[Federal Register Volume 60, Number 91 (Thursday, May 11, 1995)]
[Notices]
[Pages 25227-25230]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11555]



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FEDERAL TRADE COMMISSION
[File No. 921 0117]


Reebok International Ltd., et al.; Proposed Consent Agreement 
With Analysis to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting 
unfair acts and practices and unfair methods of competition, this 
consent agreement, accepted subject to final Commission approval, would 
prohibit, among other things, a Massachusetts corporation and its 
subsidiary from fixing, controlling or maintaining the resale prices at 
which any dealer may advertise, promote, offer for sale or sell any 
Reebok or Rockport product. The Consent agreement also would prohibit, 
for a period of ten years, the respondents from enforcing or 
threatening suspension or termination of a dealer that sells or 
advertises a product below a resale price designed by Reebok or 
Rockport.

DATES: Comments must be received on or before July 10, 1995.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Alan Loughnan, New York Regional 
Office, Federal Trade Commission, 150 William St., Suite 1300, New 
York, NY 10038. (212) 264-0459.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the 
Commission's rules of practice (16 CFR 2.34), notice is hereby given 
that the following 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 sixty (60) days. Public comment is invited. Such comments or 
views will be considered by the Commission and will be available for 
inspection and copying at its principal office in accordance with 
Sec. 4.9(b)(6)(ii) of the Commission's rules of practice (16 CFR 
4.9(b)(6)(ii)).

Commissioners: Janet D. Steiger, Chairman, Mary L. Azcuenaga, Roscoe 
B. Starek, III, Christine A. Varney

    In the matter of Reebok International Ltd., and the Rockport 
Company, Inc., corporations File No. 921 0117

Agreement Containing Consent Order to Cease and Desist

    The Federal Trade Commission having initiated an investigation of 
certain acts and practices of Reebok International Ltd. and The 
Rockport Company, Inc., a subsidiary of Reebok International Ltd., and 
it now appearing that Reebok International Ltd. and The Rockport 
Company, Inc., hereinafter sometimes referred to as proposed 
respondents, are willing to enter into an agreement containing an order 
to cease and desist from engaging in the acts and practices being 
investigated,
    It is hereby agreed by and between Reebok International Ltd. and 
The Rockport Company, Inc., by their duly authorized officers, and 
their attorneys, and counsel for the Federal Trade Commission that:
    1. Proposed respondents Reebok International Ltd. and The Rockport 
Company, Inc., a subsidiary of Reebok International Ltd., are 
corporations organized, existing and doing business under and by virtue 
of the laws of the State of Massachusetts. The mailing address and 
principal place of business of proposed respondent Reebok International 
Ltd. is: 100 Technology Center Drive, Stoughton, Massachusetts 02072. 
The mailing address and principal place of business of proposed 
respondent The Rockport Company, Inc. [[Page 25228]] is: 220 Donald 
Lynch Boulevard, Marlboro, Massachusetts 01752.
    2. Proposed respondents admit all the jurisdictional facts set 
forth in the draft of complaint here attached.
    3. The proposed respondents waive:
    (a) Any further procedural steps;
    (b) The requirement that the Commission's decision contain a 
statement of findings of fact and conclusions of law;
    (c) All rights to seek judicial review or otherwise to challenge or 
contest the validity of the order entered pursuant to this agreement; 
and
    (d) Any claim under the Equal Access to Justice Act.
    4. This agreement shall not become part of the public record of the 
proceeding unless and until it is accepted by the Commission. If this 
agreement is accepted by the Commission it, together with the draft of 
complaint contemplated thereby, will be placed on the public record for 
a period of sixty (60) days and information in respect thereto publicly 
released. The Commission thereafter may either withdraw its acceptance 
of this agreement and so notify the proposed respondents, in which 
event it will take such action as it may consider appropriate, or issue 
and serve its complaint (in such form as the circumstances may require) 
and decision, in disposition of the proceeding.
    5. This agreement is for settlement purposes only and does not 
constitute an admission by proposed respondents that the law has been 
violated as alleged in the draft of complaint here attached, or that 
the facts as alleged in the draft complaint, other than jurisdictional 
facts, are true.
    6. This agreement contemplates that, if it is accepted by the 
Commission, and if such acceptance is not subsequently withdrawn by the 
Commission pursuant to the provisions of Sec. 2.34 of the Commission's 
rules, the Commission may, without further notice to proposed 
respondents, (1) issue its complaint corresponding in form and 
substance with the draft of complaint and its decision containing the 
following order to cease and desist in disposition of the proceeding 
and (2) make information public in respect thereto. When so entered, 
the order to cease and desist shall have the same force and effect and 
may be altered, modified or set aside in the same manner and within the 
same time provided by statute for other orders. The order shall become 
final upon service. Delivery by the U.S. Postal Service of the 
complaint and decision containing the agreed-to order to proposed 
respondents' addresses as stated in this agreement shall constitute 
service. Proposed respondents waive any right they may have to any 
other manner of service. The complaint may be used in construing the 
terms of the order, and no agreement, understanding, representation, or 
interpretation not contained in the order or the agreement may be used 
to vary or contradict the terms of the order.
    7. The proposed respondents have read the proposed complaint and 
order contemplated hereby. They understand that once the order has been 
issued, they will be required to file one or more compliance reports 
showing that they have fully complied with the order. The proposed 
respondents further understand that they may be liable for civil 
penalties in the amount provided by law for each violation of the order 
after it becomes final.

