ROBERT D. JOFFE 

ALLEN FINKELSON 

RONALD 5. ROLFE 

PAUL C. SAUNDERS 

DOUGLAS O. BROADWATER 

ALAN C. STEPHENSON 

MAX R. 5HULMAN 

STUART W. GOLD 

JOHN E. BEERBOWER 

EVAN R. CHESLER 

MICHAEL L. SCHLER 

RICHARD LEVIN 

KRIS F. HGINZELMAN 

B. ROBBINS K1ESSLING 

ROGER D. TURNER 

PHILIP A. GELSTON 

RORY O. MILLSON 

FRANCIS P. BARRON 

RICHARD W. CLARY 

WIULIAM P. ROGERS, JR. 

JAMES D. COOPER 

STEPHEN L. GORDON 

DANIEL L. MOSLEY 

GREGORY M. SHAW 

PETER S. WILSON 

CRAVATH, SWAINE & MOORE LLP 

WORLDWIDE PLAZA JAMES C. VARDELL, HI WILLIAM J. WHELAN, IB DAVID S. NKELSTEIN 825 EIGHTH AVENUE ROBERT H. BARON SCOTT A. BARSHAY DAVID G ENWALD 

KEVIN J. GREHAN PHILIP J. BOECKMAN RACHEL SKAtSTIS NEW YORK, NY IOOI9-7475 STEPHEN S. MADSEN ROGER G. BROOKS PAUL H. MBRO 

C JOEL F. ROLD . ALLEN PARKER WILLIAM V. FOGG 

MARC ERIC W. LFERS S. ROSENBERG TELEPHONE: (212)-474-1000 FAIZA J. SAEED 

SUSAN WEBSTER RICHARD J. STARK GEORGE SCHOCN FACSIMILE: (212)474-3700 ERIK R. T VZEL TIMOTHY G. MASSAD THOMAS E. DUNN CRAIG F. RCCLLA 

ROWAN D. WILSON RONALD CAM! TEENA-A N V. SANKOORIKAL 

DAVID MERCADO JULIE SPELLMAN SWEET 

CITYPOINT PETER T. BARBUR MARK I. GREENE ANDREW THOMPSON ONE ROPEMAKER STREET SANDRA C. GOLDSTEIN SARKIS JEBEJIAN DAM 1 EN ZOUBEK LONDON ECEY9HR PAUL MICHALSKI JAMES C. WOOLERY LAUREN NGELILU TELEPHONE: 44-20-7453-I OOO TAT1ANA LAPUSHCHIK THOMAS O. RAFFERTY DAVID R. MARRIOTT FACSIMILE: 44-£0-7860-1150 MICHAELS. GOLDMAN MICHAEL A. RASKIN ERIC L. SCHIELE 

RICHARD HALL ANDREW J. PITTS 

ELIZABETH L. GRAYER WRITER' MICHAEL T. REYNOLDS S DIRECT DIAL NUMBER 

JULIE A, NORTH ANTONY L. RYAN SPECIAL COUNSEL 

ANDREW W. NEEDHAM GEORGE E. ZOBITZ SAMUEL C. BUTLER STEPHEN L. BURNS GEORGE A. STEPHANAKIS GEORGE J. GILLESPIE, 01 KATHER1NE B. FORREST DARIN P. MCATEE (212)474-1714 KEITH R. HUMMEL GARY A. BORNSTEIN 

DANIEL SLIFKIN TIMOTHY G. CAMERON OF COUNSEL JEFFREY A. SMITH KARIN A. DEMASI ROBERT f. TOWNSEND, HI LiZABETHANN R. EtSEN CHRISTINE BESHAR 

March 26, 2008 

In the Matter of Nine West Group Inc. 

Docket No. C-3937 

Petition to Reopen and Modify Order 

Dear Eric: 

Enclosed are my letter and its addenda submitted on behalf of Nine West 

Footwear Corporation, successor-in-interest to Nine West Group Inc., in further support 

of its petition to reopen and modify the order in the above-referenced matter. Because 

the letter contains privileged and confidential commercial information, I have enclosed a 

non-public, confidential version of the letter, as well as a public, redacted version of the 

letter, pursuant to 15 U.S.C. §§ 46(f), 57b-2(c). 

