386 F.

2d 667

RABINER & JONTOW, INC., a corporation now known as

Abbe
Rabiner, Inc., Petitioner,
v.
FEDERAL TRADE COMMISSION, Respondent.
No. 35, Docket 30915.

United States Court of Appeals Second Circuit.

Argued Sept. 21, 1967.
Decided Dec. 5, 1967.

Erwin Feldman, New York City, for petitioner.

Jerold D. Cummins, Washington, D.C (James McI. Henderson, J. B.
Truly, Federal Trade Commission, Washington, D.c., on the brief), for
respondent.
Before WATERMAN, MOORE and FEINBERG, Circuit Judges.
MOORE, Circuit Judge:

In 1961, the Federal Trade Commission (the Commission) began an

investigation into alleged discrimination between competing customers in the
granting of advertising and other promotional allowances by garment
manufacturers. The result of this investigation was an invitation by the
Commission to 310 of these manufactures, offering them an opportunity to sign
consent agreements to cease and desist from granting discriminatory
allowances. Although 298 manufacturers signed, petitioner, a manufacturer of
women's coats and suits which retail from $70.00 to $90.00, and several others
refused. The Commission thereupon issued a formal complaint, alleging that
petitioner had violated Section 2(d) of the amended Clayton Act, 15 U.S.C.
13(d),1 by granting advertising and promotional allowances to some customers
without making such allowances available to other competing customers on
proportionally equal terms.2 The hearing examiner issued an initial decision
and cease and desist order sustaining the allegations of the complaint and
holding that petitioner had failed to establish its defense that the advertising

allowance payments were made in good faith to meet competition. The

Commission, Commissioner Elman dissenting, affirmed the decision and order
of the examiner.
2

On appeal to this court, petitioner no longer disputes the Commission's finding

that it violated Section 2(d) of the Clayton Act. Instead, petitioner urges that
the cease and desist order be set aside because it was an abuse of the
Commission's discretion to proceed against it while there remains a large
number of others engaged in the same illegal practice. Petitioner argues that the
Commission acted arbitrarily in issuing the cease and desist order while
petitioner's competitors are free to continue their prior practice.

There have been no instances where a complaint has been dismissed or an order
set aside simply because it was directed against a single respondent in the face
of evidence of industry-wide violations. The most petitioner could hope to
obtain from this court is a stay of enforcement of the cease and desist order.
Two Supreme Court decisions suggest that, in a proper case, a stay may be
obtained until the Commission can conduct a larger investigation and gain
more complete compliance. This, however, is not such a case.

In Moog Industries, Inc. v. Federal Trade Commission, 355 U.S. 411, 78 S.Ct.
377, 2 L.Ed.2d 370 (1958) (per curiam), the Supreme Court refused to grant a
stay of an order against one firm until competing firms could be similarly
restrained. There the Court noted the peculiar discretion given to the
Commission in the shaping of its remedies.

'In view of the scope of administrative discretion that Congress has given the
Federal Trade Commission, it is ordinarily not for courts to modify ancillary
features of a valid Commission order. This is but recognition of the fact that in
the shaping of its remedies within the framework of regulatory legislation, an
agency is called upon to exercise its specialized, experienced judgment. Thus,
the decision as to whether or not an order against one firm to cease and desist
from engaging in illegal price discrimination should go into effect before others
are similarly prohibited depends on a variety of factors peculiarly witnin the
expert understanding of the Commission. Only the Commission, for example,
is competent to make an initial determination as to whether and to what extent
there is a relevant 'industry' within which the particular respondent competes
and whether or not the nature of that competition is such as to indicate identical
treatment of the entire industry by an enforcement agency. Moreover, although
an allegedly illegal practice may appear to be operative throughout an industry,
whether such appearances reflect fact and whether all firms in the industry
should be dealt with in a single proceeding or should receive individualized

treatment are questions that call for discretionary determination by the

administrative agency. It is clearly within the special competence of the
Commission to appraise the adverse effect on competition that might result
from postponing a particular order prohibiting continued violations of the law.
Furthermore, the Commission alone is empowered to develop that enforcement
policy best calculated to achieve the ends contemplated by Congress and to
allocate its available funds and personnel in such a way as to execute its policy
efficiently and economically.' 355 U.S. at 413, 78 S.Ct. at 379.
6

In Universal-Rundle Corp. v. Federal Trade Commission, 352 F.2d 831 (7th

Cir. 1965), the Court of Appeals ordered that a cease and desist order be stayed
until further action could be taken against the respondent's competitors.
Although the discriminatory price discounts of that case were prevalent in the
industry, the Commission selected for enforcement Universal-Rundle which
had only 6% Of the market and which was granting relatively smaller discounts
than its competitors. The Supreme Court reversed, 387 U.S. 244, 87 S.Ct. 1622,
18 L.Ed.2d 749 (1967), and set forth some guide lines for review in this area.

