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ship, so long as they are performed for a common business purpose through unified operation or common control. Further, under the definition the terms "unified operation" and "common control” refer to the performance only of the particular related activities and not to other activities which may be performed by the various persons, corporations or other business organizations, comprising the enterprise. Thus where two or more individuals or business organizations perform certain of their activities through unified operation or common control, these activities will be part of a single enterprise, assuming of course they are related activities performed for a common business purpose. Finally, the definition in section 3(r) makes clear that the described activities

may

be

performed through unified operation or common control "in one or more establishments or by one or more corporate or other organizational units.”

Section 779.216_STATUTORY CONSTRUC

TION OF THE TERMS

such activities” whether performed "in one or more establishments" or "by one or more corporate or other organizational units." Where the Congress intended to exclude certain arrangements or activities from the "enterprise" it did so by specific provision. Section 779.217—“UNIFIED OPERATION”

DEFINED Webster defines the word “unify” to mean “to cause to be one; to make into a unit; to unite.” The pertinent definition of "operation is a method or way of operating, working or functioning. Since the term “unified operation" has reference to the method of performing the related activities, it means combining, uniting, or organizing their performance so that they are in effect a single business unit or an organized business system which is directed to accomplish a common business purpose. The term “unified operation” thus includes a business which may consist of separate segments but which is conducted or operated as a unit or as a single business for a common business purpose. Section 779.218_-METHODS TO ACCOM

PLISH "UNIFIED OPERATION” There are many instances in business where several establishments, persons, corporations or other business organizations, join together to perform some or all of their activities as a unified business or business system. They may accomplish such unification through agreements, franchises, grants, leases, or other arrangements which have the effect of aligning or integrating the activities of one company with the activities of others so that they constitute a single business or unified business system. Whether in any particular case the activities are performed through “unified operation” and have the effect of creating a single enterprise, will depend upon all the facts, including the manner in which the activities are performed, the agreements and arrangements which govern their performance, and the other relationships between the parties, considered in the light of the statutory provision and the legislative intent.

The terms “unified operation” and “common control” do not have a fixed legal or technical meaning. As used in the definition, these and other terms must be given an interpretation consistent with the Congressional intention to be ascertained from the context in which they are used, the legislation of which they form a part, and the legislative history. In extending coverage of the Act on an “enterprise” basis, the Congress intended by the 1961 amendments, to corer, among others, the large business organizations and chain store systems which may perform their related activities through complex business arrangements or business structures, whether they perform their activities for a common business purpose through unified operation or through the retention or exercise of control. For these reasons, the definition of the term "enterprise” is stated in broad general terms. This legislative intent is evidenced both by the statements in the Committee Reports and by the definition itself, particularly the broad references to the inclusion in the "enterprise" of "all

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Section 779.219--UNIFIED OPERATION ious units may operate under a single trade

MAY BE ACHIEVED WITHOUT COM- name; construct their establishments to appear
MON CONTROL OR COMMON OWNER. identical; use identical equipment; sell gener-
SHIP

ally the same goods or provide the same type The performance of related activities through

of services, and, in some cases, at uniform “unified operation" to serve a common business

standardized prices; and in other respects appurpose, may be achieved without common con- pear to the persons utilizing their services or trol and without common ownership. In par

purchasing their goods as being the same busi

ness. They also may arrange for group purticular cases ownership or control of the related activities may be factors to be considered, along

chasing and warehousing; for advertising as a with all facts and circumstances, in determining

single business; and for standardization of their whether the activities are performed through

records, as well as their credit, employment, and

other business policies and practices. In such “unified operation.” It is clear from the definition that if the described activities are per

circumstances the activities may well be performed through unified operation they will be

formed through “unified operation” sufficient

to consider all of the related activities perpart of the enterprise whether they are performed by one company or by more than one

formed by the group of units as constituting corporate or other organizational unit. In fact,

one enterprise, despite the separate ownership the term "unified operation" has reference par

of the various segments and despite the fact that

the individual units or segments may retain ticularly to enterprises composed of a number

control as to some or all of their own activities. of separate companies. Where the related activities are performed by a single company, or

