UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


JSG TRDG CORP

v.

AGRI


98-1342a

D.C. Cir. 1999


*	*	*


Edwards, Chief Judge: On an appeal from a decision of an 
Administrative Law Judge ("ALJ"), a Judicial Officer of the  United
States Department of Agriculture ("USDA") deter- mined that petitioner
JSG Trading Corporation ("JSG") had  violated s 2(4) of the Perishable
Agricultural Commodities  Act ("PACA" or "Act"), 7 U.S.C. s 499b(4),
by making a  series of payments to the purchasing agents of two
separate  tomato buyers, L&P Fruit Corporation ("L&P") and Ameri- can
Banana, at a time when those agents were buying toma- toes from JSG on
behalf of their respective employers. The  Judicial Officer
subsequently revoked JSG's license to deal in  perishable agricultural


In this petition for review, JSG challenges the revocation of  its
license, alleging that the Judicial Officer was proceeding  from an
incorrect legal premise, namely, that any payment by  a produce dealer
to a purchasing agent above a de minimis  level constitutes
"commercial bribery" in violation of s 2(4) of  PACA. JSG argues that
this per se standard represents a  marked departure from prior agency
precedent, and that the  case should be remanded for factual findings
in accordance  with the correct legal standard.


We agree that, in adopting a per se standard to measure  commercial
bribery, the Judicial Officer departed from well  established
precedent without adequate justification. We  therefore remand the
case to the agency, so that it may either  attempt to justify its
creation of a new, per se standard or  make explicit factual findings
pursuant to established law.


I. Background


A. Statutory and Regulatory Background


"Congress enacted PACA in 1930 in an effort to assure  business
integrity in an industry thought to be unusually 


prone to fraud and to unfair practices." Tri-County Whole- sale Produce
Co. v. USDA, 822 F.2d 162, 163 (D.C. Cir. 1987).  A later Congress
summarized the purpose of PACA as fol- lows:


[PACA] is admittedly and intentionally a "tough" law. It  was enacted
in 1930 for the purpose of providing a  measure of control and
regulation over a branch of  industry which is engaged almost
exclusively in inter- state commerce, which is highly competitive, and
in  which the opportunities for sharp practices, irresponsible 
business conduct, and unfair methods are numerous.  The law was
designed primarily for the protection of the  producers of perishable
agricultural products--most of  whom must entrust their products to a
buyer or commis- sion merchant who may be thousands of miles away, and
 depend for their payment upon his business acumen and  fair
dealing--and for the protection of consumers who  frequently have no
more than the oral representation of  the dealer that the product they
buy is of the grade and  quality they are paying for.


S. Rep. No. 84-2507, at 3 (1956). "[T]he goal of ... [PACA is]  that
only financially responsible persons should be engaged in  the
businesses subject to the Act." Finer Foods Sales Co. v.  Block, 708
F.2d 774, 782 (D.C. Cir. 1983) (citations and  internal quotation
marks omitted). To achieve this end, the  Act requires persons who buy
or sell significant quantities of  perishable agricultural commodities
at wholesale in interstate  commerce to have a license issued by the
Secretary of  Agriculture. See 7 U.S.C. s 499c.


Section 2 of the Act makes unlawful a number of activities  by
licensees. See id. s 499b. Relevant here is s 2(4), which  makes it
unlawful for any commission merchant, dealer, or  broker, in any
transaction involving any perishable agricultur- al commodity, to,
inter alia, "fail, without reasonable cause, to  perform any
specification or duty, express or implied, arising  out of any
undertaking in connection with any such transac- tion." Id. s


In 1995, PACA was amended to establish that certain  payments were not
illegal under s 2(4). Specifically, the  following sentence was added
to s 2(4):


However, this paragraph shall not be considered to make  the good faith
offer, solicitation, payment, or receipt of  collateral fees and
expenses, in and of itself, unlawful  under this chapter.


