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"I had thought that this matter had been finally disposed of in accordance with the minutes of April 30th."

A summary of our recent actions in these matters may be in order. On January 15, 1969, the Commission issued an order requiring a number of respondents' to show cause why the Commission should not reopen this proceeding for the purpose of rescinding their orders and dismissing the complaints. Answers were filed to the show cause order and none objected to such cancellation. No order has yet been filed actually rescinding the cease and desist orders in question. In short, it is time to take these proceedings off dead center. Furthermore, my office has been informed by the staff that a number of inquiries have been received from those concerned inquiring as to the statue of the orders in question. The minute of April 30th to which Commissioner Jones refers, according to my reading, directed action only with respect to the advisory opinions outstanding in this industry. This matter not having been finally disposed of, I renew my motion of June 6th.

EVERETTE MACINTYRE, Commissioner.

SEPTEMBER 20, 1967.

Re: Docket 8100, In the Matter of ATD Catalogs, Inc.
From: Everette MacIntyre, Commissioner.
To: Bureau of Restraint of Trade.

I request that this matter be placed on the Commission's meeting agenda.
See the attached memorandum.

MEMORANDUM

SEPTEMBER 20, 1967. .

To: Commission.

From: Everette MacIntyre, Commissioner.

Subject: Rosenwasser letter-ATD Catalogs, Inc., Docket 8100.

The Rosenwasser letter of June 22, addressed to all the Commissioners, brings the toy catalog matters to a head. The Commission will have to make up its mind whether it is going to enforce its previous rulings on this matter in connection with the independent catalogs or, failing that, whether all the orders in this area including those relating to jobber-affiliated catalogs should be rescinded. It seems to me that Rosenwasser has a valid complaint that making jobberaffiliated catalogs such as ATD live up to the requirements of the statute is unconscionable when the law is not enforced as to the publishers claiming independent status.

The root of the problem, has lain in the fact that the Commission simply has had insufficient data about the actual operations of the independent catalogs to determine whether their activities come within the scope of the statute. In this connection, the TPC hearing gave little concrete information on the actual operation of the independents. In effect, there was a stalemate between the jobber related catalogs, such as ATD, asserting the independents could not be independent as a matter of law, and the allegedly independent catalogs arguing to the contrary. This led to the Commission's policy statement on this subject which did not promulgate a per se rule on the point, but outlined those circumstances whose existence would justify the conclusion that the independents' activities are within the scope of the statute.

Prominent among these are:

1. The indication that the payments for advertising by the manufacturer are conditioned on the value of orders placed with the advertising manufacturer by the jobbers buying the catalog or that the purchase volume of these jobbers is guaranteed.

2. Consulting payments, namely, payments to jobbers by independent publishers for help in the selection of merchandise to be advertised.

Assuming either or both of those factors can be demonstrated, I believe there is sufficient nexus between advertising payments of the manufacturers and the jobbers so as to bring the jobbers even in the case of the independent catalogs,

1 Docket 7971, Individualized Catalogs, Inc., et al.; Docket 8100, ATD Catalogs, Inc., et al.; Docket 8231, Santa's Official Toy Prevue, Inc., et al.; Docket 8240, Billy & Ruth Promotion, Inc., et al.; Docket 8255, United Variety Wholesalers, et al.; and Docket 8259, Santa's Playthings, Inc., et al.

2 Docket 8100, ATD Catalogs, Inc., et al.; File 643 7014, Haywood Publishing Company; and File 653 7061, I. Lodge Catalogs, Inc.

into a customer relationship within the scope of Section 2(d). It seems to me that the consulting payments and the advertising guarantees are the crucial points, although Mr. Rosenwasser's other allegations should be explored. If they could be documented in the course of a field investigation, then obviously action should be taken. Failure to explore these issues fully in a field investigation would be manifestly unfair to ATD. Mr. Rosenwasser has, in effect, provided i manual for investigating whether such guarantees and consulting payments exist. The real question is whether the Commission is determined to make an adequate investigation. To ensure an expeditious investigation by staff members well acquainted with the industry, the personnel of the Division of Compliance with previous responsibility in this area should actively participate in the field investigation, irrespective of whether the particular independent is already under order. Further, I believe it will be necessary to ensure that an accountant be assigned to the investigation at the outset and that he also actively participate in the field investigation. On a reading of the Rosenwasser letter, it appears that accounting help may well play the most important part in this investigation if it is initiated. I would like to emphasize my conviction that what is required here is a searching field investigation to determine what the independents actually do. Experience indicates that further public hearings or requiring reports from the industry will not enable the Commission to go behind the rhetoric of the parties to this industry dispute. Should there be a successful investigation. the Commission might then at last be able to take a clear cut position on the legal status of the independent publishers.

