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I .40 PERKINS, DANIELS & PERKI'NS. Attorneys & Counsellors At Law 30 Rockefeller Plaza New York 20 April 9, 1945 Federal Trade Commission,. Washington, D. C. Re: P. Lorillard Company-Docket No. 4922. Gentlemen : We have received a letter dated March 26, 1945, signed by Edward L. Smith, Attorney of the Federal Trade Commission, and delivered to us at the direction of Richard P. Whiteley, Assistant Chief Counsel of the Federal Trade Commission. With this letter were enclosed copies of a proposed' supple- mental stipulation in the above entitled procceding. A copy of the letter and of the proposed supplemental stipulation are annexed hereto. We cannot consider entering into the proposed supple- mental stipulation for the following reasons: 1. Beginning in J,anuary of 1944 we, as attorneys for the Respondent, entered into a long series of negotiations with Mr. Smith, Mr. Whiteley and other attorneys of the Federal Trade Commission to reach agreement upon the f acts and to embody them in a stipulation. At least ten conferences between attor- neys f or Respondent and attorneys f or the Commission were held, numerous draf ts of proposed stipulations were tendered to us by the attorneys for the Commission and considerablee correspondence took place between the respective attorneys. Finally, on November 13, 1944, we executed and returned to the attorneys for the Commission the stipulation as to the facts subsequently approved by the Commission. This final stipula- ~ tA ~. ,ta ~ a7 ~ ~

n 41 tion was approved' by Messrs. Smith and Whiteley and was executed by Mr. W. T. Kelley; Chief Counsel of the Federal Trade Commission, under date of November 16, 1944, and was approved by the Federal Trade Comnbission on November 20; 1944. Counsel for Respondent waived formal proof of all exhibits offered in behalf of the Commission and the only charges in the Complaint upon which testimony was taken were those contained in Paragraphs Five and Twelve of the Complaint re- lating to testimonials. Hearings on this issue were had immedi- ately following approvali of the stipulation and, as set forth in the Trial Examiner's Report, "the record' was closed Decem- ber 4, 1944". Thereafter, by a stipulation~ dated January 16, 1945, executed by counsel for Respondent and Richard P. Whiteley,, Assistant Chief Counsel, exceptions to the Trial. Examiner's Report~, presentation of arguments and filing of briefs were waived. This stipulation, which also authorized the! Federal Trade Commission to make its report, state its findings and its conclusions, and enter its order disposing of the pro- ceeding, was approved by the Commission on January 17, 1945. On lA!Iarch~ 20, 1945, onn motion of the ie Counse Iatc March 17; 1945, the Federal Trade Commission issued a rule to show cause why its approval of the stipulations in the above entitled action should not be withdrawn. We take it for granted this means such withdrawat of your approvat as would leave none of the parties to the stipulation in any way bound by it, as we signed! not as a unilateral agreement but only because the other parties to it were to sign it and you were to approve it. Any other way of dealing would be very unf air and was never contemplated by us. 2. There is no claim of discovery of new matter or that any deception has been practiced. This is just a bald attempt to get into the stipulation in this way admissions and conclusions that we specifically refused to put in the stipulation during the nego- tiations because they would have been and are contrary to the facts.

42 The matters contained in the proposed supplemental stipu- lation-and particularly the main point of that stipulation re- lating to the amount of nicotine, tars and resins contained in OLD GoLns and other cigarettes-were repeatedly and thor- oughly discussed during the negotiat~ions preceding the agree- ment on~ and~ execution of the stipulation. This matter of nico- tine, tars and resins was in fact the principal topic of the nego- tiations and its treatment in the stipulation was more carefully considered'than any other point in that~ stipulation. Mr. White- ley and Mr. Thomerson of his office took an active part in these discussions and the final stipulation was arrived at after numer- ous drafts had been rejected by one side or the other. Our posi- tion on this was made perfectly clear to the Chief Counsel's office as early as February 24, 1944, when we wrote: "This statement [referring to the statement in a draft of stipulation submitted to us embodying substan- tiall~ the thought of the present proposed supplemental stipulation] is wholly unacceptable to us and to our client forthe reason that it is not in~accordwith the facts. We cannot recommend that they sign any stipulation embodying that thought in any manner." Our position on this remained the same during all the negoti- ations and~ it was well known to Mr. Wliiteley that we would enter into no stipulation containing any such matter as is in the proposed supplemental stipulation. With~ that full knowledge he approved cxecution~ of the stipulations which he now seeks to have declared null and void. 3. On January 25, 1945, Messrs. Davies, Richberg, Beebe, Busick & Richardson, counsel for R. J. Reynolds Tobacco Com- pany in~ Federal T'rade Commission proceeding, Docket No. 4795, wrote a letter to the Federal Trade Commission suggest- ing that the Commission withhoU its finali order in Respond- ent's proceeding until the Commission had considered and weighed the evidence in the Reynolds proceeding. The Secre- tary of the Commission "by direction of the Commission` in a

43 letter dated January 29, 1945, advised Reynolds' counseli as follows: "In view of the fact that a stipulation of facts cov- ering substantially all' the allegations of the complaint has been entered' into in, the case of P. Lorillard Com- pany, Inc., and in view of its consistent policy under which each case is decided upon its own merits and record, and also in view of the public interest, the Com- mission has decided that it would not: be advisable to postpone final action upon the P. Lorillard Company r, case. We think this position of the Commission entirely correct. We do not understand why the Reynolds Company undertakes to thus interfere in our case. Shortly after this action by the Commission, and~ early in February 1945, Mr. Smith called on us andl stated that he had~ been instructed by Mr. Whiteley to advise us that unless we would execute a supplemental stipulation further covering, Paragraph Nine of the Complaintthe sapulations already ex- ecuted would be set aside by the Commission and the case set down for trial. This advice came as a distinct shock to coun- sel, who were unahle to believe that one in the responsible posi- tion of Assistant Chief Counsel of the Federal Trade Commis- sion would attempt arbitrarily to set aside stipulations that had been entered into after lengthy negotiations, carried on in the~ utmost good faithy where there was no suggestion of fraud or concealment of facts and where there had been no change in the law or the facts. However, at a conference held on Feb- ruary 19, 1945, Mr. Whiteley informed counsel for the Re- spondent that this was indeed the situation andi that unless a supplemental stipulation, to be submitted to us, was signed~ the stipulations already approved by the Commission would be rescinded and we would be so notified. It is indeed fortunate that the unorthodox procedure threatened was supplanted by due process.

44 We have made this letter long and fulll and have addressed it to the Commission rather than to Mr. Smith for the reason that we wish it to be perfectly clear to the Commission, and~ thereby to all, why we cannot and will not enter into the pro- posed supplemental stipulation or negotiate with respect' to it~. So that the Commission may be fully informed, we are attach- ing hereto copies of the l.etters written by counsel for Respond- ent to the attorneys for the Commission and photostats of the correspondence received from counsel for the Commission with reference to the stipulat7onin qucstion, We respectfully re- quest that this letter and the three copies thereof, together with all the exhibits attached thereto, be made a part of the record in the above entitled proceedir,g. Very truly yours, /s/ PERKIluS, DANIELS & PERKINS