Perishable Agricultural Commodities Act Amendments of  1995, Pub. L.
No. 104-48, s 9(b)(3), 109 Stat. 424, 430 (1995)  (codified as amended
at 7 U.S.C. s 499b(4)). The term  "collateral fees and expenses" was
defined as


any promotional allowances, rebates, service or materials  fees paid or
provided, directly or indirectly, in connection  with the distribution
or marketing of any perishable  agricultural commodity.


Pub. L. No. 104-48, s 9(a), 109 Stat. 424, 429-30 (1995)  (codified as
amended at 7 U.S.C. s 499a(b)(13)).


Upon a determination that a commission merchant, dealer,  or broker has
violated one of the provisions of s 2, the Act  authorizes the
Secretary of Agriculture to publish the facts  and circumstances of
the violation, and suspend the offender's  PACA license for up to
ninety days. See 7 U.S.C. s 499h(a).  The Secretary may revoke the
license if the violation is  "flagrant or repeated." Id.


B. Factual Background


JSG is a New Jersey corporation in the business of buying  and selling
produce. In 1988, JSG was issued a PACA  license, and that license was
renewed annually thereafter.  Beginning in January 1992, Steve Goodman
served as JSG's  president and controlled 75 percent of the company's
stock.  At all relevant times, Mr. Goodman was JSG's sole tomato 
buyer and seller. The transactions giving rise to the com- mercial
bribery charges in this case originated from JSG's  relationships with
two tomato purchasers, L&P and American  Banana, both produce dealers
located at the Hunts Point  Market in Bronx, New York.


The purchasing agents in the disputed L&P transactions  were Tony and
Gloria Gentile. Mr. Goodman and Mr. Gen- tile, as well as their
families, apparently enjoyed a close social  relationship. Long before
any of the questioned transactions  occurred--in fact, before Mr.
Goodman had any relationship  at all with JSG--Mr. Gentile taught Mr.
Goodman the tomato  business. The Goodman and Gentile families spent a
great  deal of time together, often dining out and going to shows in 
Atlantic City.


Mr. Gentile, who was the head tomato buyer for L&P from  1985 through
1991, had a joint account arrangement with  L&P, whereby he would
share profits and losses with L&P on  the tomatoes that he purchased.
Such joint accounts appar- ently are common in the New York produce
industry. Dur- ing the time that Mr. Gentile served as a buyer for
L&P, he  purchased tomatoes from JSG, as well as from other sellers.


In 1989, Mr. Goodman and Mr. Gentile formed a trucking  company called
Dirtbag Trucking Corp. ("Dirtbag"), and each  was issued 75 shares of
Dirtbag stock. Dirtbag, which oper- ated out of JSG's office, always
had a cash flow problem, and  JSG advanced money to it on a number of
occasions. Al- though JSG was Dirtbag's primary customer, Dirtbag also
 provided trucking services to other produce companies.


The purchasing agent in the questioned transactions with  American
Banana was Al Lomoriello. American Banana  hired Mr. Lomoriello in
1991, on a joint account basis similar  to L&P's arrangement with Mr.
Gentile. According to Mr.  Goodman and Mr. Lomoriello, Mr. Lomoriello
sometimes  provided various services to JSG, including delivering pro-
duce, collecting accounts receivable, and providing Mr. Good- man with
pricing information on produce and market sup- plies.