Accordingly, I move that the Division of Compliance and the Division of Accounting be directed to initiate an investigation in accord with the views outlined above.

EVERETTE MACINTYRE, Commissioner.

MARCH 4, 1969.

Re: Docket No. 8100, In the Matter of ATD Catalogs, Inc., and Toy Catalog Publishers.

From Everette MacIntyre, Commissioner.

To: Secretary Kuzew.

I request that this matter be placed on the Commission's meeting agenda.

To: The Commission.

MEMORANDUM

MARCH 4, 1969.

From: Everette MacIntyre, Commissioner.

Subject: Docket No. 8100, In the Matter of ATD Catalogs, Inc. and Toy Catalog Publishers.

Arnold Rosenwasser, on behalf of ATD, has filed an answer to the show cause order why the order outstanding against that respondent should not be rescinded Rosenwasser has summarized aptly, I think, the Commission's confused relation ship with this industry. Assuming that he manages to get sufficient publicity, the Commission's actions in this area might well become a cause celebre.

Essentially Rosenwasser takes the position that the Commission is now trying to wash its hands of this industry after having turned it upside down with tes years of enforcement activity. He claims, in effect, that the Commission has 2 moral right to do so since, as a practical matter, it will simply be impossible te restore the status quo ante.

He spells out at great length what I stated in my dissent to the show cause order, namely, the Commission's advisory opinions and failure to delineate to legal status of the so-called independent toy catalog publishers have put the affiliated catalogs, such as ATD, at a decided competitive disadvantage. He further notes that simply rescinding the order against ATD will not improve its competitive position. It will take more than this to resore the interest of mavefacturers in affiliated catalogs in ATD.

He takes the position that the independents have used the advisory opinions as a weapon against affiliated catalogs, such as ATD, and that it will take "more than abstract pontifications and cancellations of ancient orders... to overcome a decade of industry-wide brain washing." He quite rightly construes the show cause order as an indication that the Commission is attempting to thr this problem into limbo, contending this is a problem which will not go awa

He does not challenge the rescission of ATD's order but states that the Com mission should go further in order to right the competitive balance. In his view, the following steps should be taken:

(1) The advisory opinions should be rescinded.

(2) The cease and desist orders against manufacturers bearing on the toy catalog problem should also be rescinded as a natural corollary of the rescissions of the orders against the catalog companies (I think he has a point here, particularly if the Commission fails to take steps to clear up the legal ambiguity on the dichotomy between independents and jobber affiliated catalogs).

(3) Industrywide Guides should formulate standards specifically focusing on the problem presented by the independent catalogs.

In this connection the suggestion for a Guide on this subject proposed by Rosenwasser has, I believe, considerable merit since it would make clear that so-called independents are within the scope of the law when certain indicia of jobber-affiliation is present, even when there is no jobber ownership.1

It is my view that the Commission should take Mr. Rosenwasser seriously. The industry may not be large but once having set this train of events into motion, the Commission has no moral right to walk away as it evidently intends to do. Should Mr. Rosenwasser press his case in an astute and aggressive manner, the Commission could well become subjected to painfully embarrassing publicity.

Mr. Rosenwasser's letter of February 12, 1969, which he filed in response to the Commission's show cause order issued January 15, 1969, was forwarded not only to the Commission but to me and each of the other Commissioners. For that reason I am not duplicating it for further circulation at this time. However, I urge that it be reviewed and seriously considered.

EVERETTE MACINTYRE, Commissioner.

APRIL 11, 1969.

Re: Docket 8100, In the Matter of ATD Catalogs, Inc., et al.

See the attached memorandum.

From: Everette MacIntyre, Commissioner.
To: Bureau of Restraint of Trade.

I request that this matter be placed on the Commission's meeting agenda.

To: Commission.