Ronald S. Rolfe 

Eric D. Rohlck 

Federal Trade Commission 

600 Pennsylvania Avenue, N.W. 

Washington, DC 20580 

Encl. 

BY FEDEX 
ROBERT D. JOFFE 

ALLEN FIN KELSON 

RONALD S. ROLFE 

PAULC. SAUNDERS 

DOUGLAS D. BROAOWATER 

ALAN C. 5TEPHEN5ON 

MAX R. SHULMAN 

STUART W. GOLD 

JOHN E. BEERBOWER 

EVAN R. CHESLER 

MICHAEL L. SCHLER 

RICHARD LEVIN 

KRIS F. HEINZELMAN 

B. ROBBINS KIESSLING 

ROGER D. TURNER 

PHILIP A. GELSTON 

RORY O. MILL-SON 

FRANCIS P. BARRON 

RICHARD W. CLARY 

WILLIAM P. ROGERS, JR. 

JAMES D. COOPER 

STEPHEN L. GORDON 

DANIEL L. MOSLEY 

GREGORY M. SHAW 

PETER S. WILSON 

CRAVATH, SWAINE & MOORE LLP 

WORLDWIDE PLAZA JAMES C. VARDELL, IB WILLIAM J. WHELAN, ffl DAVID S. FINKELSTEIN 825 EIGHTH AVENUE ROBERT H. BARON SCOTT A. BARSHAY DAVID GREENWALD 

KEVIN J. GREHAN PHILIP J. BOECKMAN RACHEL G. SKAISTIS 

STEPHEN S. MADSEN NEW YORK, NY IOOI9-7475 ROGER G. BROOKS PAUL H. ZUMBRO 

C. ALLEN PARKER WILLIAM V. FOGG JOEL F. HEROLO 

MARC S. ROSENBERG TELEPHONE: (213)47-4-1000 FAIZA J. SAEED ERIC W. HILFERS 

SUSAN WEBSTER RICHARD J. STARK GEORGE F. SCHOEN FACSIMILE: (212)474-3700 TIMOTHY G. MASSAD THOMAS E. DUNN ERIK R. TAVZEL 

DAVID MERCADO JULIE SPELLMAN SWEET CRAIG F. ARC EL LA 

ROWAN D. WILSON RONALD CAM! TEENA-ANN V. SANKOORIKAL CITYPOINT PETER T. BARBUR MARK I. GREENE ANDREW R. THOMPSON ONE ROPEMAKER STREET SANDRA C. GOLDSTEIN SARKIS JEBEJIAN DAMIEN R. ZOUBEK LONDON EC2Y9HR PAUL MICHALSKI JAMES C. WOOLERY LAUREN ANGELILLI TELEPHONE: 44-20-7453-1000 THOMAS G. RAFFERTY DAVID R. MARRIOTT TATIANA LAPUSHCHIK FACSI MILE: 44-2O-7S6O-I I SO MICHAEL S. GOLDMAN MICHAEL A. PASKIN ERIC L. SCHIELE

 

RtCHARD HALL ANDREW J. PITTS

 ELIZABETH L. GRAYER WRITER'S MICHAEL T. REYNOLDS

 DIRECT DIAL NUMBER JULIE A. NORTH ANTONY L. RYAN SPECIAL COUNSEL 

ANDREW W. NEEDHAM GEORGE E. ZOBITZ SAMUEL C. BUTLER STEPHEN L. BURNS GEORGE A. STEPHANAKIS GEORGE J. GILLESPIE, ID DARIN P. MCATEE (212)474-1714 KEITH R. HUMMEL GARY A. BORNSTEIN

 DANIEL SL1FKIN TIMOTHY G. CAMERON

 JEFFREY A. SMITH KARIN A. DEM ASI

 OF COUNSEL 

ROBERT I. TOWNSEND, Q LIZABETHANN R. EISEN CHRISTINE BESHAR 

March 26, 2008 

In the Matter of Nine West Group Inc. 