C. Procedural Background


In January 1993, the USDA received a telephone complaint  about JSG.
The caller said that Mr. Goodman had been  making payments to Mr.
Gentile while Mr. Gentile was 


buying tomatoes for L&P. The USDA assigned two investi- gators to audit
JSG, and a formal PACA complaint was  eventually brought against JSG,
the Gentiles, and Mr. Lomo- riello. The complaint alleged that the
respondents had "en- gaged in a scheme" whereby JSG made payments to
the  Gentiles and Mr. Lomoriello "to induce [them] to purchase 
tomatoes from ... JSG on behalf of [L&P and American  Banana,
respectively]." Amended Complaint pp 6-7, reprint- ed in Joint
Appendix ("J.A.") 10-11. On June 17, 1997, after  a lengthy hearing,
the ALJ determined that the respondents  had committed wilful,
flagrant, and repeated violations of  s 2(4). See In re JSG Trading
Corp., PACA Docket Nos.  D-94-0508, D-94-0526 (June 17, 1997), at
46-47 ("ALJ Deci- sion"), reprinted in J.A. 61-62. The ALJ found that,
during  the time that Mr. Gentile was buying tomatoes from JSG on 
behalf of L&P, Mr. Goodman and JSG made payments and  transferred
items of value to the Gentiles. Similarly, the  ALJ found that JSG had
made a series of payments to Mr.  Lomoriello, while Mr. Lomoriello was
buying tomatoes from  JSG on behalf of American Banana. The ALJ
identified  seven transactions that he considered illegal bribes. We 


1. The Boat


Mr. Goodman bought a boat in 1987 for approximately  $47,000. Beginning
in late 1990, he allowed Mr. Gentile to  use the boat with the
understanding that Mr. Gentile would  pay for the boat's upkeep and
maintenance. In late 1992, Mr.  Goodman sold the boat to Mr. Gentile
for $10,000. It is  undisputed that Louis Beni, L&P's
secretary-treasurer and  35 percent owner, was aware of the purchase.
In fact, Mr.  Gentile told Mr. Beni that he had gotten a good deal on
the  boat. Two years later, after he had spent approximately  $7000 in
repairs, Mr. Gentile sold the boat for approximately  $20,000.


2. The Car


In 1990, a 1990 model Mercedes 300 SEL car was leased to  Mr. Gentile
for 48 months. The lease was authorized through  Dirtbag, although, as
with many of Dirtbag's creditors, some 


of the lease was paid for by JSG. Mr. Goodman testified that  he gave
the car to Mr. Gentile for him to drive while doing  work for Dirtbag.
When the car was presented to Mr.  Gentile, Mr. Goodman placed a red
ribbon on it. It is  undisputed that Mr. Gentile's superiors at L&P
knew about  the car, and knew about Mr. Gentile's association with Mr.
 Goodman and Dirtbag. Despite Mr. Goodman's and Mr.  Gentile's
testimony as to the work Mr. Gentile did for Dirt- bag, the ALJ found
it "doubtful" that Mr. Gentile used the  car for Dirtbag business,
concluding rather that the car was  probably a gift from Mr. Goodman
to Mr. Gentile. See ALJ  Decision at 23-24, reprinted in J.A. 38-39.


3. The Watch


In July 1992, Mr. Goodman purchased a $3000 Rolex watch  and gave it to
Mr. Gentile as a gift. Mr. Goodman testified  that he gave the watch
to Mr. Gentile partly as a birthday  present, partly as a present to
celebrate Mr. Gentile's recov- ery from cancer, and partly in
appreciation for Mr. Gentile's  willingness to teach him about the
tomato business. Mr.  Gentile wore the watch openly, and it is
undisputed that Mr.  Beni knew about the gift.


4. The Stock Sale


When he was diagnosed with cancer, Mr. Gentile trans- ferred his 75
shares of Dirtbag stock to Mrs. Gentile. In  February 1991, Mrs.
Gentile entered into a written agree- ment to sell her 75 shares of
Dirtbag to Mr. Goodman for  $80,000. The agreement provided that upon
final payment, a  loan of $40,000 from Mr. Gentile to Dirtbag would be
re- leased. There was also evidence that Mr. Gentile had invest- ed an
additional $7000 in Dirtbag for a new truck. The ALJ  concluded that,
because Dirtbag was an unprofitable compa- ny, Mr. Goodman had
overpaid the Gentiles by at least  $33,000 ($80,000 minus the $47,000
that Mr. Gentile had  invested in Dirtbag). Neither party offered a
valuation ex- pert on this issue.


