But it is not only the principle here that I am concerned with. The fact is, and we must assume, that complaint counsel need these records to prove their case. Does it really solve anything, therefore, to take the easy course and back away from an insistence upon compliance with a proper order? To do so would mean we could have a trial but would the Commission, in such an eventuality, be granting complaint counsel adequate opportunity to support the allegations? Going ahead without the documents would strike me as not being a wholly responsible action. The other alternative which immediately comes to mind is to grant respondents' appeal in whole or in part and to order respondents to begin their pretrial disclosures. Factors Involved in Ordering a Start on Respondent's Pretrial: The question before the Commission on the appeal concern only the issue of whether or not to proceed with respondents' part of the pretrial prior to the completion by complaint counsel of their discovery. The examiner's analysis of the problems and his reasons for denying the motion point up the difficulties. Respondents' brief in opposition to the appeal reiterate more or less the same points. Additionally, see discussion of the issues in my memorandum of March 18, 1966, attached. The difficulties would seem to boil down to two main things: (1) whether or not it would be fair to respondents, particularly in view of the hearing examiner's Pre-Hearing Order No. 1, to direct them to commence their pretrial procedures when complaint counsel, because of the failure of respondents' production of documents, have not fully completed their pretrial; and (2) the fact that this might result in some duplication of effort in the recalling of witnesses, etc. The second point appears to me to be of very little merit. Even if there is some repetition on recalling of witnesses, this would surely be a minor factor compared to the harm to this case resulting from an indefinite suspension of hearings. The first point on the question of fairness to the respondents presents a more difficult problem. I have attempted to answer this in the proposed opinion circulated with this memorandum. In view of the examiner's stand. I don't suppose this question can ever be entirely satisfactorily resolved until the matter of the production of records is finally settled. Nevertheless, it does not seem to me that any possible difficulties of inconvenience which a continuance of the pretrial might present to respondents would be of such a nature as to result in any abridgement of fundamental rights. I recommend, therefore, that the Commission return this matter to the hearing examiner, with directions to order respondents to commence their pretrial procedures. I have attached hereto a proposed opinion and order to this effect. I move that these be approved by the Commission. EVERETTE MACINTYRE, Commissioner. MEMORANDUM JANUARY 4, 1967. To: The Commission. Subject: U.S. v. Associated Merchandising Corp., et al., 66 Civ. 1156 (SDNY)– FTC Docket No. 8651 Staff. Recommendation that appeal be taken from adverse ruling of the District Court. The appellate staff seeks Commission approval of a recommendation to the Civil Division of the Department of Justice that an appeal be taken from that part of the ruling of the Southern District of New York adverse to the Commission in the Commission's enforcement action against AMC arising out of the latter's refusal to comply with an order to produce documents issued pursuant to §3.11 of the Commission's Rules. The U.S. attorney for the Southern District strongly suggests an appeal. In denying the Commission's petition for enforcement the Court construed the $3.11 requirement that documents subject to production "constitute or contain evidence" as virtually requiring a prior determination of probative weight. I agree with the staff that the Court was in error in so holding. I am not sure I agree with staff counsel's contention that "summary proceedings" of the kind here involved do not admit of any degree of independent fact finding by the District Court. Since this is a petition to the court by the Commis sion for enforcement and not an appellate proceeding, it seems to me the District Court can make whatever factual inquiry it feels is necessary to determine for its own satisfaction whether a finding of relevance is proper. Accordingly, I move that the last paragraph on page nine and the second paragraph on page ten of the staff's proposed letter be stricken. I do believe, however, that it applied the wrong criterion of relevance and that the court erroneously permitted the question of burdensomeness to intrude into its determination of relevance. The decision could occasion delay and difficulty in future Commission proceedings, and I move that the staff recommendation be approved. The letter to the Civil Division requires minor corrections as follows: Page 1, paragraph 1, 5th line from the bottom: the date should be Novem ber 18 rather than December 18. Page 1, paragraph 2, line 4: the first word should be "be" rather than "by". Page 4, paragraph 1, 5th line from the bottom should be changed to read “... and nothing derived from a complete reading. . .”