Order

I

    It is ordered that for the purpose of this order, the following 
definitions shall apply:
    (A) The term ``Reebok'' means Reebok International Ltd., its 
predecessors, subsidiaries, divisions, groups, and affiliates 
controlled by Reebok International Ltd., and its respective directors, 
officers, employees, agents, and representatives, and the respective 
successors and assigns of each.
    (B) The term ``Rockport'' means The Rockport Company, Inc., its 
predecessors, subsidiaries, divisions, groups, and affiliates 
controlled by the Rockport Company, Inc., and its respective directors, 
officers, employees, agents, and representatives, and the respective 
successors and assigns of each.
    (C) The term ``respondents'' means Reebok and Rockport.
    (D) The term ``product'' means any athletic or casual footwear item 
which is manufactured, offered for sale or sold under the brand name of 
``Reebok'' or ``Rockport'' to dealers or consumers located in the 
United States of America.
    (E) The term ``dealer'' means any person, corporation or entity not 
owned by Reebok or Rockport, or by any entity owned or controlled by 
Reebok or Rockport, that in the course of its business sells any 
product in or into the United States of America.
    (F) The term ``resale price'' means any price, price floor, minimum 
price, maximum discount, price range, or any mark-up formula or margin 
of profit used by any dealer for pricing any product. ``Resale price'' 
includes, but is not limited to, any suggested, established, or 
customary resale price.

II

    It is further ordered that Reebok and Rockport, directly or 
indirectly, or through any corporation, subsidiary, division or other 
device, in connection with the manufacturing, offering for sale, sale 
or distribution of any product in or into the United States of America 
in or affecting ``commerce,'' as defined by the Federal Trade 
Commission Act, do forthwith cease and desist from, directly or 
indirectly:
    (A) Fixing, controlling, or maintaining the resale price at which 
any dealer may advertise, promote, offer for sale or sell any product.
    (B) Requiring, coercing, or otherwise pressuring any dealer to 
maintain, adopt, or adhere to any resale price.
    (C) Securing or attempting to secure any commitment or assurance 
from any dealer concerning the resale price at which the dealer may 
advertise, promote, offer for sale or sell any product.
    (D) For a period of ten (10) years from the date on which this 
order becomes final, adopting, maintaining, enforcing or threatening to 
enforce any policy, practice or plan pursuant to which respondents 
notify a dealer in advance that: (1) The dealer is subject to partial 
or temporary suspension or termination if it sells, offers for sale, 
promotes or advertises any product below any resale price designated by 
respondents, and (2) the dealer will be subject to a greater sanction 
if it continues or renews selling, offering for sale, promoting or 
advertising any product below any such designated resale price. As used 
herein, the phrase ``partial or temporary suspension or termination'' 
includes but is not limited to any disruption, limitation, or 
restriction of supply: (1) Of some, but not all, products, or (2) to 
some, but not all, dealer locations or businesses, or (3) for any 
delimited duration. As used herein, the phrase ``greater sanction'' 
includes but is not limited to a partial or temporary suspension or 
termination of greater scope or duration than the one previously 
implemented by respondent, or complete suspension or termination.
    Provided that nothing in this Order shall prohibit Reebok and 
Rockport from announcing resale prices in advance and unilaterally 
refusing to deal with those who fail to comply. Provided further that 
nothing in this Order shall prohibit Reebok and Rockport from 
establishing and maintaining cooperative advertising programs that 
include conditions as to the prices at which dealers offer products, so 
long as such advertising programs are not part of a resale price 
[[Page 25229]] maintenance scheme and do not otherwise violate this 
order.

III

    It is further ordered that, for a period of five (5) years from the 
date on which this order becomes final, Reebok shall clearly and 
conspicuously state the following on any list, advertising, book, 
catalogue, or promotional material where it has suggested any resale 
price for any product to any dealer:

    ALTHOUGH REEBOK MAY SUGGEST RESALE PRICES FOR PRODUCTS, 
RETAILERS ARE FREE TO DETERMINE ON THEIR OWN THE PRICES AT WHICH 
THEY WILL ADVERTISE AND SELL REEBOK PRODUCTS.