5. The Circular Checks


JSG issued 35 checks, totaling approximately $62,000, made  payable to
"A. Gentile." These checks were not deposited in 


a bank account controlled or owned by the Gentiles. Instead,  they were
endorsed in the name of "A. Gentile" by JSG's  bookkeeper, and
redeposited in a JSG account. Although the  checks were "circular," in
that they ended up back in JSG's  account, the ALJ found that the
checks were used in JSG's  records to indicate that Mr. Goodman was
sharing his profit  with Mr. Gentile. See ALJ Decision at 30,
reprinted in J.A.  45. Further, the ALJ found that sixteen of the
checks were  shown in JSG's records as reducing a loan that Mr.
Gentile  owed to JSG. See id.


6. The Payments to Mrs. Gentile


JSG also made several payments to Mrs. Gentile. Accord- ing to Mr.
Goodman and Mrs. Gentile, the payments were for  services rendered to
JSG by Mrs. Gentile. Specifically, Mrs.  Gentile testified that, at
Mr. Goodman's request, she checked  tomatoes at Florida packing houses
and gave reports on her  findings to Mr. Goodman. The ALJ, however,
relying pri- marily on the fact that there was no written agreement 
between Mr. Goodman and Mrs. Gentile, found the payments  to be bribes
rather than compensation for services rendered.


7. The Payments to Mr. Lomoriello


From December 1992 through February 1993, a period  during which Mr.
Lomoriello was responsible for buying  tomatoes on behalf of American
Banana, JSG issued seven  checks to Mr. Lomoriello, totaling
approximately $10,000.  According to Mr. Goodman and Mr. Lomoriello,
the payments  were for various services Mr. Lomoriello rendered to
JSG.  American Banana's vice-president, Demetrius Contos, testi- fied
that he was aware that Mr. Lomoriello used his own  truck during the
evenings for his own business unrelated to  American Banana. The ALJ,
however, found that the pay- ments were bribes, and cited evidence in
JSG's records  suggesting that Mr. Lomoriello was getting paid a
certain  amount for each box of tomatoes that JSG sold to American 


After describing these seven payments, the ALJ interpret- ed prior
agency precedent as dictating that "JSG could only 


make ... payments [to the Gentiles and Mr. Lomoriello] with  its
customers' [i.e., L&P's and American Banana's] permis- sion." ALJ
Decision at 18, reprinted in J.A. 33. The ALJ  concluded that "[e]ven
if it received permission, JSG should  not have made more than de
minimis payments to Mr.  Gentile and Mr. Lomoriello. These payments
were more  than de minimis. Therefore, these payments constituted 
commercial bribery, in violation of section 2(4) of the PACA."  Id.
The ALJ found that the PACA violations were "wilful,  flagrant, and
repeated," and ordered JSG's PACA license  revoked. Id. at 46,


JSG and the Gentiles (but not Mr. Lomoriello) appealed the  ALJ's
decision to the Judicial Officer, to whom the Secretary  has delegated
authority as the final deciding officer in the  agency's adjudicatory
process. See 7 C.F.R. ss 1.132, 2.35  (1998). On March 2, 1998, the
Judicial Officer adopted, with  minor and insignificant changes, the
ALJ's factual and legal  conclusions. See In re JSG Trading Corp.,
PACA Docket  Nos. D-94-0508, D-94-0526 (May 2, 1998), at 8 ("Judicial 
Officer Decision"), reprinted in J.A. 70. JSG filed a petition  for
reconsideration with the Judicial Officer, which was de- nied on June
1, 1998. See In re JSG Trading Corp., PACA  Docket Nos. D-94-0508,
D-94-0526 (June 1, 1998), at 25  ("Reconsideration Order"), reprinted
in J.A. 182. On July 30,  1998, the Judicial Officer issued a stay of
the order revoking  JSG's license pending judicial review. JSG, alone,
then peti- tioned this court for review of the Judicial Officer's
final  determination.


