## Facts

- The Federal Trade Commission brought an administrative complaint alleging that Kellogg Company, General Mills, Inc., and General Foods Corporation maintained a “shared monopoly” in the national ready-to-eat (RTE) cereal market.
- During the relevant period (roughly 1958–1972), the three firms accounted for more than 80% of national RTE cereal sales, with high advertising expenditures and extensive branding activity across numerous cereal varieties.
- The FTC asserted that high prices and profits were sustained by entry barriers tied to heavy brand advertising, product proliferation, and retailer trade practices affecting shelf space and promotion.
- The FTC alleged a cluster of exclusionary practices, including: (1) widespread brand and product proliferation to occupy shelf space and consumer segments; (2) large-scale advertising and promotional allowances; (3) use of marketing leverage to secure favorable shelf placement; and (4) an alleged tacit understanding not to produce private-label RTE cereals.
- An Administrative Law Judge (ALJ) issued an initial decision rejecting the FTC’s theory and dismissing the complaint.
- The Commission later declined to overturn the ALJ’s dismissal, and no structural relief (including any break-up) was ordered.

## Issues

1. Whether the respondents’ alleged pattern of product proliferation, advertising, shelf-space practices, and asserted private-label forbearance constituted an unfair method of competition under § 5 of the FTC Act absent proof of an explicit agreement.
2. Whether parallel conduct and oligopolistic interdependence, combined with high concentration and alleged entry barriers, is sufficient to establish a “shared monopoly” violation under § 5.

## Decision

- The ALJ concluded the FTC failed to prove a § 5 violation and dismissed the complaint.
- The Commission did not overturn the ALJ’s dismissal, effectively ending the matter without liability findings or structural remedies.
- The requested relief premised on restructuring the industry was not granted.

## Legal Principles

- A § 5 “shared monopoly” theory requires evidence connecting challenged conduct to unlawful competitive harm; high concentration, high profits, and parallel behavior alone are insufficient.
- Where conduct is plausibly consistent with rational unilateral behavior in a concentrated market, the agency must show more than interdependent decision-making to establish unlawful coordination.
- Product introductions, advertising, and brand development are not unlawful merely because they raise rivals’ costs or complicate entry; they must be shown to function as exclusionary conduct with anticompetitive effect, not ordinary competition.
- Allegations of tacit coordination (including claimed mutual forbearance in private-label production) require evidentiary support beyond inference from market structure and pricing outcomes.

## Conclusion

The proceeding ended with dismissal because the record did not support treating concentrated-market parallelism and aggressive marketing conduct as an unfair method of competition under § 5 without stronger proof of coordinated exclusion or other unlawful concerted action.


In re Kellogg Co., 99 F.T.C. 8 (1982)