Opinion ID: 184858
Heading Depth: 2
Heading Rank: 2

Heading: The Prohibition Against Commercial Bribery Under PACA

Text: 30 Section 2(4) of PACA does not, by its terms, proscribe commercial bribery. Nevertheless, the agency has, on two previous occasions, interpreted the provision to cover activity that falls within the traditional definition of commercial bribery. See In re Tipco, Inc., 50 Agric. Dec. 871, 1991 WL 295153 (1991), aff'd per curiam, Tipco, Inc. v. Yeutter, 953 F.2d 639 (4th Cir.1992) (unpublished table decision), available in 1992 WL 14586; In re Sid Goodman & Co., 49 Agric. Dec. 1169, 1990 WL 320442 (1990), aff'd per curiam, Sid Goodman & Co. v. United States, 945 F.2d 398 (4th Cir.1991) (unpublished table decision), available in 1991 WL 193489. 31 Tipco and Goodman involved very similar facts, as well as some of the same parties. In each case, a wholesale produce dealer paid the purchasing agents of a supermarket chain 25 cents per package of produce bought by the chain, in an effort to induce the agents to buy from that dealer and not a competitor. The dealer then raised the price of each package by 25 cents, in order to cover the payment to the purchasing agents. The purchasing agents' employers--the supermarket chains--were unaware of the payments to their employees and the surcharge that they incurred. The payment schemes resulted in increased sales for the dealer, a kickback for the purchasing agents, and, of course, higher prices for the innocent supermarket chain. In each case, the agency brought complaints against the dealers under PACA, and eventually revoked their PACA licenses, citing flagrant and repeated violations of § 2(4). 32 In Goodman, the first PACA case ever to address allegations of commercial bribery, the Judicial Officer applied the following definition of commercial bribery: 33 [T]he offer of consideration to another's employee or agent in the expectation that the latter will, without fully informing his principal of the gift, be sufficiently influenced by the offer to favor the offeror over other competitors. 34 In re Sid Goodman & Co., 49 Agric. Dec. 1169, 1184, 1990 WL 320442, at  10 (quoting 2 Rudolph Callman, THE LAW OF UNFAIR COMPETITION TRADEMARKS AND MONOPOLIES § 49 (3d ed.1968)). The Judicial Officer went on to make specific findings that the dealer made the payments with the intent to induce the purchasing agents to buy from that dealer as opposed to its competitors, see Goodman, 49 Agric. Dec. at 1187, 1990 WL 320442, at  12, and that the payments were made surreptitiously, i.e., without the knowledge of the purchasing agents' employers, see id. at 1187-88, 1990 WL 320442, at  13. 35 In Tipco, the same Judicial Officer once again made specific findings of both intent to induce, see Tipco, 50 Agric. Dec. at 896, 1991 WL 295153, at  16, and secrecy, see id. at 899, 1991 WL 295153, at  18. Although he did not repeat the definition of commercial bribery that he had used in Goodman, the Judicial Officer in Tipco made it clear that he was relying on the standard he had employed in the previous case. See, e.g., id. at 889, 1991 WL 295153, at  11 ([T]he evidence of record is certain that licensee Tipco made surreptitious payments to its customer's employee to induce the employee to buy, or continue to buy, its produce, certainly, in derogation of its competitors. Under the precepts of the Goodman case, this is enough, in itself, for me to find that respondent Tipco deserves the same sanction for the same violation as found in the Goodman proceeding.). The Fourth Circuit, in unpublished dispositions, upheld the agency's interpretation of § 2(4) in both cases. See Tipco, Inc. v. Yeutter, 953 F.2d 639 (4th Cir.1992) (unpublished table decision), available in 1992 WL 14586; Sid Goodman & Co. v. United States, 945 F.2d 398 (4th Cir.1991) (unpublished table decision), available in 1991 WL 193489. 36 It is clear that the test for commercial bribery employed by the agency in Goodman and Tipco requires a finding of both intent to induce and secrecy. These requirements are not surprising, given that commercial bribery statutes typically contain at least these two elements. See, e.g., N.Y. PENAL LAW §§ 180.00, 180.03 (McKinney 1999) (A person is guilty of commercial bribing ... when he confers, or offers or agrees to confer, any benefit upon any employee, agent or fiduciary without the consent of the latter's employer or principal, with intent to influence his conduct in relation to his employer's or principal's affairs.); 720 ILL. COMP. STAT. ANN. 5/29A-1 (West 1998) (A person commits commercial bribery when he confers, or offers or agrees to confer, any benefit upon any employee, agent or fiduciary without the consent of the latter's employer or principal, with intent to influence his conduct in relation to his employer's or principal's affairs.); see also 2 Rudolph Callman, THE LAW OF UNFAIR COMPETITION TRADEMARKS AND MONOPOLIES § 12.01, at 1 n.0.50; § 12.01, at 8-9 (4th ed.1996 & Supp.1999); BLACK'S LAW DICTIONARY 270 (6th ed.1990) (defining commercial bribery as [a] form of corrupt and unfair trade practice in which an employee accepts a gratuity to act against the best interests of his employer). 37 We do not disagree with the Fourth Circuit that the broad and ambiguous language of § 2(4) can be read to proscribe activity that falls within one of the traditional definitions of commercial bribery described above. Indeed, JSG concedes that commercial bribery is illegal under PACA. See Reply Brief of Petitioner at 4. The issue presented here is whether the agency applied the same commercial bribery standard in the instant case that it applied in both Goodman and Tipco, and, if not, whether it adequately explained its reasons for departing from prior agency precedent. 38