II. Analysis


A. Standard of Review


This court has exclusive jurisdiction to review final orders  of the
USDA in disciplinary actions brought under PACA.  See 28 U.S.C. s
2342(2). We review the agency's orders  under the Administrative
Procedure Act's ("APA") arbitrary  and capricious standard. That is,
we will uphold the Judicial  Officer's decision unless we find it to
be arbitrary, capricious,  an abuse of discretion, not in accordance
with law, or unsup-


ported by substantial evidence. See 5 U.S.C. s 706(2)(A),  (E).


B. The Prohibition Against Commercial Bribery Under  PACA


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 brib- ery. 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), avail- able 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.


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 s 2(4).


In Goodman, the first PACA case ever to address allega- tions of
commercial bribery, the Judicial Officer applied the  following
definition of commercial bribery:


[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 influ-


enced by the offer to favor the offeror over other compet- itors."


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 s 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.


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 Good- man, 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 deroga- tion 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 s 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


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 ss 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 con- fers, 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 s 12.01, at 1 n.0.50; s 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").


We do not disagree with the Fourth Circuit that the broad  and
ambiguous language of s 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.


C. The Commercial Bribery Standard Applied in This Case


JSG argues that the agency in the instant case departed  from the
precedent established in Goodman and Tipco by  applying a per se test
for commercial bribery. The agency  concedes that the Judicial Officer
applied a per se test, which  deems illegal any payment above a de
minimis level from a  produce dealer to a purchasing agent, regardless
of whether  there is any secrecy or intent to induce. Indeed, agency 
counsel stated at oral argument that "[t]here is no way of 
characterizing [the test employed by the Judicial Officer] any  other
way." Tr. of Oral Argument at 18. Agency counsel 


also conceded that, because he was employing a per se test,  the
Judicial Officer did not make explicit findings with re- spect to
secrecy or intent to induce. See id. at 18, 19, 36. In  fact, the
Judicial Officer specifically found that Mr. Gentile's  employer was
aware of at least one of Mr. Goodman's gifts.  See, e.g., Judicial
Officer Decision at 33, reprinted in J.A. 95  (finding that Mr. Beni
was aware that Mr. Goodman had  given Mr. Gentile a good deal on the
boat). The agency  argues, however, that the Judicial Officer's use of
the per se  test was permissible under prior agency precedent. We 
disagree. It is clear here that the Judicial Officer adhered to  a new
definition of commercial bribery that finds no support  in the case
law; it is also clear that he offered no justification  whatsoever
either for his re-definition of commercial bribery  or for the
necessity of a per se test in this or any other case.


The Judicial Officer did purport to follow Goodman and  Tipco. See,
e.g., Judicial Officer Decision at 90, reprinted in  J.A. 155 ("[T]he
legal standard for bribery, in violation of  section 2(4) of the PACA
... is established by Goodman and  Tipco...."). Nevertheless, the
Judicial Officer never once,  in his entire 96-page opinion, cited the
actual definition of  commercial bribery that was quoted in Goodman
and em- ployed by the agency in both Goodman and Tipco. Instead,  the
Judicial Officer cited the following dicta from the Judicial 
Officer's opinion in Tipco:


Included within [the obligations of a PACA licensee] is  the positive
duty to refrain from corrupting an employee  of a person with whom
[the licensee] is dealing, e.g., each  PACA licensee is obligated to
avoid offering a payment  to a customer's employee to encourage the
employee to  purchase produce from it on behalf of his employer. On 
the other hand, if the employee seeks a payment from  the licensee,
the licensee is affirmatively obligated to  report that request to its
customer, could only make  payments with the customer's permission,
and, even  then, would risk violating PACA with anything more  than a
de minimis payment (e.g., more than a pen,  calendar or lighter).