That this is in accord with the congressional

intent is plain, since where the Congress inunder other single ownership, they will ordi

tended that such arrangements shall not bring narily be performed through “common control”, and the question of whether they are also per

a group of certain individual retail or service

establishments into a single enterprise, proviformed through unified operation will not need

sion to be decided.

to accomplish such exception

specifically included. (See section 779.226, disSection 779.220_UNIFIED OPERATION cussing the proviso in section 3(r) with respect

MAY EXIST AS TO SEPARATELY to certain franchise and other specified arrange-
OWNED OR CONTROLLED ACTIVI. ments entered into between independently
TIES WHICH ARE RELATED

owned retail or service establishments and Whether there is unified operation of related

other businesses.) activities will thus be of concern primarily in

Section 779.221-“COMMON CONTROL” those cases where the related activities are sep

DEFINED rately owned or controlled but where, through arrangement, agreement or otherwise, they are Under the definition the "enterprise" includes so performed as to constitute a unified business all related activities performed through “comsystem organized for a common business pur

mon control” for a common business purpose. pose. For example, a group of separately in- The word "control" may be defined as the act corporated, separately owned companies, may or fact of controlling; power or authority to agree to conduct their activities in such manner control; directing or restraining domination. as to be for all intents and purposes a single

The word "control" thus includes the power or business system except for the fact that the authority to control. In relation to the perownership and control of the individual seg

formance of the described activities, the word ments of the business are retained, in part or

"control”, under the definition in section 3(r), in whole, by the individual companies com

includes the power to direct, restrict, regulate, prising the unified business system. The var- govern, or administer, the performance of the

was

activities. “Common" control means the shar- trol" referred to in the definition. It is clear ing of control and it is not limited to sole con- from the Act and the legislative history that the trol or complete control by one person or cor- Congress did not intend that such a chain orporation. "Common" control therefore exists

ganization should escape the effects of the law where the performance of the described activi- with respect to any segment of its business ties are controlled by one person or by a number merely by separately incorporating or otherwise of persons, corporations, or other organizational dividing the related activities performed for a units acting together. This is clearly sup- common business purpose. ported by the definition which specifically in

Section 779.223–CONTROL WHERE cludes in the "enterprise” all such activities

OWNERSHIP VESTED IN INDIVIDwhether performed by “one or more corporate

UAL OR SINGLE ORGANIZATION or other organizational units.”

Ownership, sufficient to exercise "control,” of Section 779.222--OWNERSHIP AS FACTOR

course, exists where total ownership is vested in As pointed out in section 779.215 “unified op- a single person, partnership, corporation, or eration" and "common control" do not refer to other single business organization. Ownership the ownership of the described activities but sufficient to exercise control" exists also where only to their performances. It is clear, however, there is 51 percent ownership of voting stock. that ownership may be an important factor in But "control" may exist with much more limited determining whether the activities are per- ownership, and, in certain cases, exists in the formed through “unified operation or common absence of any ownership. The mere ownership control.” Thus common control may exist where of stock in a corporation does not by itself estabthere is common ownership. Where the right to lish the existence of the “control” referred to in control, one of the prerogatives of ownership, the definition. The question whether the ownerexists, there may be sufficient "control” to meet ship in a particular case includes the right to the requirements of the statute. Ownership, or exercise the requisite "control” will necessarily sufficient ownership to exercise control, will be depend upon all the facts in the light of the regarded as sufficient to meet the requirement statutory provisions. of "common control". Where there is such

