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Central Retailer-Owned Grocers Inc. v. Federal Trade Commission.

decided.: July 2, 1963.

CENTRAL RETAILER-OWNED GROCERS, INC., ET AL.
v.
FEDERAL TRADE COMMISSION.



Author: Schnackenberg

Before SCHNACKENBERG, KNOCH and SWYGERT, Circuit Judges.

SCHNACKENBERG, Circuit Judge:

Petitioners, Central Retailer-Owned Grocers, Inc., et al.*fn1 which are all corporations, have asked us to review a cease and desist order issued by the Federal Trade Commission on May 14, 1962, upon a complaint charging them with engaging in practices in violation of § 2(c) commonly known as the brokerage section, of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C.A.§ 13(c), which provides:

(c) It shall be unlawful for any person engaged in commerce, in the course of such commerce, to pay or grant, or to receive or accept, anything of value as a commission, brokerage, or other compensation, or any allowance or discount in lieu thereof, except for services rendered in connection with the sale or purchase of goods, wares, or merchandise, either to the other party to such transaction or to an agent, representative, or other intermediary therein where such intermediary is acting in fact for or in behalf, or is subject to the direct or indirect control, of any party to such transaction other than the person by whom such compensation is so granted or paid.

While Central Retailer-Owned Grocers, Inc., has been referred to as "CROG", we shall refer to it as "Central". The pronunciation of "CROG" is undetermined. We do not believe that the rights of any of the parties will suffer if we use the word "Central" as a reference.

"Central" will be used as also including 29 corporations, who are members thereof and may sometimes also be referred to as "members". There were 35 members named in the complaint and the order, but only 29 joined in the petition for review.

The theory of the complaint, according to the Commission's counsel, is that Central, wholly owned by its members, a group of retailer-owned wholesale grocers, in connection with the purchase of private brand food and grocery products from various suppliers on behalf of its members, received and accepted from its suppliers sums of money which it distributed to its members in the form of patronage dividends, and further, that the members placed their orders for private name brands of food and grocery products through Central, shipments thereof being made directly from the suppliers to the members and payment being made by Central to the sellers, with Central reinvoicing its members for the merchandise shipped. Further, the theory is that Central, in connection with such purchases, performed services commonly rendered by independently-owned brokers, which it replaced in a large number of purchase and sale transactions. Accordingly, the Commission's complaint took the position that the sums Central received and accepted from certain of its suppliers constituted brokerage or allowances and discounts in lieu of brokerage, in violation of said § 2(c).

In their answer the members denied that Central purchased food and grocery products in their behalf. Central's answer stated that it was the purchaser of these products, in its own name.

Various hearings were held before an examiner, in which the testimony of the officials of suppliers who had sold merchandise to Central, and several other witnesses, as well as many documentary exhibits, was received in evidence.

The examiner filed an initial decision, finding that respondents (petitioners here) violated § 2(c) aforesaid, and entered a cease and desist order.

The Commission in its final order modified the initial decision and the order therein contained and thereupon adopted it as its own. It filed an opinion, from which Commissioner Elman dissented.

1. The evidence shows that Central is engaged in the business of buying, selling and promoting its own brands of food products and other products that are sold in retail grocery stores, that it receives orders from its members for various products, that it invoices its members for such orders at a price higher than its cost, and that, after paying operating costs, anything that is left is distributed as patronage dividends to the members of Central in accordance with the amount of business done by them with Central during the year. Each member contributes to a deposit with Central to enable it to finance its operation.

The evidence also shows that the members, also referred to in the evidence as "member warehouses", own Central and are themselves in turn owned by retail grocers located in their respective areas, and also that approximately 10% of the purchases of merchandise made by the members of Central consists of controlled label merchandise*fn2 purchased from Central, with the remaining approximately 90% being purchased from other sources, and also that all of the merchandise handled by Central is packed under controlled labels such as Shurfine and Elmdale.

Central concedes that the evidence shows that in certain instances it has been granted price reductions, discounts and allowances by certain of its suppliers in connection with merchandise purchased by it from said suppliers. Counsel for Central points out, however, that both of the officials of Central who testified at the hearings, Mr. Garbers and Mr. Stolte, and also the officials of all the suppliers of Central who testified, stated that said price reductions, discounts and allowances were not granted to Central as brokerage commissions or as discounts or allowances in ...


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