Judicial Officer Decision at 28, reprinted in J.A. 90 (quoting  Tipco,
50 Agric. Dec. at 882-83, 1991 WL 295153, at **9). On  the basis of
that dicta--which, at most, establishes a risk of a  PACA
violation--the Judicial Officer reached the following  conclusion with
respect to the record in the instant case:


As in Goodman and Tipco, JSG was obligated to refrain  from making
payments to Mr. Gentile and Mr. Lomoriel- lo since such payments would
encourage Mr. Gentile and  Mr. Lomoriello to purchase tomatoes from
JSG. JSG  could only make such payments with its customers' per-
mission. Even if it received permission, JSG should not  have made
more than de minimis payments to Mr.  Gentile and Mr. Lomoriello. The
payments [made by  JSG to Messrs. Gentile and Lomoriello] were more
than  de minimis. Therefore, these payments constitute com- mercial
bribery, in violation of section 2(4) of the PACA.


Id. at 28-29, reprinted in J.A. 90-91 (brackets in original).  This
conclusion blatantly ignores the legal test of commercial  bribery
established and applied in Goodman and Tipco, ap- plying instead a per
se rule that was never even contemplated  in the prior cases.


Under the Judicial Officer's per se test, produce dealers are  guilty
of commercial bribery when they transfer items of  value to purchasing
agents, even if the agents' employers are  fully aware of the gifts,
and even if the dealers have no intent  to induce the agents to buy
from them. For example, Mr.  Goodman claimed that he gave the Rolex
watch to Mr.  Gentile essentially as a gesture of friendship, and to
celebrate  Mr. Gentile's recovery from cancer. The Judicial Officer
held  that "[a]lthough Mr. Goodman said he was motivated by his 
friendship with Mr. Gentile, the [act of] bestowing such an  expensive
present upon Mr. Gentile at the time that JSG was  selling large
quantities of tomatoes to L&P ... was unlaw- ful." Id. at 35,
reprinted in J.A. 97 (brackets in original); see  also Reconsideration
Order at 17, reprinted in J.A. 174 ("Mr.  Goodman's alleged personal
relationship with Mr. Gentile  does not obviate the requirement that
JSG refrain from  making gifts of substantial value to Mr. Gentile[,]


working for one of JSG's customers."). Under this theory, as  agency
counsel conceded at oral argument, see Tr. of Oral  Argument at 27-31,
it would have been illegal for Mr. Good- man to give the owner of L&P
a Rolex watch, or even for Mr.  Goodman to take the owner of L&P out
to lunch. These are  far-fetched notions of commercial bribery, at
least under  established law. We have been unable to find any
precedent,  in any context, that defines commercial bribery as here 
suggested, and agency counsel cited none.


Putting aside for the moment the question whether the  Judicial Officer
adequately justified his creation of this rather  novel theory of
commercial bribery, it is quite clear that this  per se test deviates
dramatically from the standard test for  commercial bribery that was
actually employed in Goodman  and Tipco. For example, under the test
cited in Goodman,  the gift of the watch would not have been illegal
unless there  had been specific findings that Mr. Gentile's employer
was  not aware of the gift, and that Mr. Goodman intended to  induce
Mr. Gentile to purchase from JSG. Likewise, Mr.  Goodman would hardly
be guilty of commercial bribery under  the traditional definition if
he had taken the owner of L&P  out to lunch, even if the purpose of
the lunch was for Mr.  Goodman to extoll the virtues of his product.


