[Federal Register Volume 60, Number 35 (Wednesday, February 22, 1995)]
[Notices]
[Pages 9860-9866]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-4283]



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DEPARTMENT OF JUSTICE
Antitrust Division


United States of America v. Playmobil USA, Inc.; Proposed Final 
Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b) through (h), that a proposed Final 
Judgment, Stipulation and Competitive Impact Statement have been filed 
with the United States District Court for the District of Columbia in 
United States of America versus Playmobil USA, Inc., Civil Action No. 
95-0214. The Complaint alleged that Playmobil engaged in a combination 
and conspiracy with dealers to fix the price of children's toys in 
violation of section 1 of the Sherman Act, 15 U.S.C. 1. The proposed 
Final Judgment that Playmobil has agreed to prohibits it for a period 
of ten years from (A) agreeing with any dealer to fix or maintain the 
resale prices at which Playmobil`s products may be sold; (B) discussing 
or encouraging adherence to Playmobil's suggested resale prices; (C) 
threatening to terminate or retaliate against a dealer for discounting; 
and (D) communicating information to any dealer relating to the 
termination of any other dealer due to discounting. Additionally, for 
five years Playmobil is barred from (E) terminating any dealer or 
taking any other action for reasons relating to that dealer's 
discounting of Playmobil products; (f) announcing that it will adopt 
any resale pricing policy under which a dealer may be terminated 
because of discounting; (G) acting, or representing that it will act, 
upon a dealer's complaint of another dealer's discounting; and (H) 
establishing any cooperative advertising policy that denies or reduces 
advertising allowances for any reason related to a dealer's advertised 
discount prices. These prohibitions are discussed more fully in the 
Competitive Impact Statement.
    Playmobil is also required to appoint an antitrust compliance 
officer and establish an antitrust compliance program. This program is 
designed to inform Playmobil employees and agents about the consent 
decree and the antitrust laws, thereby helping to prevent future 
violations.
    Public comment is invited within the statutory 60-day comment 
period. Such comments and responses to them will be published in the 
Federal Register and filed with the Court. Comments should be directed 
to Rebecca P. Dick, Chief, Civil Task Force I, U.S. Department of 
Justice, Antitrust Division, 1401 H Street, NW., Room 3700, Washington, 
DC 20530 (telephone: 202/514-8368).
Constance K. Robinson,
Director of Operations, Antitrust Division.
In the United States District Court for the District of Columbia
    United States of America, Plaintiff, v. Playmobil USA, Inc., 11 
E. Nicholas Court, Dayton, NY 08810. Defendant.

Case Number 1:95CV00214
Judge: James Robertson
Deck Type: Antitrust
Date Stamp: 01/31/95

Complaint

    The United States of America, plaintiff, by its attorneys acting 
under the direction of the Attorney General of the United States, 
brings this civil action against the above-named 
[[Page 9861]] defendant and complains and alleges as follows:

I.

Jurisdiction and Venue

    1. This complaint is filed under section 4 of the Sherman Act, as 
amended (15 U.S.C. 4), in order to prevent and restrain violations, as 
hereinafter alleged, by the defendant of section 1 of the Sherman Act 
(15 U.S.C. 1). This court has jurisdiction over this matter pursuant to 
28 U.S.C. 1331 and 1337.
    2. Defendant transacts business and is found in the District of 
Columbia.

II.

Definitions

    3. ``Person'' means any individual, corporation, partnership, 
company, sole proprietorship, firm or other legal entity.
    4. ``Dealer'' means any person not wholly owned by defendant who 
has at any time purchased or acquired Playmobil products for resale, 
excluding any person who did not purchase or acquire Playmobil products 
directly from Playmobil or its agents.
    5. ``Playmobil product'' means any product sold or distributed by 
defendant for resale in the United States.

III.

Defendant and Co-Conspirators

    6. Playmobil USA, Inc. (``Playmobil'') is made a defendant herein. 
Playmobil is a corporation headquartered in the District of New Jersey, 
organized and existing under the laws of the State of New Jersey.
    7. Various companies and individuals who are dealers, not made 
defendants in this complaint, have been induced to participate by and 
have participated with the defendant in the offense charged herein and 
performed acts and made statements in furtherance of it.

IV.

Trade and Commerce

    8. Playmobil is a prominent seller of specialty toys for children 
in the United States. Playmobil products are manufactured by 
Playmobil's parent company, Geobra Brandstatter GmbH & Co., KG., in 
Germany and sold and distributed in the United States by Playmobil.
    9. Playmobil sells substantial quantities of Playmobil products to 
dealers throughout the United States, which in turn resell Playmobil 
products to consumers.
    10. During the period covered by this complaint, there has been a 
continuous and uninterrupted flow in interstate commerce of Playmobil 
products from Playmobil's facilities in New Jersey to dealers 
throughout the United States. The activities of the defendant and its 
co-conspirators, as hereinafter described, have been within the flow 
of, and have substantially affected, interstate commerce.

