United States v. New York Great A. & P. Tea Co.

Decision Date21 September 1946
Docket NumberCriminal No. 16153.
Citation67 F. Supp. 626
PartiesUNITED STATES v. NEW YORK GREAT ATLANTIC & PACIFIC TEA CO., Inc., et al.
CourtU.S. District Court — Eastern District of Illinois

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COPYRIGHT MATERIAL OMITTED

Holmes Baldridge, Horace L. Flurry, Earl A. Jinkinson, Richard B. O'Donnell, Walker Smith, Margaret H. Brass, Richard L. Porter, and Sigmund Timberg, Sp. Assts. to Atty. Gen., Wendell Berge, Asst. Atty. Gen., and William W. Hart, U. S. Atty., and Ray M. Foreman, Asst. U. S. Atty., both of Danville, Ill., for plaintiff.

W. M. Acton and Paul F. Jones, both of Danville, Ill., and Henry I. Green, of Urbana, Ill. (Caruthers Ewing, of New York City, George J. Feldman, of Washington, D. C., Sumner S. Kittelle, of New York City, Charles R. Fox, of Detroit, Mich., John N. Touchstone, of Dallas, Tex., Henry S. Rademacher, of Chicago, Ill., Enos L. Phillips, of Urbana, Ill., V. W. McIntire, of Danville, Ill., E. J. Donahue, of Derby, Conn., and Ralph B. Schipa, of New York City, of counsel), for defendants.

LINDLEY, District Judge.

The information in this cause charges, in the first count, that defendants unlawfully formed and carried out, in part within the Eastern District of Illinois, a combination and conspiracy unreasonably to restrain interstate commerce in food products; and, in count two, that they entered into and carried out, in the same manner, a conspiracy to monopolize a substantial part of such products in interstate commerce, all in violation of the Sherman Act, 15 U.S. C.A. §§ 1-7, 15 note.

The corporate defendants are: The New York Great Atlantic & Pacific Tea Company, Inc., a New York corporation, The Great Atlantic & Pacific Tea Company of America, a Maryland corporation, The Great Atlantic & Pacific Tea Company, a New Jersey corporation, The Great Atlantic & Pacific Tea Company, an Arizona corporation, The Great Atlantic & Pacific Tea Company, a Nevada corporation, The Great Atlantic & Pacific Tea Corporation, a Delaware corporation, The Great Atlantic & Pacific Company of Vermont, Inc., a Vermont corporation, The Quaker Maid Company, Inc., White House Milk Company, Inc., Nakat Packing Corporation, and Atlantic Commission Company, Inc., all New York corporations and The American Coffee Corporation, a New Jersey corporation.

Certain individuals comprise the so-called headquarters defendants, as follows: George L. Hartford, president of the first above named corporation; chairman of the board of directors of the second; president and director of the Great A & P Tea Co., Ltd., Canada, secretary and director of Atlantic Warehouses, Inc., N. Y., Great American Tea Co., N. Y., and the Arizona corporation; treasurer and director of the New Jersey and Nevada corporations and director of the Delaware corporation. John A. Hartford, first vice president and director of the first named corporation, president and director of the Maryland, the Arizona, the New Jersey, the Nevada and the Delaware corporations and of The Great American Tea Company, New York; treasurer and director of Atlantic Warehouses, Inc., New York, vice president and director of The Great Atlantic & Pacific Tea Co., Ltd., Canada. R. W. Burger, assistant secretary of the Arizona, the New York and the Nevada corporations, the American Coffee Corporation, Nakat Packing Corporation, the Atlantic Commission Company, the Great American Tea Company, the Atlantic Warehouses, Inc., and The Great Atlantic & Pacific Tea Co., Ltd., secretary of the New Jersey and Maryland corporations, secretary and director of the Delaware corporation, assistant secretary and director of the Quaker Maid Company, secretary-treasurer and director of White House Milk Company, vice president, Stores Publishing Co., Inc., New York. Robert B. Smith (now deceased), vice president and director of the Maryland, New Jersey and Nevada corporations, and of the White House Milk Company; president and director of Nakat Packing Corporation, the Atlantic Commission Company, and the Quaker Maid Company and vice president of Stores Publishing Company. David T. Bofinger, vice president and director of the New Jersey corporation and the Stores Publishing Company. R. G. Ernst, vice president of the Quaker Maid Company. Francis M. Kurtz, vice president, American Coffee Corporation, New Jersey. H. A. Baum, vice president, general manager and director of Atlantic Commission Company, New York.