. Page 12. first full paragraph, line 5: the word "matter" should be substituted for the phrase "troublesome litigation". JOHN R. REILLY, Commissioner. SPECIAL MATTER OCTOBER 13, 1967. Re Associated Merchandising Corp., et al., Docket No. 8651. (Previously circulated by Commissioner MacIntyre as a special matter on October 12, 1967.) From: Commissioner Elman. To: Comm. Dixon; Comm. MacIntyre; Comm. Reilly; Comm. Jones: Secretary: General Counsel; Bur. of Economics; Bur. of Restraint of Trade; Bur. of Deceptive Practices; Bur. of Industry Guidance; Bur. of Textiles & Furs. This is a special matter (not listed on the regular agenda) which I shall pre sent at the next Commission meeting. Commissioner MacIntyre has circulated an order granting the requested pro duction of documents, but excluding "all documents and information coming within the terms of § 4.10 (a)(1) through (5), and (7)”. No explanation or justification is stated for the exclusion, and I am at a loss to know why it is pre posed. To: Commission. MEMORANDUM NOVEMBER 1. 1967. From: Everette MacIntyre, Commissioner. I am circulating herewith an order denying respondents' motion for the pro duction of documents made pursuant to §3.11 of the old rules. Responder's' motion encompasses "all books, records and other documents" obtained by ac plaint counsel or any employee or agent of the Federal Trade Commission fra ten suppliers specified in respondents' application. It is my recommendation that the application be rejected on the ground that it does not comply with Le requirement in the rule that the material or information sought be identified 25 exactly as possible. $3.36 requires a Commission review of requests for de closure under this rule and this of course contemplates a meaningful eval tion of such requests. Obviously, it is impossible to intelligently review an ap cation as broadly phrased as the one under consideration here. It is further eer. ous from respondents' motion that they could, if they so desired, identify t documents they seek far more exactly than they have done in their motion. Re spondents have already had a measure of discovery against the suppliers, and have been informed by them that certain documents have been turned over % the Commission, while certain documents were destroyed. Under the cire stances, it is obvious that respondents have made little, if any, effort to conÈ with the requirement that the materials sought be described as exactly as possible. Since this is one of the first cases to come up under § 3.36, the Commission should obviously make an effort to make it clear that applications for disclosure must meet its requirements. I therefore move the Commission adopt the attached order. There is also in my office at this time, respondents' appeal from the hearing examiner's order denying their application for depositions and subpoenas duces tecum to non supplier companies and persons filed October 16, 1967. This appeal does not involve an interpretation of § 3.36 and I believe it should be handled separately. EVERETTE MACINTYRE, Commissioner. SPECIAL ADJUDICATIVE MATTER NOVEMBER 6, 1967. Re Docket No. 8651; In the Matter of Associated Merchandising Corp., et al. Order denying appeal from examiner's denial of application for depositions and subpoenas and opinion of the Commission. From: Everette MacIntyre, Commissioner. To: Comm. Dixon; Comm. Elman; Comm. Reilly; Comm. Jones; Secretary; General Counsel. This adjudicative matter will be presented to the Commission at the next meeting. Attached is a copy of an order of the hearing examiner of October 5, 1967, which denied respondents' application for depositions and supporting subpoena duces tecum. Also attached is a copy of the respondents' appeal from such order, complaint counsel's answer and respondents' reply to the complaint counsel. I have prepared an order denying appeal from the examiner's denial of application for depositions and subpoenas and an opinion supporting such order. Copies of that proposed order and opinion also are attached. They fully explain the situation. I recommend and move the approval of the order and the opinion. MEMORANDUM FEBRUARY 14, 1968. To: The Commission. Subject: Associated Merchandising Corp. v. William K. Jackson, Civil No. 18993 (D. Md.)