[Federal Register Volume 77, Number 58 (Monday, March 26, 2012)]
[Notices]
[Pages 17479-17481]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-7234]


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FEDERAL TRADE COMMISSION

[Docket No. 9351]


Star Pipe Products, Ltd.; Analysis of Proposed Consent Order To 
Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the complaint and 
the terms of the consent order--embodied in the consent agreement--that 
would settle these allegations.

DATES: Comments must be received on or before April 20, 2012.

ADDRESSES: Interested parties may file a comment online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write ``Star Pipe, Docket No. 
9351'' on your comment, and file your comment online at https://ftcpublic.commentworks.com/ftc/starconsent, by following the 
instructions on the web-based form. If you prefer to file your comment 
on paper, mail or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Room H-113 (Annex 
D), 600 Pennsylvania Avenue NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Linda M. Holleran (202-326-2267), FTC, 
Bureau of Competition, 600 Pennsylvania Avenue NW., Washington, DC 
20580.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and 3.25(f) the 
Commission Rules of Practice, 16 CFR 3.25(f), notice is hereby given 
that the above-captioned consent agreement containing a consent order 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, has been placed on the public record 
for a period of thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for March 20, 2012), on the World Wide Web, at http://www.ftc.gov/os/actions.shtm. A paper copy can be obtained from the FTC Public 
Reference

[[Page 17480]]

Room, Room 130-H, 600 Pennsylvania Avenue NW, Washington, DC 20580, 
either in person or by calling (202) 326-2222.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before April 20, 2012. 
Write ``Star Pipe, Docket No. 9351'' on your comment. Your comment--
including your name and your state--will be placed on the public record 
of this proceeding, including, to the extent practicable, on the public 
Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm. As a 
matter of discretion, the Commission tries to remove individuals' home 
contact information from comments before placing them on the Commission 
Web site.
    Because your comment will be made public, you are solely 
responsible for making sure that your comment does not include any 
sensitive personal information, like anyone'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. You are also solely 
responsible for making sure that your comment does not include any 
sensitive health information, like medical records or other 
individually identifiable health information. In addition, do not 
include any ``[t]rade secret or any commercial or financial information 
which is obtained from any person and which is 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). In particular, do 
not include competitively sensitive information such as costs, sales 
statistics, inventories, formulas, patterns, devices, manufacturing 
processes, or customer names.
    If you want the Commission to give your comment confidential 
treatment, you must file it in paper form, with a request for 
confidential treatment, and you have to follow the procedure explained 
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept 
confidential only if the FTC General Counsel, in his or her sole 
discretion, grants your request in accordance with the law and the 
public interest.
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    \1\ In particular, the written request for confidential 
treatment that accompanies the comment must include the factual and 
legal basis for the request, and must identify the specific portions 
of the comment to be withheld from the public record. See FTC Rule 
4.9(c), 16 CFR 4.9(c).
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    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/starconsent by following the instructions on the web-based form. If 
this Notice appears at http://www.regulations.gov/#!home, you also may 
file a comment through that Web site.
    If you file your comment on paper, write ``Star Pipe, Docket No. 
9351'' on your comment and on the envelope, and mail or deliver it to 
the following address: Federal Trade Commission, Office of the 
Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue NW., 
Washington, DC 20580. If possible, submit your paper comment to the 
Commission by courier or overnight service.
    Visit the Commission Web site at http://www.ftc.gov to read this 
Notice and the news release describing it. The FTC Act and other laws 
that the Commission administers permit the collection of public 
comments to consider and use in this proceeding as appropriate. The 
Commission will consider all timely and responsive public comments that 
it receives on or before April 20, 2012. You can find more information, 
including routine uses permitted by the Privacy Act, in the 
Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

