[Federal Register Volume 73, Number 215 (Wednesday, November 5, 2008)]
[Notices]
[Pages 65856-65859]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-26404]
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FEDERAL TRADE COMMISSION
Consumer Benefits and Harms: Distinguishing Resale Price
Maintenance that Benefits Consumers From Resale Price Maintenance that
Harms Consumers; Public Workshops; Comment Request
AGENCY: Federal Trade Commission.
ACTION: Notice of Public Workshops and Opportunity for Comment.
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SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'') will
hold a series of public Workshop sessions at one or more locations to
explore how best to distinguish between uses of resale price
maintenance (RPM)\1\
[[Page 65857]]
that benefit consumers and those that do not, for purposes of enforcing
Section 1 of the Sherman Act, 15 U.S.C. Sec. 1, and Section 5 of the
Federal Trade Commission Act, 15 U.S.C. Sec. 45 (hereinafter
``Sections 1 and 5''). Among other things, the Workshops will examine
when and whether particular market facts or conditions make it more or
less likely that the use of RPM will be procompetitive or neutral, and
when or whether RPM may harm competition and consumers.
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\1\ RPM is typically an agreement between a manufacturer and
retailer setting the prices at which the retailer will resell the
manufacturer's goods to consumers. If the agreement requires the
retailer to sell only at or above the price established by the
manufacturer, it is said to be minimum RPM. Conversely, if the
agreement requires the retailer to sell only at or below the price
directed by the manufacturer, it is said to be maximum RPM. Thomas
K. McCaw, Competition and ``Fair Trade'': History and Theory, 16
Res. In Econ. Theory 185, 186 (1996).
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The FTC expects to focus on legal doctrines and jurisprudence,
economic research (both theoretical and empirical), as well as business
and consumer experiences. The FTC is soliciting public comment from
lawyers, economists, marketing professionals, the business community,
consumers groups, law enforcement officials, academics (including
business and economic historians), and all other interested persons on
three general subjects:
(1) The legal, economic, and management principles relevant to the
application of Sections 1 and 5 to RPM, including the administrability
of current or potential antitrust or other rules for the application of
these laws;
(2) The business circumstances regarding the use of RPM that the
FTC should examine in the upcoming Workshops, including examples of
actual conduct; and
(3) Empirical economic studies or analyses that might provide
better guidance and assistance to the business and legal communities
regarding RPM enforcement issues.
With respect to the request for examples of real-world conduct, the
FTC is soliciting discussions of the business reasons for, and the
actual or likely competitive effects of, the use of RPM, including
actual or likely efficiencies, as well as the theoretical underpinnings
for whether the conduct had or has pro- or anticompetitive effects.
When each individual Workshop session is announced, the FTC will
solicit additional submissions regarding the topics to be covered at
that particular session.
The FTC encourages submissions from businesses or business
consultants from a variety of unregulated and regulated markets,
recognizing that market participants can offer unique insights into how
RPM affects competition, and that the effects of RPM may differ
depending on industry context and market structure. The FTC seeks this
practical input to provide a real-world foundation of knowledge upon
which to draw as the Workshops progress. Respondents are encouraged to
respond on the basis of their actual experiences.
The goal of these Workshops is to promote dialogue, learning, and
consensus building among all interested parties with respect to the
analysis of RPM under Sections 1 and 5, both for purposes of law
enforcement and to provide practical guidance to businesses with
respect to antitrust compliance. The FTC plans to hold four to six
half-day Workshop sessions between January and March 2009. The FTC
plans to publish a more detailed description of the topics to be
discussed before each session and to solicit additional submissions
about each topic. The sessions will be transcribed and placed on the
public record. Any written comments received also will be placed on the
public record. After the conclusion of the Workshops, the Commission
may prepare a public report that incorporates the findings of the
Workshops, as well as a description of other research that might be
undertaken by the Commission or others.
DATES: Any interested person may submit written comments responsive to
any of the topics addressed in this Federal Register Notice.
Respondents are encouraged to provide comments and requests to
participate in the workshops as soon as possible, but in any event no
later than the final Workshop session. However, to assist the FTC in
planning the Workshop sessions, respondents are encouraged to provide
initial comments regarding the three general questions raised in the
Summary above, as well as requests to participate in the workshops, to
the FTC on or before December 12, 2008.
ADDRESSES: Interested parties are invited to submit written comments or
requests to participate in the public workshop electronically or in
paper form. Comments and requests should refer to ``Resale Price
Maintenance Workshop, P090400'' to facilitate their organization.
