Before KALODNER and STALEY, Circuit Judges, and STEEL, District Judge.
By STALEY, Circuit Judge: We are asked by these petitions pursuant to Section 11 of the Clayton Act, 38 Stat. 734, 15 U.S.C. § 21, to review and set aside two substantially identical cease and desist orders issued by the Federal Trade Commission.The orders to be reviewed were issued by the Commission against General Foods Corporation and P. Lorillard Company,*fn1 the petitioners, at the conclusion of proceedings upon complaints which charged them with violations of Section 2(d) of the Clayton Act, as amended.*fn2 These proceedings were had before the hearing examiner upon stipulated records with annexed exhibits. The initial decisions of the hearing examiner, which include cease and desist orders, were adopted by the Commission without further opinion.*fn3
The complaints charged the petitioners with having made payments to certain broadcasting companies*fn4 for the benefit of chainstore customers of petitioners, thus providing broadcasting time "to the favored customers for said customers' own advertising purposes." The payments thus effected were alleged to have been made as compensation or in consideration for services or facilities furnished by these favored customers in connection with the offering for sale and the sale of petitioners' products. Further, it is averred that the benefits so conferred on some of petitioners' customers were not made available on proportionately equal terms to petitioners' other customers, in violation of Section 2(d) of the Clayton Act, as amended.
The stipulated facts may be summarized as follows: In 1950 and 1951 the sale of broadcasting time had become difficult, and the broadcasting companies each developed promotional schemes to enable them to sell time to manufacturers and sellers of grocery products. Although the companies devised their plans independently they are substantially similar in content, providing for in-store promotions as an inducement to purchase radio and television time. The broadcasting companies negotiated contracts with certain grocery chains whereby they covenanted to provide the chains with specified amounts of radio or television time each week during the term of the contracts. The contracts provided that the broadcasting time would be used by the chains only for their own advertising. In exchange therefor the chain stores agreed to conduct a specified number of week-long promotional displays in their stores of products sold therein. The products and dates were not specified in the contracts but rather it was provided that they were to be agreed upon by the parties, the broadcasting companies proffering suggestions, subject to the right of the chains to decline to promote products not deemed by them to be suitable for promotion in their stores. These contracts were made without any prior commitment or agreement involving anyone other than the grocery chains and the broadcasting companies. Following negotiations of this series of contracts, the broadcasting companies solicited petitioners and other manufacturers and sellers of grocery products to purchase radio or television time from them, and, as an added inducement for such purchase, offered in-store promotions of petitioners' products in the chain stores under contract. These promotional plans were variously named "Supermarketing," "Chain Lightning," "Mass Merchandising," and "Sell-A-Vision" and were promoted by means of brochures and circulars stating the details of the offers. The leaflets indicated that purchasers of a minimum amount of radio or television time would be provided, at no extra cost, with a specific number of in-store promotions of their products. The broadcasting companies stated in their brochures that they were able to offer the displays as a result of the firm contractual commitments which they had previously negotiated with specified chain stores. The circulars also emphasized the size of the chains under contract, their annual volume, and the percentage of the retail market that they controlled.
Petitioners entered into contracts for the purchase of broadcasting time, and, although the contracts contained no mention of the in-store promotions and specifically negatived any agreement other than that contained in the written contract,*fn5 they received the benefits of the plans as specifically set forth in the brochures. In fact, in many instances, after notification of the proposed date of a promotion, petitioners contacted the designated chain store for the purpose of arranging the details of the in-store promotional displays. Without exception, those of petitioners' customers who received radio or television advertising time, pursuant to the contracts described herein, were grocery chains in competition in the resale of petitioners' products with other grocery chains and independent customers of petitioners in the same market areas. The latter customers did not receive nor were they offered broadcasting time or anything of value in lieu thereof.
Petitioners deny that they paid anything to or contracted with the broadcasting companies "for the benefit of" a customer within the meaning of Section 2(d) of the Clayton Act. Further, they deny having paid for or supported the furnishing of broadcasting time to the chains and, lastly, deny having adopted or having become a party to the broadcasting companies' sales promotions. It is readily apparent that the arguments overlap and that their determination depends largely upon the Commission's interpretation of Section 2(d) and the stipulated facts.