Section 779.224-COMMON CONTROL IN ownership, it is immaterial that some segments

OTHER CASES of the related activities may operate on a semiautonomous basis, superficially free of actual (a) As stated in section 779.215 "common control, so long as the power to exercise control

control" may exist with or without ownership. exists through such ownership. For example, In such cases, the actual control of the performa parent corporation may operate a chain of re- ance of the related activities is sufficient to estailor service establishments which, for business tablish the "control” referred to in the definireasons, may be divided into several geographic tion. In some cases an owner may actually units. These units may have certain autonomy relinquish his control to another, or by agreeas to purchasing, marketing, labor relations and

ment or other arrangement, he may so restrict other matters. They may be separately incor- his right to exercise control as to abandon the porated, and each unit may maintain its own control or to share the control of his business records, including records of its profits or losses. activities with other persons or corporations. All the units together, in such a case, will con- In such a case, the activities may be performed stitute a single enterprise with the parent cor- under "common control”. In other cases, the poration. They would constitute a single busi

power to control may be reserved through ness organization under the "common control”

agreement or arrangement between the parties of the parent corporation so long as they are so as to vest the control of the activities of one related activities performed for a common busi- business in the hands of another. ness purpose. The common ownership in such (b) Activities are considered to be performed cases provides the power to exercise the "con- under "common control” even if, because of the

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particular methods of operation, the power to (c) Since the definition specifically includes
control is only seldom used, as where the busi- in the "enterprise”, for the purpose of this Act,
ness has been in operation for a long time with- "departments of an establishment operated
out change in methods of operation and through leasing arrangements”, any such de-
practically no actual direction is necessary; also partment will be considered a part of the enter-
common control may exist where the control, al- prise in the absence of special facts and circum-
though rarely visibly exercised, is evidenced by stances warranting a different conclusion.
the fact that mere suggestions are adopted (d) Whether, in a particular case, the rela-
readily by the business being controlled.

tionship is such as to constitute the lessee's op(c) In the retail industry, particularly, there eration to be a separate establishment rather are many instances where, for business reasons, than a "leased department” as described in the related activities performed by separate com- definition, will depend upon all the facts includpanies are so unified or controlled as to con- ing the agreements and arrangements between stitute a single enterprise. A common example, the parties as well as the manner in which the specifically named in the definition, is the leased operations are conducted. If, for example, the department. This and other examples are dis- facts show that the lessee occupies a physically cussed in sections 779.225 through 779.235.

separate entrance, and operates under a separate

name, with his own separate employees and recVARIOUS BUSINESS

ords, and in other respects conducts his business ARRANGEMENTS

independently of the lessor's, the relationship

of the parties may be only that of landlord and Section 779.225_LEASED DEPARTMENTS tenant. In such a case, the lessee's operations (a) As stated in section 3(r), the enterprise

will not be regarded as a "leased department” includes "departments of an establishment op

and will not be included in the same enterprise erated through leasing arrangements.” This

with the lessor. statutory provision is based on the fact that

Section 779.226_EXCEPTION FOR AN ordinarily the activities of such leased depart- INDEPENDENTLY OWNED RETAIL ments are related to the activities of the estab

OR SERVICE ESTABLISHMENT lishment in which they are located, and they are UNDER CERTAIN FRANCHISE AND performed for a common business purpose either

OTHER ARRANGEMENTS through “unified operation" or "common

While certain franchise and other arrangecontrol.” (b) In the ordinary case, the establishment

ments may operate to bring the one to whom

the franchise is granted into a large enterprise may control many of the operations of the leased department and unify its operation with its own.

(see section 779.232), section 3(r) contains a Thus, they may operate under a common trade

specific exception for certain arrangements enname; the establishment may determine, or have

tered into by a retail or service establishment

which is under independent ownership. The the power to determine, the leased department's space location, the type of merchandise it will

specific exception in section 3(r) reads as

follows:
sell, its pricing policy, its hours of operation
and some or all of its hiring, firing and other