Docket No. C-3937 

Petition to Reopen and Modify Order 

Dear Eric: 

Your email of March 7, 2008 asked us to respond to the following 

additional inquiries: 

1. Product Market definitions (Al, 66, and B8): Some Commissioners are 

concerned that imposition of RPM by Nine West in a particular segment of the 

women's fashion footwear market could raise concerns if Nine West has market 

power in some or any of those market segments. This is consistent with the concerns 

expressed in the Leegin decision. Please break out, if possible, Nine West's 

approximate market shares in identifiable segments of the overall market, e.g., dress 

shoes, casual shoes, walking/light exercise shoes, sandals, etc. Also, state any 

arguments or evidence about why these lines are or are not antitrust markets. 

Below are Nine West's 2007 shares of total sales by segment, based upon available total 

department store and national chain store sales: 

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Segment Total Dollar Nine West's Share Average Nine West Price 

Sales of Total Sales 

Dress $443,638,900 15.3% $49.43 

Dress Casual $2,107,361,000 14.1% $44.80 

Casual $1,750,730,000 5.8% $35.05 

Leisure/Low $724,834,300 8.4% $45.37 

Performance 

Evening $109,920,900 12.1% $46.78 

These categories do not constitute antitrust markets. Notably, the price points for these 

categories, with the exception of "casual", are within a few dollars of one another, as 

reflected in the table above. And retailers and manufacturers regularly change the actual 

and suggested selling prices of shoes. Further, the various styles of footwear falling 

within several of these categories are reasonably substitutable for one another — that is, a 

consumer seeking a pair of shoes for one particular use (e.g., basic work pump) might 

find acceptable candidates in each of the "dress", "dress casual" and "evening" 

categories. Because pairs of shoes within these categories are generally reasonably 

substitutable based on style and price, these categories should not be treated as separate 

antitrust markets. 

In addition, these categories should not be treated as distinct antitrust markets because of 

the supply substitution among them. As described in response A2 of my February 29, 

2008 letter, Nine West contracts with third-party manufacturers to produce the shoes it 

designs and sells. For the same reasons that barriers to entry are non-existent for 

companies adopting Nine West's wholesaler business model, such companies can easily 

and inexpensively transition production among the above categories. All that is required 

for such a transition is a shoe design, capital and a third-party manufacturer. As a result, 

in an antitrust market analysis, every footwear firm that adopts Nine West's business 

model must be viewed as a producer for each and every category. See, e.g., Horizontal 

Merger Guidelines, U.S. Department of Justice and Federal Trade Commission (Apr. 2, 

1992, revised Apr. 8, 1997), § 1.321 ("If a firm has existing assets that likely would be 

shifted or extended into production and sale of the relevant product within one year, and 

without incurring significant sunk costs of entry and exit, in response to a 'small but 

significant and nontransitory' increase in price for only the relevant product, the Agency 

will treat that firm as a market participant."). Given this cross-elasticity of supply, it is 

not reasonable to treat the categories as separate antitrust markets. 

2. Entry (A2): How difficult is it for a new manufacturer/distributor of 

women's shoes to develop a brand, i.e., how long does it take, how costly is it to get 

shelf space in retail locations, does it matter if the distributor has other shoes or is a 

PUBLIC 
new entrant, how much cost is involved in brand development, e.g., market studies, 

advertising, etc., do brand entry conditions vary by type of shoe, e.g., easier to enter 

with a sandal than a dress shoe? 

As noted in response A2 to my February 29,2008 letter, all that is required for a firm to 

enter into women's fashion footwear is a shoe design and a modest amount of start-up 

capital for brand development and manufacturing. The process for developing a brand is 

similar for established wholesalers like Nine West and for start-up designers. 

That process begins with a shoe design that is presented to the public in a manner aimed 

at developing a favorable brand image. Brand image development does not necessarily 

require formal market research or large advertising campaigns — smaller designers can 

effectively develop brand image via the Internet and through marketing techniques 

relying on preexisting social networks and word-of-mouth, such as by placing samples in 

boutique stores and celebrity gift baskets or by posting videos on social networking 

websites. Thus, this process need not be expensive and may take only a few months, 

depending on the type of shoe and the consumer appeal of its design. Though shelf space 

in larger retail locations may not be immediately accessible for new brands, smaller retail 

stores, e-commerce retailers and the new entrant's own website provide means for 

reaching customers during the early stages of brand development. 

