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13 COMP. GEN. 127

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American Government

13 COMP. GEN. 127

Comptroller General of the United States
November 10, 1933

A-51737, NOVEMBER 10, 1933, 13 COMP. GEN. 127

CONTRACTS - CODES OF FAIR COMPETITION - COMPLIANCE WHERE A CODE OF FAIR COMPETITION HAS BEEN APPROVED BY THE PRESIDENT FOR AN INDUSTRY OR TRADE, SUCH CODE IS THE LAW FOR ALL MEMBERS THEREOF REGARDLESS OF WHETHER THEY HAVE OR HAVE NOT AFFIRMATIVELY ASSENTED THERETO, AND IT IS PRESUMED THAT THE MEMBERS THEREOF HAVE COMPLIED AND WILL COMPLY WITH THE PROVISIONS OF THAT CODE WHERE THERE IS NO PROOF OF ANY VIOLATION THEREOF BY SUCH MEMBERS. WHERE A BID FOR FURNISHING AUTOMOBILES OR TRUCKS TO THE GOVERNMENT IS SUBMITTED BY AND THE CONTRACT IS AWARDED TO A MEMBER OF THE MOTOR VEHICLE RETAILING TRADE, NOT ONLY THE CODE FOR SUCH TRADE BUT ALSO THE CODE FOR THE AUTOMOBILE MANUFACTURING INDUSTRY IS APPLICABLE AND BOTH SUCH CODES ARE FOR CONSIDERATION IN DETERMINING WHETHER THE TERMS OF THE CONTRACT ARE PROPERLY COMPLIED WITH. WHERE CODES CONTAIN PRICE-FIXING RULES OR SCHEDULES SUCH RULES OR SCHEDULES DO NOT APPLY TO SALES TO THE FEDERAL GOVERNMENT.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF AGRICULTURE, NOVEMBER 10, 1933:

I HAVE YOUR LETTER OF NOVEMBER 4, 1933, AS FOLLOWS:

RECEIPT IS ACKNOWLEDGED OF YOUR LETTER OF OCTOBER 28, 1933 (A 51737), ADVISING THAT THE NORTHWEST MOTOR COMPANY OF BETHESDA, MARYLAND, HAS PROTESTED THE AWARDING OF A CONTRACT FOR FURNISHING MOTOR EQUIPMENT TO THIS DEPARTMENT UNDER PROPOSAL U.S.D.A. NO. 5155, TO ANY BIDDER OTHER THAN SAID COMPANY. YOU REQUEST A FULL REPORT OF THE FACTS, IN ORDER THAT THE QUESTION RAISED BY THE PROTESTING BIDDER MAY BE DETERMINED BY YOU IN ADVANCE OF ADMINISTRATIVE ACTION PURPORTING TO OBLIGATE THE APPROPRIATION INVOLVED.

IN THIS INSTANCE A REQUEST FOR PROPOSALS WAS SENT OUT UNDER DATE OF OCTOBER 13, 1933, BY THE DIVISION OF PURCHASE, SALES, AND TRAFFIC OF THIS DEPARTMENT. TWO O-CLOCK P.M., OCTOBER 18, 1933 WAS ORIGINALLY SET AS THE TIME OF OPENING BUT ALL PROSPECTIVE BIDDERS WERE SUBSEQUENTLY NOTIFIED OF A CHANGE IN THIS RESPECT TO NOON, OCTOBER 21, 1933, AT WHICH TIME THE OPENING ACTUALLY OCCURRED. A COPY OF THE ADVERTISEMENT, ALL ORIGINAL BIDS RECEIVED, AND AN ABSTRACT OF THE LATTER, ARE ENCLOSED. YOU ALREADY HAVE A COPY OF THE LETTER ADDRESSED TO THE SECRETARY OF AGRICULTURE BY THE NORTHWEST MOTOR COMPANY, ON OCTOBER 24, 1933, WHICH CAME TO YOU WITH THE PROTEST NOW UNDER CONSIDERATION.