MEMORANDUM

APRIL 11, 1969.

From: Everette MacIntyre, Commissioner.

Subject: Docket No. 8100, In the Matter of ATD Catalogs, Inc., et al.

This matter is before the Commission on respondents' answers to the show cause order providing for the rescission of the cease and desist orders running against six toy catalog publishers and their jobber members. Service was not effectuated in a substantial number of cases. Evidently not a few of the respondents have gone out of business.

Those respondents filing an answer do not oppose rescission of their orders. Two recipients of advisory opinions, claiming status as independent publishers, however, contend strenuously that the advisory opinions giving the green light to their operations should not be rescinded.

The answers to the show cause order and the statements requesting that the advisory opinions on this subject not be rescinded again bring into focus the larger question before the Commission. That issue is simply whether this agency in fact intends to enforce the law in this industry. If I read the intentions of the majority correctly, it is unlikely that any further enforcement effort will be expended here. In that event, however, the Commission's statement in the show cause order pledging continued efforts to seek compliance with the law through informal enforcement procedures and reserving the right to issue complaints is as a practical matter misleading.

1 E.g., preparation of a list of jobbers associated with the catalog publisher and presentation of such list to a manufacturer in an attempt to secure advertising payments, and an understanding on the part of the manufacturer that advertising payments are to be guaranteed or conditioned on the purchaser volume of the customer-jobbers distributing the catalog, etc.

In my view the majority committed a serious error when it failed to approve my motion that the staff be authorized to seek the informal settlements reconmended by the Compliance Division's memorandum of September 4, 1968. The show cause order issued January 15, 1969, providing for rescission of the cease and desist orders coupled with the meaningless generalizations contained therein on the subject of further enforcement activity has obviously confused the industry. The Commission should therefore seize this last opportunity to clear up the resulting confusion. If the majority is of the view that no further effort should be expended on this industry then it should issue an explicit statement to that effect. Adherence to the spirit of the Freedom of Information Act requires no less. On the other hand, if the Commission does intend to continue surveillance of toy catalog publishers as the show cause order of January 15, 1969, seems to imply then certain steps will have to be taken if such oversight is in fact to be meaningful. The first step would be to rescind the advisory opinions rendered to toy catalog publishers claiming independent status. The second would be to issue guides specifically focusing on the dichotomy between jobber affiliated and independent publishers in this industry.

In my view, the arguments presented for retaining the advisory opinions in effect have little validity. Taking into consideration the information developed by the field investigation of the toy catalog industry whose results are snmmarized in the staff memorandum of September 4, 1968, it is plain that these advisory opinions were in fact improvidently granted. As the staff states, "the advisory opinions given to the "independents," while validly based on factual representations which subsequently proved to be only in part true or correct, have been misused by 'independents' to the competitive detriment of jobberowned or "affiliated companies." The fact that these advisory opinions have been misused as a competitive weapon against jobber affiliated catalogs is made plain by a letter of March 23, 1967, from Oakes Catalogs to the Tonka Corpora tion, a toy manufacturer. In pertinent part, Oakes states in that letter:

"Our attorneys have advised us that the Commission's statement makes a legally significant distinction between independent catalogs on the one hand, and jobber-owned or affiliated publications, on the other hand. They point out that according to the statement, the requirements of the Robinson-Patman and Federal Trade Commission Acts are applicable to advertisers' payments to a jobber-owned or affiliated catalog published, but are not applicable to advertisers' payments to an independent catalog publisher. Consequently, our attorneys state advertisers in an independent catalog need not bring their advertising payments within a co-operative advertising plan." (emphasis supplied)

Oakes, as the letter makes clear, made this statement although acknowledging that in some cases the extent of the advertising payments is conditioned on the sales of the advertised products by jobbers distributing the catalogs. Clearly, the Commission was unaware of that fact when the advisory opinion was granted and equally obvious is the fact that Oakes' operations have violated the law. The Commission's erroneous advice has resulted in a competitive imbalance in the industry which it would be unconscionable to ignore.

Accordingly, I move that the Commission rescind the cease and desist orders now in effect, rescind the advisory opinions now outstanding in this industry. and that the staff be directed to draft guides focusing specifically on the problems of this industry.

EVERETTE MACINTYRE, Commissioner.

