It is an unfair trade practice for any member of the industry to contract to sell or sell any industry product, or fix a price charged therefor, or discount from, or rebate upon, such price, on the condition, agreement, or understanding that the purchaser thereof shall not use or deal in the products of a competitor or competitors of such industry member, where the effect of such sale or contract for sale, or of such condition, agreement, or understanding, may be substantially to lessen competition or tend to create a monopoly in any line of commerce. [Rule 211

DEAR DOCTOR: I am enclosing a copy of the final judgment which has been approved by the Court and entered in this case. Certain provisions of this judgment are binding upon you as a defendant class doctor and therefore this letter, which has been approved by the Court, is being written to you, in order that you may understand why the Judgment is binding upon you, as well as the purpose and effect of the judgment, as it affects you.

Final judgments containing identical provisions forbidding doctors from sharing profits connected with the sale of glasses have been approved and entered in all six of the "Optical Rebating" cases which were brought by the Government. These cases are United States v. Bausch & Lomb Optical Company et al., United States American Optical Company et al., United States v. House of Vision-Belgard-Spero, Inc., et al., United States v. Uhlemann Optical Company et al. (all filed in Chicago), United States v. N. P. Benson Optical Com

V.

pany et al. (filed in Minneapolis, Minnesota), and United States v. The WhiteHaines Optical Company et al. (Filed in Columbus, Ohio). These six final judgments directly bind you, and the approximately 4,000 other doctors who were sued in those cases. These judgments were entered with the consent of the parties who had signed them (and for that reason frequently are called "consent decrees"), but they have the same binding effect as a judgment entered by the Court after trial.

When the complaints in this case and the related cases were first filed, the Government anticipated trying them in court. A date was set by the Court for the trial of the first of these cases and the Government made extensive preparations for trial in all six cases. Counsel representing the defendants in the various cases then opened negotiations with the Government with a view to disposing of the cases by consent instead of undergoing what undoubtedly would be lengthy trials. The final judgment which you now have is the result of negotiations which extended over a period of more than two years.

As you know, this case and the five other Optical Rebating cases are "class actions." Only a selected number of doctors (in no one case more than 30) were named in each of the complaints that were filed in the cases, but those were chosen as being representative of a much larger "class" of doctors. This is the authorized procedure where a number of persons sued in a case is large. Clearly it would have been impractical to name as individual defendants the approximately 4,000 doctors who we knew had received rebates and to require each one of them to appear in court to file answers and otherwise defend themselves in the suits.

All of the doctors in this case who were sued individually and as representatives of the "class doctors" have consented to the entry of this final judgment. Of the 75 doctors who were sued as representatives of the class doctors in the six cases, all have agreed to the entry of similar judgments. In each of the six cases a considerable number of "class doctors," i.e., those not named as individual defendants in the complaint, voluntarily filed statements submitting to the jurisdiction of the court and agreeing to be bound by whatever judgment might be entered. The remaining "class doctors" were served with "show cause orders" which informed the doctor as to his status in this case. These "show cause orders" also gave him the right, if he objected to being represented by the doctors named as representative defendants in the complaint or to being bound by a final judgment entered in the case, to answer the complaint and defend himself as an individual defendant. It is noteworthy that not a single doctor of the 4,000 involved in the six cases availed himself of the "day in court" afforded by the show cause order.

Over two years after the show cause orders were issued, one doctor (who shortly thereafter died and whose position was assumed by two doctors) filed a motion attacking the theory and operation of the class action in this case and seeking to have this case dismissed as to all "class doctors." The Court denied the motion and upheld the class suit as being a valid and proper one. A copy of the Court's memorandum opinion on that question is sent you herewith. Considering all the foregoing, it is the Government's opinion that the final judgment in this case is as binding on you as if you had been personally present in court as an individual defendant and had in that capacity given your assent to its entry against you.

Your attention is called particularly to paragraph III of this final judgment and to the relevant definitions contained in paragraph II. These are the provisions which will probably be of greatest interest to you and the other doctors. Paragraph III is the order of the Court enjoining the individual and class defendant doctors from accepting, directly or indirectly, from any dispenser any payment, however described, arising out of or connected with dispensing to any person and further enjoining any entry into or participation in any plan, arrangement, or scheme under which any defendant doctor receives any such payment from any dispenser.