Please note that comments will be placed on the public record of this
proceeding--including on the publicly accessible FTC website, at
(http://www.ftc.gov/os/publiccomments.shtm)--and therefore should not
include any sensitive or confidential information. In particular,
comments and requests should not include any sensitive personal
information, such as an individual's Social Security Number; date of
birth; driver's license number or other state identification number, or
foreign country equivalent; passport number; financial account number;
or credit or debit card number. Comments and requests also should not
include any sensitive health information, such as medical records or
other individually identifiable health information. In addition,
comments and requests should not include any ``[t]rade secrets and
commercial or financial information obtained from a person and
privileged or confidential. . . .,'' as provided in Section 6(f) of the
FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2)
(2008). Comments and requests containing material for which
confidential treatment is requested must be filed in paper form, must
be clearly labeled ``Confidential,'' and must comply with FTC Rule
4.9(c).\2\
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\2\ FTC Rule 4.2(d), 16 CFR 4.2(d). The comment or request must
be accompanied by an explicit request for confidential treatment,
including the factual and legal basis for the request, and must
identify the specific portions of the comment or request to be
withheld from the public record. The request for confidential
treatment will be granted or denied by the Commission's General
Counsel, consistent with applicable law and the public interest. See
FTC Rule 4.9(c), 16 CFR 4.9(c) (2008).
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Because paper mail addressed to the FTC is subject to delay due to
heightened security screening, please consider submitting your comments
and requests in electronic form. Comments filed in electronic form
should be submitted by using the following weblink: (https://secure.commentworks.com/ftc-resalepricemaintenanceworkshop/) (and
following the instructions on the web-based form). To ensure that the
Commission considers an electronic comment, you must file it on the
web-based form at the weblink: (https://secure.commentworks.com/ftc-resalepricemaintenanceworkshop/). Additionally, you may inform the FTC
of your desire to participate in the Workshop by emailing information
regarding your interest in participation, as well as the issue(s) you
might wish to address, to the FTC at [email protected]. You may also
visit the FTC website at http://www.ftc.gov to read the Notice and the
news release describing it.
A comment or request filed in paper form should include the
reference to ``Resale Price Maintenance Workshop, P090400'' both in the
text and on the envelope, and should be mailed or delivered to the
following address: Federal Trade Commission/Office of the Secretary,
Room H-135 (Annex R), 600 Pennsylvania Avenue, NW, Washington, DC
20580. The FTC is requesting that any comment filed in paper form be
sent by courier or overnight service, if
[[Page 65858]]
possible, because U.S. postal mail in the Washington area and at the
Commission is subject to delay due to heightened security precautions.
The Federal Trade Commission Act (``FTC Act'') and other laws the
Commission administers permit the collection of public comments and
requests to participate to consider and use in this proceeding as
appropriate. The Commission will consider all timely and responsive
public comments and requests that it receives, whether filed in paper
or electronic form. Comments and requests received will be available to
the public on the FTC website, to the extent practicable, at (http://www.ftc.gov/os/publiccomments.shtm). As a matter of discretion, the
Commission makes every effort to remove home contact information for
individuals from the public comments and requests to participate it
receives before placing them on the FTC website. More information,
including routine uses permitted by the Privacy Act, may be found in
the FTC's privacy policy, at (http://www.ftc.gov/ftc/privacy.shtm).
The workshop will be open to the public, and there is no fee for
attendance. For admittance to the building, all attendees will be
required to show a valid photo identification, such as a driver's
license. Pre-registration is not required for attendees, but persons
desiring to participate as panelists must submit a request to
participate and file a comment. Members of the public and press who
cannot attend in person may view a live webcast of the workshop on the
FTC's website. The workshop will be transcribed, and the transcript
will be placed on the public record.
The workshop venue will be accessible to persons with disabilities.
If you need an accommodation related to a disability, call Carrie
McGlothin at (202) 326-3388. Such requests should include a detailed
description of the accommodations needed and a way to contact you if we
need more information. Please provide advance notice of any needs for
such accommodations.
FOR FURTHER INFORMATION CONTACT: James C. Cooper, Deputy Director,
Office of Policy Planning, 600 Pennsylvania Ave., N.W., Washington, DC
20580, telephone 202-326-3367, or John Yun, Staff Economist, Antitrust
I Division, Bureau of Economics, 600 Pennsylvania Ave., N.W.,
Washington, DC 20580, telephone 202-326-2433; or by email at
[email protected]. Detailed agendas for the Workshops will be
available on the FTC Home Page (http://www.ftc.gov).
