The Federal Trade Commission cleared the breakfast cereal case off its table yesterday.
By a three-to-one vote, the FTC dismissed "with prejudice" the renowned nine-year-old case against the three leading manufacturers of ready-to-eat cereal: Kellogg Co., General Mills Inc. and General Foods Corp. The case cannot be brought again.
But the action also prompted FTC member and former chairman Michael Pertschuk to say the move raises questions about "the integrity and propriety" of FTC legal proceedings. Pertschuk said the FTC refused to continue the matter, apparently on the grounds that it would be a waste of resources. "The resources at stake apparently are the costs of a round of briefs," Pertschuk wrote in a dissent.
The case has been heralded as a test of whether federal laws can deal with shared-monopoly allegations, or charges that firms that dominate particular industries violate antitrust laws.
Pertschuk charged that the commission ducked both the case and a significant opportunity to evaluate the possible use of antitrust laws in dealing with concentrated industries.
"This case represents a serious, carefully-thought-out attempt by a no-nonsense, Republican-led commission in 1972 to deal with the problem of a tight oligopoly and a poorly performing industry," he wrote.
Pertschuk said the problem of concentrated industries will increase. and the decision only confirms the agency's unwillingness to tackle a difficult problem. "I view today's decision as a confirmation of the political inability of a commission to see such a case through to the end," he wrote.
Pertschuk was opposed by FTC Chairman James C. Miller and Commissioners David Clanton and Patricia Bailey. Although Clanton, in essence, agreed with the law judge who dismised the suit, saying the commission had not proved its case, Bailey said the relief, or divestiture plan, proposed by the commission staff goes beyond the commission's legal and political mandate.
Bailey voted to close the case because it "will not, in any eventuality, conceivably lead to a restructuring of the cereal firms, she wrote. In fact, she said that for purposes of her analysis, the companies "share monopoly power."
The FTC staff had charged that an alleged industry monopoly between 1958 and 1972 had cost consumers more than $1.2 billion in higher grocery store prices and said the industry, through marketing and other practices, had limited competition.
The case had become a cause celebre in Congress, where industry fears that the break-up of the leading manufacturers might cost Michigan and other grain areas jobs found a ready audience. The case also was complicated by charges, led by the most outspoken defendant, Kellogg Co., that the FTC had improperly rehired a law judge after the judge announced his plans to retire.
Praising the commission's action yesterday, Kellogg Chairman William E. LaMothe said the case "has been an expensive and wasteful cloud hanging over our company and the free enterprise system for nearly a decade."