General Foods had 62.2 percent national market. In 1946 total United States pectin sales were divided as follows: General Foods now had 80.5 percent of the national market. This shows(A) The 1939 liquid market dropped from 56 percent in 1939 to 48.5 percent in 1946, or a drop of 7.5 percentage points. 1. Certo gained from 41.4 percent in 1939 to 42.8 percent in 1946, or a 1.4 percentage point gain on a dropping market. 2. All other liquids including Jels-Rite dropped from 14.6 percent in 1939 to 5.7 percent in 1949, or a loss of 8.9 percentage points. (B) The powdered market gained from 44 percent in 1939 to 51.5 percent in 1946, or a gain of 7.5 percentage points. 1. Sure-Jell gained from 20.8 percent in 1939 to 37.7 percent in 1946, or a gain of 16.9 percentage points. 2. Pen-Jell lost from 11.6 percent in 1939 to 6.1 percent in 1946, or a loss of 5.5 percentage points on a rising market. 3. M. C. P. which first appears on the chart in 1941 with 4.7 percent had 4.4 percentage in 1946 or a loss of three-tenths of a percentage point on a rising market. 4. All others lost from 11.6 percent in 1939 to 3.3 percent in 1946, or a loss of 8.3 percentage points on a rising market. The above analysis and also the majority opinion point out that in 1939, the year immediately prior to the initiation of the deals, General Foods controlled 62.2 percent of the national market in pectin. The opinion and the analysis further shows that General Foods' share of the market increased during the "deal" years to 1946 when its share was 80.5 percent of the market (during the last deal year-1947-General Foods had operational difficulties and its share of the national market decreased). The Court in the case of E. B. Muller & Co. v. Federal Trade Commission, 142 Fed. (2d) 511, aptly described this economic situation. "These discriminations were not, as petitioners would have us believe, unrelated to the central purpose, which was the destruction of petitioners' only competitor. By discriminating against other general trade areas in favor of New Orleans, Muller, on the one hand was able to force the price so low in New Orleans that Schanzer could not meet its competition. On the other hand, by selling at higher prices in other general trade areas, Muller made up its loss in the New Orleans district." Economists may differ as to what particular percentage of the national market a concern may have before it may be classified as a monopoly. A concern having 35 percent of the market may not be a monopoly, but certainly when a concern begins to obtain over 50 percent of the national market in any particular commodity. then such concern, because of such share, is in the position to exert a very significant effect on the market. An area price discrimination by a concern having 35 percent of the market may not have as great an adverse effect as a discrimination by a concern controlling 80 percent of the market. If a crocodile had any concern as to the future of the fish enclosed with him in a small pool, the crocodile should exert some care as to the manner in which he flips his tail. It would not be necessary for him to exercise the same degree of care if he and the fish were in a large body of water. In the smaller pool the crocodile already occupies most of the maneuvering space. Commission Exhibit 28 which was taken from the files of General Foods affords a very enlightening picture as to what officials of General Foods believed these deals were accomplishing on the west coast. The exhibit states in part that the Pacific Northwest and Southwest account for close to one-fourth of the total pectin sales "hence losses or gains in this important pectin territory affect our national pectin sales materially." The exhibit states that a table shown on the exhibit "shows a comparison of our (General Foods) competitive position in these two crop areas for 1938-39-the two years immediately prereding our deal operation and for the three years during which we had the consumer deal in effect." This table shows that in 1939 (the last predeal year) A witness for Jels-Rite, another competitor of respondent, testified on page 747 of the record as follows: "Q. State whether or not the deals in effect on Certo and Sure-Jell during the years 1940 through 1947 in any way affected the sales of your product, Jels-Rite. "A. I feel definitely that they did. "Q. What effect did they have on your sales? "A. Decreasing our sales through their advertising medium and their free goods, or whatever you wish to term it, and their aggressiveness, pointed, I would say, particularly at our Northwestern territory." This witness on cross-examination was interrogated as follows: "Q. As I understand it, you complain because the price of Sure-Jell as you contend was reduced in your territory; is that right? "A. Right. "Q. Well what difference did it make to you whether it was reduced or maintained outside of your territory? What effect would that have on your territory? "A. The effect it had was to break down my territory, I would say. In other words, I was reaching at that time to Denver and San Diego and it did make, it made it increasingly hard for me to get into these territories, and I am completely out of them now." A witness for the California Fruit Growers Exchange testified on page 454 of the record: "Q. And would you state that, in your sales to the jobbers, those deals of General Foods Corporation might affect the sales to these jobbers? "A. Yes, I think any special deal of any competitor is bound to affect the sale of a similar product of other manufacturers." A witness for a food brokerage firm in