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

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: ________

----------------------------------------------------------------------

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