V.

Violation Alleged

    11. Beginning at least as early as February, 1990, and continuing 
at least through August, 1994, the exact dates being unknown to the 
United States, the defendant and its co-conspirators engaged in a 
combination and conspiracy in unreasonable restraint of interstate 
trade and commerce in violation of section 1 of the Sherman Act, as 
amended (15 U.S.C. 1). This unlawful combination and conspiracy will 
continue or may be renewed unless the relief prayed for herein is 
granted.
    12. The combination and conspiracy consisted of a continuing 
agreement, understanding, and concert of action among the defendant and 
its co-conspirators to fix and maintain the resale price of Playmobil 
products at the amount set by the defendant, Playmobil.
    13. In furtherance of this combination and conspiracy, the 
defendant did the following things, among others:
    (a) Established and communicated to dealers minimum resale prices 
for Playmobil products;
    (b) Threatened to terminate dealers for selling or advertising 
Playmobil products at prices below defendant's minimum resale prices;
    (c) Used threats of termination to secure dealers' adherence to 
defendants' minimum resale prices and to limit the duration of 
promotional sales by dealers;
    (d) Enforced adherence to minimum resale prices at the behest of 
dealers in order to stop ``price wars'' among them; and
    (e) Agreed with dealers on the retail prices for Playmobil products 
to be charged by the dealers.

VI.

Effects

    14. The aforesaid combination and conspiracy has had the following 
effects, among others:
    (a) Resale prices of children's toys have been fixed and 
maintained; and
    (b) Competition in the sale of children's toys by dealers has been 
restrained, suppressed, and eliminated.

VII.

Prayer for Relief

    Wherefore, plaintiff prays:
    1. That the Court adjudge and decree that the defendant has 
combined and conspired to restrain interstate trade and commerce of 
Playmobil products in violation of section 1 of the Sherman Act.
    2. That the defendant, its officers, directors, agents, employees 
and successors and all other persons acting or claiming to act on their 
behalf be enjoined and restrained from, in any manner, directly or 
indirectly, continuing, maintaining, or renewing the combination and 
conspiracy herein before alleged, or from engaging in any other 
combination, conspiracy, contract, agreement, understanding or concern 
of action having a similar purpose or effect, and from adopting or 
following any practice, plan, program, or device having a similar 
purpose or effect.
    3. That plaintiff have such other relief as the Court may deem just 
and proper.
    4. That plaintiff recover the costs of this action.
Anne K. Bingaman,
Assistant Attorney General
Robert E. Litan,
Mark C. Schechter,
Rebecca P. Dick,
Bruce K. Yamanaga,
Andrew S. Cowan,
Steven Semeraro, ]
D.C. Bar No. 419612, Attorneys, Department of Justice Antitrust 
Division, Civil Task Force, 1401 H Street, NW., Room 3700, Washington, 
DC. 20530, (202) 514-8368.
In the United States District Court for the District of Columbia
    United States of America, Plaintiff, v. Playmobil USA, Inc., 
Defendant.

Civil Action No. 95-0214

Stipulation

    It is stipulated by and between the undersigned parties, by their 
respective attorneys, that:
    1. The parties to this Stipulation consent that a Final Judgment in 
the form attached may be filed and entered by the Court, upon any 
party's or the Court's own motion, at any time after compliance with 
the requirements of the Antitrust Procedures and Penalties Act (15 
U.S.C. 16), without further notice to any party or other proceedings, 
provided that plaintiff has not withdrawn its consent, which it may do 
at any time before entry of the proposed Final Judgment by serving 
notice on the defendant and by filing that notice with the Court.
    2. If plaintiff withdraws its consent or the proposed Final 
Judgment is not [[Page 9862]] entered pursuant to this Stipulation, 
this Stipulation shall be of no effect whatever and its making shall be 
without prejudice to any party in this or any other proceedings.
    For the plaintiff:
Anne K. Bingaman
Assistant Attorney General
Robert E. Litan,
Mark Schechter,
Rebecca P. Dick,
Bruce K. Yamanaga,
Andrew S. Cowan,
Attorneys, U.S. Department of Justice, Antitrust Division, Civil Task 
Force, 1401 H Street, NW., Room 3700, Washington, DC. 20530, (202) 514-
8368.
    For the defendant:
Eugene J. Meigher,
Counsel for Playmobil, USA, Inc.

Certificate of Service

    I certify that, on this day January 31, 1995, I have caused to be 
served, by messenger, a copy of the foregoing Stipulation, Final 
Judgment and Competitive Impact Statement on counsel of record for 
Playmobil USA, Inc. at the address below:

Eugene Meigher, Arent, Fox 1050 Connecticut Ave NW., 5th Floor, 
Washington, DC 20036
Andrew S. Cowan
In the United States District Court for the District of Columbia
    United States of America, Plaintiff, v. Playmobil USA, Inc., 
Defendant.