Portland, Oregon, was interrogated at page 876 of the record as follows: "Q. And what effect, if any, on your attempted sales of M. C. P. products did these General Food Corporation deals on Certo and Sure-Jell have? "A. Well, it has been my job to cover the entire area, the State of Oregon and the 7 Southern Counties in Washington, and also West Idaho there, to cover all the jobbers and large direct chain buyers in the interest of M. C. P. powdered pectin. "Now, as you gentleman well know the merchandising of pectin is entirely a seasonal operation. Time is the essence, and as I made these rounds and contacts, it was particularly noticeable among the larger jobbers and the larger chains, also the fact that when we presented our picture to the jobber, buyer, or other chain store buyer, the buyers' answers seemed to be entirely contingent upon the receipt of an announcement from General Foods as to the number of Certo deals and the number of Sure-Jell deals he was going to receive. "Now, in other words, when we were working against the General Foods deal, it was extremely difficult for us to secure large initial placement orders at the beginning of the season, with which to merchandise to the retailer and other consumers. * * *. "In other words, there was a natural reluctance on the part of the buyer to purchase large quantities of M. C. P. or even to cover at times, until he knew exactly what he had coming from General Foods;-and by the way, these allotments in my territory were usually handled on the allotment basis, and the jobber and the chain were told earlier in the season how many cases of deals they could plan on receiving, and their merchandising was built around that quantity. "Now, that infiltrates itself into the retail level because every retailer has got to buy the deals to protect himself from competition, and it is entirely relative.” The testimony of this food broker paints a very clear picture of the effect on competition of the deals offered by General Foods. Each customer of General Foods was allotted a certain number of these deals and apparently these customers would not consider purchasing competitive products until it was ascertained by them the extent of the deal allotment they would receive from General Foods. One must keep in mind that these deals constituted price reductions to customers on the West Coast and price discriminations to customers elsewhere. I believe it is obvious that the use by General Foods of these deals not only resulted in a reasonable probability that competition in these Western states was injured but on the basis of the present record the Commission could reasonably find that competition was injured in fact. In F. T. C. vs. Morton Salt, 334 U. S. 37, the Supreme Court pointed out that the Congressional Committee reports on the Robinson-Patman Act emphasized the belief that the old Section 2 of the Clayton Act had been too restrictive in a war chest to beat down the small business competition. For General Foods— it was soft competition. For the small competitors-it was unfair competition. Under this system the small local area businessman cannot compete on even approximately equal terms with the nationwide distributor. The large corporation can play its area pricing patterns like a piano. It can crush small-business competition wherever the latter appears and charge the tariff to its other customers who have no price alternatives. The little Davids are deprived of even their slingshots in their contest with Goliath. Is that hard or soft competition for Goliath? It is soft for the dominant seller, the Goliath. It is calamitous for small business, the little Davids. Because of his limited area distribution, each of the small-business man's customers is generally in competition with the other customers. The small distributor, therefore, must charge all of his customers proportionately equal prices or else he may be guilty of an illegal price discrimination. The nationwide distributor, of course, has many customers who are not in competition with each other and he may charge different prices in different areas without directly injuring the nonfavored customers. If the nationwide distributor can legally use this area price discrimination weapon against his small competitors, he has another powerful weapon to add to his arsenal which includes mass production, nationwide advertising, large financial resources, research facilities, and many others. Should a large distributor receive a price subsidy from other areas of the country in order to compete with a few small competitors on the West Coast? Again I ask, is that hard or soft competition-for General Foods? To constitute a prima facie case of violation of Section 2 (a) of the Clayton Act, there must be established (1) jurisdiction; (2) the sale of goods of like grade and quality to purchasers at discriminatory prices; and (3) the existence of circumstances which make it reasonably probable that the competitive effects described in the statute will result from this price discrimination. There is no issue before us as to jurisdiction, the grade or quality of the goods or that General Foods sold at discriminatory prices. The only issue is as to whether or not the competitive effects described in the statute resulted from the price discrimination. The statute describes these effects as follows: "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": It is admitted that Government counsel did not offer in evidence in this case the scalps or the hides of the small-business competitors of General Foods. We do not have in evidence pounds of flesh or buckets of blood. We