The final judgment does not prevent you from following the normal professional practice and procedure of prescribing lenses for your patients and giving the prescription to the patient, who then takes the prescription to an optical supply company (dispensing optician) to be filled. The optical supply company then fulfills the purely business function of filling the prescription, selling the glasses to the patient, and making the necessary fitting of the glasses to the patient's face. Doctors continue to be free to follow this procedure. They are, of course, subject to those provisions in the final judgment which prohibit the rebating practice in all its forms.

In our opinion, the provisions of this final Judgment would not prevent any individual doctor from doing his own dispensing in his own professional offices (either himself or through a bona fide full time employee) to his own patients only. The same holds true as to doctors who operate through a partnership for purely professional purposes, or in a clinic, or through other similar arrangements involving the occupancy by the doctors In the group of common, or contiguous and inter-connected professional office space, and the sharing of such common facilities as the reception room, telephone operator, receptionist, stenographic help, and the like. Such "group practice" doctors could likewise share in the common utilization of the services of a bona fide employee of such doctors who does dispensing to the patients of such doctors only, in the professional offices of such doctors.

It is clear to us, however, that the individual doctors or "group practice" doctors as described above, who do their own dispensing or use a bona fide employee to do such dispensing to patients of such doctors only, could not enter into any agreement or understanding or concert of action with any other persons, including other doctors or other dispensers, with respect to the prices to be charged for the spectacles and parts thereof dispensed.

It is also clear to us that all forms of arrangements between doctors (other than the above arrangements associated with "group practice"), directed at setting up or utilizing a dispenser whose services shall be shared by more than one doctor and from whom such doctors derive any payments arising out of or connected with such dispensing to their patients, whether such payment be in the form of or regarded as a rebate, credit, credit balance, gift, dividend, participation in or share in profits or otherwise, would be prohibited under the decree. Sincerely yours,

H. G. MORISON,
Assistant Attorney General.
By WILLIS L. HOTCHKISS,
Chief, Midwest Office
Antitrust Division.

(TEXT OF DEPARTMENT'S SEPTEMBER 24, 1951,
LETTER PERTAINING ΤΟ INVESTMENT BY
DOCTORS IN CORPORATIONS ENGAGED IN
DISPENSING)

Your second inquiry concerns the applicability of the Judgments to the investment by doctors in corporations engaged in dispensing. The situation which you describe may be summarized as follows:

Four doctors and a layman form a corporation which is to engage in optical dispensing. Each of these persons pays $2,000 for 20% of the stock. The doctors direct their patients to the company without disclosing their ownership interest therein. Each doctor and the layman receives dividends proportionate to the amount of stock held by each, without regard to the number of referrals. The doctor-stock-holders "have no connection whatsoever with the prices charged."

It is not our general practice to give our construction of a consent judgment except with respect to the facts of specific and identified cases involving parties to the judgment. However, it is our view that the "stock investment" plan outlined in the preceding paragraph would be in violation of the Optical Rebating Judgments. Sincerely yours,

H. G. MORISON, Assistant Attorney General. (TEXT OF DEPARTMENT'S SEPTEMBER 10, 1951, LETTER ON CHARGE AND SEND PLANS)

Since receiving your letter requesting an opinion on the question whether the final

judgment in this case applies to the type of "charge and send" plan you describe, we have had a number of inquiries relating to variations of the same plan asking whether such plans are permissible under the final judgments entered in the optical rebating cases. These inquiries have provided us with considerable information on the operation and effect of the various plans.

The basic "charge and send" plan consists of the following procedure:

(a) the doctor makes a refraction for which he charges the patient a professional fee, writes a prescription, and sends the patient to a designated optical house to have it filled;

(b) the optical house makes the necessary measurements, displays the frames and mountings from which the patient makes his selection, quotes the patient the consumer price for the finished glasses, grinds the lenses to the prescription and mounts them;

(c) the patient later returns to the optical house to have the glasses fitted and adjusted, and the optical house then sends the glasses to the doctor rather than turning them over to the patient;

(d) the patient returns to the doctor who turns the glasses over to the patient and collects the consumer price for them, remits to the optical house the wholesale price plus the fitting fee, and retains for himself the difference between that amount and the consumer price.

You have described a variant whereby the doctor would keep a case of sample frames in his professional office from which the patient would make his selection, with the doctor then quoting to the patient the consumer price.