Civil Action No. 95-0214

Final Judgment

    Plaintiff, United States of America, having filed its complaint 
herein on __________, and plaintiff and defendant, Playmobil, USA, 
Inc., having consented to the entry of this Final Judgment without 
trial or adjudication of any issue of fact or law herein and without 
the Final Judgment constituting any evidence against or an admission by 
any party with respect to any such issue;
    And whereas defendant has agreed to be bound by the provisions of 
this Final Judgment pending its approval by the Court;
    Now, Therefore, before the taking of any testimony and without 
trial or adjudication of any issue of fact or law herein, and upon 
consent of the parties hereto, it is hereby ORDERED, adjudged and 
decreed as follows:

I.

Jurisdiction

    This Court has jurisdiction of the subject matter of this action 
and of the party consenting hereto. The complaint states a claim upon 
which relief may be granted against defendant under Section 1 of the 
Sherman Act (15 U.S.C. 1).

II.

Definitions

    As used in this Final Judgment:
    A. ``Cooperative advertising policy'' means any policy or program 
under which defendant provides a dealer with any rebate, allowance, or 
reimbursement that relates to that dealer's advertising of Playmobil 
products.
    B. ``Dealer'' means any person not wholly owned by defendant who 
has at any time purchased or acquired Playmobil products for resale, 
excluding any person who did not purchase or acquire Playmobil products 
directly from Playmobil or its agents.
    C. ``Discount'' means to offer, sell or advertise any Playmobil 
product for resale at a price below defendant's suggested resale price.
    D. ``Person'' means any individual, corporation, partnership, 
company, sole proprietorship, firm or other legal entity.
    E. ``Playmobil product'' means any product sold or distributed by 
defendant for resale in the United States.
    F. ``Promotional event'' means a sale of offering of limited 
duration during which a dealer discounts a Playmobil product.
    G. ``Resale price'' means any price, price floor, price ceiling, 
price range, or any mark-up, formula or margin of profit relating to 
Playmobil products sold by dealers.
    H. ``Suggested resale price'' means any resale price level, 
including those related to everyday pricing or promotional pricing, 
that is suggested, endorsed, communicated, distributed or determined by 
defendant.
    I. ``Terminate'' means to refuse to continue selling, either 
permanently or temporarily, any or all Playmobil products to a dealer.

III.

Applicability

    A. This Final Judgment applies to defendant and to each of its 
officers, directors, agents, employees, subsidiaries, successors, and 
assigns, and to all other persons in active concert or participation 
with any of them who shall have received actual notice of this Final 
Judgment by personal service or otherwise.
    B. Defendant shall require, as a condition of the sale of all or 
substantially all of its assets or stock, that the acquiring party 
agree to be bound by the provisions of this Final Judgment.

IV.

Prohibited Conduct

    A. Defendant is hereby enjoined and restrained from directly or 
indirectly entering into, adhering to, maintaining, furthering, 
enforcing or claiming any right under any contract, agreement, 
understanding, plan or program with any dealer to fix, stabilize, or 
maintain the resale prices at which defendant's products may be sold or 
offered for sale in the United States by any dealer.
    B. Defendant is further enjoined and restrained from (1) 
discussing, explaining, or encouraging adherence to defendant's 
suggested resale prices with any dealer, (2) threatening or warning any 
dealer that it may be terminated or otherwise subjected to any action 
by the defendant for discounting, and (3) communicating to any dealer 
information relating to any actual or contemplated termination of any 
other dealer for any reason related to discounting.
    C. Defendant is further enjoined and restrained for a period of 
five (5) years from the date of entry of the final judgment from 
directly or indirectly announcing to the public or to any present or 
potential dealer of its products that defendant has or is adopting, 
promulgating, suggesting, announcing or establishing any resale pricing 
policy for Playmobil products that: (1) Provides that defendant will 
sell only to a dealer that prices at or above suggested resale prices; 
(2) provides that defendant may or will terminate, or take any other 
action related to, a dealer for discounting; or (3) relates to the 
duration or frequency of any dealer's promotional events.
    D. Defendant is further enjoined and restrained for a period of 
five (5) years from the date of entry of the final judgment from (1) 
representing that it will act on any complaint or communication from a 
dealer that relates to any other dealer's discounting, (2) discussing 
any such complaint or communication with the complaining dealer, except 
that defendant may state that it does not accept dealer complaints or 
communications that relate to the pricing practices of other dealers, 
and (3) terminating any dealer or taking any other action for reasons 
relating to that dealer's discounting.
    E. Defendant is further enjoined and restrained for a period of 
five (5) years from the date of entry of the final judgment from 
adopting, promulgating, suggesting, announcing or establishing any 
cooperative advertising policy that denies or reduces advertising 
rebates, allowances or reimbursements to a [[Page 9863]] dealer for any 
reason related to that dealer's advertised prices.
    F. Nothing in this Section IV shall prohibit defendant from (1) 
establishing suggested resale prices and communicating these prices to 
dealers, provided that such communications also state that these prices 
are only suggested prices and that dealers are free to adopt any resale 
price that they choose, or (2) terminating any dealer for reasons 
unrelated to that dealer's discountings.

