The opinion of the court was delivered by: MCLEAN
Denying in part and granting in part motion to compel compliance in order in FTC Dkt. 8651.
This is a proceeding under Section 9 of the Federal Trade Commission Act (15 U.S.C. § 49) for an order directing respondents to comply with an order dated August 12, 1965 of a Hearing Examiner of the Federal Trade Commission which directed respondents to produce certain documents. On July 13, 1966 I denied respondents' motion to dismiss petitioner's application and by order dated that day I set the application down for a hearing on September 9. United States v. Associated Merchandising Corp., 256 F. Supp. 318 (S.D.N.Y. 1966). After an adjournment, the hearing was held on September 19 at which time petitioner introduced certain documentary evidence and respondents Associated Merchandising Corporation (AMC) and Aimcee Wholesale Corporation (AWC) called two witnesses and introduced various exhibits. Respondent Federated Department Stores, Inc. (Federated) offered no additional evidence. It rested on the affidavit which it had originally submitted in opposition to the application.
There is no dispute as to the following facts.
On November 24, 1964, the Commission issued a complaint charging these respondents and others with knowingly inducing or receiving price discriminations in violation of Section 2(f) of the Robinson-Patman Act (15 U.S.C. § 13(f)). The allegations of this complaint may be briefly summarized as follows:
AMC is a New York corporation organized in 1939, the stock of which is owned by various department or specialty stores, including Federated. AWC is a New York corporation organized in 1946. It is a wholly owned subsidiary of AMC.
AMC purchases goods of various suppliers (referred to as "resources") "through respondent AWC for the account of each AMC shareholder store." AMC and AMC shareholder stores "through the agency and instrumentality of respondent AWC" have knowingly induced resources to grant preferential prices to AMC shareholder stores by selling their goods to these stores at lower prices or with higher allowances or discounts than those which the resources grant to customers who are not AMC shareholders, but who are in competition with AMC shareholder stores. No time period for these alleged activities is specified in the complaint.
Respondents have filed an answer in the administrative proceeding denying these charges.
During pre-trial proceedings before the Hearing Examiner, counsel for the Commission supporting the complaint ("complaint counsel") filed with the Hearing Examiner a "submission" in which they outlined the proof that they proposed to offer at the trial. In this document complaint counsel stated that they would offer detailed evidence with respect to transactions with ten specified resources. They stated that "precise information showing price discrimination by suppliers will be limited to" these ten. Complaint counsel furnished the Hearing Examiner with tabulations of sales made by these ten suppliers to certain AMC stores and to certain non-AMC stores. Each of these tabulations is concerned with transactions in 1963 or 1964.
In their submission complaint counsel further stated that "for the purpose of demonstrating that respondent AWC is not a legitimate wholesaler but is simply an instrumentality of respondent AMC and respondent AMC shareholder stores to obtain preferential prices from resources," complaint counsel would introduce "information from 200 of respondents' largest suppliers." The submission stated that "reference to the 200 resources will be made during this trial only from the standpoint of showing how much respondents purchase from each of these suppliers, the precise amount of goods purchased that are shipped to any warehouse of AWC or AMC, the amount of such goods purchased by the individual AMC shareholder stores as well as the amount of such goods sold by AWC to customers other than the AMC shareholder stores."
Thereafter complaint counsel moved before the Hearing Examiner for an order directing respondents to produce a number of documents. The motion was made pursuant to Section 3.11 of the Commission's Rules of Practice for Adjudicative Proceedings (16 C.F.R. § 3.11). That Rule, as far as pertinent, reads:
"Upon motion of any party showing good cause therefor and upon such notice as the hearing examiner may provide, the hearing examiner may order any party to produce and permit the inspection and copying of non-privileged documents, papers, books, or other physical exhibits which constitute or contain evidence relevant to the subject matter involved and which are in the possession, custody, or control of such party."
Complaint counsel moved at the same time in the alternative for an order granting them access to respondents' files for the purpose of examining and copying these documents. This application was based on Rule 3.17(c) of the Rules of Practice for Adjudicative Proceedings (16 C.F.R. § 3.17(c)) which, as far as pertinent, provides:
"Application for issuance of an order requiring any corporation being proceeded against to grant access to files for the purpose of examination and the right to copy documentary evidence shall be made in writing to the hearing examiner, and shall specify as exactly as possible the files to which access is requested, showing the general relevancy of the files and the reasonableness of the scope of the order."
Respondents opposed both motions before the Examiner.
By order dated August 12, 1965, the Examiner granted complaint counsel's first motion in its entirety. He directed respondents to produce all the documents demanded. His order neither granted nor denied the alternative motion for access to the documents. Apparently he treated this motion as moot, in view of his decision granting the first motion.
Respondents applied to the Commission for leave to appeal from the Hearing Examiner's order. The Commission, by order dated September 23, 1965, denied respondents' application. In so doing, it wrote an opinion in which it took occasion to discuss the meaning of "good cause" and expressed the view that complaint counsel's showing before the Hearing Examiner "appears clearly to meet the indicated requirements of § 3.11."
Respondents declined to comply with the Hearing Examiner's order. The present enforcement proceeding followed in due course.
Some of the documents which respondents have been directed to produce relate to the ten suppliers specified in complaint counsel's pre-trial submission. Some relate to 276 other suppliers.
Some relate to neither group of resources, but call for lists of officers and salesmen, directors' minutes, manuals, reports, and the like.
A few of the documents are precisely identified as, for example, a particular manual, or records reflecting sales for specified years. Most of the items, however, are phrased in general terms and several are of the typical dragnet variety calling for "all correspondence, memoranda or other written material" relating to various subjects. In many instances the time periods involved are extensive. Some items require production of documents "for the period 1945 to date." Others specify no period at all so that theoretically, at least, AMC and AWC have been required to produce documents coming into existence at any time since the date of their incorporation in 1939 and 1946 respectively.
At the hearing in this court, AMC and AWC introduced evidence which demonstrates that at four different periods prior to the filing of the Commission's complaint in November 1964, representatives of the Commission requested information and documents from AMC and AWC with respect to their purchases from suppliers and their sales of merchandise to AMC stores and non-AMC stores. Such requests were made in 1951-1954, 1960-1961, 1962 and 1963. Many documents were requested. AMC and AWC complied with all these requests, apparently with very considerable expense to themselves. It is unnecessary to recite these ...