Syllabus IN THE MATTER OF WISCONSIN WHOLESALE GROCERS' ASSOCIATION ET AL. COMPLAINT (SYNOPSIS), FINDINGS, AND ORDER IN REGARD TO THE ALLEGED Docket 1196—November 3, 1926 Where an association of wholesale grocers, and the officers and members thereof, in pursuance of a common undertaking to cause manufacturers, producers and their respective brokers to confine distribution of products dealt in by them to the so-called regular and legitimate channels of distribution, i. e., channels running from the manufacturer or producer to the so-called legitimate wholesaler to retailer to consumer, and to prevent con cerns engaged in the distribution and sale of groceries at wholesale under contract with retailers on a cost plus basis, and other so-called irregular concerns, i. e., manufacturers who sell and retailers who buy without the assistance of the so-called legitimate wholesalers, from purchasing such merchandise at jobbers' prices, (a) Discussed and formulated plans at various association meetings for combating irregular concerns and restricting their competition; (b) Classified and designated various concerns as irregular and illegitimate channels of distribution and held their competition unfair by reason of such designation; (c) Informed each other through their secretary and through their association bulletins circulated by him, of means and methods employed by the various members to accomplish their joint undertaking, and the success thereof; (d) Circulated disparaging and derogatory statements concerning the business methods and plans of organization of the aforesaid concerns, for the purpose of inducing manufacturers and brokers not to sell to them and retailers not to affiliate with them; (e) Sought to induce manufacturers and brokers to refuse dealings with such concerns by sending and causing to be sent to them protests and objections made in concert by their customers among the members; (f) Complained to manufacturers and brokers that said concerns were selling at less than the manufacturer's list price and recognized said price as the proper selling price for the jobber; (g) Informed manufacturers and brokers that if they sold to such concerns they could not expect the support and patronage of the so-called legitimate wholesale grocer; (h) Canceled orders and refused to do business with brokers and manufacturers unless they would refuse to sell to said concerns. (i) Placed orders with manufacturers and brokers on condition that they would not sell to said concerns and refused shipments made in violation of such condition; (j) Discriminated and urged discrimination in favor of manufacturers and brokers who acceded to their requests and demands that they cease or refrain from selling said concerns; and Complaint 10 F. T. C. (k) Organized and carried out a campaign to induce manufacturers to eliminate the practice of shipping direct to retailers on the jobber's order, seeking thereby to restrict the ability of so-called irregular concerns, of whose business such shipments were a substantial portion, to undersell the so-called legitimate jobber, and to subject all shipments to the imposition of the jobbers' warehousing charge; With the result that many manufacturers and brokers selling and shipping groceries and food stuffs into the territory herein concerned, refused to sell or discontinued selling to the aforesaid so-called irregular concerns, and confined their distribution to the so-called regular channels approved by the association and its members, so-called irregular dealers were prevented from purchasing various lines of goods from the manufacturers and in some instances were compelled to buy through members of the association, and retailers were compelled to purchase various lines from members of the associations at prices higher than those charged by manufacturers and by so-called irregular wholesalers; and Where two merchandise brokerage concerns representing a number of nationally known line of food products, and also other producers of food stuffs; (1) Refused to sell and induced their principals not to sell further to so-called irregular concerns objected to by the members, pursuant to their aforesaid common undertaking and understanding, and because of assurances by the members that they would increase their sales efforts in behalf of the goods handled by the aforesaid brokerage concerns if the objectionable sales were discontinued; (m) Informed the members that certain other manufacturers and brokers sold to the so-called irregular trade, for the purpose and with the effect of causing said members to cease or refrain from dealing with such manufacturers and brokers and putting their sales efforts on its own lines; and (n) Diverted orders in the case of one of the aforesaid brokerage concerns designated by retailers as for the account of certain so-called irregulars, to the account of its so-called legitimate jobbing customers among the members: Held, That such practices, under the circumstances set forth, constituted unfair methods of competition. Mr. Walter B. Wooden for the Commission. Schmitz, Wild & Gross, of Milwaukee, Wis., for respondents. SYNOPSIS OF COMPLAINT Reciting its action in the public interest, pursuant to the provisions of the Federal Trade Commission Act, the Commission charged respondent Wisconsin Wholesale Grocers' Association, its officers and members, purchasing the products dealt in by them from manufacturers and producers located, mostly, in other States than Wisconsin, and naturally and normally in competition with one another but for the matters and things alleged herein, and in competition with others similarly engaged, and respondents Glass-Turbush Co. and Otto L. Kuehn & Co., two Wisconsin corporations engaged in a brokerage business in groceries and allied products, and with principal place of business in Milwaukee, with undertaking and cooperating together, for more than three years preceding the complaint, to confine distribution to so-called regular and legitimate channels of trade, prevent irregular dealers (and especially cooperative purchasing enterprises of retailers) from obtaining supplies from manufacturers and producers, and to fix uniform prices for the sale of the products dealt in and prevent the sale by others in the territory concerned, at substantially lower prices.1 Methods employed, as charged, by respondents, to make effective their undertaking, included the following: Agreeing upon, fixing, revising from time to time and abiding by uniform discounts from manufacturers' list or suggested retail prices for a number of the products dealt in by respondent members. Making known to one another through association bulletins, and correspondence and reports between the association and the members, and between the members themselves, instances of sales to irregular dealers including cooperative purchasing enterprises of retailers, and to consumers, and bringing pressure to bear upon manufacturers or producers so selling, to cease doing so, and bringing about such result by persuasion, boycott, threats thereof and other species of intimidation. Persecuting and harassing irregular dealers, including the aforesaid cooperative enterprises, by making and publishing statements disparaging the business methods and financial responsibility of said dealers, in the territory concerned, and by continually bringing pressure to bear upon manufacturers and producers supplying them, as herein above set forth. Employing similar tactics and practices against dealers selling at wholesale for prices substantially below those in effect among the members and using other cooperative and individual means to carry out their undertakings herein above set forth. Respondent brokers, as charged, cooperated generally with respondent association and members in the foregoing acts and things and especially by refusing to negotiate sales for products concerned 1 According to the complaint "respondents regard the channel of distribution commencing with the manufacturer or producer, flowing thence to the wholesaler, from the wholesaler to the retailer and from the retailer to the consuming public, as the only proper and legitimate channel of distribution of the products in which they deal and which by them is denominated, the regular or legitimate channel of distribution. Channels of distribution originating with the manufacturer or producer and which do not flow through the wholesale dealer but go direct to the consumer or to the dealer doing both a wholesale and retail business or direct to retail dealers and especially to cooperative purchasing enterprises of retail dealers banded together to buy in wholesale or jobbing ouantities, are by respondents regarded and denominated as irregular and illegitimate channels of trade and aforesaid dealers acquiring goods through said so-called illegitimate channels are by respondents considered and denominated irregular or illegitimate dealers." "between manufacturers and producers on the one hand and socalled irregular dealers, especially aforesaid cooperative retail purchasing enterprises, on the other, and by advising, persuading and urging manufacturers to refuse to supply such irregular dealers with goods either through the medium of themselves, said broker respondents, or otherwise." According to the complaint "the above alleged acts and things done by respondents and by each of them have tended and