It is appropriate to keep in mind that administrative interpretations of statutes by agencies charged by Congress with their execution are recognized as having peculiar persuasiveness and weight. National Labor Relations Board v. Hearst Publications, Inc ., 322 U.S. 111 (1944); American Airlines, Inc. v. Civil Aeronautics Board, 178 F.2d 903 (C.A. 7, 1949); Miller Hatcheries, Inc. v. Boyer, 131 F.2d 283 (C.A. 8, 1942). As we recently stated in St. Marys Sewer Pipe Co. v. Director of the U.S. Bureau of Mines, 262 F.2d 378, 381 (C.A. 3, 1959), "Ordinarily, such constructions should be accepted by the courts unless they could not be reasonably or soundly made under the terms of the statute." The agency's interpretation, however, must be consistent with the purposes of the statute for, as Justice Frankfurter states in the recent case of United States v. Shirey, - U.S. - (decided April 20, 1959),
"Statutes, including penal enactments are not inert exercises in literary composition. They are instruments of government, and in construing them 'the general purpose is a more important aid to the meaning than any rule which grammar or formal logic may lay down.' United States v. Whitridge, 197 U.S. 135, 143. This is so because the purpose of an enactment is embedded in its words even though it is not always pedantically expressed in words. See United States v. Wurzbach, 280 U.S. 396, 399. Statutory meaning, it is to be remembered, is more to be felt than demonstrated, see United States v. Johnson, 221 U.S. 488, 496, or, as Judge Learned Hand has somewhere put it, the art of interpretation is 'the proliferation of purpose.'"
The purpose of the section here involved was to eliminate all discriminations under the guise of payments for advertising or promotional services, and Congress employed language that would cover any evasive methods. This is made clear by the statement of Congressman Utterback, chairman of the House conferees, in explaining Sections 2(d) and (e), as follows:
"The existing evil at which this part of the bill is aimed is, of course, the grant of discriminations under the guise of payments for advertising and promotional services which, whether or not the services are actually rendered as agreed, results in an advantage to the customer so favored as compared with others who have to bear the cost of such services themselves. The prohibitions of the bill, however, are made intentionally broader than this one sphere, in order to prevent evasion in resort to others by which the same purpose might be accomplished, and it prohibits payment for such services or facilities, whether furnished 'in connection with the processing, handling, sale, or offering for sale' of the products concerned." 80 Cong. Rec. 9418.
Petitioners' argument when analyzed and stripped to its essentials is basically a plea for reliance upon technical rules of contract law. It asserts, in effect, that since it was not a party to the contracts between the broadcasting companies and the chain stores and that since they preceded its contracts with the broadcasting companies, there is nothing illegal or violative of Section 2(d) in the transactions. On the other hand the Commission refuses to wear blinders and insists that the series of contracts be viewed as a whole. Substance is lent to the Commission's analysis by the presence in this case of a number of brochures or circulars which were utilized by the broadcasting companies. Although it is true that the petitioners' contracts with the broadcasting companies contained no mention of the in-store promotions, they were prominently mentioned in the brochures. These promotions were not only held out as inducements for the purchase of broadcasting time by the petitioners, but were sought and utilized by them.
The petitioners' position is bottomed on the assumption that in deciding whether a violation of the statute has occurred the Commission must restrict itself to an assessment of the consequences which flow from a written contract by the application of formal principles which a court would be required to apply in an action between the contracting parties. If, however, we keep in focus the real question involved, that is, whether the petitioners have made payments to someone which actually are of benefit to their customers and not whether they have bound themselves to do so by a legally enforceable contract, it is readily apparent that petitioners' position is untenable. Certainly, the legal effect of the contracts involved may be relevant to the resolution of the real issue before the Commission, but it does not follow that the Commission must give to those contracts the effect for which the parties to them contend nor that it cannot view them in the setting of all the other evidence relevant to the issue before the Commission.
Petitioners contend here as they did before the Commission that they did not pay or contract to pay to any third person anything of value for the benefit of a customer. In support of this position, petitioners assert that a payment to or contract with a third person is not made for the benefit of a customer within the meaning of Section 2(d) unless the seller makes it with the intention of benefiting the customer or has reason to know that some direct benefit to the customer will proximately result therefrom. No authority for the former proposition is cited, and in fact it conflicts with the statement of counsel for the petitioners, Cyrus ...