Provided, That, within the meaning of this subsec

tion, a retail or service establishment which is under personnel policies; advertising, adjustment and

independent ownership shall not be deemed to be so credit operations, may be unified, and insurance,

operated or controlled as to be other than a separate taxes, and other matters may be included as a

and distinct enterprise by reason of any arrangement, part of the total operations of the establishment. which includes, but is not necessarily limited to, an Some or all of these and other functions, which

agreement, (1) that it will sell, or sell only, certain are the normal prerogatives of an independent

goods specified by a particular manufacturer, distribu

tor, or advertiser, (2) that it will join with other such businessman, may be controlled or unified with

establishments in the same industry for the purpose the store's other activities in such a way as to

of collective purchasing, or (3) that it will have the constitute a single enterprise under the Act. exclusive right to sell the goods or use the brand name

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of a manufacturer, distributor, or advertiser within

chasing arrangement must be “in the same ina specified area, or by reason of the fact that it oc

dustry." This has reference to such arrangecupies premises leased to it by a person who also

ments by a group of grocery stores, or by some leases premises to other retail or service establish

other trade group in the retail industry. ments. Section 779.227-CONDITIONS WHICH

(d) Any arrangement whereby the establish

ment's premises are leased from a person who MUST BE MET FOR EXCEPTION

also leases premises to other retail or service This exception, in accordance with its specific establishments. In connection with this rental terms, will apply only if the following condi

arrangement, the Senate Report cites as an tions are met:

example the retail establishment which rents (a) The establishment must be a "retail or its premises from a shopping center operator service establishment” as this term is defined

(S. Rept. 145, 87th Cong., 1st Sess., p. 41). It in section 13(a) (2) of the Act (see discussion is clear that this exception was not intended to of this term in sections 779.312 and 779.313); apply to the usual leased department in an and

establishment, which is specifically included (b) The retail or service establishment must within the larger enterprise under the definition not be an "enterprise” which is large enough to of section 3(r). (See discussion under section come within the scope of section 3(s) of the Act; 779.225.) and

Section 779.229-OTHER (c) The retail or service establishment must

ARRANGEMENTS be under independent ownership.

With respect to those arrangements specifiSection 779.228_TYPES OF ARRANGE

cally described in the proviso contained in the MENTS CONTEMPLATED BY EXCEP.

definition, an independently owned retail or TION

service establishment will not be considered to If the retail or service establishment meets

be other than a separate and distinct enterprise, the requirements in paragraphs (a) through

if other arrangements the establishment makes (c) of section 799.227, it may enter into the fol

do not have the effect of bringing the establishlowing arrangements without becoming a part

ment within a larger enterprise. Whether or of the larger enterprise, that is, without losing

not other arrangements have such an effect will its status as a "separate and distinct enterprise”:

necessarily depend upon all the facts. The

Senate Report makes the following observations (a) Any arrangement, whether by agreement, franchise or otherwise, that it will sell, or sell with respect to this: only certain goods specified by a particular Thus the mere fact that a group of independently manufacturer, distributor, or advertiser.

owned and operated stores join together to combine

their purchasing activities or to run combined adver(b) Any such arrangement that it will have

tising will not for these reasons mean that their activithe exclusive right to sell the goods or use the

ties are performed through unified operation or combrand name of a manufacturer, distributor, or

mon control and they will not for these reasons be advertiser within a specified area.

considered a part of the same "enterprise". This is (c) Any such arrangement by which it will also the case in food retailing because of the great join with other similar retail or service estab- extent to which local independent food store operators lishments in the same industry for the purpose

have joined together in many phases of their business.

While maintaining their stores as independently owned of collective purchasing. Where an agreement

units, they have affiliated together not just for the purfor “collective purchasing" is involved, further

chasing of merchandise, but also for providing numerrequirements are imposed, namely, that all of ous other services such as (1) central warehousing ; the other establishments joining in the agree- (2) advertising; (3) sales promotions; (4) managerial

advice; (5) store engineering; (6) accounting sysment must be retail or service establishments

tems; (7) site location; and (8) hospitalization and under independent ownership, and that all of

life insurance protection. (S. Rept. 145, 87th Cong., the establishments joining in the collective pur- 1st Sess., p. 42.)

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