Precision Moulding Company, Inc.; Proposed Consent Agreement With Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 951-0124]

Precision Moulding Company, Inc.; 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 or deceptive acts or practices and unfair methods of

competition, this consent agreement, accepted subject to final

Commission approval, would prohibit, among other things, the

Cottonwood, California-based company from requesting, suggesting,

urging, or advocating that any competitor raise, fix, or stabilize

price levels. This consent agreement settles allegations that

Precision, the leading supplier of wood products used to construct

frames for artists' canvases, attempted to fix prices and restrain

trade in the market for these products, known as stretcher bars.

DATES: Comments must be received on or before August 26, 1996.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT:

Michael Antalics, Federal Trade Commission, S-2627, 6th and

Pennsylvania Ave, NW, Washington, DC 20580. (202) 326-2821.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 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 Section 4.9(b)(6)(ii) of the Commission's Rules of

Practice (16 CFR 4.9(b)(6)(ii)).

Agreement Containing Consent Order To Cease and Desist

The Federal Trade Commission (``Commission''), having initiated an

investigation of certain acts and practices of Precision Moulding Co.,

Inc., a corporation, hereinafter sometimes referred to as ``proposed

respondent,'' and it now appearing that Precision Moulding Co., Inc. is

willing to enter into an agreement containing an order to cease and

desist from the use of the acts and practices being investigated.

It is hereby agreed by and between Precision Moulding Co. Inc., by

its duly authorized officer, and its attorney, and counsel for the

Commission that:

1. Proposed respondent Precision Moulding Co., Inc., is a

corporation organized, existing and doing business under and by virtue

of the laws of the State of California with its principal place of

business located at 3308 Cyclone Court, Cottonwood, California 96022,

and its mailing address at P.O. Box 406, Cottonwood, California 96022.

2. Proposed respondent admits all the jurisdictional facts set

forth in the draft of complaint.

3. Proposed respondent waives:

(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

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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 respondent, 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 respondent that the law has been

violated as alleged in the draft of complaint, or that the facts as

alleged in the 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

respondent, (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 respondent's

address as stated in this agreement shall constitute service. Proposed

respondent waives any right it 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. Proposed respondent has read the proposed complaint and order

contemplated hereby. Proposed respondent understands that once the

order has been issued, it will be required to file one or more

compliance reports showing that it has fully complied with the order.

Proposed respondent further understands that it may be liable for civil

penalties in the amount provided by law for each violation of the order

after it becomes final.

Order

I

For purposes of this order, the following definitions shall apply:

A. ``Respondent'' means Precision Moulding Co., Inc., its

directors, officers, employees, agents and representatives,

predecessors, successors and assigns; its subsidiaries, divisions, and

groups, and affiliates controlled by Precision Moulding Co., Inc., and

the respective directors, officers, employees, agents and

representatives, successors, and assigns of each.

B. ``Stretcher bar products'' means an art supply wood product

which when assembled comprises a rectangular frame over which a canvas

used for painting is stretched, and includes any size of stretcher bar.

II

It is ordered that respondent, directly or indirectly, through any

corporation, subsidiary, division or other device, in connection with

the manufacture, advertising, offering for sale, sale or distribution

of any stretcher bar products, in or affecting commerce, as

``commerce'' is defined in the Federal Trade Commission Act, forthwith

cease and desist from:

A. Requesting, suggesting, urging, or advocating that any

competitor raise, fix or stabilize prices or price levels, or engage in

any other pricing action; and

B. Entering into, attempting to enter into, adhering to, or

maintaining any combination, conspiracy, agreement, understanding, plan

or program with any competitor to fix, raise, establish, maintain or

stabilize prices or price levels.

Provided, that nothing in this order shall prohibit respondent

from: (1) agreeing to sell or distribute its stretcher bar products to

its competitors, and (2) negotiating or agreeing upon the price which

any of its stretcher bar products will be sold to its competitors.

It is further ordered That respondent shall:

A. Within thirty (30) days of the date on which this order becomes

final, provide a copy of this order to all of its directors, officers,

and management employees;

B. For a period of three (3) years after the date on which this

order becomes final, and within ten (10) days after the date on which

any person becomes a director, officer, or management employee of

respondent, provide a copy of this order to such person; and

C. Require each person to whom a copy of this order is furnished

pursuant to subparagraphs III.A. and B. of this order to sign and

submit to Precision Moulding Co., Inc. within thirty (30) days of the

receipt thereof a statement that: (1) acknowledges receipt of the

order; (2) represents that the undersigned has read and understands the

order; and (3) acknowledges that the undersigned has been advised and

understands that non-compliance with the order may subject Precision

Moulding Co., Inc. to penalties for violation of the order.

