customers of Shreveport Macaroni. Petitioner contends that there was a total absence of competition in interstate commerce between the favored and unfavored customers, and for that reason the order cannot stand.

With respect to Weingarten, the facts show that it was headquartered in Houston, Texas. It had thirty nine retail grocery stores in Texas and Louisiana but purchased the products of Petitioner for sale only in certain of the Louisiana stores. The purchases were made from Houston but the deliveries were to the designated stores in Louisiana. There was competition inside but none outside the State of Louisiana between stores of Weingarten and other customers of Petitioner. On four occasions in 1958 and 1959, Weingarten solicited Petitioner from its Houston office to participate in special promotional sales by contributing to newspaper advertisements, with a choice being given as to newspapers in various areas of Texas and Louisiana. Petitioner chose to participate to the extent of paying for or toward an advertisement to appear in a Shreveport, Louisiana newspaper and contributed $106.01 on three of the occasions, and $107.51 on the other. It is undisputed that the same type products of Petitioner were sold in the stores of all its customers and that the allowances made to Weingarten and Childs were not made to other customers of Petitioner, whether within or without the State of Louisiana.

Childs Big Chain, a division of Kroger Company, had its general office in Shreveport, Louisiana. It had stores in Louisiana, Texas, and Arkansas. Effective January 1, 1958, Petitioner agreed to pay Childs an advertising allowance of ten cents per case on macaroni and egg noodles based on yearly purchases of nine thousand cases or more. Childs was the only customer in 1958 or 1959 whose purchases met this standard, and was paid $996.10 in 1958 and $649.70 in 1959, with an additional $176.10 being, at the time of the hearing, due for the last quarter of 1959.

In addition to these payments, Childs solicited Petitioner for a special advertising allowance in 1958 by way of participation in an anniversary sale to be conducted throughout its organization. The solicitation contained several offers and Petitioner chose proposition No. 5 at a cost of $887.00. It included the featuring of Petitioner's products in advertisements appearing on seven consecutive days in seven major papers in Louisiana and Texas, on four radio spots per day for seven consecutive days and on one television program, together with a display in all thirty three stores of Childs.³ Thereafter, in 1959, Petitioner participated in a sales plan offered by Childs which it called its television package deal and for which Petitioner made four advertising allowance payments of $120.00 each. This at least included the advertisement of Petitioner's products over Station KLTV, Tyler, Texas.

All products purchased by Childs from Petitioner were delivered to the Childs warehouse in Shreveport, but some were from there shipped by Childs to Tyler, Texas for sale in its stores there. This is the only evidence of interstate commerce in the record as it pertains to Petitioner's products, whether sold to Weingarten or Childs. Again, as with Weingarten, there was no proof of competition between the stores of Childs and other customers of Petitioner in the sale of products of Petitioner outside the State of Louisiana but there was an abundance of proof of competition within Louisiana.⁴

It was admitted that Petitioner was engaged in interstate commerce. Weingarten and Childs were engaged in interstate commerce. The payments to Weingarten were solicited and paid in interstate commerce. The purchases by Weingarten were from its Houston office and in interstate commerce although the deliveries and retail sales were intrastate. The No. 5 promotion of Childs paid for by Petitioner was in interstate commerce at least to the extent of the newspaper advertisements, and this was true with regard to the television program in Tyler, Texas. The advertising allowance was on products purchased in Louisiana but some of which were shipped to Tyler, Texas by Childs for resale there. There was competition between the favored and unfavored retailers in Louisiana. Stated differently, we have a manufacturer engaged in interstate commerce making an allowance to two food chain customers who are also engaged in interstate commerce in connection with products sold only in intrastate competition, but with the allowance being made or used in interstate commerce. This, we think, meets the test of the statute...