'* * * Consequently, the reviewing court's inquiry is not whether the evidence
adduced in support of a petition for a stay tends to establish certain facts, such
as that the industry is engaged in allegedly illegal price discrimination
practices; rather, the court's review must be limited to determining whether the
Commission's evaluation of the merit of the petition for a stay was patently
arbitrary and capricious.' 387 U.S. at 250, 87 S.Ct. at 1626.

In the facts of the particualr case before us, there is no indication that the
Commission acted arbitrarily in proceeding against petitioner. An extensive
industry-wide investigation was conducted and almost 300 consent orders were
obtained before tha present action was taken. The Commission held public
hearings on how enforcement could best be achieved and various proposals
were submitted from industry representatives. Even then, the Commission
considered the possible competitive disadvantage its orders might have and
waited until 1965 to make those orders effective. Abby Kent Co., et al., FTC
Docket No. C-328 et al. (August 9, 1965), CCH Trade Reg. Rep. (1965-1967
Transfer Binder) P17,301 at p. 22,461. At that time the Commission noted:

'* * * For the most part this phase of the wearing apparel inquiry is terminated.
The few unresolved matters do not involve suppliers who constitute a force
capable of competitively disadvantaging those industry members who will be
under the order.' at p. 22,464.

10

Far from acting in an 'arbitrary' manner, the Commission appears to have made

10

Far from acting in an 'arbitrary' manner, the Commission appears to have made
every effort to achieve industry-wide compliance in as equitable a manner as
possible under the circumstances.

11

Petitioner insists that a proper determination of the relevant market will reveal
that the garment industry is really a group of approximately 20 different kinds
of men's and women's wear manufacturers, none of which compete with each
other. Under petitioner's classification, it is in the women's coat and suit
industry which numbers about five hundered firms. Of those firms, petitioner
claims that it was one of only 7 or 8 involved in the Commission's complaint.
The evidence as to the proper market division is not at all clear but, assuming
petitioner's contention to be true, we still do not think there is a basis for
finding that the Commission acted arbitrarily. Petitioner has not shown that
violations of Section 2(d) are prevalent in that segment of the industry in which
it operates. Its own expert witness testified only that 'It was very widespread
among top manufacturers and top stores,' and that he would place petitioner
'towards the top.' Petitioner relies upon a statement issued by the Commission
in 1962 that its investigation revealed 'widespread violations.' However, this
observation was made prior to the time the Commission entered into the almost
300 cease and desist orders and does not support a contention that the same
conditions continue to exist.

12

Petitioner has failed to show that compliance with the Commission's order will
place it at a competitive disadvantage. Although petitioner alleges that
widespread violations do in fact remain in the industry, it has never provided
the Commission with names or other information upon which the Commission
could take appropriate action. The Commission is continuing to take action
against violators. See, e.g., Clarise Sportswear Co., Inc., FTC Docket No. C993 (consent order, September 20, 1965); May Knitting Company, Inc., FTC
Docket No. C-995 (consent order, September 20, 1965); Huddlespun, Inc., FTC
Docket No. C-995 (consent order, September 20, 1965); Dan Millstein, Inc.,
FTC Docket No. C-1020 (consent order, December 7, 1965); Susan Thomas,
Inc., FTC Docket No. C-1185 (consent order, March 20, 1967); GladstoneArcuni, Inc., FTC Docket No. 8664 (hearing examiner's order issued February
10, 1967).

