Dividing the Loaf

Two years after scandals that enveloped it during 1972, ITT Corp., the giant multinational conglomerate, finds itself in a new scrape. Last week the Federal Trade Commission charged that the ITT Continental Baking Co. Inc., a subsidiary and the nation's biggest baker, had engaged in illegal pricing practices to monopolize markets for its Wonder bread. The FTC asked that Continental be divided into two or more separate firms; in effect, ITT would have to sell off half of the subsidiary.

The FTC and Continental are old antagonists; in 1971 the agency charged that Continental was misleading the public when it implied that Wonder bread was something special, in ads that claimed the loaf "helps build strong bodies twelve ways." Now the agency accuses ITT management of nagging Continental to build itself up too rapidly; James Halverson, director of the FTC'S Bureau of Competition, says that "ITT set profit and market goals for ITT Continental that forced the subsidiary to adopt predatory practices." According to the FTC complaint, Continental practiced a classic monopolistic scheme: it would use high profits from areas where competition was weak to subsidize below-cost sales of Wonder bread in cities where it faced a strong competitive challenge; then, when rivals were driven out of business, it would jack up prices again.

During 1972 and early 1973, Halverson says, 43 wholesale bakers operating 80 plants went out of business in the U.S., and Continental's tactics "contributed substantially" to their downfall. ITT Continental issued a formal denial of the charges, but would say nothing further.

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