Analysis of Agreement Containing Consent Order To Aid Public Comment

    The Federal Trade Commission (``Commission: or ``FTC'') has 
accepted, subject to final approval, an agreement containing a proposed 
consent order (``Agreement'') from Star Pipe Products, Ltd. (``Star''). 
The Agreement seeks to resolve in part an administrative complaint 
issued by the Commission on January 4, 2012. The complaint charges that 
Star and certain of its competitors violated Section 5 of the Federal 
Trade Commission Act, 15 U.S.C. 45, by engaging in collusive acts and 
practices in the market for ductile iron pipe fittings (``DIPF'').
    The Commission anticipates that, with regard to Star, the 
competitive issues described in the complaint will be resolved by 
accepting the proposed order, subject to final approval, contained in 
the Agreement. The Agreement has been placed on the public record for 
30 days for receipt of comments from interested members of the public. 
Comments received during this period will become part of the public 
record. After 30 days, the Commission will again review the Agreement 
and any comments received, and will decide whether it should withdraw 
from the Agreement or make final the proposed order contained in the 
Agreement.
    The purpose of this Analysis to Aid Public Comment is to invite and 
facilitate public comment concerning the proposed order. It is not 
intended to constitute an official interpretation of the Agreement and 
proposed order or in any way to modify its terms.
    The proposed order is for settlement purposes only and does not 
constitute an admission by Star that it violated the law, or that the 
facts alleged in the complaint, other than jurisdictional facts, are 
true.

I. The Complaint

    The following allegations are taken from the complaint and publicly 
available information.

A. Background

    The largest sellers of DIPF in the United States are Star, McWane, 
Inc. (``McWane''), and Sigma Corporation (``Sigma''). DIPF are used in 
municipal water distribution systems to change pipe diameter or 
pipeline direction. There are no widely available substitutes for DIPF. 
Both imported and domestically produced DIPF are commercially 
available.
    DIPF suppliers distribute these products through wholesale 
distributors, known as waterworks distributors, which specialize in 
distributing products for water infrastructure projects. The end users 
of DIPF are typically municipal and regional water authorities.
    DIPF prices are based off of published list prices and discounts, 
with customers negotiating additional discounts off of those list 
prices and discounts on a transaction-by-transaction basis. DIPF 
suppliers also offer volume rebates.

B. Challenged Conduct

    Between January 2008 and January 2009, Star allegedly conspired 
with McWane and Sigma to increase the prices at which DIPF were sold in 
the United States. In furtherance of the conspiracy, and at the request 
of McWane, Star changed its business methods to make it easier to 
coordinate price levels, first by limiting the discretion of regional 
sales personnel to offer price discounts, and later by exchanging 
information documenting the volume of its monthly sales, along with 
sales by McWane and Sigma, through an entity known as the Ductile Iron 
Fittings Research Association (``DIFRA'').

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II. Legal Analysis

    The January and June 2008 price restraints among Star, McWane, and 
Sigma alleged in the complaint are naked restraints on competition that 
are per se unlawful.\2\
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    \2\ Federal Trade Commission & United States Department of 
Justice, Antitrust Guidelines for Collaboration Among Competitors 
(``Competitor Collaboration Guidelines'') Sec.  1.2 (2000); In re 
North Texas Specialty Physicians, 140 F.T.C. 715, 729 (2005) (``We 
do not believe that the per se condemnation of naked restraints has 
been affected by anything said either in California Dental or 
Polygram'').
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    The June 2008 agreement, which was allegedly reached after a public 
invitation to collude by McWane, illustrates how price fixing 
agreements may be reached in public. Here, McWane's invitation to 
collude was conveyed in a letter sent to waterworks distributors, the 
common customers of Star, McWane, and Sigma. McWane's letter contained 
a section that was meaningless to waterworks distributors, but was 
intended to inform Star and Sigma of the terms on which McWane desired 
to fix prices.\3\
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    \3\ Because McWane's communication informed its rivals of the 
terms of price coordination desired by McWane without containing any 
information for customers, this communication had no legitimate 
business justification. See In re Petroleum Products Antitrust 
Litig., 906 F.2d 432, 448 (9th Cir. 1990) (public communications may 
form the basis of an agreement on price levels when ``the public 
dissemination of such information served little purpose other than 
to facilitate interdependent or collusive price coordination'').
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    The DIFRA information exchange was a component of the illegal price 
fixing agreement. Specifically, the complaint alleges that the DIFRA 
information exchange played a critical role in the 2008 price fixing 
conspiracy, first as the quid pro quo for a price increase by McWane in 
June 2008, and then by enabling Star, McWane, and Sigma to monitor each 
others' adherence to the collusive arrangement through the second half 
of 2008.
    Evaluated apart from the price fixing conspiracy, Star's 
participation in the information exchange is an independent violation 
of the antitrust laws because this concerted action facilitated price 
coordination among the three competitors.\4\
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    \4\ The Commission articulated a safe harbor for exchanges of 
price and cost information in Statement 6 of the 1996 Health Care 
Guidelines. See Dep't of Justice & Federal Trade Comm'n, Statements 
of Antitrust Enforcement Policy in Health Care, Statement 6: 
Enforcement Policy on Provider Participation in Exchanges of Price 
and Cost Information (1996). The DIFRA information exchange failed 
to qualify for the safety zone of the Health Care Guidelines for 
several reasons. Although the DIFRA information exchange was managed 
by a third party, the information exchanged was insufficiently 
historical, the participants in the exchange too few, and their 
individual market shares too large to qualify for the permissive 
treatment contemplated by the Health Care Guidelines. While failing 
to qualify for the safety zone of the Health Care Guidelines is not 
in itself a violation of Section 5, firms that wish to minimize the 
risk of antitrust scrutiny should consider structuring their 
collaborations in accordance with the criteria of the safety zone.
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III. The Proposed Order