IV

    It is further ordered that, for a period of five (5) years from the 
date on which this order becomes final, Rockport shall clearly and 
conspicuously state the following on any list, advertising, book, 
catalogue, or promotional material where it has suggested any resale 
price for any product to any dealer:

    ALTHOUGH ROCKPORT MAY SUGGEST RESALE PRICES FOR PRODUCTS, 
RETAILERS ARE FREE TO DETERMINE ON THEIR OWN THE PRICES AT WHICH 
THEY WILL ADVERTISE AND SELL ROCKPORT PRODUCTS.

V

    It is further ordered that, within thirty (30) days after the date 
on which this order becomes final, Reebok shall mail by first class 
mail the letter attached as Exhibit A, together with a copy of this 
order, to all of its directors and officers, and to dealers, 
distributors, agents, or sales representatives engaged in the sale of 
any product in or into the United States of America.

VI

    It is further ordered that, within thirty (30) days after the date 
on which this order becomes final, Rockport shall mail by first class 
mail the letter attached as Exhibit B, together with a copy of this 
order, to all of its directors and officers, and to dealers, 
distributors, agents, or sales representatives engaged in the sale of 
any product in or into the United States of America.

VII

    It is further ordered that, for a period of two (2) years after the 
date on which this order becomes final, Reebok shall mail by first 
class mail the letter attached as Exhibit A, together with a copy of 
this order, to each new director, officer, dealer, distributor, agent, 
and sales representative engaged in the sale of any product in or into 
the United States of America, within ninety (90) days of the 
commencement of such person's employment or affiliation with Reebok.

VIII

    It is further ordered that, for a period of two (2) years after the 
date on which this order becomes final, Rockport shall mail by first 
class mail the letter attached as Exhibit B, together with a copy of 
this order, to each new director, officer, dealer, distributor, agent, 
and sales representative engaged in the sale of any product in or into 
the United States of America, within ninety (90) days of the 
commencement of such person's employment or affiliation with Rockport.

IX

    It is further ordered that Reebok or Rockport shall notify the 
Commission at least thirty (30) days prior to any proposed changes in 
Reebok or Rockport such as dissolution, assignment or sale resulting in 
the emergence of a successor corporation, the creation or dissolution 
of subsidiaries, or any other change in the corporations which may 
affect compliance obligations arising out of the order.

X

    It is further ordered that, within sixty (60) days after the date 
this order becomes final, and at such other times as the Commission or 
its staff shall request, Reebok and Rockport shall file with the 
Commission a verified written report setting forth in detail the manner 
and form in which Reebok and Rockport have complied and are complying 
with this order.

XI

    It is further ordered that this order shall terminate on [insert 
date twenty years after date of issuance].

Exhibit A

[Reebok Letterhead]

    Dear Retailer: The Federal Trade Commission has conducted an 
investigation into Reebok's sales policies, and in particular 
Reebok's Centennial Plan, which was announced in November 1992 and 
whose retail pricing provisions have since been withdrawn. To 
expeditiously resolve the investigation and to avoid disruption to 
the conduct of its business, Reebok has agreed, without admitting 
any violation of the law, to the entry of a Consent Order by the 
Federal Trade Commission prohibiting certain practices relating to 
resale prices. A copy of the Order is enclosed. This letter and the 
accompanying Order are being sent to all of our dealers, sales 
personnel and representatives.
    The Order spells out our obligations in greater detail, but we 
want you to know and understand that you can sell and advertise our 
products at any prices you choose. While we may send materials to 
you which contain suggested retail prices, you remain free to sell 
and advertise those products at any price you choose.
    We look forward to continuing to do business with you in the 
future.

      Sincerely yours,

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President,
Reebok International Ltd.

Exhibit B

[Rockport Letterhead]

    Dear Retailer: The Federal Trade Commission has conducted an 
investigation into Rockport's sales policies, and in particular 
Rockport's Suggested Retail Pricing Policy, which was announced in 
July 1992 and which, together with Rockport's subsequent ``Marathon 
Policy,'' has since been withdrawn. To expeditiously resolve the 
investigation and to avoid disruption to the conduct of its 
business, Rockport has agreed, without admitting any violation of 
the law, to the entry of a Consent Order by the Federal Trade 
Commission prohibiting certain practices relating to resale prices. 
A copy of the Order is enclosed. This letter and the accompanying 
Order are being sent to all of our dealers, sales personnel and 
representatives.
    The Order spells out our obligations in greater detail, but we 
want you to know and understand that you can sell and advertise our 
products at any price you choose. While we may send materials to you 
which contain suggested retail prices, you remain free to sell and 
advertise those products at any price you choose.
    We look forward to continuing to do business with you in the 
future.