SUPPLEMENTARY INFORMATION: Section 1 of the Sherman Act condemns
``every contract, combination, in the form of trust or otherwise, or
conspiracy in restraint of trade and commerce among the several States,
or with foreign nations,''\3\ which includes violations of the Sherman
Act.\4\ Although the FTC does not directly enforce Section 1 of the
Sherman Act, Section 5 of the FTC Act condemns ``unfair methods of
competition in or affecting commerce, and unfair or deceptive acts or
practices in or affecting commerce.''\5\ In 1911, two U.S. Supreme
Court decisions held, respectively, that RPM agreements were illegal as
a matter of law (Dr. Miles);\6\ and that Section 1 of the Sherman Act
prohibited restraints of trade that are ``unreasonably restrictive of
competitive conditions'' (Standard Oil).\7\ Except to the extent that
RPM was exempted from federal antitrust liability by the Fair Trade
Laws from 1937 to 1975,\8\ minimum RPM was treated as per se illegal
under the antitrust laws until the Supreme Court decided the Leegin\9\
case in June 2007.\10\
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\3\ 15 U.S.C. Sec. 1.
\4\ See Fed. Trade Comm'n v. Motion Picture Advert. Serv. Co.,
344 U.S. 392, 394-95 (1953) (stating that Section 5 of the FTC Act
``condemn[s] as `unfair methods of competition' existing violations
of `` the Sherman and Clayton Acts).
\5\ 15 U.S.C. Sec. 45
\6\ Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S.
373 (1911). Subsequent cases referred to RPM as being per se
illegal.
\7\ Standard Oil of New Jersey v. United States, 221 U.S. 1, 58
(1911)
\8\ McCraw, supra note 1, at 187.
\9\ Leegin Creative Leather Products, Inc. v. PSKS, Inc., 127 S.
Ct. 2705 (2007).
\10\ The Supreme Court subjected maximum RPM to the rule of
reason in 1997. State Oil Co. v. Khan, 522 U.S. 3 (1997).
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Leegin overruled the Dr. Miles decision, finding that the Court's
more recent decisions were inconsistent with rationales upon which Dr.
Miles was based.\11\ The Court directed that the legality of minimum
RPM would be determined under the rule of reason; however, the Court
did not specify the contours of the rule of reason analysis that would
be necessary or appropriate in all cases. Rather, it observed that:
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\11\ Id. at 2712-25 (citing, inter alia, Continental T.V., Inc.
v. GTE Sylvania, Inc., 433 U.S. 36 (1977) (``GTE Sylvania'');
Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717
(1988); and State Oil Co. v. Khan, 522 U.S. 3 (1997)).
As courts gain experience considering the effects of these restraints
by applying the rule of reason over the course of decisions, they can
establish the litigation structure to ensure the rule operates to
eliminate anticompetitive restraints from the market and to provide
more guidance to businesses. Courts can, for example, devise rules over
time for offering proof, or even presumptions where justified, to make
the rule of reason a fair and efficient way to prohibit anticompetitive
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restraints and to promote competitive ones.
Id. at 2720.
In the Nine West matter,\12\ the Commission recently confronted the
Court's lack of specificity, as follows:
\12\Nine West Group, Inc., Docket No. C-3937 (Apr. 11, 2000),
Order Granting In Part Petition to Reopen and Modify Order Issued
April 11, 2000 (May 6, 2008), available at: (http://www.ftc.gov/os/caselist/9810386/080506order.pdf.)
As it abandoned the per se prohibition of Dr. Miles, the Court
cautioned that it was not declaring RPM to be per se legal. Leegin
summarized some of the possible procompetitive and anticompetitive
consequences of resale price maintenance. The Court explained that RPM
might stimulate interbrand competition and have a procompetitive effect
on competition, so that RPM does not meet the per se illegality
standard of a practice that ``always or almost always tends to restrict
competition and decrease output.'' At the same time, after reviewing
the potential anticompetitive effects of RPM, the Court said, ``[a]s
should be evident, the potential anticompetitive consequences of
vertical price restraints must not be ignored or underestimated.'' In
light of these potential adverse effects, the Court further observed
that ``[i]f the rule of reason were to apply to vertical price
restraints, courts would have to be diligent in eliminating their
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anticompetitive uses from the market.''