Other defendants are: O. C. Adams, chairman of the board of the Atlantic division; W. F. Leach, president of the Atlantic division; W. M. Byrnes, president of the Eastern division; J. J. Byrnes, president, New England division; R. M. Smith, president, Southern division; O. I. Black, general superintendent of Dallas unit; T. A. Connors, agent in charge of the national meat department of A & P; A. W. Vogt, agent in charge of the buying office, Milwaukee, Wisconsin; Business Organization, Inc., a New York corporation, and Carl Byoir, chairman of its board.

The information sets forth at some length the respective participating activities of the members of A & P group in the food industry of the United States. It avers and the fact is that the New York corporation and the Maryland corporation are holding companies, the first holding the stock of the other and the latter that of the other corporate defendants except the Vermont corporation which is owned by the New Jersey corporation; that defendants George and John Hartford, as trustees of the George H. Hartford Trust hold all the authorized and issued voting stock of the New York corporation and, individually and as trustees, 99.97% of the authorized capital stock of that corporation; that besides retailing food through retail stores, the group processes, packs and wholesales food products and engages in brokerage business in such products.

It is charged that headquarters control the buying; that the purchasing department is located at headquarters where food products to be retailed are purchased; that in various states, there are located other offices, known as buying and brokerage offices, where A & P's agents and employees, under the direction of the grocery purchasing department, purchase various products, all of which are shipped to A & P warehouses and from there forwarded in interstate commerce to the retail stores, and that the stores, 6412 in number, in 3436 cities, constitute the conduit through which food products are moved in commerce from producers to consumers. It is charged that headquarters also control the selling and advertising of the entire group, dictate where stores shall be located and suggest profit rates and expense rates for all the stores.

All defendants1 entered pleas of not guilty and both sides waived trial by jury. Voluminous evidence was submitted, both oral and documentary. The Government relies upon the records made by defendants in their corporate and group meeting minutes, their communications with each other and with others, testimony of suppliers from whom A & P bought food products, and that of producers of fruits and vegetables and the officers or agents of cooperatives producing and selling such produce. Defendants produced controverting evidence, both oral and documentary, submitting portions of its records as part of the res gestae.

The Government has not offered evidence of any expressed undertaking to restrain interstate trade or to create a monopoly. It insists, however, that the policies and practices of the allied corporations and their officers from the year 1925 until the time the information was filed have remained constant, namely, lower buying prices for A & P than those of its competitors, realized largely through discriminatory preferences to A & P from suppliers, enabling A & P to undersell retail competitors and to off-set losses incurred in selected areas at a profit rate below cost of operation. It complains, not of the size of the defendants' enterprise but that, through vertical and horizontal integration reflected by the evidence, defendants have acquired and used tremendous power in such manner and employed such means as inherently involve unreasonable restraint of competition. It insists that A & P, in meeting competition in certain sections has so lowered prices as to result in stores in those sections being operated at a loss; that, to reimburse them for losses or lessened profits, stores have received allotments of other earnings which are first received at headquarters and then allocated to the stores; that these include, not only earnings of the wholly owned subsidiaries but also stock gains, advertising allowances received from suppliers and various other "headquarters" profits, and contribute to an illegal result, i.e., they bar or handicap open competition; and that in certain sections, defendants have agreed with others to fix prices. It insists that there is adequate proof of illegal action by Atlantic Commission Company in that it acts as buying agent for A & P and at the same time as broker for vendors selling to other distributors and as buying broker for others and eventually turns over all its profits to A & P. It insists that defendants have engaged in false front activities, the nature of which I shall discuss hereafter. In short, it is the Government's position that it has proved beyond reasonable doubt that all of the actions of defendants disclosed by the evidence in the end amount inevitably to illegal restraint of trade as charged in the first count and to an attempt to create a partial monopoly as charged in the second count, while defendants insist that proper analysis of the evidence can lead only to a conviction that they never at any time intended to violate the law; that their recorded policy over a period of years has been to live within the law, and that they have studiously attempted at all times to meet competition fairly, without threat to its healthy open existence, all in order to achieve their only purpose — to furnish the consuming...

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