V.

Notification Provisions

    Defendant is ordered and directed:
    A. To send a written notice, in the form attached as Appendix A to 
this Final Judgment, and a copy of this Final Judgment, within sixty 
(60) days of the entry of this Final Judgment, to each dealer who 
purchased Playmobil products in 1993 or 1994.
    B. To send a written notice, in the form attached as Appendix A to 
this Final Judgment, and a copy of this Final Judgment, to each dealer 
who purchases products from defendant within ten (10) years of entry of 
this Final Judgment and who was not previously given such notice. Such 
notice shall be sent within thirty (30) days after the first shipment 
of Playmobil products to such dealer.

VI.

Compliance Program

    Defendant is ordered to establish and maintain an antitrust 
compliance program which shall include designating, within 30 days of 
entry of this Final Judgment, an Antitrust Compliance Officer with 
responsibility for implementing the antitrust compliance program and 
achieving full compliance with this Final Judgment. The Antitrust 
Compliance Officer shall, on a continuing basis, be responsible for the 
following:
    A. Furnishing a copy of this Final Judgment within thirty (30) days 
of entry of the Final Judgment to each of defendant's officers and 
directors and each of its employees, salespersons, sales 
representatives, or agents whose duties include supervisory or direct 
responsibility for the sale or advertising of Playmobil products in the 
United States, except for employees whose functions are purely clerical 
or manual;
    B. Distributing in a timely manner a copy of this Final Judgment to 
any owner, officer, employee or agent who succeeds to a position 
described in Section VI (A);
    C. Providing each person designated in Sections VI (A) or (B) with 
a written explanation in plain language of this Final Judgment, with 
examples of conduct prohibited by the Final Judgment and with 
instructions that each person designated in Section VI (A) and (B) 
shall report any known violations of the Final Judgment to the 
Antitrust Compliance Officer;
    D. Arranging for an annual oral briefing to each person designated 
in Sections VI (A) or (B) on the meaning and requirements of this Final 
Judgment and the antitrust laws, accompanied by a written explanation 
of the type described in Section VI. (C);
    E. Obtaining (1) from each person designated in Sections VI (A) or 
(B) certification that he or she has read, understands and agrees to 
abide by the terms of this Final Judgment and is not aware of any 
violation of the Final Judgment that has not been reported to the 
Antitrust Compliance Officer; and (2) from each officer, director and 
employee certification that he or she understands that failure to 
comply with this Final Judgment may result in conviction for criminal 
contempt of court.
    F. Maintaining (1) a record of all certifications received pursuant 
to Section VI (E); (2) a file of all documents related to any alleged 
violation of this Final Judgment; (3) a record of all communications 
related to any such violation, which shall identify the date and place 
of the communication, the persons involved, the subject matter of the 
communication, and the results of any related investigation; and (4) a 
list of all persons terminated as dealers, or threatened with 
termination, after the effective date of this Final Judgment and all 
documents related to any such termination or threatened termination.

VII.

Certification

    A. Within 75 days of the entry of this Final Judgment, defendant 
shall certify to plaintiff whether the defendant has designated an 
Antitrust Compliance Officer and has distributed the Final Judgment in 
accordance with Section VI (A) above.
    B. For ten years after the entry of this Final Judgment, on or 
before its anniversary date, the defendant shall file with the 
plaintiff an annual statement as to the fact and manner of its 
compliance with the provisions of Sections V and VI.
    C. If defendant's Antitrust Compliance Officer learns of any 
violations of any of the terms and conditions contained in this Final 
Judgment, defendant shall immediately notify the plaintiff and 
forthwith take appropriate action to terminate or modify the activity 
so as to comply with this Final Judgment.

VIII.