should not expect the type of evidence that Salome is said to have asked of Herod-the head of John the Baptist on a silver platter. In lieu of sanguinary evidence, let us review what the victims of General Foods' price discrimination practices had to say about this particular brand of competition. A witness representing M. C. P., a competitor of General Foods, testified on page 307 of the record as follows: "Q. I ask you one direct question, Mr. Leo. Is it your testimony that during the years 1940 through 1947, while the General Foods Corporation deals were in effect on Certo and Sure-Jell that they hurt your business? "A. Yes, they did very materially." This witness also testified as follows: "Q. Now, in the areas where the General Foods' special deals on Certo and Sure-Jell were in effect, would you tell us whether or not they substantially affected the sales of your product? "A. Yes, very definitely, because it was a special deal that they offered. And General Foods, without any special deals, are pretty tough competition. They operate with some 2,500 salesmen and have entre to retail chains and jobbers by various pressure methods. They are able to get distribution where the average small-business concern today is faced with a horrible problem of trying to get distribution, and they try to hold that distribution from time to time. And we didn't have a margin of profit sufficient to travel very many men out. now we can only travel two or three men, and it's quite difficult to maintain distribution." Even This competitor was fortunate in that he also sold in an area where General Foods did not offer these deals. This competitor enjoyed some increase in business. However, this witness was asked whether or not the business increase was more in the territories where there was no deal than it was in the territories where there was a deal. The witness answered, "Positively." A witness for Jels-Rite, another competitor of respondent, testified on page 747 of the record as follows: "Q. State whether or not the deals in effect on Certo and Sure-Jell during the years 1940 through 1947 in any way affected the sales of your product, Jels-Rite. "A. I feel definitely that they did. "Q. What effect did they have on your sales? "A. Decreasing our sales through their advertising medium and their free goods, or whatever you wish to term it, and their aggressiveness, pointed, I would say, particularly at our Northwestern territory." This witness on cross-examination was interrogated as follows: "Q. As I understand it, you complain because the price of Sure-Jell as you contend was reduced in your territory; is that right? "A. Right. "Q. Well what difference did it make to you whether it was reduced or maintained outside of your territory? What effect would that have on your territory? "A. The effect it had was to break down my territory, I would say. In other words, I was reaching at that time to Denver and San Diego and it did make, it made it increasingly hard for me to get into these territories, and I am completely out of them now." A witness for the California Fruit Growers Exchange testified on page 454 of the record: "Q. And would you state that, in your sales to the jobbers, those deals of General Foods Corporation might affect the sales to these jobbers? "A. Yes, I think any special deal of any competitor is bound to affect the sale of a similar product of other manufacturers." A witness for a food brokerage firm in Portland, Oregon, was interrogated at page 876 of the record as follows: "Q. And what effect, if any, on your attempted sales of M. C. P. products did these General Food Corporation deals on Certo and Sure-Jell have? "A. Well, it has been my job to cover the entire area, the State of Oregon and the 7 Southern Counties in Washington, and also West Idaho there, to cover all the jobbers and large direct chain buyers in the interest of M. C. P. powdered pectin. "Now, as you gentleman well know the merchandising of pectin is entirely a seasonal operation. Time is the essence, and as I made these rounds and contacts, it was particularly noticeable among the larger jobbers and the larger chains, also the fact that when we presented our picture to the jobber, buyer, or other chain store buyer, the buyers' answers seemed to be entirely contingent upon the receipt of an announcement from General Foods as to the number of Certo deals and the number of Sure-Jell deals he was going to receive. "Now, in other words, when we were working against the General Foods deal, it was extremely difficult for us to secure large initial placement orders at the beginning of the season, with which to merchandise to the retailer and other consumers. *** "In other words, there was a natural reluctance on the part of the buyer to purchase large quantities of M. C. P. or even to cover at times, until he knew exactly what he had coming from General Foods;-and by the way, these allotments in my territory were usually handled on the allotment basis, and the jobber and the chain were told earlier in the season how many cases of deals they could plan on receiving, and their merchandising was built around that quantity. "Now, that infiltrates itself into the retail level because every retailer has got to buy the deals to protect himself from competition, and it is entirely relative." The testimony of this food broker paints a very clear picture of the effect on competition of the deals offered by General Foods. Each customer of General Foods was allotted a certain number of these deals and apparently these customers would not consider purchasing competitive products until it was ascertained