    The proposed order is designed to remedy the unlawful conduct 
charged against Star in the complaint and to prevent the recurrence of 
such conduct.
    Paragraph II.A of the proposed order prohibits Star from 
participating in or maintaining any combination or conspiracy between 
any competitors to fix, raise or stabilize the prices at which DIPF are 
sold in the United States, or to allocate or divide markets, customers, 
or business opportunities.
    Paragraph II.B of the proposed order prohibits Star from soliciting 
or inviting any competitor to participate in any of the actions 
prohibited in Paragraphs II.A.
    Paragraph II.C of the proposed order prohibits Star from 
participating in or facilitating any agreement between competitors to 
exchange ``Competitively Sensitive Information'' (``CSI''), defined as 
certain types of information related to the cost, price, output or 
customers of or for DIPF. Paragraph II.D of the proposed order 
prohibits Star from unilaterally disclosing CSI to a competitor, except 
as part of the negotiation of a joint venture, license or acquisition, 
or in certain other specified circumstances. Paragraph II.E of the 
proposed order prohibits Star from attempting to engage in any of the 
activities prohibited by Paragraphs II.A, II.B, II.C, or II.D.
    The prohibitions on Star's communication of CSI with competitors 
contained in Paragraphs II.C and II.D of the proposed order are subject 
to a proviso that permits Star to communicate CSI to its competitors 
under certain circumstances. Under the proposed order, Star may 
participate in an information exchange with its competitors in the DIPF 
market provided that the information exchange is structured in such a 
way as to minimize the risk that it will facilitate collusion among 
Star and its competitors. Specifically, the proposed order requires any 
exchange of CSI to occur no more than twice yearly, and to involve the 
exchange of aggregated information more than six months old. In 
addition, the aggregated information that is exchanged must be made 
publicly available, which increases the likelihood that an information 
exchange involving Star will simultaneously benefit consumers. The 
proposed order also prohibits Star's participation in an exchange of 
CSI involving price, cost or total unit cost of or for DIPF when the 
individual or collective market shares of the competitors seeking to 
participate in an information exchange exceed specified thresholds. The 
rationale for this provision is that in a highly concentrated market 
the risk that the information exchange may facilitate collusion is 
high. Due to the highly concentrated state of the DIPF market as 
currently structured, an information exchange involving Star and 
relating to price, output or total unit cost of or for DIPF is unlikely 
to reoccur in the foreseeable future.
    Paragraph III of the proposed order requires Star to cooperate with 
Commission staff in the still-pending administrative litigation against 
McWane.
    The proposed order has a term of 20 years.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2012-7234 Filed 3-23-12; 8:45 am]
BILLING CODE 6750-01-P