Plaintiff Access

    A. For the purpose of determining or securing compliance with this 
Final Judgment, and for no other purpose, duly authorized 
representatives of plaintiff shall, upon written request of the 
Attorney General or the Assistant Attorney General in charge of the 
Antitrust Division, and on reasonable notice to the defendant, be 
permitted, subject to any legally recognized privilege:
    1. Access during the defendant's office hours to inspect and copy 
all records and documents in the possession or under the control of 
defendant, which may have counsel present, relating to any matters 
contained in this Final Judgment; and
    2. To interview the defendant's officers, employees and agents, who 
may have counsel present, regarding any such matters. The interviews 
shall be subject to the defendant's reasonable convenience.
    B. Upon the written request of the Attorney General or the 
Assistant Attorney General in charge of the Antitrust Division made to 
defendant at its principal office, defendant shall submit such written 
reports, under oath if requested, with respect to any of the matters 
contained in this Final Judgment as may be requested, subject to any 
legally recognized privilege.
    C. No information or documents obtained by the means provided in 
this Section VIII shall be divulged by any representative of the 
Department of Justice to any person other than a duly authorized 
representative of the Executive Branch of the United States, except in 
the course of legal proceedings to which the United States is a party, 
or for the purpose of securing compliance with this Final Judgment, or 
as otherwise required by law.
    D. If at the time information or documents are furnished by 
defendant to plaintiff, defendant represents and identifies in writing 
the material in any such information or documents to which a claim of 
protection may be asserted under Rule 26(c)(7) of the Federal Rules of 
Civil Procedure, and defendant marks each pertinent page of such 
material, ``Subject to claim of protection under Rule 26(c)(7) of the 
Federal Rules of Civil Procedure,'' then ten (10) days' notice shall be 
given by plaintiff to defendant prior to divulging such material in any 
legal proceeding (other than a grand jury proceeding), so that 
defendant shall have an [[Page 9864]] opportunity to apply to this 
Court for protection pursuant to Rule 26(c)(7) of the Federal Rules of 
Civil Procedure.

IX.

Duration of Final Judgment

    Except as otherwise provided hereinabove, this Final Judgment shall 
remain in effect until ten (10) years from the date of entry.

X.

Construction, Enforcement, Modification and Compliance

    Jurisdiction is retained by the Court for the purpose of enabling 
any of the parties to this Final Judgment to apply to this Court at any 
time for such further orders or directions as may be necessary or 
appropriate for the construction or carrying out of this Final 
Judgment, for the modification of any of its provisions, for its 
enforcement or compliance, and for the punishment of any violation of 
its provisions.

XI.

Public Interest

    Entry of this Final Judgment is in the public interest.
    Dated: ________
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United States District Judge

Appendix A

Dear Playmobil Dealer:

    Since 1991, Playmobil USA has maintained a Retailer Discount 
Policy that provided for the termination of any Playmobil dealer 
that failed to adhere to certain Playmobil suggested price ranges. 
In January 1995, the Antitrust Division of the United States 
Department of Justice filed a civil suit that alleged that Playmobil 
enforced this policy in a manner that violated the antitrust laws by 
reaching agreements with some of its retailers about what their 
retail prices would be. Playmobil has agreed, without admitting any 
violation of the law and without being subject to any monetary 
penalties, to the entry of a civil Consent Order prohibiting certain 
pricing practices in the United States.
    I have enclosed a copy of the Order for your information. Under 
its terms, you as a Playmobil dealer are absolutely free to sell 
Playmobil products at whatever resale price you choose. Furthermore, 
Playmobil may not attempt to influence your discounting of Playmobil 
products, influence the duration or frequency of your promotional 
events, or condition advertising allowances on your adhering to 
Playmobil's suggested resale prices.
    If you learn that Playmobil or its agents have violated the 
terms of the Order at any time after the effective date of the 
Order, you should provide this information to Playmobil in writing.
    Should you have any questions concerning this letter, please 
feel free to contact me.

      Sincerely,______________
John Thorpe,
President Playmobil USA, Inc. 11 E. Nicholas Court Dayton, NJ 08810

In the United States District Court for the District of Columbia

    United States of America, Plaintiff v. Playmobil USA, Inc., 
Defendant.

Case Number 1:95CV00214
Judge: James Robertson
Deck Type: Antitrust
Date Stamp: 01/31/95

Competitive Impact Statement

    The United States of America, pursuant to section 2 of the 
Antitrust Procedures and Penalties Act (``APPA''), 15 U.S.C. 16(b), 
submits this Competitive Impact Statement in connection with the 
proposed Final Judgment submitted for entry in this civil antitrust 
proceeding.