still tend to, and did and do, unlawfully suppress and hinder competition in the sale and distribution of groceries in the territory served by respondents; have prevented and still prevent competing and other dealers selling said commodities in the territory served by respondent members from securing said commodities from aforesaid original sources at prices accorded wholesale dealers; have obstructed and still obstruct the natural flow of commerce in the channels of interstate trade and have denied and still deny to dealers in and consumers of said commodities in aforesaid territory the advantages in price and otherwise which they would obtain from the natural flow of commerce in said commodities under conditions of free and unobstructed competition. Wherefore, said acts and things done by respondents are all to the prejudice of the public and of respondents' competitors." Upon the foregoing complaint, the Commission made the following REPORT, FINDINGS AS TO THE FACTS, AND ORDER Acting in the public interest, pursuant to the provisions of an act of Congress approved September 26, 1914, the Federal Trade Commission issued and served a complaint upon the various parties mentioned in the caption hereof, charging them with the use of unfair methods of competition in interstate commerce in violation of the provisions of section 5 of said act. Respondents having entered their appearance and filed their answers herein, hearings were held before an examiner of the Commission theretofore duly appointed. Thereupon this proceeding came on for a final hearing on the briefs and oral argument, and the Commission being fully advised in the premises makes these its findings as to the facts and its conclusions drawn therefrom: FINDINGS AS TO THE FACTS PARAGRAPH 1. The respondents Wisconsin Wholesale Grocers' Association is a voluntary trade association and on the date of the issuance of the complaint herein had the following members: Chip pewa Mercantile Co., Chippewa Falls, Wis.; Edward Dewey Co., Milwaukee, Wis.; L. Dobbritz, Milwaukee, Wis.; Dahlman & Inbusch Grocery Co., Milwaukee, Wis.; Eau Claire Grocery Co., Eau Claire, Wis.; Flannelly Grocery Co., Ashland, Wis.; Gateway Grocery Co., La Crosse, Wis.; George & Geiger & Co., Milwaukee, Wis.; E. R. Godfrey & Sons Co., Milwaukee, Wis.; Gould, Wells, & Blackburn Co., Madison, Wis.; Henrickson-Jacobson Co., Racine, Wis.; John Hoffman & Sons Co., Milwaukee, Wis.; J. J. Hogan, Inc., La Crosse, Wis.; Joannes Brothers Co., Green Bay, Wis.; Kenosha Wholesale Grocery Co., Kenosha, Wis.; A. Kickbush Grocery Co., Wausau, Wis.; Kleuter & Co., Madison, Wis.; Kurth Brothers Co., Milwaukee, Wis.; The H. T. Lange Co., Eau Claire, Wis.; Lange Grocery Co., Sparta, Wis.; Latsch & Sons Co., Winona, Minn.; Marshfield Grocery Co., Marshfield, Wis.; H. F. Mueller & Co., Racine, Wis.; E. R. Pahl & Co., Milwaukee, Wis.; Plumb & Nelson Co., Manitowoc, Wis.; D. Reck & Sons, Milwaukee, Wis.; George I. Robinson & Co., Milwaukee, Wis.; Roundy, Peckham & Dexter Co., Milwaukee, Wis.; Simon Brothers Co., Madison, Wis.; J. & M. Steiner, Milwaukee, Wis.; The Zincke Co., Fond du Lac, Wis. At the time of the issuance of the complaint herein, the respondent Wisconsin Wholesale Grocers' Association had the following officers: James D. Godfrey, president, Milwaukee, Wis.; M. J. Brew, first vice president, Milwaukee, Wis.; Mitchell Joannes, second vice president, Green Bay, Wis.; Francis E. Dewey, treasurer, Milwaukee, Wis.; Francis J. Rickert, secretary, Milwaukee, Wis. PAR. 2. The members of the respondent association are engaged in the sale and distribution of groceries at wholesale and form the usual sources of supply for the retail grocers of Wisconsin. They purchase their products largely through brokers representing manufacturers located in various States of the United States other than Wisconsin, and cause said products to be transported from such places of manufacture to said members' respective warehouses and places of business in the State of Wisconsin from which points respondent members sell and cause said products to be transported to their respective retail customers located in the State of Wisconsin. In some instances respondent members cause said products to be transported from their respective places of manufacture in other States direct to their customers in the State of Wisconsin. A number of members of respondent association cause their products to be sold and transported to their respective retail grocer customers located in the neighboring States of Iowa, Minnesota, Illinois, and Michigan either from respondent members' Wisconsin warehouses or from the places where the goods are manufactured. In the ordinary course |