Affiliated Foods, Inc. - Page 6

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          FMA indicated that petitioner could earn promotional funds by:              
          putting a price reduction into effect during the previous 30                
          days; making a special distribution of cases to retail outlets;             
          or making a special purchase (direct or indirect).                          
               Under the Cooperative Merchandising Agreement (CMA) with               
          P&G, P&G created a promotional account for each brand listed in             
          the agreement; e.g., Ivory bar soap, Top Job, Spic & Span, and              
          Bounce.  The amount paid into the promotional account for each              
          quarter was determined by multiplying 34 cents by the number of             
          cases of the specified brands shipped to petitioner during the              
          base period, which was defined as the same quarter during the               
          previous year.  Petitioner could use the entire amount in the               
          promotional account, under payment terms set forth in the CMA,              
          for print, broadcast, display, or outdoor billboard advertising.            
          The payment terms varied.  For example, if petitioner performed             
          in print media, petitioner would be entitled to "cost plus 50%              
          for advertising overhead expense," or, as an alternative, it                
          could "elect to be paid at the rate of $1.00 per physical case              
          distributed to stores in support of a feature on the Brands in              
          the Merchandiser's best print medium used for any item during the           
          period of the sale."  In addition, petitioner was entitled to use           
          up to 20 percent of the promotional account for other activities            
          in the amounts specified in the CMA; for example, petitioner                

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Last modified: May 25, 2011