I

Nature and Purpose of the Proceeding

    On January 30, 1995, the United States filed a civil antitrust 
complaint under section 4 of the Sherman Act, as amended, 15 U.S.C. 4, 
alleging that the defendant Playmobil USA, Inc. (``Playmobil'') engaged 
in a combination and conspiracy, in violation of section 1 of the 
Sherman Act, 15 U.S.C. 1, to fix the retail prices of Playmobil 
children's toys throughout the United States. The complaint alleges 
that, in furtherance of this conspiracy, Playmobil from February 1990 
through August of 1994:
    (a) Established and communicated to dealers minimum resale prices 
for Playmobil toys;
    (b) Threatened to terminate dealers for selling or advertising 
Playmobil toys at prices below those minimum resale prices;
    (c) Through the threats of termination, secured dealers' adherence 
to those minimum resale prices and limited the duration of promotional 
sales by dealers;
    (d) Enforced adherence to minimum resale prices at the behest of 
dealers in order to stop price wars among them; and
    (e) Agreed with dealers on the retail prices the dealers would 
charge for Playmobil toys.
    The complaint also alleges that as a result of the combination and 
conspiracy, prices of children's toys have been fixed and maintained, 
and competition in the sales of children's toys has been restrained.
    The complaint alleges that the combination and conspiracy is 
illegal, and accordingly requests that this Court prohibit Playmobil 
from continuing or renewing such activity or similar activities.
    The United States and Playmobil have stipulated that the proposed 
Final Judgment may be entered after compliance with the APPA, unless 
the United States withdraws its consent.
    The Court's entry of the proposed Final Judgment will terminate the 
action, except that the Court will retain jurisdiction over the matter 
for possible further proceedings to construe, modify or enforce the 
Judgment, or to punish violations of any of its provisions.

II

Description of Practices Giving Rise to the Alleged Violation of the 
Antitrust Laws

    Playmobil, a New Jersey corporation, is a prominent seller of 
specialty toys for children in the United States, with annual sales at 
wholesale in excess of $18 million. Playmobil imports its toys from 
Germany, where its parent company makes them. From New Jersey it 
distributes to retail toy stores in every state, and these stores in 
turn sell Playmobil toys to consumers.
    Over the past several years, Playmobil regularly published what it 
termed ``Suggested Retail Price Ranges'' for all of its products. It 
also annually issued letters to all of its dealers setting forth a 
``Retailer Discount Policy.'' The Playmobil letters facially expressed 
a well-defined, unilateral, dealer-termination policy under United 
States versus Colgate & Co., 250 U.S. 300 (1919) that even included 
some safeguards to ensure that Playmobil and its dealers would not 
enter into resale price agreements. The stated policy said, in effect, 
that Playmobil would, entirely on its own, monitor its retailers and 
automatically, without discussion, refuse to sell to any dealer it 
determined was discounting beyond the prescribed limits (emphasis 
supplied). In the letters, Playmobil also committed not to further 
discuss the policy or anything related to it.
    In practice, however, Playmobil ignored these restrictions: 
Playmobil personnel repeatedly contacted and pressured dealers in over 
a dozen states who reportedly were discounting below the policy's 
``suggested'' minimum levels. Playmobil secured from a number of its 
dealers express agreements to follow Playmobil's published retail 
prices. Playmobil often expressly threatened a dealer with termination 
in order to obtain its agreement.
    Frequently the impetus for Playmobil's actions was pressure from 
other dealers that did not want to face [[Page 9865]] price competition 
in the retail sales of Playmobil toys. Playmobil determined whether an 
accused dealer was in fact discounting beyond the ``suggested'' limits, 
and if it was, Playmobil forcefully ``discussed'' its resale pricing 
policy with the offending dealer.
    If, after such discussions, the dealer did not agree to raise its 
prices, Playmobil responded with various threats--additional stores in 
the immediate area might begin carrying Playmobil toys, Playmobil might 
improperly process orders, a variety of shipping problems could occur. 
In some instances, Playmobil refused to sell additional toys to a 
dealer until after that dealer agreed to adhere to Playmobil's price 
ranges.
    The volume of commerce affected by Playmobil's illegal conduct is 
difficult to estimate. Playmobil's illegal conduct was concentrated in 
the more than one dozen states where, at the urging of retail dealers 
that wanted to prevent price competition, it obtained illegal resale 
pricing agreements with potential discounters. Thus while it is 
difficult to estimate the total volume of commerce affected by 
Playmobil's violations, it clearly was substantial although 
significantly less than the entire $35 million in annual, nationwide, 
retail sales of Playmobil toys.
    Playmobil, by using the devices described, was usually successful 
in inducing dealers to raise their prices. Indeed, the power of these 
actions was such that Playmobil never had to permanently sever its 
relationship with a dealer because of that dealer's continued 
discounting. Thus, the result of Playmobil's activities was to fix, 
raise and stabilize the prices at which toy retailers sold Playmobil 
products. The courts have routinely found conduct such as Playmobil's 
here to be a per se violation of the prohibition on agreements in 
restraint of trade under section 1 of the Sherman Act.