IV

It is further ordered That respondent shall:

A. Within sixty (60) days from the date on which this order becomes

final, and annually thereafter for three (3) years on the anniversary

date of this order, and at such other times as the Commission may be

written notice to the respondent require, file with the Commission a

verified written report setting forth in detail the manner and form in

which respondent has complied and is complying with this order;

B. For a period of three (3) years after the order becomes final,

maintain and make available to the staff of the Federal Trade

Commission for inspection and copying, upon reasonable notice, all

records of communications with competitors of respondent relating to

any aspect of pricing for stretcher bar products, and records

pertaining to any action taken in connection with any activity covered

by parts II, III and IV, of this order; and

C. Notify the Commission at least thirty (30) days prior to any

change in respondent 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 corporation

that may affect compliance obligations arising out of this order.

V

It is further ordered That this order shall terminate on ,

2016.

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission has accepted an agreement to a

proposed consent order from Precision Moulding Company, Inc., a

manufacturer of stretcher bars \1\ with its principal place of business

located at 3308 Cyclone Court, Cottonwood, California.

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\1\ A stretcher bar is an art supply wood product which when

assembled comprises a rectangular frame over which a canvas used for

painting is stretched.

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The proposed consent order has been placed on the public record for

60 days for reception of comments by interested

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persons. Comments received during this period will become part of the

public record. After 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 two representatives of Precision

Moulding Co., Inc. visited one of its competitors and invited the

competitor to raise its prices for stretcher bars. The complaint

alleges that the invitation to collude, if accepted, would constitute

an agreement in restraint of trade.

Solicitations to collude have been condemned as unlawful under

Section 2 of the Sherman Act (attempted monopolization), under the wire

and mail fraud statutes,\2\ and under Section 5 of the FTC Act. In this

case, the structure of the stretcher market is not conducive to

prosecution under Section 2 of the Sherman Act. Market structure does

not affect whether an alleged solicitation to collude can be prosecuted

under the wire fraud or mail fraud statutes. However, those statutes do

not apply in this case, because there is no evidence that Precision

Moulding Company, Inc. used either the telephone (or another form of

wire communication) or the mail to invite its competitor to collude.

Thus, if not prosecuted under Section 5 of the FTC Act, the conduct

would go unpunished.

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\2\ See 18 U.S.C.A. Secs. 1341, 1343 (mail and wire fraud).

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Solicitations to collude have been alleged to be unfair methods of

competition that violate Section 5 of the FTC Act, which reaches

anticompetitive activities that may not violate the Sherman Act.\3\

During the past several years, the Commission has entered into several

consent agreements involving invitations to collude that could not be

reached under the wire and mail fraud statutes. See YKK, C-3345 (1993);

Quality Trailer Products, C-3403 (1992) (``Quality''); A.E. Clevite,

Inc., C-3429 (1993). The Commission has condemned invitations to

collude where the evidence is unambiguous, regardless of market power.

Section 5 provides an appropriate vehicle for relief where the conduct

falls short of criminal liability.

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\3\ See Fashion Originators' Guild v. FTC, 312 U.S. 457, 466

(1941); FTC v. Brown Shoe Co., 384 U.S. 316, 321 (1966) (Commission

could ``ban trade practices which conflict with the basic policies

of the Sherman and Clayton Acts even though such practices may not

actually violate those laws''); FTC v. Cement Institute, 333 U.S.

683, 708 (1948) (Commission was intended to ``restrain practices as

`unfair' which, although not yet having grown into Sherman Act

dimensions would most likely do so if left unrestrained'').

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The alleged conduct engaged in by Precision Moulding Co., Inc. and

the terms of the proposed consent order are similar to the conduct

alleged and the relief obtained in Quality Trailer Products, C-3403

(1992). In Quality, according to the Commission complaint, two

representatives of a firm visited the headquarters of a competitor and

met with an officer of the firm. During the course of the meeting, they

invited the competitor to fix prices. As in Quality, the visit here was

uninvited, and the solicitor informed its competitor in a private

conservation that its prices were too low. See Quality (Concurring

Statement of Commissioner Azcuenaga) (Nov. 5, 1992).

The proposed consent order prohibits Precision Moulding Co., Inc.

from requesting, suggesting, urging, or advocating that any other

producer or seller of stretcher bars raise, fix or stabilize prices or

price levels, or engage in any other pricing action. The proposed

consent order also prohibits Precision Moulding Co., Inc. from entering

into, adhering to, maintaining, or carrying out any combination,

conspiracy, agreement, understanding, plan or program with any other

producer or seller of stretcher bars to fix, raise, establish, control,

maintain or stabilize prices or price levels. The provisions of the

order apply to stretcher bar products of any size.

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.

By direction of the Commission.

Donald S. Clark,

Secretary.

[FR Doc. 96-16114 Filed 6-24-96; 8:45 am]

BILLING CODE 6750-01-M