P. LORILLARD COMPANY, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent. GENERAL FOODS CORPORATION, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.
Nos. 12665, 12709.
United States Court of Appeals Third Circuit.
June 4, 1959.
Rehearing Denied Aug. 4, 1959.
267 F.2d 439
The method chosen by the Commissioner was fair and equitable. The decision of the Tax Court is affirmed.
Steel, District Judge, dissented.
Frederick H. Mayer, Atty., F.T.C., Washington, D. C. (Earl W. Kintner, Gen. Counsel, James E. Corkey, Asst. Gen. Counsel, F.T.C., Washington, D. C., on the brief), for respondent.
Malcolm A. Hoffmann, New York City (Rosenman, Goldmark, Colin & Kaye, Ralph F. Colin, Geraldine B. Zorbaugh, Robert J. Dunne, Norman Solovay, New York City, on the brief), for Columbia Broadcasting System, Inc., amicus curiae.
Befоre KALODNER and STALEY, Circuit Judges, and STEEL, District Judge.
STALEY, Circuit Judge.
We are asked by these petitions pursuant to
The complaints charged the petitioners with having made payments to certain broadcasting companies4 for the benefit of chain-store customers of petitioners, thus providing broadcasting time “to the favored customers for said customers’ own advertising purposes.” The payments thus effected were alleged to have been made as compensation or in consideration for services or facilities furnished by these favored customers in connection with the offering for sale and the sale of petitioners’ products. Further, it is averred that the benefits so conferred on some оf petitioners’ customers were not made available on proportionately equal terms to petitioners’ other customers, in violation of
The stipulated facts may be summarized as follows: In 1950 and 1951 the sale of broadcasting time had become difficult,
Petitioners entered into contracts for the purchase of broadcasting time, and, although the contracts contained no mention of the in-store promotions and specifically negatived any agreement other than that contained in the written contract,5 they received the benefits of the plans as specifically set forth in the broсhures. In fact, in many instances, after notification of the proposed date of a promotion, petitioners contacted the designated chain store for the purpose of arranging the details of the in-store promotional displays. Without exception, those of petitioners’ customers who received radio or television advertising time, pursuant to the contracts described herein, were grocery chains in competition in the resale of petitioners’ products with other grocery chains and independent customers of petitioners in the same market areas. The latter customers did not reсeive nor were they offered broadcasting time or anything of value in lieu thereof.
Petitioners deny that they paid anything to or contracted with the broadcasting companies “for the benefit of” a customer within the meaning of
It is appropriate to keep in mind that administrative interpretations of statutes by agencies charged by Congress with their execution are recognized as having peculiar persuasiveness and weight. National Labor Relations Board v. Hearst Publications, Inc., 1944, 322 U.S. 111, 64 S.Ct. 851, 88 L.Ed. 1170; American Airlines, Inc. v. Civil Aeronautics Board, 7 Cir., 1949, 178 F.2d 903; Miller Hatcheries, Inc. v. Boyer, 8 Cir., 1942, 131 F.2d 283. As we recently stated in St. Marys Sewer Pipe Co. v. Director of United States Bureau of Mines, 3 Cir., 1959, 262 F.2d 378, 381, “Ordinarily, such constructions should be accepted by the courts unless they could not be reasonably or soundly made under the terms of the statute.” The agency‘s interpretation, however, must be consistent with the purposes of the statute for, as Justice Frankfurter states in the recent case оf United States v. Shirey, 1959, 359 U.S. 255, 79 S.Ct. 746, 749, 3 L.Ed.2d 789,
“Statutes, including penal enactments, are not inert exercises in literary composition. They are instruments of government, and in construing them ‘the general purpose is a more important aid to the meaning than any rule which grammar or formal logic may lay down.’ United States v. Whitridge, 197 U.S. 135, 143, 25 S.Ct. 406, 49 L.Ed. 696. This is so because the purpose of an enactment is embedded in its words even though it is not always pedantically expressed in words. See United States v. Wurzbach, 280 U.S. 396, 399, 50 S.Ct. 167, 168, 74 L.Ed. 508. Statutory meaning, it is to be remembered, is more to be felt than demonstrated, see United States v. Johnson, 221 U.S. 488, 496, 31 S.Ct. 627, 55 L.Ed. 823, or, as Judge Learned Hand has somewhere put it, the art of interpretation is ‘the prоliferation of purpose.‘”
The purpose of the section here involved was to eliminate all discriminations under the guise of payments for advertising or promotional services, and Congress employed language that would cover any evasive methods. This is made clear by the statement of Congressman Utterback, chairman of the House conferees, in explaining
“The existing evil at which this part of the bill is aimed is, of course, the grant of discriminations under the guise of payments for advertising and promotional services which, whether or not the services are actually rendered as agreed, results in an advantage to the сustomer so favored as compared with others who have to bear the cost of such services themselves. The prohibitions of the bill, however, are made intentionally broader than this one sphere, in order to prevent evasion in resort to others by which the same purpose might be accomplished, and it prohibits payment for such services or facilities, whether furnished ‘in connection with the processing, handling, sale, or offering for sale’ of the products concerned.” 80 Cong.Rec. 9418.