It is our opinion that the basic "charge and send" plan is prohibited under the optical rebating judgments. The same is true as to the variations which you describe, and those variations similar thereto, such as the "C.O.D. charge and send." Each of these procedures constitutes a plan, arrangement, or scheme whereby the doctor obtains a financial return arising out of cr connected with dispensing to his patient, with the doctor performing no real function in the dispensing procedure other than collecting the consumer price. The procedures accomplish by indirection, and by a complex and artificial procedure, what was done directly and simply under the old rebate system. The procedures therefore come under the prohibition of the final judgments in this and the related optical rebating cases.

Sincerely yours,

H. G. MORISON,
Assistant Attorney General.
By WILLIS L. HOTCHKISS,

Chief, Midwest Office
Antitrust Division.

193.3

193.4

193.5

193.6 193.7

193.8

193.9

193.10

193.11

193.12

193.13

(unlawful price fixing, etc.).

Prohibited sales below cost.
Exclusive deals.

Coercing purchase of one product
as a prerequisite to the purchase
of other products.

Consignment distribution.

Unfair threats of infringement suits.
Inducing breach of contract.

Substitution of products.

False invoicing.

Commercial bribery.

Enticing away employees of competitors.

Defamation of competitors or false disparagement of their products. 193.14 Procurement of competitors' confidential information by unfair means and wrongful use thereof. Deceptive use and imitation of trade or corporate names, trade-marks, etc.

193.15

For the purpose of this part, the following definitions apply:

(a) "Member of the industry” (or “industry member”), shall mean any person, firm, corporation or organization engaged in the manufacture, assembly, or distribution and marketing of industry products.

(b) "Industry product," shall mean a slide fastener (commonly called "zipper"), as the term slide fastener is hereinafter defined, or any component part or parts thereof, including stringers, fastener chains, sliders, pulls, bottom and top stops, and separating end components.

(c) "Slide fastener," shall mean a pair of fastener stringers, each having a series of cooperating fastener elements, portions, or scoops arranged along their adjacent longitudinal edges, or a continuous portion arranged along the

longitudinal edge of one stringer which interlocks with a continuous portion along the longitudinal edge of the opposite stringer, with a slider mounted thereon for opening and closing the fastener, and with or without end stops to limit the movement thereof.

§ 193.1 Prohibited discrimination.1

(a) Prohibited discriminatory prices, rebates, refunds, discounts, credits, etc., which effect unlawful price discrimination. It is an unfair trade practice for any member of the industry engaged in commerce, in the course of such commerce, to grant or allow, secretly or openly, directly or indirectly, any rebate, refund, discount, credit, or other form of price differential, where such rebate, refund, discount, credit, or other form of price differential, effects a discrimination in price between different purchasers of goods of like grade and quality, where either or any of the purchases involved therein are in commerce, and where the effect thereof 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: Provided, however:

(1) That the goods involved in any such transaction are sold for use, consumption, or resale within any place under the jurisdiction of the United States, and are not purchased by schools, colleges, universities, public libraries, churches, hospitals, and charitable institutions not operated for profit, as supplies for their own use;

NOTE: Purchases by U. S. Government: In an opinion submitted to the Secretary of War under date of December 28, 1936, the U. S. Attorney General advised that the Robinson-Patman Antidiscrimination Act "is not applicable to Government contracts

'As used in this section, the word "commerce" means "trade or commerce among the several States and with foreign nations, or between the District of Columbia or any Territory of the United States and any State, Territory, or foreign nation, or between any insular possessions or other places under the jurisdiction of the United States, or between any such possession or place and any State or Territory of the United States or the District of Columbia or any foreign nation, or within the District of Columbia or any Territory or any insular possession or other place under the jurisdiction of the United States."

for supplies." (38 Opinions, Attorney General 539.)

(2) That nothing contained in this paragraph shall prevent differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which such commodities are to such purchasers sold or delivered;

NOTE 1: Cost justification to be based on net savings in cost of manufacture, sale or delivery. Cost justification under the above proviso depends upon net savings in cost based on all facts relevant to the transac tions under the terms of subparagraph (2) of this paragraph. For example, if a seller regularly grants a discount based upon the purchase of a specified quantity by a single order for a single delivery, and this discount is justified by cost differences, it does not follow that the same discount can be cost justified if granted to a purchaser of the same quantity by multiple orders or for multiple deliveries.

