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Vanity Fair Paper Mills Inc. v. Federal Trade Commission.

decided: November 27, 1962.


Author: Friendly

Before CLARK, FRIENDLY and MARSHALL, Circuit Judges.

FRIENDLY, Circuit Judge: Vanity Fair Paper Mills, Inc., petitioner here but to which we will hereafter refer as "respondent", the position that it occupied before the Federal Trade Commission, asks us to set aside an order of the Commission finding that it violated § 2(d) of the Robinson-Patman Act, 49 Stat. 1527 (1936), 15 U.S.C. § 13(d), quoted in the margin.*fn1 We deny the petition and will enforce the order save for a single minor modification.

The evidentiary record, a four-page stipulation of facts with three attached exhibits, tells us the following: Respondent is in the business of manufacturing "household paper products" in New York and selling them in interstate commerce to retail and wholesale grocers and druggists in Texas, Louisiana and other states. In 1958, it used a standard contract, as to which the Commission has not here complained, wherein it agreed to reimburse its customers for displaying and advertising its products at fixed prices per case; the contract stated "This Cooperative Advertising Agreement is openly offered to any and all customers able to perform the required services."*fn2

The complaint here relates to payments outside the framework of the standard contract; Paragraph 6 of the stipulation gives the background:

"6. During 1958, the foregoing standard contract constituted the only offer made by respondent to Weingarten and its competitors to compensate such customers for the furnishing of any services or facilities in connection with their offering for sale or selling respondent's products. During said period, respondent did not solicit or request from its customers the furnishing of any services or facilities in addition to those regularly furnished under the standard contract. Respondent did not have sufficient funds available for extensive advertising in various media and relied on the support of customers' promotions. It was its policy, therefore, to take under consideration any request made by any customer for respondent's participation in one-time special promotions conducted by that customer, such as anniversary sales, wherein respondent's products would be featured along with those of other suppliers. It was respondent's policy to participate in such promotions if payment requested for services rendered therein was in an amount reasonably related to the cost of the services to the customer. If hearings were held in this proceeding, a representative of respondent would testify that all sales representatives of respondent were advised of these policies and were instructed to inform respondent's customers thereof."

Weingarten, mentioned in the paragraph just quoted, was a retail grocery chain, operating in southeastern Texas and southwestern Louisiana, which purchased from respondent the same household paper products as did other customers who competed in their resale in the same territory. Weingarten requested respondent and other suppliers to participate in a 57th Anniversary Sale in February, 1958; to that end it submitted a schedule giving the supplier a choice of various possible commitments. These ranged from $56.05, which would provide 1/16 page of a section in a Lake Charles paper plus the "entire service" by way of "personal enthusiasm and carefully laid plans for presentation of all merchandise to insure success on an overall basis", to $3995.90 for "Full page, including entire service" in a number of different areas. Respondent opted for $215.00, for which it received "the entire promotional service with the display and resale of its product during the Anniversary Sale in all the Weingarten stores located in Texas and Louisiana and with advertising consisting of 1/16 of a page in newspapers with distribution in Houston, Freeport, Baytown and Texas City." In October, 1958, Weingarten made a similar request for respondent's participation in its 20th Texas and Louisiana Products Sale, and obtained a similar response. Only one other of respondent's customers who competed with Weingarten in southeastern Texas and southwestern Louisiana received a special promotional allowance in 1958; this was Childs Big Chain, which received $152.00. None of the 26 others requested such an allowance. The combination of cooperative advertising payments under the standard contract and special promotional allowances gave Weingarten 3.4% and Childs 2.2% on respondent's gross sales to them; the percentages for the other customers, who received no special allowance, ranged from 1.9% to zero.

After proceedings which it is unnecessary to detail, the Commission found that payment of the special allowance to Weingarten violated § 2(d) of the Robinson-Patman Act and ordered that respondent

"in or in connection with the sale in commerce as 'commerce' is defined in the Clayton Act, as amended, of paper products, do forthwith cease and desist from: Making or contracting to make, to or for the benefit of J. Weingarten, Inc., or any other customer, any payment of anything of value as compensation or in consideration for advertising or other services or facilities furnished by or through such customer, in connection with the handling, offering for resale, or resale of the respondent's products, unless such payment is offered or otherwise affirmatively made available on proportionally equal terms to all other customers competing in the distribution or resale of such products."

Commissioner Elman, agreeing that the record supported a finding of violation of § 2(d), dissented with respect to the form of the order, which he did not consider to be "the most effective and appropriate remedy for dealing with the violation found." Respondent claims that the Commission was not warranted in issuing any order and, in the alternative, that the order was too broad. We find no merit in the first claim and but little in the second.


It is not disputed that Weingarten received from respondent something of value for services or facilities furnished in the sale of respondent's products which was not received by "other customers competing in the distribution of such products or commodities."*fn3 The issue is whether the Commission was warranted in finding that the "payment or consideration" given to Weingarten was not "available" to all the nonrecipients "on proportionally equal terms."

Determination of what a seller must do in order that payments of the sort described in § 2(d) should be "available" to all customers has not been easy. The problem inherent in the vagueness of the term is aggravated by the use of the word "accorded" in the parallel § 2(e), dealing with services and facilities furnished by the seller. Moreover, the provision that became § 2(d) initially used the word "offered".*fn4 The dictionary would suggest that "accorded" requires more in the way of affirmative action than "available", as "offered" surely does, thereby giving color to an argument that the standard of "availability" in § 2(d) is not a very high one. As against this report of the House Judiciary Committee, which inserted "available" into § 2(d), seems to treat the standards of § 2(d) and § 2(e) as equivalent,*fn5 thereby supporting a contrary argument that "available" should be read with the flavor of "accorded".

Even against this semantic background, a few cases are plain. A promotional allowance is not "available" to all customers if it has been "denied" to some. Corn Products Refining Co. v. F.T.C., 324 U.S. 726, 744 (1945). Neither is it "available" if steps have been taken to conceal it. On the other hand the legislative history, noted above, argues against a construction that would require the seller to make an actual "offer" to all customers, including many who might not be interested. Between these polar positions the Commission has shifted uneasily. For some years it tended toward an ever stronger attitude coming perilously close to requiring an offer, as can be seen by comparing earlier cases where the complaint emphasized secrecy and concealment, e.g., N. Erlanger, Blumgart & Co., 46 F.T.C. 1139, 1142 (1950), with the increasingly severe requirements of affirmative and specific notification set forth in Kay Windsor Frocks, Inc., 51 F.T.C. 89, 95 (1954); Henry Rosenfeld, Inc., 52 F.T.C. 1535, 1548 (1956); and Chestnut Farms Chevy Chase Dairy, 53 F.T.C. 1050, 1060 (1957).Then it made a slight retreat toward a more generalized notification requirement in its 1960 Guides for Advertising Allowances and Other Merchandising Payments and Services, 1 C.C.H. Trade Reg. Rep., pages 6072, 6075, which say:

"The seller should take some action to inform all his customers competing with any participating customer that the plan is available. He can do this by any means he chooses, including letter, telegram, notice on invoices, salesmen, brokers, etc. However, if a seller wants to be able to show later that he did make an offer to ...

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