SEPTEMBER 20, 193

Re: File 651 0126, In the matter of The Weatherhead Company.
From: Everette MacIntyre. Commissioner,

To: Bureau of Restraint of Trade.

I request that this matter be placed on the Commission's meeting agenda.

1 See my circulation of October 11, 1968.

MEMORANDUM

To: Commission.

From: Everette MacIntyre, Commissioner.

SEPTEMBER 20, 1968.

Subject: File No. 651 0126, In the Matter of The Weatherhead Company.

The investigation in this case disclosed that Weatherhead, a firm engaged in the business of producing, selling and distributing industrial fittings and related products such as valves, hose ends, hose assemblies and regulators used in the transmission and control of fluid power products discriminated in price through volume-quantity discounts ranging from 5 to 23%. Weatherhead revised its volume-quantity discount by providing that in the case of one order per month distributors could place an order at the maximum discount irrespective of the quantity ordered. To insure that the revised discount program will be functionally available to its distributors, Weatherhead apparently has eliminated many of its distributors who in the past have either been unwilling or unable to purchase and stock Weatherhead's fittings in the quantities necessary to qualify for the discounts. On the basis of its revised volume-quantity discount plan, respondent requested that this matter be closed informally by an assurance of compliance. The Commission rejected that request and issued its complaint under the consent order procedure.

The staff and respondent have now negotiated a consent order. The executed agreement, however, differs substantially from the notice order going out with the complaint and I have serious doubts about its effectiveness.1

Specifically, the order provides that respondent with respect to a number of specifically enumerated parts, such as brass inverted fittings "and related products regularly maintained in the inventory, by Weatherhead Industrial Distributors pursuant to Weatherhead's Industrial Distributor Policy" is to cease and desist from discriminating in the price of such products by selling to some purchasers at net prices higher than the prices charged their competitors.

The order further provides that "all other products", i.e., those not regularly maintained in inventory pursuant to Weatherhead's Industrial Distributor Policy shall be offered on uniform terms and conditions of sale disclosed to all industrial distributors.

The proposed order presents a number of difficulties. The phrase "regularly maintained in the inventory, .. pursuant to Weatherhead Industrial Distributor Policy" is ambiguous. Clearly, it modifies "related products" but it may also, as noted by the Division of Consent Orders, modify the products specifically enumerated in the order such as brass inverted fittings. The memorandum of the Division of Consent Orders suggests that this is the interpretation of Weatherhead's counsel. Obviously, the order is unacceptable until this ambiguity is cleared up.

Furthermore, it appears, as the Division of Consent Orders recognizes, that the "regularly maintained in inventory" phrase in effect would permit respondent to contract or expand the scope of the order by its actions pursuant to its distributor policy. Whether or not respondent would be acting in good faith in this connection is irrelevant. Clearly, the scope of Commission orders should not rest on so evanescent a basis.

In addition, this phrase could be construed as incorporating Weatherhead's revised discount plan in the order. This would make a future proceeding most awkward should the Commission later determine that the Weatherhead Industrial Distributor Policy has been implemented in violation of the law.

1 The first paragraph of the consent order proposed by respondent provides as follows: "IT IS ORDERED that respondent, The Weatherhead Company, a corporation, and its officers, representatives, agents and employees, directly or through any corporate or other device, in or in connection with the sale and distribution of brass Inverted, Compression, S.A.E., Mini-Barb, Pipe, Self-Align, Knurl-On, Sermeto and Air Brake Fittings; Auto and Industrial valves: steel and stainless steel Ermeto, J.I.C. and Pipe fittings, Reusable Hose Ends. Swivel Adapters, Swage Ends and Bulk Hose, and related products regularly main tained in the inventory, by Weatherhead Industrial Distributors pursuant to Weatherhead Industrial Distributor Policy in commerce, as "commerce" is defined in the amended Clayton Act, do forthwith cease and desist from discriminating, directly or indirectly, in the price of such products of like grade and quality by selling to some purchasers at net prices higher than net prices charged any other purchaser who, in fact, competes in the resale and distribution of respondent's afore-identified products with the purchasers paying the higher net prices, provided, however, that all other products sold to such industrial distributors shall be offered on uniform terms and conditions of sale disclosed to all industrial distributors." (Emphasis supplied).

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