Petitioners’ argument when analyzed and stripped to its essentials is basically a plea for reliance upon technical rules оf contract law. It asserts, in effect, that since it was not a party to the contracts between the broadcasting companies and the chain stores and that since they preceded its contracts with the broadcasting companies, there is nothing illegal or violative of
The petitioners’ position is bottomed on the assumption that in deciding whether a violation of the statute has occurred the Commission must restrict itself to an assessment of the consequences which flow from a written contract by the application of formal principles which a court would be required to apply in an action between the contrаcting parties. If, however, we keep in focus the real question involved, that is, whether the petitioners have made payments to someone which actually are of benefit to their customers and not whether they have bound themselves to do so by a legally enforceable contract, it is readily apparent that petitioners’ position is untenable. Certainly, the legal effect of the contracts involved may be relevant to the resolution of the real issue before the Commission, but it does not follow that the Commission must give to those contracts the effect for which the parties to them contend nor that it cаnnot view them in the setting of all the other evidence relevant to the issue before the Commission.
Petitioners contend here as they did before the Commission that they did not pay or contract to pay to any third person anything of value for the benefit of a customer. In support of this position, petitioners assert that a payment to or contract with a third person is not made for the benefit of a customer within the meaning of
“It is no defense for a seller charged with a violation of either of these sections [
§§ 2(d) and2(e) ] to show that he furnished or paid for a service solely in his own interest and not pursuant to any prior understanding with the purchaser. These sections prohibit discrimination in merchandising allowances or services irrespective of whether the making of the payment or furnishing of the service was a term or condition of sale, or amountеd to an indirect price discrimination.”
In accord, State Wholesale Grocers v. Great Atlantic & Pacific Tea Co., 7 Cir., 1958, 258 F.2d 831, 837, certiorari denied sub nom. General Foods Corp. v. State Wholesale Grocers, 1959, 358 U.S. 947, 79 S.Ct. 353, 3 L.Ed.2d 352. This section of the Act does not concern itself with motive or intention. It is only concerned with the consequences which flow from an act. If those consequences eventuate, the act from which they result is forbidden. The Commission, however, went further than required and found that “the responsible officials of Respondent [petitioners] knew, or should have known, when they entered into the plan presented to Respondent by the broadcasting company, that Respondent, in adopting such plan, would be supplying the consideration which would constitute compensation for the benefits to be received by a few favored customers, to the prejudice of their competitors.” This finding is amply supported by the record.
A substantial portion of petitioners’ argument is directed to refuting the Commission‘s finding that they were the “sole financial support” of the promotional plan. Reliance is placed upon one case—State Wholesale Grocers v. Great Atlantic & Pacific Tea Co., 154 F.Supp. 471, D.C.N.D.Ill.1957, affirmed in part and reversed in part, 7 Cir., 1958, 258 F.2d 831, certiorari denied sub nom. General Foods Corp. v. State Wholesale Grocers, 1959, 358 U.S. 947, 79 S.Ct. 353, 3
Petitioners’ last objection relates to the “sweeping” nature of the cease and desist orders issued by the Commission. Clearly, the orders in the instant cases go no further than that issued against the Ruberoid Company and specifically approved by the Supreme Court in Federal Trade Commission v. Ruberoid Co., 1952, 343 U.S. 470, 72 S.Ct. 800, 96 L.Ed. 1081. Also see Moog Industries, Inc. v. Federal Trade Commission, 1958, 355 U.S. 411, 78 S.Ct. 377, 2 L.Ed.2d 370, affirming Moog Industries, Inc. v. Federal Trade Commission, 8 Cir., 1956, 238 F.2d 43. The fact that these cases involved orders issued in the language of
The orders of the Commission will be affirmed.
STEEL, District Judge (dissenting).