Although the agency was not strictly bound to follow the  test for
commercial bribery applied in prior cases, it was  obligated to
articulate a principled rationale for departing  from that test. See
Gilbert v. NLRB, 56 F.3d 1438, 1445  (D.C. Cir. 1995) ("It is, of
course, elementary that an agency  must conform to its prior decisions
or explain the reason for  its departure from such precedent.");
Greater Boston Televi- sion Corp. v. FCC, 444 F.2d 841, 852 (D.C. Cir.
1970) ("[A]n  agency changing its course must supply a reasoned
analysis  indicating that prior policies and standards are being
deliber- ately changed, not casually ignored, and if an agency glosses
 over or swerves from prior precedents without discussion it  may
cross the line from the tolerably terse to the intolerably  mute.")
(footnote omitted). We find that the agency mani- festly failed to
explain its abrupt departure from prior prece-


dent. We therefore are constrained to remand this case to the 


The agency may be able to provide a justification for  applying a
different and lesser standard for commercial brib- ery under s 2(4)
than that cited in Goodman. Given the  broad language of s 2(4), the
agency is not necessarily bound  by traditional statutory definitions
of commercial bribery.  Nonetheless, some justification for a lesser
standard is neces- sary, for there is certainly no immediately
apparent, or  intuitive, rationale for a per se rule that does not
require a  finding of secrecy or intent to induce. Indeed,
traditionally it  is precisely the secrecy and intent to induce
elements that are  thought to transform otherwise innocent gifts into
pernicious  bribes that destroy marketplace competition. See 2 Rudolph
 Callman, The Law of Unfair Competition Trademarks and  Monopolies s
12.01, at 1 n.0.50 (4th ed. 1996 & Supp. 1999)  ("When the fact that
the seller is paying a commission to the  buyer's purchasing agent is
revealed to the buyer, there is no  commercial bribery."); id. s
12.01, at 8-9 ("The consideration  paid by the briber may involve such
pecuniary benefits as  cash payments, commissions and loans, or such
nonpecuniary  pleasures as dinner and entertainment (e.g., theatre
tickets),  and trips. In any case, the true test is the intent or
purpose  of the offeror: Is the consideration given to influence the 
agent and cause him to subordinate his bargaining function  and
judgment?") (footnote omitted); Franklin A. Gevurtz,  Commercial
Bribery and the Sherman Act: The Case for Per  Se Illegality, 42 U.
Miami L. Rev. 365, 370-71 (1987) ("Busi- nesses may (and usually do)
provide gratuities, entertain- ment, campaign contributions, and the
like in the hope of  disposing the recipient favorably toward them.
There must  be more than this, however, to constitute a bribe. An
agree- ment must exist between the payor and the recipient that  there
will be a quid pro quo."). Even the PACA official who  testified on
behalf of the agency at the hearing conceded that  a gift exchanged
between old friends who happened to be in a  seller-buyer relationship
was unlikely to run afoul of PACA.  See J.A. 249-50 (testimony of


Specialist in the Trade Practices Section of the USDA's  PACA


Even assuming that Mr. Goodman's gifts to Mr. Gentile  were made not
out of pure friendship, but rather in an effort  to curry favor with
Mr. Gentile, it is not immediately obvious  how the marketplace is
disturbed--or how Mr. Goodman is  violating any implied duty under
PACA--if Mr. Gentile's  employer is aware of the gifts, and there is
no specific quid  pro quo agreement between Mr. Goodman and Mr.
Gentile.  Cf. United States v. Sun-Diamond Growers of California,  119
S. Ct. 1402, 1406 (1999) (explaining that the "intent to  influence"
element of the federal bribery of public officials  statute, 18 U.S.C.
s 201(b)(1), (2), means that "for bribery  there must be a quid pro
quo--a specific intent to give or  receive something of value in
exchange for an official act").  In other words, without a finding of
secrecy and intent to  induce, there appears to be nothing to
distinguish an illegal  bribe from a simple promotional gift. Cf. id.
at 1407 (criticiz- ing as "peculiar" a reading of the federal gratuity
statute, 18  U.S.C. s 201(c)(1)(A), (B), that would "criminalize, for
exam- ple, token gifts to the President ... such as the replica 
jerseys given by championship sports teams each year during 
ceremonial White House visits [or] ... a high school princi- pal's
gift of a school baseball cap to the Secretary of Edu- cation ... on
the occasion of the latter's visit to the school")  (citation
omitted). At oral argument, agency counsel ac- knowledged that it is,
of course, not illegal for a seller to  reduce his or her prices in an
effort to induce purchases. But  agency counsel admitted that, under
the agency's per se  standard, it would be illegal for the seller,
rather than  lowering prices, to instead take the owner of a
purchasing  entity out to dinner in an effort to promote his or her 
product. See Tr. of Oral Argument at 29, 31. There is no  basis in the
record or in the explanations offered by the  agency for treating the