NOTE 2: Credit or refund for returned goods. In determining whether a price differential based on cost savings under the above proviso is warranted there shall be taken into account any portion of the goods involved which are returned by the customer-purchaser to the seller for credit or refund. See also Note 2 under paragraph (e) of this section.

(3) That nothing contained in this section shall prevent persons engaged in selling goods, wares, or merchandise in commerce from selecting their own customers in bona fide transactions and not in restraint of trade;

(4) That nothing contained in this paragraph shall prevent price changes from time to time where made in response to changing conditions affecting the market for or the marketability of the goods concerned, such as but not limited to obsolescence of seasonal goods, distress sales under court process, or sales in good faith in discontinuance of business in the goods concerned;

(5) That nothing contained in this section shall prevent the meeting in good faith of an equally low price of a competitor.

NOTE: See subsection (b) of section 2 of the Clayton Act as amended, which is set forth in the note following paragraph (g) of this section.

(b) The following are examples of price differential practices to be considered as subject to the prohibitions of pargaraph (a) of this section when in

volving goods of like grade and quality which are sold for use, consumption, or resale within any place under the jurisdiction of the United States, and which are not purchased by schools, colleges, universities, public libraries, churches, hospitals, and charitable institutions not operated for profit, as supplies for their own use, and when,

(1) The commerce requirements specified in paragraph (a) of this section are present; and

(2) The price differential has a reasonable probability of substantially lessening competition or tending to create a monopoly in any line of commerce, or of injuring, destroying, or preventing competition with the industry member or with the customer receiving the benefit of the price differential, or with customers of either of them; and

(3) The price differential is not justified by cost savings (see paragraph (a) (2) of this section); and

(4) The price differential is not made in response to changing conditions affecting the market for or the marketability of the goods concerned (see paragraph (a) (4) of this section); and

(5) The lower price was not made to meet in good faith an equally low price of a competitor (see paragraph (a) (5) of this section).

Example 1. At the end of a given period an industry member grants a discount to a customer equivalent to a fixed percentage of the total of such customer's purchases during the period and fails to grant a discount of the same percentage to all other customers during such period.

Example 2. An industry member sells goods to one or more of his customers at a higher price than he charges other customers for like merchandise. It is immaterial whether the goods sold at the lower price are classified by the industry member as "seconds," "secondary line," "rejects," or are otherwise represented by the industry member as inferior, if the goods are in fact of like grade and quality as the goods sold at the higher price.

Example 3. Terms of 2 percent 10 days are granted by an industry member to some customers on goods purchased by them from the industry member. Another customer or customers are, nevertheless, allowed to take a 5 percent instead of a 2 percent discount when making payment to the industry member within the time prescribed.

Example 4. An industry member sells goods to one or more of his customers at a lower price than he charges other customers

2 See also note under subparagraph (1) of paragraph (a) of this section.

therefor, basing his justification for the price difference solely on the fact that the goods sold at the lower price bear the private brand name of customers.

Example 5. An industry member invoices goods to all his customers at the same price but supplies additional quantities of such goods at no extra charge to one or more, but not to all, such customers; or supplies other goods or premiums to one or more, but not to all, such customers for which he makes no extra charge and which effects an actual price difference in favor of certain of his customers.

NOTE: As previously indicated, the foregoing are examples of practices to be considered violative of the prohibitions of paragraph (a) of this section when involving goods of like grade and quality and when not subject to the other exemptions, exclusions, or defenses set forth in this paragraph.

(c) Prohibited brokerage and commissions. It is an unfair trade practice for any member of the industry engaged in commerce, in the course of such commerce, to pay or grant, or to receive or accept, anything of value as a commission, brokerage, or other compensation, or any allowance or discount in lieu thereof, except for services rendered in connection with the sale or purchase of goods, wares, or merchandise, either to the other party to such transaction or to an agent, representative, or other intermediary therein where such intermediary is acting in fact for or in behalf, or is subject to the direct or indirect control, of any party to such transaction other than the person by whom such compensation is so granted or paid.

(d) Prohibited advertising or promotional allowances, etc. It is an unfair trade practice for any member of the industry engaged in commerce to pay or contract for the payment of advertising or promotional allowances or any other thing of value to or for the benefit of a customer of such member 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 member, unless such payment or consideration is available on proportionally equal terms to all other customers competing in the distribution of such products or commodities.

NOTE 1: Industry members giving allowances for advertising or sales promotion must, in addition to according same to all competing customers on proportionally equal terms,