by them the extent of the deal allotment they would receive from General Foods. One must keep in mind that these deals constituted price reductions to customers on the West Coast and price discriminations to customers elsewhere. I believe it is obvious that the use by General Foods of these deals not only resulted in a reasonable probability that competition in these Western states was injured but on the basis of the present record the Commission could reasonably find that competition was injured in fact. In F. T. C. vs. Morton Salt, 334 U. S. 37, the Supreme Court pointed out that the Congressional Committee reports on the Robinson-Patman Act emphasized the belief that the old Section 2 of the Clayton Act had been too restrictive in requiring a showing of general injury to competitive conditions. The Court in a footnote quoted from the statement of the Senate Judiciary Committee as follows: "This clause represents a recommended addition to the Bill as referred to your committee. It tends to exclude from the Bill otherwise harmless violations of its letter, but accomplishes a substantial broadening of a similar clause not contained in Section 2 of the Clayton Act. The latter has in practice been too restrictive, in requiring a showing of general injury to competitive conditions in the line of commerce concerned; whereas the more immediately important concern in the injury to the competitor victimized by the discrimination. Only through such injury, in fact, can the larger general injury result, and to catch the weed in the seed will keep it from coming to flower." We do not have here only one competitor testifying that he has been "victimized" by a discrimination in price, but we have substantially all of respondent's competitors on the West Coast testifying that they have been "victimized." If the dominant seller continues to suppress its smaller competitors and continues to obtain by means of price discriminations a larger and larger share of the market, the probable result would be a monopoly and then perhaps a Sherman Act case for dissolution. A dissolution would certainly not be good for the dominant concern. For the entire economy, it is much better for these conditions to be corrected before a dissolution proceeding is necessary. It was for that principal reason that the Congress passed the Clayton Act. It is the duty of the Commission to act in the incipiency of the monopolistic tendencies before the monopoly matures and a dissolution suit is the only effective remedy. It is stated that assuming that General Foods illegally discriminated in prices between 1940 and 1946 this discrimination was not continued thereafter. In other words, it is claimed that there is no public interest now to justify the Commission proceeding further in this matter. General Foods contends that it did not discriminate illegally. General Foods has not stated that if the Commission dismisses this complaint General Foods will not resume this practice in the future. In this connection, Commission Exhibit No. 80, dated November 12, 1948, is interesting. This was a memorandum obtained from the files of General Foods. The memorandum was written after the deals had been discontinued by General Foods but a few months before the complaint was issued by the Commission. The memorandum states: "West Coast promotion-study of Barton and Neilson reports indicate that the major powdered competitor-M. C. P.-made competitive headway on the Coast this summer, as did Pen-Jell on a smaller scale. For lack of a better explanation, we have to believe that the withdrawal of our West Coast free-goods deal put us at a competitive disadvantage which we can ill afford in that region. Accordingly, we agree with you that it is almost essential that you reinstate some form of deal in 1949." It is reasonable to assume that if the complaint in this case had not been issued, General Foods would have resumed offering the deals on the West Coast. In other words, the smaller competitors could compete with General Foods if General Foods did not discriminate in price. The dominant seller, however, demands the added weapon of price discrimination when it competes with small business. Does General Foods want hard competition or soft competition-for General Foods? The majority opinion relies as a matter of law in dismissing this case on Minneapolis-Honeywell Regulator Company v. F. T. C. (191 Fed. (2d) 786). That was a Section 2 (a) Clayton Act case involving in part the question of injury in the primary line of commerce. However, the price discriminations involved were not geographical price discriminations. Minneapolis-Honeywell was using a quantity discount system of pricing which it was alleged was discriminatory. The Court of Appeals for the Seventh Circuit reversed a finding by the Commission of injury in the primary line of commerce. The Court based its opinion on a showing that the total business of Minneapolis-Honeywell competitors had increased, that three new concerns which had entered the industry had enjoyed a steady growth in sales volume, that Minneapolis-Honeywell's share of the available control business was reduced from 73 percent in 1937-38 to only 60 percent in 1941, that Minneapolis lost to its competitors 53 percent of the control business of 31 customers who previously had standardized on Minneapolis controls and that in the same year 126 of Minneapolis' other oil burner manufacturer-customers also purchased competitive controls. In my opinion, the above statement by the Court of the facts in the Minneapolis-Honeywell case clearly distinguishes that case from the factual situation |