Had petitioner1 paid for the broadcasting time of the chains, either directly by payments to the chains, or indirectly by payments to the broadcasting companies independently of the purchase by petitioner of its own broadcast time, the payments clearly would have been for the “benefit” of the chains within the meaning of
A violation of
In determining whether the petitioner‘s payments to the broadcasting companies were for the “benefit” of the chains within the meaning of
The contracts between the broadcasting companies and the chains under which the chains received air time antedated the contracts between the broadcasting companies and petitioner. The execution of the agreements by petitioner was not a contingency upon which the right of the chains to air time depended. That right had theretofore accrued; it was fixed, immediate and unqualified. Nothing was required of petitioner or anyone elsе to bring into fruition the right of the chains to air time save the performance by the broadcasting companies of their contracts with the chains. Petitioner was in no way responsible for this. So that on the face of the matter, the advertising which the chains become entitled to receive the moment they put pen to paper with the broadcasting companies was not the result of any payment by petitioner.
The Commission and a majority of the Court assert, however, that the separate elements of the sales promotional plan initiated by the broadcasting companies, i. e., the two sets of contracts, thе brochures of solicitation, and the designation of products for in-store promotions, cannot properly be given fragmentary evaluation, but that each must be treated as an integral part of the whole. This approach would be understandable if the broadcasting companies were defendants and their activities were charged to be violative of the law. The broadcasting companies stand at the hub of the transaction. It was their correlating activities which gave to the plan whatever cohesiveness and interdependence was inherent in it. It was their efforts which were responsible for obtaining the in-store sales promotional rights from the chains. It was they who chose the chains from which petitioner might make its selection for in-store promotions. All this was done by the broadcasting companies without any prior commitment, authorization, agreement, or understanding with petitioner. This is a stipulated fact. So that no basis exists for the Commission‘s finding that the broadcasting companies occupied an “agency” relationship to petitioner through which petitioner in effect channeled payments to the chains in the modified form of broadcasting time.
In the light of the peripheral relationship which petitioner bore to the plan, the statement of the Commission that petitioner became a “party” to and “adopted” the plan is meaningless. All petitioner did was to accept what the broadcasting companies offered. Yet, under the Commission‘s concept of “benefit“, petitionеr would be culpable under the Clayton Act even if it had not designated any of its products for promotion by the chains. For under the Commission‘s view, it was petitioner‘s payments to the broadcasting companies which constituted payment for the air time allotted to the chains. The amount of petitioner‘s payments did not depend upon whether it designated products for in-store promotions. Petitioner‘s payments were the same in either case. The failure of petitioner to designate products for in-store displays would have exculpated petitioner from liability under
If the Commission‘s conception of “benefit” is adhered to, the only way in which the petitioner could have escaped the toils of the Clayton Act during the period whеn the broadcasting companies were offering in-store promotions would have been either to forego completely advertising over the air through the broadcasting companies offering the promotions, or to buy air time for all of petitioner‘s customers on a basis proportionately equal to that on which the broadcasting companies had allotted air time to the chains. Petitioner would have found itself in this unhappy plight solely because of the contracts which the broadcasting companies made with the chains for which the petitioner was in no way responsible.
Carried to its logical limit, the dеcision of the Commission means that if a common supplier of a vendor and vendee, without pre-arrangement with the vendor, grants the vendee terms more favorable than the supplier has granted other customers of the vendor, the vendor must stop dealing with the supplier, give proportionately equal “benefits” to all of its other customers, or be adjudged guilty of Clayton Act discrimination. This result would follow regardless of how vital the commodities or services furnished by the supplier might be to the vendor. A construction of
The foregoing views are not at variance with the cases which the majority of the Court has cited. Herbert v. Shanley Co., 1917, 242 U.S. 591, 37 S.Ct. 232, 61 L.Ed. 511, and M. Witmark & Sons v. L. Bamberger & Co., D.C.D.N.J.1923, 291 F. 776 involved constructions of the Copyright Act. Pittsburgh Athletic Co. v. KQV Broadcasting Co., D.C.W.D.Pa. 1938, 24 F.Supp. 490, was concerned with principles of unfair competition and the Communication Act of 1934 in their relationship to interference with a contractual right to broadcast baseball games. These decisions are scarcely pertinent to a determination whether petitioner‘s payments to the broadcasting companies were a “benefit” to the chains within the purview of the Clayton Act. To the extent that State Wholesale Grocers v. Great Atlantic & Pacific Tea Company, 7 Cir., 1958, 258 F.2d 831, may have application, it tends to refute rather than to support the decision of the Commission.
It may be that the sales promotional plan of the broadcasting companies is economically undesirable and that the broadcasting companies which sponsored it are beyond the reach of the present law. But this is no reason for making a whipping boy out of petitioner by affirming the far-fetched conception of Clayton Act “benefit” which the Commission has adopted.
Judicial responsibility requires that a Court which sits in review of an administrative order shall interpret the applicаble statute and hold unlawful and set aside any agency action not in accordance with law,
District of Columbia or any insular possession or other place under the jurisdiction of the United States, and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them: * * *”