IT IS TO BE NOTED THAT THE ADVERTISEMENT IS SO WORDED THAT AWARDS, BASED ON THE RESPONSES RECEIVED, MAY BE MADE FROM TIME TO TIME AS NEEDS ARISE FROM THE DATE OF NOTICE OF AWARD TO NOVEMBER 30, 1933, AND THAT THE RIGHT IS RESERVED, IN EVENT OF DEVELOPMENT OF NEED FOR TRUCKS EXCEEDING THE RATE AT WHICH THE LOW BIDDER MEETING SPECIFICATIONS CAN FURNISH THEM, TO MEET CURRENT REQUIREMENTS BY AWARDING TO BIDDERS IN A POSITION TO DELIVER PROMPTLY; ALSO THAT THE FOREST SERVICE, IN RECOMMENDING THE FIRST GROUP OF AWARDS UNDER THE PROPOSALS (SEE ITS ENCLOSED MEMORANDUM OF OCTOBER 25, 1933), INVOKES THESE SPECIAL PROVISIONS. IN VIEW OF THE FACT THAT THE RECOMMENDED AWARDS, IF MADE, INVOLVE REJECTION IN TOTO OF THE PROPOSAL OF THE CHEVROLET MOTOR COMPANY (ON THE BASIS OF DELIVERY TERMS ENTIRELY INCOMPATIBLE WITH THE DEPARTMENT'S NEEDS), AND A DIVISION OF THE BUSINESS AMONG CERTAIN OTHER BIDDERS IN ORDER TO SECURE THAT IMMEDIATENESS OF DELIVERY WHICH THE DEPARTMENT REQUIRES, IT WILL BE APPRECIATED IF YOU WILL CONSIDER AND ADVISE THE DEPARTMENT UPON THE PROPRIETY OF THE PROPOSED AWARDS, IN THE EVENT THAT YOU FIND THE PROPOSAL OF THE NORTHWEST MOTOR COMPANY NOT FOR CONSIDERATION. IF, HOWEVER, YOU DEEM THE LATTER PROPOSAL AS ENTITLED TO CONSIDERATION, THE DEPARTMENT WISHES TO POINT OUT THAT IT MUST RESERVE THE RIGHT TO APPLY DELIVERY CONDITIONS AND REQUIREMENTS IN ITS CONSIDERATION OF SAID PROPOSAL.

AS TO THE APPROPRIATIONS WHICH THE PROPOSED PURCHASES WILL INVOLVE: THE INITIAL PURCHASE OF 1,000 UNITS WILL BE CHARGEABLE TO THE EMERGENCY CONSERVATION FUND (CIVILIAN CONSERVATION CORPS). LATER PURCHASES, HOWEVER, ALTHOUGH PRINCIPALLY CHARGEABLE TO THIS FUND, MAY INVOLVE SOME EXPENDITURES UNDER ALLOTMENTS BY THE FEDERAL EMERGENCY ADMINISTRATION OF PUBLIC WORKS.

THE FOREST SERVICE HAS VERY URGENT NEED FOR THIS EQUIPMENT IN CONNECTION WITH THE TRANSFER, NOW BEING MADE, OF CIVILIAN CAMP PERSONNEL TO MORE SOUTHERLY LOCATIONS AND THE WORK TO BE CARRIED ON THERE; AN EARLY DETERMINATION BY YOU OF THE MATTERS IN ISSUE IS ACCORDINGLY EARNESTLY REQUESTED.

PARAGRAPH 3 OF "GENERAL CLAUSES" FORMING A PART OF THE ADVERTISED SPECIFICATIONS AND TO BECOME A PART OF THE CONTRACT, CONTAINS THE FOLLOWING PROVISIONS:

3. (A) THE CONTRACTOR SHALL COMPLY WITH ALL PROVISIONS OF THE APPLICABLE APPROVED CODE OF FAIR COMPETITION FOR THE TRADE OR INDUSTRY OR SUBDIVISION THEREOF CONCERNED, OR, IF THERE BE NO APPROVED CODE OF FAIR COMPETITION FOR THE TRADE OR INDUSTRY OR SUBDIVISION THEREOF CONCERNED, THEN WITH THE PROVISIONS OF THE PRESIDENT'S REEMPLOYMENT AGREEMENT PROMULGATED UNDER AUTHORITY OF SECTION 4 (A) OF THE "ACT TO ENCOURAGE NATIONAL INDUSTRIAL RECOVERY, TO FOSTER FAIR COMPETITION, AND TO PROVIDE FOR THE CONSTRUCTION OF CERTAIN USEFUL PUBLIC WORKS, AND FOR OTHER PURPOSES," APPROVED JUNE 16, 1933 (PUBLIC. NO. 67, 73D CONGRESS), OR ANY AMENDMENT THEREOF, WITHOUT REGARD TO WHETHER CONTRACTOR IS HIMSELF A PARTY TO SUCH CODE OR AGREEMENT.