—FTC Docket No. 8651. Associated Merchandising Coporation and the other respondents in Docket No. 8651 have submitted the attached settlement proposal, covering both the proceeding in Docket No. 8651 and the collateral lawsuit now pending before the federal district court in Baltimore. The General Counsel's office recommends that the Commission withdraw this case from adjudication, pursuant to Section 2.34(d) of the Rules, in order to permit consent negotiations between the staff and respondents' counsel. Because of the unusual complexity of this case, the difficulty of assessing the merits of the present proposal, and our lack of information as to the position of the Bureau of Restraint of Trade on the question whether this matter should be withdrawn from adjudication, I think it wise to refer the present proposal to the examiner.' When he has ascertained and analyzed the relevant information he can certify the matter to us with his recommendation. I move the attached order. My office has been informed by the General Counsel's office that prompt action by the Commission may obviate the necessity for the General Counsel to file extensive papers, due in early March, in the pending collateral litigation in district court. I am therefore circulating this as a walkaround. 1 Indicative of the difficulty of assessing the questions raised by this proposal is that my office was informed that as recently as last night respondents agreed to make certain amendments in its settlement proposal. 36-138-70-vol. 3- -107 MEMORANDUM To: Commission. From: Commissioner MacIntyre. JUNE 10, 1968. Subject: In the Matter of Associated Merchandising Corp., et al., Docket No 8651. On June 3, 1968, the Commission, upon my recommendation, extended the time in which this matter is withdrawn from adjudication, from June 3, 1968 to June 17, 1968. Attached to my June 3 circulation were copies of the memorandum from the Bureau of Restraint of Trade, recommending that the Commission accept the proposed consent agreement, memorandum from the Division of Consent Orders concurring with that Bureau's recommendation, and a copy of the conformed agreement. I have been unable to make a recommendation in this matter due to the fact that not all papers have yet been received. It is my understanding that Frank Mayer, Chief of the Division of Discriminatory Practices, intends to file a memorandum opposing the proposed settlement. This memorandum has not yet been received by my office. I am circulating this to the Commission for its immediate consideration in view of the fact that the extension of time withdrawing this matter from adjudication runs out Monday, June 17. I also understand that Basil Mezines, attorney in the case, will be in California next week and thus not be available to the Commission. Accordingly, I hereby recommend to the Commission that this matter be placed on the agenda for consideration by the Commission this coming Wednesday, June 12, or Thursday, June 13, and that the interested staff members, including Basil Mezines and Frank Mayer, be called to present their views. I have attached hereto certain additional pertinent papers in this matter. They include copy of memorandum dated February 13, 1968 to the Commission from the Assistant General Counsel; letter to Chairman Dixon dated April 16, 1968; and draft of Order Dismissing Joseph Horne Company as a Respondent to This Proceeding. Mr. Mayer's memorandum, as noted, is not included. EVERETTE MACINTYRE, Commissioner. SPECIAL MATTER JULY 23, 1968 Re Associated Merchandising Corp., et al., Docket No. 8651. ASSOCIATED MERCHANDISING CORP., DOCKET No. 8651 DISSENTING STATEMENT OF COMMISSIONER NICHOLSON I must record my disagreement with the action of the majority in refusing te accept the consent order which has been negotiated with the respondents. The order proposed is surely an adequate, if not completely satisfactory, disposition of the matter. As in any settlement, it represents reasonable concessions by both sides the Respondents and the Commission. The concessions by the Commissiet are not contrary to the public interest, but, in fact, best serve that interest. This case was initiated, according to the complaint, for the purpose of termi nating alleged inducements of discriminatory prices by the individual members of AMC from their suppliers. These inducements were allegedly made, not individually, but through the wholly-owned subsidiary buying organization of AMC. known as AWC. Termination of those alleged violations has been achieved by the proffered settlement, which would effectively prevent all the group buying activities which gave rise to this complaint and which would, additionally, provide for the permanent divestiture of AWC by the individual members who coprise AMC. The