      Sincerely yours,
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President,
The Rockport Company, Inc.

Analaysis of Proposed Consent Order to Aid Public Comment

    The Federal Trade Commission has accepted an agreement to a 
proposed consent order from Reebok International Ltd. and The Rockport 
Company, Inc. (a wholly-owned subsidiary of Reebok International Ltd.).
    The proposed consent order has been placed on the public record for 
sixty (60) days for reception of comments by interested persons. 
Comments received during this period will become part of the public 
record. After sixty (60) days, the Commission will again review the 
agreement and the comments received and will decide whether it should 
withdraw from the agreement or make final the agreement's proposed 
order.
    The complaint alleges that Reebok International Ltd. (``Reebok'') 
and The Rockport Company, Inc. (``Rockport'') have entered into 
combinations, agreements and understandings with certain of their 
dealers to maintain the [[Page 25230]] resale prices at which certain 
of their dealers sell certain of their athletic or casual footwear 
products. The complaint alleges that this conduct violates Section 5 of 
the Federal Trade Commission Act.
    Reebok and Rockport have signed a consent agreement to the proposed 
consent order that prohibits them from fixing, controlling or 
maintaining the resale prices at which any dealer may advertise, 
promote, offer for sale or sell any Reebok or Rockport product. The 
proposed order prohibits Reebok and Rockport from coercing or 
pressuring any dealer to maintain, adopt or adhere to any resale price, 
and from securing or attempting to secure commitments or assurances 
from any dealer concerning resale prices. The proposed consent order 
also for a period of ten years prohibits Reebok and Rockport from 
enforcing or threatening to enforce any policy, practice or plan under 
which Reebok or Rockport notifies a dealer in advance that the dealer 
is subject to partial or temporary suspension or termination if it 
sells or advertises any product below a resale price designated by 
Reebok or Rockport, and that the dealer will be subject to a greater 
sanction if it continues or renews selling or advertising any product 
below a designated resale price.
    The proposed order requires Reebok and Rockport to mail a letter to 
their dealers which will inform them that they can sell and advertise 
Reebok and Rockport products at any price they choose. The proposed 
order also requires Reebok and Rockport, for a period of five years, to 
place on any material in which they suggest resale prices a statement 
that the dealer is free to determine the prices at which it will sell 
Reebok or Rockport products.
    The proposed order provides that the order shall terminate 20 years 
after the date of its issuance by the Commission.
    The purpose of this analysis is to facilitate public comment on the 
proposed order, and it is not intended to constitute an official 
interpretation of the agreement and proposed order or to modify in any 
way their terms.
Donald S. Clark,
Secretary.

Dissenting Statement of Commissioner Roscoe B. Starek III, in the 
Matter of Reebok International, Ltd., File No. 921-0117

    I find reason to believe that Reebok International, Ltd. 
(``Reebok'') has entered into agreements with retailers to restrain 
resale prices and has thereby violated Section 5 of the FTC Act, 15 
U.S.C. Sec. 45.\1\ But I have dissented from the decision to accept the 
consent agreement in this matter because certain provisions of the 
Commission's order are not necessary to prevent unlawful conduct and 
may unduly restrain procompetitive activity by Reebok.

    \1\See Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 
U.S. 373 (1911) (resale price maintenance (``RPM'') held unlawful 
upon mere proof of agreement).
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    Under most circumstances, including those here, the competitive 
effects of RPM are ambiguous at worst and a full rule of reason 
analysis likely would not reveal cognizable anticompetitive effects.\2\ 
Therefore, I would prefer that injunctive relief ordered to address RPM 
be strictly tailored to the per se allegations. The fencing-in 
restrictions in this order is related to resale price advertising (in 
subparagraphs II (A) and (C)) and to Reebok's ``structured termination 
policy'' (subparagraph II(D))--are unnecessarily broad and may enjoin 
efficient conduct.\3\

    \2\See, e.g., Pauline Ippolito, Resale Price Maintenance: 
Evidence From Litigation, 34 J.L. & Econ. 263 (1991). See also Kevin 
J. Arquit, Resale Price Maintenance: Friend or Foe? 60 Antitrust 
L.J. 447 (1992).
    \3\Even if the evidence in this case suggests that Reebok's 
dealer advertising and termination policies supported RPM, deleting 
the related fencing-in injunctions likely would be procompetitive. 
The order should permit Reebok to exercise its lawful dealer 
termination rights and to engage in any procompetitive minimum 
advertised price programs ``unless (this conduct) includes some 
agreement on price levels.'' Business Electronics Corp. v. Sharp 
Electronics Corp., 484 U.S. 717, 735-36 (1988).
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[FR Doc. 95-11555 Filed 5-10-95; 8:45 am]
BILLING CODE 6750-01-M