In addition to brand development, the shoes themselves must be manufactured. For 

wholesalers like Nine West with preexisting relationships with manufacturers, this 

process is typically not difficult. Finding manufacturers willing to operate on smaller 

production scales for start-up designers may be more challenging, but there exist 

manufacturers who specialize in producing shoes for such designers. Entry conditions do 

not necessarily vary depending on the style of shoe (sandal versus dress shoe). Rather, 

the key factors relevant to securing manufacturers are material and factory costs — for 

instance, Italian factories used for salon shoes can be more costly than Asian factories, 

but Asian factories may require larger orders. 

3. Ubiquity of RPM practice (A3): In Nine West's experience, have their 

sales personnel heard of retailers/discounters being terminated by other shoe 

distributors/manufacturers due to violations of Colgate-type sales price restrictions? 

Intuitively, it seems that Nine West would know through its sales force if other 

distributors are pushing or enticing retailers to put more money into displays or 

sales incentives to sell more shoes. Is there any indication that, other than the "no 

couponing" practices Nine West identified, there are other incentive programs being 

conducted by other distributors? Also, identify the submarkets or types of shoes 

that are usually subject to the RPM actions by other distributors. 

We are aware of no instance where retailers/discounters were terminated by other shoe 

^distributors/manufacturers because of violations of Colgate-type sales price restrictions. 

ULJ 

PUBLIC 
Also, in addition to the coupon exclusion practices set forth in paragraph 13 of Andrew 

Cohen's Supplemental Declaration in Support of Petition to Reopen and Modify Order 

("Suppl. Cohen Decl."), Nine West executives understand that the Clarks, Merrell and 

Born brands exclude themselves from certain direct mail flyers and sales books sent out 

by department stores such as Macy's and Lord & Taylor. 

4. Procompetitive Benefits of Previous RPM conduct (A4 and B7): While we 

understand that Nine West has attempted to abide by the law and Commission 

Order, are there any facts or evidence from the late 1990's that indicate whether 

more or fewer shoes were sold by the retailers who were subject to the alleged RPM 

agreements during the time of the agreements? Also, were there any formal 

planning documents prepared for those alleged RPM agreements or any documents 

created after-the-fact analyzing whether or not the attempted program was 

beneficial and led to the sale of more shoes? If there are no documents or evidence 

from the past practices, please explicitly state that. 

Nine West has no further information responsive to these questions beyond that 

previously provided to the Commission. (See Suppl. Cohen Decl. tlf 8-10; Supplemental 

Memorandum in Support of Petition to Reopen and Modify Order at 8-10; Response A4 

of February 29, 2008 letter to Eric D. Rohlck.) 

5. Nine West sales personnel: Nine West should provide any (or a sample of) 

training materials or informational brochures that it distributes to its sales 

personnel to assist them in selling various styles of Nine West shoes. Does Nine West 

offer training for retail sales personnel not affiliated with its company-owned stores, 

i.e., off-site seminars, on-line training, brochures, on-site training with company 

personnel? 

Attached to this letter as Addendum A are samples of training materials and 

informational brochures sent to sales personnel in company-owned stores. These 

materials contain both product information and information about sales trends. 

Attached to this letter as Addendum B are samples of materials that were provided to 

non-company-owned retailer sales staff. In addition, personnel from Nine West's 

"Merchandise Coordinator" program advise larger retailers about appropriate product 

assortment and product flow, making recommendations about when a product should be 

re-ordered, providing sales guidance, including the training of store personnel, and 

PUBLIC 
developing advertising programs with the retailer to promote sales. For other (mostly 

smaller) retailers, Nine West wholesale sales force employees perform many of these 

same functions in a more informal way, advising those retailers about company products 

and sales trends. (See also Andrew Cohen's Declaration in Support of Petition to Reopen 

and Modify Order f 10.) 

Sincerely, 

Ronald S. Rolfe 

Eric D. Rohlck 

Federal Trade Commission 

600 Pennsylvania Avenue, N.W. 

Washington, DC 20580 

Encls. 

BY FEDEX 

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