III

Explanation of the Proposed Final Judgment

    The parties have stipulated that the Court may enter the proposed 
Final Judgment at any time after compliance with the APPA. The proposed 
Final Judgment states that it shall not constitute an admission by 
either party with respect to any issue of fact or law.
    The proposed Final Judgment enjoins any continuation or renewal, 
directly or indirectly, of the type of combination or conspiracy 
alleged in the Complaint. Specifically, Section IV A prohibits 
Playmobil from entering into any agreement or understanding with any 
dealer to fix, stabilize or maintain any dealer's prices for Playmobil 
products in the United States.
    The law permits a manufacturer unilaterally to announce and 
unilaterally to implement a policy of terminating discounters. Colgate, 
supra. The manufacturer may not, however, secure a dealer's agreement 
on retail price levels. United States v. Parke, Davis & Co., 362 U.S. 
29 (1960). If a dealer discounts, the manufacturer must choose either 
to continue to supply that dealer, knowing of its discounting 
practices, or to forego that retail outlet for its products in the 
future.
    In this case, the Complaint alleges that Playmobil reached illegal 
agreements with its dealers in the course of discussions about discount 
pricing. Although discussions between a manufacturer and a dealer about 
resale pricing do not always result in an agreement about those prices, 
see Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752 (1984), the 
evidence in this case showed, and the Complaint alleges, that 
Playmobil's discussions clearly led to, and in fact included, illegal 
agreements. Isaksen v. Vermont Castings, 825 F.2d 1158, 1164 (7th Cir. 
1987), cert. denied, 486 U.S. 1005 (1988). To avoid a repetition of 
such episodes, Section IV B bars Playmobil from discussing, explaining, 
or encouraging dealers to adhere to suggested prices, threatening to 
terminate a dealer for discounting, or discussing a dealer's 
termination with another dealer. This prohibition addresses the central 
offense in this case and extends for the entire ten-year life of the 
decree.
    The proposed Final Judgment not only bars Playmobil's unlawful 
practices, but also contains additional provisions that are remedial in 
nature, intended to restore competitive conditions in retail toy 
markets and in dealer relationships, both of which have been distorted 
by Playmobil's conduct from 1990 through August of 1994, as set forth 
in the Complaint. These provisions bar some activities that are not, in 
and of themselves, illegal, but which could nevertheless serve the same 
purpose as Playmobil's outright agreements to fix resale prices--
preventing Playmobil dealers from selling or advertising at discount 
prices.
    To establish a new pricing regime to replace the former illegally 
enforced regime, and to encourage retailers of Playmobil toys that 
previously could not offer Playmobil products at discount prices, 
because of Playmobil's illegal conduct, to exercise their ability to 
discount if they so wish, Sections IV C and D of the Final Judgment 
prohibit Playmobil for the first five years of the decree from 
reestablishing its resale price policy in any form, even forms that 
would be legal if Playmobil had never engaged in the illegal conduct 
alleged in the Complaint. Thus, Section IV C bars Playmobil from 
announcing policies to (1) sell only to non-discounting dealers, (2) 
terminate or hinder dealers for discounting, or (3) control the 
duration or frequency of a dealer's discounting. Section IV D 3 further 
ensures that regardless of its stated policies, Playmobil will not 
terminate or otherwise take actions against any dealer because of 
discounting. Under the decree, the only thing Playmobil may continue to 
do is to publish truly suggested retail prices, together with the clear 
statement that dealers are free to ignore the suggestions.
    When it is clear that a manufacturer's suggested retail prices are 
informational only and strictly optional, they can serve useful market 
functions without adversely affecting competition. In such an 
environment, dealers become fully aware of and accustomed to exercising 
their pricing rights.
    Since the problem with Playmobil's policy lay in the implementation 
of the policy rather than in the policy itself, the prohibition on 
adopting such a policy extends only for five years. Similarly, since 
Playmobil never improperly terminated any dealers, the prohibition on 
terminations also extends only for five years. Playmobil will 
thereafter regain its Colgate right unilaterally to announce a resale 
pricing policy and unilaterally to terminate non-complying dealers. 
Throughout the period, Playmobil will be able to disseminate its 
suggested retail prices, but it must make clear that actual retail 
sales prices will be set entirely at its dealers' discretion.
    Subsections 1 and 2 of Section IV D of the Final Judgment also 
prohibit Playmobil from accepting dealer complaints about other 
dealers' pricing. In some cases, Playmobil was acting in response to 
dealers' complaints when it pressured other dealers to agree to charge 
higher retail prices. The complaints about discounting were the 
proximate cause of much of the illegal conduct alleged in the 
Complaint. Although a manufacturer's merely listening to a dealer's 
complaint about another's pricing does not necessarily violate the law, 
Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717 
(1988), the evidence here showed that the dealer complaints led 
directly to Playmobil's violations. Accordingly, in order to establish 
a period of time during which Playmobil's [[Page 9866]] and its 
dealers' conduct can become clearly legal, Playmobil has agreed not 
even to accept such communications from its dealers for five years.
    Section IV E of the Final Judgment prohibits Playmobil from 
establishing a cooperative advertising program that conditions rebates 
in any way upon a dealer's adherence to certain advertising price 
levels. Playmobil did not have a cooperative advertising program, but 
its illegal price agreements with dealers were often triggered by 
advertising. In order to avoid any discussions at all with dealers on 
the sensitive issue of retail pricing, Playmobil has also agreed not to 
undertake a cooperative advertising program during the first five years 
of the decree. This will provide a period of time during which market 
conditions can become more competitive, and Playmobil and its dealers 
can become more accustomed to remaining within legal parameters.
    Section V of the proposed Final Judgment is designed to ensure that 
Playmobil's dealers are aware of the limitations the Final Judgment 
imposes on Playmobil. Section V requires Playmobil to send notices and 
copies of the Judgment to each dealer who purchased Playmobil products 
from the defendant in 1993 or 1994. In addition, Playmobil must send 
notices and copies of the Judgment to every other dealer to which it 
sells Playmobil products within ten years of the date of the Judgment's 
entry.
    Sections VI and VII require Playmobil to set up an antitrust 
compliance program and designate an antitrust compliance officer. Under 
the program, Playmobil is required to furnish a copy of the Judgment 
and a less formal written explanation of it to each of its officers and 
directors and each of its non-clerical employees, representatives, or 
agents responsible for the sale or advertising of Playmobil products in 
the United States.
    In addition, the proposed Final Judgment provides methods for 
determining and securing Playmobil's compliance with its terms. Section 
VIII provides that, upon request of the Department of Justice, 
Playmobil shall submit written reports, under oath, with respect to any 
of the matters contained in the Judgment. Additionally, the Department 
of Justice is permitted to inspect and copy all books and records, and 
to interview officers, directors, employees and agents, of Playmobil.
    Section IX makes the Judgment effective for ten years from the date 
of its entry.
    Section XI of the proposed Final Judgment states that entry of the 
Judgment is in the public interest. The APPA conditions entry of the 
proposed Final Judment upon a determination by the Court that the 
proposed Final Judgment is in the public interest.
    The Government believes that the proposed Final Judgment is fully 
adequate to prevent the continuation or recurrence of the violation of 
section 1 of the Sherman Act alleged in the Complaint, and that 
disposition of this proceeding without further litigation is 
appropriate and in the public interest.