The Court's comments about the possible harms of RPM, and its caution
to lower courts ``to be diligent in eliminating their anticompetitive
uses from the market,'' can usefully be understood in the context of
the debate between the Leegin majority and the dissent about the wisdom
of abandoning the per se ban of Dr. Miles. The dissent argued that the
majority had slighted the potential anticompetitive consequences of
RPM. The majority's recitation of examples of some of the possible
competitive harms and its call for ``diligent'' efforts by the lower
courts to be attentive to these harms can be seen as an attempt to
provide assurances that the Court foresaw a
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useful role for continued antitrust scrutiny of RPM.
* * *
At this early stage of the application of Leegin by the lower courts
and the Commission, the Leegin factors can serve as helpful guides to
begin an assessment of when RPM deserves closer scrutiny. Through the
Commission's own enforcement work, research, and external consultations
such as workshops, we anticipate further refinements to this analysis,
including the further specification of scenarios in which RPM poses
potential hazards and those in which it does not.
Nine West, supra n. 11 at 9-14 (citations omitted).
By holding these Workshops, the FTC hopes to identify the market
facts, circumstances, and conditions under which the use of RPM is
likely to be procompetitive or benign, as opposed to anticompetitive
and harmful to consumers. The Commission believes that an appropriate
antitrust approach to RPM requires the means for distinguishing
permissible from impermissible conduct in varied circumstances.
Moreover, those means should provide reasonable guidance to businesses
attempting to evaluate the legality of proposed conduct before
undertaking it. The development of clear standards that both protect
consumers and enable businesses to adopt strategies that comply with
the antitrust laws presents some of the most complex issues facing the
Commission, the courts, and the antitrust bar.
Given this challenge--and because antitrust analysis must reflect
the particular market facts and circumstances within which a restraint
has been adopted--the FTC encourages commenters to describe actual
examples of RPM that the FTC should consider in the context of the
Workshop, discuss the business reasons for the conduct, and the actual
or likely competitive effects of the conduct.
Illustrative Questions for Consideration With Respect to the RPM Usages
That the Commenter Discusses. Commenters should indicate whether
responses would change if the conduct is an express RPM agreement or an
RPM arrangement that achieves its outcome under a Colgate policy.\13\
Commenters should also indicate whether responses would differ if the
arrangement were directed toward different industry levels (e.g.,
retail, wholesale, or manufacturer).
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\13\ A manufacturer uses a Colgate policy when it does not ask
retailers for any agreement regarding resale prices; rather, the
manufacturer announces in advance that it will only sell its
products to retailers that resell those products at or above the
prices it specifies, and then enforces the policy by deciding
unilaterally that it will refuse to make any future sales of its
products to any retailer who has violated its pricing policies.
These arrangements take their name from the Supreme Court's decision
in United States v. Colgate & Co., 250 U.S. 300, 307-8 (1919)
(distinguishing Dr. Miles on the ground that the ``unlawful
combination [in that case] was effected through contracts which
undertook to prevent dealers from freely exercising the right to
sell'').
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1. How should the structure of the market and the market shares of
participants be taken into account in analyzing RPM?
2. Are there other specific market facts or circumstances that
might have an impact on the likely competitive effects of RPM under the
circumstances described? Without limiting the scope of this question,
commenters are specifically invited to comment on the effect on
marginal and inframarginal consumers.
3. What are the business reasons (e.g., management, marketing,
financial, etc.) for the use of RPM? Are there alternative business
strategies available to achieve the same results? What factors,
including any cost savings, entered the decision to use RPM to achieve
the desired result?
4. To what extent does uncertainty regarding the legality of RPM
under state law affect the decision to use RPM?
5. What are the likely procompetitive and anticompetitive effects
of RPM under the circumstances described?
6. What strategies might competitors use to respond to a loss of
sales to a firm that uses RPM?
7. Under what market conditions is the use of RPM likely either to
promote or hinder market entry by other manufacturers or retailers?
8. Are there industries where the use of RPM is prominent?
9. Are there any original theoretical, analytical or empirical
studies on the nature or competitive effects of RPM or alternatives to
RPM that should be brought to the attention of the Commission?
10. What tests or standards should courts or enforcement agencies
use in assessing whether particular conduct violates Sections 1 or 5?
Commenters are specifically requested to assess whether the test or
standard applicable to a particular usage of RPM might vary based on
particular market facts or circumstances. Additionally, are there
particular market facts and circumstances where the approach
established by the Court of Appeals for the District of Columbia
Circuit in Polygram Holding, Inc. v. Fed. Trade Comm'n, 416 F. 3d (D.C.
Cir. 2005), would or would not be appropriate?
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. E8-26404 Filed 11-4-08: 8:45 am]
BILLING CODE 6750-01-S