Indeed, Congress appeared to recognize the legality of  promotional
efforts when it passed the 1995 amendment to  PACA, which allows the
"good faith ... payment ... of 


collateral fees and expenses," which are defined as "any  promotional
allowances, rebates, service or materials fees  paid or provided,
directly or indirectly, in connection with the  distribution or
marketing of any perishable agricultural com- modity." 7 U.S.C. ss
499a(b)(13), 499b(4). Several of the  gifts given to Mr. Gentile by
Mr. Goodman arguably could be  considered "promotional allowances"
made in good faith (i.e.,  not in secret), and in connection with the
marketing of JSG's  product. The Judicial Officer summarily dismissed
this sug- gestion, asserting in a conclusory manner that the payments 
were not promotional devices. See Judicial Officer Decision  at 76,
reprinted in J.A. 138. But no reasoning is offered to  support this
conclusion. Agency counsel suggested at oral  argument that the
amendment was intended only to cover  trivial promotional devices,
such as sales banners provided by  wholesale dealers to retail
outlets. See Tr. of Oral Argument  at 33. Counsel was unable, however,
to cite to any legislative  history to support that interpretation,
and the agency has  never proffered it in any previous adjudication.
Such a  limited interpretation of the 1995 amendment may be entitled 
to deference under Chevron, but the agency has yet to  advance a


On remand, the agency must explain its justification, if it  has one,
for employing a per se test for commercial bribery,  and it must do so
in conjunction with the 1995 amendment to  PACA. The agency is free,
of course, to abandon the per se  approach, and apply the traditional
commercial bribery test  employed in Goodman and Tipco. In any event,
the agency  must make factual findings that are precisely connected to
 the standard employed. Although the Judicial Officer alluded  to
record evidence that might support findings of both secre- cy and
intent to induce--particularly with respect to the  payments to Mr.
Lomoriello, see, e.g., Judicial Officer Deci- sion at 54-61, reprinted
in J.A. 116-23--even agency counsel  concedes that the Judicial
Officer did not follow a traditional  commercial bribery test and made
no explicit findings that  were tied to such a test.


This court, of course, cannot sift through the record evi- dence to
find support for the result reached by the agency, 


see Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins.  Co., 463
U.S. 29, 50 (1983) ("It is well established that an  agency's action
must be upheld, if at all, on the basis articu- lated by the agency
itself."), nor can we affirm an agency's  final order on the
assumption that the agency might reach the  same result upon remand,
see FEC v. Akins, 118 S. Ct. 1777,  1786 (1998) ("If a reviewing court
agrees that the agency  misinterpreted the law, it will set aside the
agency's action  and remand the case--even though the agency (like a
new  jury after a mistrial) might later, in the exercise of its lawful
 discretion, reach the same result for a different reason."). 
Accordingly, we offer no view on the appropriate disposition  of this
case; the matters at issue here must be addressed by  the agency in
the first instance on remand of this case.  Appropriate findings and
conclusions by the agency may be  made on the existing record or on a
supplemented version of  the existing record, as is deemed


III. Conclusion


For the reasons stated above, we grant the petition for  review and
remand this case for further proceedings consis- tent with this


So ordered.