IV

Remedies Available to Potential Private Litigants

    Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any 
person who has been injured as a result of conduct prohibited by the 
antitrust laws may bring suit in federal court to recover three times 
the damages the person has suffered, as well as costs and reasonable 
attorney fees. Entry of the proposed Final Judgment will neither impair 
nor assist the bringing of any private antitrust damage action. Under 
the provisions of section 5(a) of the Clayton Act, 15 U.S.C. 16(a), the 
proposed Final Judgment has no prima facie effect in any subsequent 
private lawsuit that may be brought against the defendant.

V

Procedures Available for Modification of the Proposed Final Judgment

    The United States and the defendant have stipulated that the 
proposed Final Judgment may be entered by the Court after compliance 
with the provisions of the APPA, provided that the United States has 
not withdrawn its consent.
    The APPA provides a period of at least 60 days preceding the 
effective date of the proposed Final Judgment within which any person 
may submit to the United States written comments regarding the proposed 
Final Judgment. Any person who wants to comment should do so within 60 
days of the date of publication of this Competitive Impact Statement in 
the Federal Register. The United States will evaluate the comments, 
determine whether it should withdraw its consent, and respond to the 
comments. The comments and the response of the United States will be 
filed with the Court and published in the Federal Register.
    Written comments should be submitted to: Rebecca P. Dick, Chief, 
Civil Task Force I, U.S. Department of Justice, Antitrust Division, 
1401 H Street NW., Room 3700, Washington, DC 20530.
    Under Section X of the proposed Judgment, the Court will retain 
jurisdiction over this matter for the purpose of enabling either of the 
parties to apply to the Court for such further orders or directions as 
may be necessary or appropriate for the construction, implementation, 
modification, or enforcement of the Judgment, or for the punishment of 
any violations of the Judgment.

VI

Alternatives to the Proposed Final Judgment

    The only alternative to the proposed Final Judgment considered by 
the Government was a full trial on the merits and on relief. Such 
litigation would involve substantial cost to the United States and is 
not warranted, because the proposed Final Judgment provides appropriate 
relief against the violations alleged in the Complaint.

VII

Determinative Materials and Documents

    No particular materials or documents were determinative in 
formulating the proposed Final Judgment. Consequently, the Government 
has not attached any such materials or documents to the proposed Final 
Judgment.

    Dated:

    Respectfully submitted,
Bruce K. Yamanaga,
Andrew S. Cowan,
Attorneys, U.S. Department of Justice, Antitrust Division, 1401 H 
Street NW., Room 3700, Washington, DC 20530, (202) 514-8368.
[FR Doc. 95-4283 Filed 2-21-95; 8:45 am]
BILLING CODE 4410-01-M