PROVIDED THAT WHERE SUPPLIES ARE PURCHASED THAT ARE NOT MINED, PRODUCED, OR MANUFACTURED IN THE UNITED STATES THE SPECIAL OR GENERAL CODE OF FAIR PRACTICE SHALL APPLY TO THAT PORTION OF THE CONTRACT EXECUTED WITHIN THE UNITED STATES.

(B) IF THE CONTRACTOR FAILS TO COMPLY WITH THE FOREGOING PROVISION, THE GOVERNMENT MAY BY WRITTEN NOTICE TO THE CONTRACTOR TERMINATE THE CONTRACTOR'S RIGHT TO PROCEED WITH THE CONTRACT, AND PURCHASE IN THE OPEN MARKET THE UNDELIVERED PORTION OF THE SUPPLIES COVERED BY THE CONTRACT AND THE CONTRACTOR AND HIS SURETIES SHALL BE LIABLE TO THE GOVERNMENT FOR ANY EXCESS COST OCCASIONED THE GOVERNMENT THEREBY.

THE NORTHWEST MOTOR CO. PROPOSES TO FURNISH TRUCKS MANUFACTURED BY THE FORD MOTOR CO., AND IN A LETTER OF OCTOBER 21, 1933, TRANSMITTING ITS BID, APPEARS THE FOLLOWING STATEMENT:

BIDDER HEREBY CERTIFIES THAT IT HAS COMPLIED WITH THE PROVISIONS OF THE N.R.A., BUT HAS NO AUTHORITY TO MAKE ANY STATEMENT IN REGARD THERETO RESPECTING ANY OF THE MANUFACTURERS FROM WHOM IT PURCHASES THE PARTS, VEHICLES, AND EQUIPMENT IT OFFERS IN THIS BID. THE MANUFACTURERS ARE IN NO RESPECT A PARTY TO THIS BID.

IN THE CONSIDERATION OF THE BIDS RECEIVED IN THIS INSTANCE A QUESTION APPEARS TO HAVE ARISEN AS TO WHETHER THE FACT THAT THE FORD MOTOR CO. HAD NOT SIGNED THE PRESIDENT'S REEMPLOYMENT AGREEMENT OR THE "ASSENT FORM" SIGNIFYING AFFIRMATIVELY ITS ASSENT TO THE CODE OF FAIR COMPETITION FOR THE AUTOMOBILE MANUFACTURING INDUSTRY PRECLUDES ACCEPTANCE OF THE NORTHWEST MOTOR CO.'S BID.

THE PRESIDENT'S REEMPLOYMENT AGREEMENT IS NOT FOR CONSIDERATION HERE BECAUSE THERE HAS BEEN APPROVED BY THE PRESIDENT, PURSUANT TO SECTION 3, TITLE I, OF THE ACT OF JUNE 16, 1933, 48 STAT. 195, 196, A CODE OF FAIR COMPETITION FOR THE AUTOMOBILE MANUFACTURING INDUSTRY AND, ALSO, A CODE OF FAIR COMPETITION FOR THE MOTOR VEHICLE RETAILING TRADE.

THERE APPEARS NOTHING IN THE CODE FOR THE AUTOMOBILE MANUFACTURING INDUSTRY NOR IN THE ACT OF JUNE 16, 1933, SUPRA, PURSUANT TO WHICH SAID CODE WAS ADOPTED AND APPROVED, TO REQUIRE THAT PERSONS OR FIRMS ENGAGED IN THE INDUSTRY SIGN OR OTHERWISE AFFIRMATIVELY SIGNIFY THEIR ASSENT TO THE APPROVED CODE. ON THE CONTRARY, IT SEEMS CLEAR FROM THE PLAIN TERMS OF SAID ACT AND THE PROCEDURE UNDER WHICH CODES ARE PREPARED AND APPROVED THAT NO SUCH SIGNING OR AFFIRMATIVE ASSENT IS NECESSARY. IN THIS CONNECTION THE FOLLOWING PROVISIONS OF SAID ACT ARE TO BE NOTED:

SEC. 3. (A) UPON THE APPLICATION TO THE PRESIDENT BY ONE OR MORE TRADE OR INDUSTRIAL ASSOCIATIONS OR GROUPS, THE PRESIDENT MAY APPROVE A CODE OR CODES OF FAIR COMPETITION FOR THE TRADE OR INDUSTRY OR SUBDIVISION THEREOF, REPRESENTED BY THE APPLICANT OR APPLICANTS * * * THE PRESIDENT MAY * * * PROVIDE SUCH EXCEPTIONS TO AND EXEMPTIONS FROM THE PROVISIONS OF SUCH CODE AS THE PRESIDENT IN HIS DISCRETION DEEMS NECESSARY TO EFFECTUATE THE POLICY HEREIN DECLARED.

(B) AFTER THE PRESIDENT SHALL HAVE APPROVED ANY SUCH CODE, THE PROVISIONS OF SUCH CODE SHALL BE THE STANDARDS OF FAIR COMPETITION FOR SUCH TRADE OR INDUSTRY OR SUBDIVISION THEREOF. ANY VIOLATION OF SUCH STANDARDS IN ANY TRANSACTION IN OR AFFECTING INTERSTATE OR FOREIGN COMMERCE SHALL BE DEEMED AN UNFAIR METHOD OF COMPETITION IN COMMERCE WITHIN THE MEANING OF THE FEDERAL TRADE COMMISSION ACT, AS AMENDED * * *

(C) THE SEVERAL DISTRICT COURTS OF THE UNITED STATES ARE HEREBY INVESTED WITH JURISDICTION TO PREVENT AND RESTRAIN VIOLATIONS OF ANY CODE OF FAIR COMPETITION APPROVED UNDER THIS TITLE; AND IT SHALL BE THE DUTY OF THE SEVERAL DISTRICT ATTORNEYS OF THE UNITED STATES, IN THEIR RESPECTIVE DISTRICTS, UNDER THE DIRECTION OF THE ATTORNEY GENERAL, TO INSTITUTE PROCEEDINGS IN EQUITY TO PREVENT AND RESTRAIN SUCH VIOLATIONS.

(F) WHEN A CODE OF FAIR COMPETITION HAS BEEN APPROVED OR PRESCRIBED BY THE PRESIDENT UNDER THIS TITLE, ANY VIOLATION OF ANY PROVISION THEREOF IN ANY TRANSACTION IN OR AFFECTING INTERSTATE OR FOREIGN COMMERCE SHALL BE A MISDEMEANOR AND UPON CONVICTION THEREOF AN OFFENDER SHALL BE FINED NOT MORE THAN $500 FOR EACH OFFENSE, AND EACH DAY SUCH VIOLATION CONTINUES SHALL BE DEEMED A SEPARATE OFFENSE.

THERE IS LIKEWISE FOR OBSERVING THAT THERE APPEARS NOTHING IN THE CODE FOR MOTOR VEHICLE RETAILING TRADE TO REQUIRE THAT PERSONS OR FIRMS ENGAGED IN SUCH INDUSTRY SIGN OR OTHERWISE AFFIRMATIVELY SIGNIFY THEIR ASSENT TO SUCH CODE.

WHILE ALL PERSONS AND FIRMS ENGAGED IN AN INDUSTRY HAVE A RIGHT UNDER THE LAW TO PARTICIPATE IN THE FORMATION OF A CODE OF FAIR COMPETITION FOR THEIR INDUSTRY, WHEN SUCH CODE IS FINALLY ADOPTED AND APPROVED BY THE PRESIDENT PURSUANT TO THE ABOVE-QUOTED PROVISIONS OF THE NATIONAL INDUSTRIAL RECOVERY ACT, IT BECOMES THE LAW FOR THAT INDUSTRY AND IS BINDING ON THOSE MEMBERS OF THE INDUSTRY WHO TOOK NO PART IN ITS FORMATION AND DO NOT ASSENT TO ITS PROVISIONS AS WELL AS ON THOSE WHO DID PARTICIPATE IN ITS FORMATION AND WHO MAY HAVE SPECIFICALLY ASSENTED TO ITS PROVISIONS. IN THIS CONNECTION NOTE SECTION 3 (B) OF THE NATIONAL INDUSTRIAL RECOVERY ACT,"AFTER THE PRESIDENT SHALL HAVE APPROVED ANY SUCH CODE, THE PROVISIONS OF SUCH CODE SHALL BE THE STANDARDS OF FAIR COMPETITION FOR SUCH TRADE OR INDUSTRY OR SUBDIVISION THEREOF.'

