| **DISSENTING STATEMENT OF COMMISSIONER ORSON SWINDLE**

*IN THE MATTER OF*

**STONE CONTAINER CORPORATION**

FILE NO. 951 0006

I have voted against the Commission's acceptance of a consent agreement in this case    because I do not believe that the facts unearthed and presented in the investigation    support the allegation that Stone Container ("Stone") invited its competitors    "to join a coordinated price increase."

The Commission's proposed complaint alleges that Stone took several actions in the    second half of 1993 that amounted to an invitation to collude on linerboard prices.    According to the complaint, Stone's invitation-to-collude strategy consisted at the outset    of a plan "to take downtime at its plants, to reduce its production by approximately    187,000 tons, and contemporaneously to purchase 100,000 tons of linerboard from    competitors and to reduce Stone Container's inventory by 87,000 tons." To carry out    this plan, Stone allegedly "conducted a telephone survey of major U.S. linerboard    manufacturers, asking competitors how much linerboard was available for purchase and at    what price."

Pursuant to its scheme, Stone's "[s]enior officers" -- whose role in this    regard is alleged to have been "outside the ordinary course of business" --    "contacted their counterparts at competing linerboard manufacturers to inform them of    the extraordinary planned downtime and linerboard purchases." Stone "arranged    and agreed to purchase a significant volume of linerboard from each of several    competitors" and is alleged to have "communicated to competitors" -- both    in private conversations and through public statements -- "its intention to take mill    downtime and to draw down industry inventory levels, and its belief that these actions    would support a price increase." The complaint asserts that Stone's communications    with its competitors on these subjects were made with "[t]he specific intent . . . to    coordinate an industry wide price increase" and that Stone's actions "were    undertaken with anticompetitive intent and *without an independent legitimate business    reason*" (emphasis added).

I have quoted at length from the proposed complaint because it (together with the    Analysis To Aid Public Comment) is the document in which the Commission sets forth its    theory of violation and, to the extent permissible, the evidence underlying that theory.    As I see it, the acts and communications of Stone alleged in the complaint, as well as    other evidence in this case, do not sufficiently support the Commission's theory of    violation.

As 1993 approached, Stone and other firms in the linerboard industry had been and were    experiencing financial difficulties, 

including excess production capacity, alleged excess inventory, and depressed price    levels. It should hardly be surprising that Stone chose mill downtime and inventory    reductions as a normal competitive response to general industry conditions.    "Extraordinary" as Stone's downtime and inventory purchases may have been, it is    difficult to second-guess the rationality of those actions from a business perspective.    The assertion in the complaint that Stone's actions "were undertaken with    anticompetitive intent and without an independent legitimate business reason" is a    considerable stretch.(1) If senior officials of Stone had been more    circumspect in their statements -- particularly their public statements -- about Stone's    reasons for its own downtime and purchase decisions, I doubt that the Commission would    have considered this matter a worthy target of our scarce resources.

The Commission's Analysis To Aid Public Comment discusses explicit and implicit    invitations to collude and places the present situation in the latter category. I agree    with that categorization as far as it goes, since no one from Stone is alleged to have    contacted a competitor and baldly suggested a price increase or an output reduction (and    thus this case is not a replay of *American Airlines*). Instead, it is the totality    of Stone's *conduct* -- when judged against the backdrop of Stone's remarks    concerning low prices, excess capacity, and possible inventory overhang -- that has led    the Commission to conclude that Stone implicitly invited its competitors to collusively    raise prices.(2) I am unable to place on Stone's actions (and its    explanations of them) the sinister characterization that would permit me to condemn its    otherwise justifiable actions. I am concerned that the Commission's decision in this case    may deter corporate officials from making useful public statements (*e.g.*, in    speeches to investors or presentations to securities analysts) that candidly address    industry conditions, individual firms' financial situations, and other important subjects.

I respectfully dissent.

(1)In their Concurring Statement, my colleagues rely on the    Analysis To Aid Public Comment in this case for the proposition that "it would have    been more economical for Stone Container to keep its plants open than to purchase    inventory from competitors . . ." With all due respect, it is precisely the truth of    that assertion that I find insufficiently supported by the evidence.

(2)The Analysis To Aid Public Comment cites *Precision    Moulding Co., Inc.*, Docket No. C-3682, as an example of an implicit invitation to    collude. According to the Analysis, Precision Moulding "informed [its] competitor    that its prices were 'ridiculously low' and that the competitor did not have to 'give the    product away.'" I do not consider Stone's conduct and language to have communicated a    message nearly as pointed as that conveyed by Precision Moulding.UBLIC "-//IETF//DTD HTML//EN"> |
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