Commission has already expended a great deal of time, effort and expense in bringing this case to the point where it now rests. We are now confronted with a very simple choice. I can appreciate the majority's apparent desire to obtain an order, at this time in this decision, to which a number of individual retail corporations are parties, broad enough to block all other paths by which the respondents might reach the same objectives. Assuming that the individual retail corporate respondents now engage, or intend to engage, in the individual inducement of discriminatory prices in violation of Section 2(f) [neither of which, fact or intention, is alleged in the complaint], it is far from clear that the pleadings, as now constituted, would provide sufficient basis for such a prohibitory order. But, assuming further, that an individual order might be obtained, the breadth of that order is conjectural. Would it apply to all purchases by individual respondents? Would it apply only to those lines where there is some evidence group buying violations are proved? Or, would it be limited to those ten (10) or so lines where in depth proof of violations will purportedly be made? I am concerned that the price we will have to pay to achieve any individual order will be out of all proportion to the benefit which might accrue to the public. No member of the Commission would stop short of any solution to this matter, nor would any compromise be accepted, which did not discharge the duty to protect the public interest and enforce the law. In weighing the alternatives before us, however, I am persuaded that, by accepting the proposed settlement, we would have achieved the major goal which we set. The public interest will be little served by the rejection which is based upon a tenacious insistence upon a catch-all provision covering some activities of the members of AMC acting in their individual capacities. The complaint in this matter, as issued by the Commission in 1964, was accompanied by a form of order containing two prohibitions. One was designed to prevent the direct inducement of discriminatory prices by the individual stores comprising AMC and the other was aimed at their group buying activities. However, the direct-buying activities of the individual store members were not challenged in the complaint, which was based solely upon the use of AWC as a "wholesale" front for purchases by the AMC member stores. The direct-buying provision apparently was included since it had become standard practice from the orders growing out of the so-called "automotive parts" cases.' However, it should be noted that in those cases the buying groups were formed and existed solely for the purpose of inducing and receiving lower prices, whereas AMC, of which AWC is merely the buying arm, was formed to render a broad range of other services to its members. Thus there is doubt as to the wisdom of using these "order desk” situations as models for all subsequent buying group orders. Further, the initial automotive parts cases were concluded only after protracted litigation, during which the respondents contested every foot of the ground, following which broad orders were drafted which were coextensive with the Commission's power to prohibit illegal practices in whatever form they might become manifest. I have no quarrel with this approach following litigation and believe that in that posture the Commission is well justified in drafting orders which are broad enough "effectively to close all roads to the prohibited goal.” But this is not to say that we need to insist dogmatically upon this approach in all cases which come before us. We should not extend this solution to necessarily include those matters where the parties are able to reach an agreement without litigation and which will effectively terminate all the practices we challenged and concerning which evidence can be produced. In such circumstances, a stubborn insistence upon an exact reproduction of past orders issued in other cases and under different conditions constitutes an issuance of orders by vote, sacrificing our discretion to choose a remedy deemed adequate to cope with the unlawful practices found to exist." It is, furthermore, in contravention of the mutual concessions necessary to any compromise settlement procedure. The majority wants by way of settlement, the whole cake which might be obtained from litigation. 1 American Motor Specialties Co., Inc. v. F.T.C. (2nd Cir. 1960) 278 F. 2d 225, cert. den. 364 U.S. 884 (1960); Alhambra Motor Parts v. F.T.C. (9th Cir. 1962) 309 F. 2d 213; General Auto Supplies, Inc. v. F.T.C. (7th Cir. 1965) 346 F. 2d 311; Mid-South Distributors v. F.T.C. (5th Cir. 1961) 287 F. 2d 512. 2 F.T.C. v. Ruberoid Co., 343 U.S. 470 (1952). |