THE FACT THAT THE FORD MOTOR CO. MAY NOT HAVE SIGNED ASSENT TO THE CODE OF ITS INDUSTRY AND INDICATED THAT IT INTENDS TO COMPLY WITH THE PROVISIONS OF SAID CODE SEEMS NOT CONTROLLING HERE. UNTIL IT IS ESTABLISHED THAT ONE SUBJECT TO A DULY APPROVED CODE OF FAIR COMPETITION HAS VIOLATED ITS PROVISIONS IT IS TO BE ASSUMED, AS IS THE RULE RESPECTING ANY LAW, THAT THE PROVISIONS OF THE CODE WILL BE DULY OBSERVED. IN THIS CONNECTION THERE IS NOTED A PROVISION IN THE FORD MOTOR CO.'S PRINTED FORM OF SALES AGREEMENT, PRESUMABLY THE FORM OF AGREEMENT EXISTING BETWEEN SAID COMPANY AND THE NORTHWEST MOTOR CO., AS FOLLOWS:

(7) DEALER AGREES SPECIFICALLY AS FOLLOWS:

(B) TO TURN OVER IMMEDIATELY TO COMPANY, WITHOUT COMMISSION OR OTHER REMUNERATION, ALL INQUIRIES AND ORDERS RECEIVED FROM THE UNITED STATES GOVERNMENT OR ANY DEPARTMENT THEREOF OR FROM THE AMERICAN RED CROSS, AND TO DELIVER COMPANY'S PRODUCTS TO THE ABOVE OR ON ANY DIRECT SALE MADE BY COMPANY, WHEN AND AS DIRECTED BY THE COMPANY, WITHOUT CHARGE FOR HANDLING.

BUT WHATEVER MAY BE THE AGREEMENT OR ARRANGEMENT BETWEEN THE NORTHWEST MOTOR CO. AND THE FORD MOTOR CO. WITH RESPECT TO THE FURNISHING OF AUTOMOBILES OR TRUCKS TO THE GOVERNMENT, IT MAY BE SAID GENERALLY THAT IN APPLYING CONTRACT PROVISIONS DESIGNED TO PROMOTE THE PURPOSES OF THE NATIONAL INDUSTRIAL RECOVERY ACT, THERE CANNOT BE RECOGNIZED SUCH AN INDEPENDENT STATUS BETWEEN THE MANUFACTURERS OF AUTOMOBILES OR TRUCKS AND THE SALES AGENCIES OR DEALERS WHO CONTRACT TO SELL SAID AUTOMOBILES OR TRUCKS TO THE GOVERNMENT AS TO WARRANT HOLDING THAT SUCH CONTRACT PROVISIONS RELATE ONLY TO THE CODE FOR THE MOTOR VEHICLE RETAILING TRADE.

AS TO THE STATEMENT MADE BY THE BIDDER, THE NORTHWEST MOTOR CO., IN ITS LETTER OF OCTOBER 21, 1933, AS FOLLOWS:

BIDDER HEREBY CERTIFIES THAT IT HAS COMPLIED WITH THE PROVISIONS OF THE N.R.A., BUT HAS NO AUTHORITY TO MAKE ANY STATEMENT IN REGARD THERETO RESPECTING ANY OF THE MANUFACTURERS FROM WHOM IT PURCHASES THE PARTS, VEHICLES, AND EQUIPMENT IT OFFERS IN THIS BID. THE MANUFACTURERS ARE IN NO RESPECT A PARTY TO THIS BID.