13

Furthermore, the 'good faith meeting of competition' defense provided in

Section 2(b) of the Clayton Act,3 is 'implicit in every order issued under the
authority of the Act, just as if the order set (it) out in extenso.' Federal Trade
Commission v. Ruberoid Co., 343 U.S. 470, 476, 72 S.Ct. 800, 96 L.Ed. 1081
(1952). Even though petitioner is under a cease and desist order, it is free to
establish its own nondiscriminatory promotional plan and When necessary,
offer certain customers the same amount as a competitor whose allowance it

may have to meet. This would minimize any competitive disadvantage.

Petitioner argues, however, that it should be free from the Commission's order
and be permitted to grant disproportionate allowances to meet competition
generally without showing that any particular payment was made to meet a
specific competitor's offer. Were such a practice to be approved, the very
purpose of Section 2(d) would be frustrated.
14

For the foregoing reasons, the Commission's order is affirmed.

15

The Commission has filed with this court a formal cross-application for
enforcement of the order under Rule 13(e) of the Rules of this Court. This was
done in accordance with our instructions in William H. Rorer, Inc. v. Federal
Trade Commission, 374 F.2d 622, 627 n. 9 (2d Cir. 1967).

16

'Only on the last page of its brief has the Commission made a cross-application
for enforcement of its order pursuant to 15 U.S.C. 21(c). We hold this
application to be legally sufficient, but in the future the Commission should
follow the orderly procedure for such an application set forth in our rules. Rule
13(e), Rules of the United States Court of Appeals for the Second Circuit.'

17

The Commission Urges that both the wording and history of Section 11(c) of
the Clayton Act, 15 U.S.C 21(c), show that the intendment was that a court
order of enforcement be entered automatically upon affirmance of the
Commission's order. The relevant portion of the statute reads:

18

'* * * To the extent that the order of the commission or board is affirmed, the
court shall issue its own order commanding obedience to the terms of such
order of the commission.'

19

Prior to its amendment by the Finality Act of 1959, Section 11 specifically

required the Commission to file an application for enforcement before the
Commission could obtain a court decree compelling obedience to its order. The
purpose of the Finality Act of 1959, was to amend Section 11 of the Clayton
Act to conform it to the procedures of Section 5(c) of the Federal Trade
Commission Act, as amended, 15 U.S.C. 45(c). Federal Trade Commission v.
Jantzen, Inc., 386 U.S. 228, 231, 87 S.Ct. 998, 18 L.Ed.2d 11 (1967). Section
5(c) of the Federal Trade Commission Act does not require a cross-application
for enforcement.

20

'When review is sought, if the Commission is affirmed, the Court of Appeals,

pursuant to 5(c) of the Act, 'shall thereupon issue its own order commanding

obedience to the terms of such order of the Commission.' Thus it is not the
Commission which requests an enforcement order from the reviewing Court.
One is entered automatically.' United States v. Standard Distributors, Inc., 267
F.Supp. 7, 11 (N.D.Ill. 1967).
21

We are told by the Commission's counsel that no other circuit court requires
the Commission to make a cross-motion for enforcement. Accordingly we hold
that a cross-application for enforcement is not required by the amended Clayton
Act and that our Rule 13(e) is not applicable. To the extent that William H.
Rorer, Inc. v. Federal Trade Commission, supra, is to the contrary, it is
overruled.4

22

The Commission's order is affirmed and enforced.

Section 2(d) provides:

That it shall be unlawful for any person engaged in commerce to pay or contract
for the payment of anything of value to or for the benefit of a customer tomer of
such person in the course of such commerce as compensation or in
consideration for any services or facilities furnished by or through such
customer in connection with the processing, handling, sale, or offering for sale
of any products or commodities manufactured, sold, or offered for sale by such
person, unless such payment or consideration is available on proportionally
equal terms to all other customers competing in the distribution of such
products or commodities.

The parties entered into stipulations to the effect that during the period in
question advertising allowances were granted to six favored customers in three
cities and were not paid to other competing customers in those cities who
purchased identical goods from petitioner. The favored customers were large
retail stores in New York City, Boston and Washington, D.C

The relevant portion of Section 2(b) provides:

That nothing herein contained shall prevent a seller rebutting the primafacie
case thus made by showing that his lower price or the furnishing of services or
facilities to any purchaser or purchasers was made in good faith to meet an
equally low price of a competitor, or the services or facilities furnished by a
competitor.

This opinion has been submitted to all members of the Court and they are in

accord with this result