THIS APPARENTLY MEANS NO MORE THAN THAT THE BIDDER ATTEMPTS NO REPRESENTATION RESPECTING COMPLIANCE OR NONCOMPLIANCE BY "THE MANUFACTURERS FROM WHOM IT PURCHASES THE PARTS, VEHICLES, AND EQUIPMENT" BID UPON, WITH THE PROVISIONS OF THE CODE OR CODES APPLICABLE TO SUCH MANUFACTURERS. IT IS LIKELY THE BIDDER HAS NO SUCH CONTROL OVER THE MANUFACTURERS AS TO EXACT CODE COMPLIANCE THEREBY AND ASSUMING, AS STATED, SUCH MANUFACTURERS ARE IN NO RESPECT PARTIES TO THE BID, SUCH FACTS, IF FACTS THEY BE, CAN HAVE NO EFFECT TO RELIEVE THE BIDDER FROM RESPONSIBILITY UNDER THE CODE FOR THE MOTOR VEHICLE RETAILING TRADE AND THE PROVISIONS OF THE CONTRACT IN THE EVENT OF FAILURE OF MANUFACTURERS INVOLVED TO COMPLY WITH THE PROVISIONS OF THE CODE OF FAIR COMPETITION FOR THE AUTOMOBILE MANUFACTURING INDUSTRY.

THERE IS NOTED, ALSO, A PARAGRAPH IN THE NORTHWEST MOTOR CO.'S LETTER OF OCTOBER 21, 1933, AS FOLLOWS:

ACCEPTANCE OF THIS BID PRIOR TO NOVEMBER 2, 1933, THE DATE THE MARKETING CLAUSE OF THE RETAIL AUTOMOBILE DEALERS CODE GOES INTO EFFECT IS IMPORTANT, AS OUR INTERPRETATION OF THAT CODE IS THAT NO ONE CAN SELL AUTOMOTIVE PARTS, AUTOMOTIVE EQUIPMENT, AUTOMOBILES, OR AUTOMOTIVE ACCESSORIES AT LESS THAN THE RETAIL PRICE. THIS SUGGESTION IS MADE FOR THE BENEFIT OF THE GOVERNMENT AS WELL AS OURSELVES. IF WE ARE WRONG IN THIS INTERPRETATION, WE DESIRE SOME OFFICIAL RULING. THEREFORE, IN ORDER THAT BIDDER MAY NOT BE IN A POSITION OF IGNORING THE LAW, IF THE GOVERNMENT REQUIRES ADDITIONAL TIME TO MAKE THE AWARD, THEN THE ACCEPTANCE OF OUR BID MUST BE BASED UPON THE CONDITION THAT THE GOVERNMENT WAIVE ALL QUESTIONS RELATING TO THIS FEATURE OF THE AUTOMOBILE DEALERS CODE, AND IF PURCHASE ORDERS ARE AWARDED UNDER THIS BID AFTER NOVEMBER 2, 1933, THE GOVERNMENT MUST ASSUME ALL RESPONSIBILITY FOR ANY DEVIATION IN PRICE AS THE RESULT OF THE OPERATION OF LAW. THE PROVISIONS OF THESE CODES APPROVED BY THE PRESIDENT PURSUANT TO STATUTORY AUTHORITY HAVE THE FORCE AND EFFECT OF LAW. HENCE, THE RULES GOVERNING THE CONSTRUCTION OF STATUTES ARE FOR APPLICATION IN CONSTRUING SUCH PROVISIONS. THEREFORE, UNDER THE WELL ESTABLISHED RULE THAT GENERAL WORDS IN A STATUTE DO NOT INCLUDE THE GOVERNMENT, THE MARKETING RULES, ARTICLE IV-B OF THE CODE FOR THE MOTOR VEHICLE RETAILING TRADE, WOULD APPEAR TO HAVE NO APPLICATION TO SALES TO THE FEDERAL GOVERNMENT. SEE 13 COMP. GEN. 65; ID. 76; ID. 100, AND AUTHORITIES THEREIN CITED.

NOTHING HAS BEEN SUBMITTED WHICH IN THE LIGHT OF THE FOREGOING NOW JUSTIFIES REJECTION OF THE LOW BID IF SUCH BID OTHERWISE MEETS THE REQUIREMENTS OF THE SPECIFICATIONS AND THERE FOLLOWS CONTRACTING ON THE BASIS OF THE SPECIFICATIONS AS SUBMITTED FOR BIDS.



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