Hyde Athletic Industries, Inc.; Proposed Consent Agreement With Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 922-3236]

Hyde Athletic Industries, Inc.; Proposed Consent Agreement With

Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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

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 Peabody,

Massachusetts-based athletic footwear manufacturer from

misrepresenting, in any manner, that footwear made wholly abroad was

made in the United States. The agreement resolves charges that Hyde

misrepresented that all of its Saucony footwear is made in the United

States when a substantial amount is made wholly abroad.

DATES: Comments must be received on or before November 18, 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: Elaine D. Kolish, Federal Trade

Commission, S-4302, 6th & Pennsylvania Ave, NW, Washington, DC 20580.

(202) 326-3042. C. Steven Baker, Chicago Regional Office, Federal Trade

Commission, 55 East Monroe Street, Suite 1437, Chicago, Illinois 60603.

(312) 353-8156.

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 having initiated an investigation of

certain acts and practices of Hyde Athletic Industries, Inc., a

corporation (``proposed respondent''), and it now appearing that

proposed respondent is willing to enter into an agreement containing an

order to cease and desist from the acts and practices being

investigated,

It is hereby agreed by and between Hyde Athletic Industries, Inc.,

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

Federal Trade Commission that:

[[Page 49142]]

1. Proposed respondent Hyde Athletic Industries, Inc., is a

Massachusetts corporation with its principal office or place of

business at 13 Centennial Industrial Park Drive, Peabody, Massachusetts

01960. Proposed respondent is a U.S. manufacturer, importer, and seller

of footwear, with manufacturing facilities in Bangor, Maine.

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) All claims under the Equal Access to Justice Act.

4. This agreement shall not become a 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 the complaint contemplated hereby, will be placed on the

public record for a period of sixty (60) days and information in

respect thereto publicly released. The Commission thereafter may either

withdraw its acceptance of this agreement and so notify 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 complaint or that the facts as alleged

in the draft complaint, other than the 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 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 might 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 in the agreement may be used to vary or

contradict the terms of the order.

7. Proposed respondent has read the complaint and the order

contemplated hereby. It understands that once the order has been

issued, it will be required to file one or more compliance reports

showing 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

Definition

For purposes of this order, the term ``Clearly and prominently''

shall mean as follows:

A. In a television or video advertisement, the disclosure shall be

presented simultaneously in both the audio and video portions of the

advertisement. The audio disclosure shall be delivered in a volume and

cadence sufficient for an ordinary consumer to hear and comprehend it.

The video disclosure shall be of a size and shade, and shall appear on

the screen for a duration, sufficient for an ordinary consumer to read

and comprehend it.

B. In a radio advertisement, the disclosure shall be delivered in a

volume and cadence sufficient for an ordinary consumer to hear and

comprehend it.

C. In a print advertisement, the disclosure shall be in a type

size, and in a location, that is sufficiently noticeable so that an

ordinary consumer will see and read it, in print that contrasts with

the background against which it appears. In multipage documents, the

disclosure shall appear on the cover or first page.

D. On a product label, the disclosure shall be in a type size, and

in a location on the principal display panel, that is sufficiently

noticeable so that an ordinary consumer will see and read it, in print

that contrasts with the background against which it appears.

Nothing contrary to, inconsistent with, or in mitigation of the

disclosure shall be used in any advertisement or on any label.

I

It is ordered that respondent, Hyde Athletic Industries, Inc., a

corporation, its successors and assigns, and its officers, agents,

representatives, and employees, directly or through any corporation,

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

manufacturing, labeling, advertising, promotion, offering for sale,

sale, or distribution of any footwear in or affecting commerce, as

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

forthwith cease and desist from misrepresenting, in any manner,

directly or by implication, that footwear made wholly abroad is made in

the United States.

PROVIDED, however, that respondent will not be in violation of this

Order, if, in connection with a truthful representation about domestic

production of its footwear, it makes one of the following disclosures,

if truthful, in a clear and prominent manner.

A. ``Most Saucony models are made in the USA''; or

B. ``Models ____ are not made in the USA''; or

C. ``Only models ____ are imported''; or

D. ``____% of Saucony footwear is made in the USA.''

This proviso shall not apply to any advertising, labeling or

promotional material containing any depiction of or other

representation relating to footwear made wholly abroad.

II

It is further ordered that for five (5) years after the last date

of dissemination of any representation covered by this Order,

respondent, or its successors and assigns, shall maintain and upon

request make available to the Federal Trade Commission for inspection

and copying:

A. All materials that were relied upon in disseminating such

representations; and

B. All tests, reports, studies, surveys, demonstrations, or other

evidence in its possession or control that contradict, qualify, or call

into question such representation, or the basis relied upon for such

representation, including complaints from consumers.

III

It is further ordered that the respondent shall distribute a copy

of this Order to each of its operating divisions and to each of its

officers, agents, representatives, or employees

[[Page 49143]]

engaged in the preparation or placement of advertisements, promotional

materials, product labels or other such sales materials covered by this

Order.

IV

It is further ordered that respondent shall notify the Commission

at least thirty (30) days prior to any proposed change in the

corporation such as a 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 which may affect

compliance obligations under this Order.

V

It is further ordered that respondent shall, within sixty (60) days

after service of this Order upon it, and at such other times as the

Commission may require, file with the Commission a report, in writing,

setting forth in detail the manner and form in which it has complied

with this Order.

VI

It is further ordered that this Order will terminate twenty (20)

years from the date it becomes final, or twenty (20) years from the

most recent date that the United States or the Federal Trade Commission

files a complaint (with or without an accompanying consent decree) in

federal court alleging any violation of the Order, whichever comes

later;

Provided, However, that the filing of such a complaint will not

affect the duration of:

A. Any paragraph in this Order that terminates in less than twenty

(20) years;

B. This Order's application to any respondent that is not named as

a defendant in such complaint; and

C. This Order if such complaint is filed after the Order has

terminated pursuant to this paragraph.

Provided Further, that if such complaint is dismissed or a federal

court rules that the respondent did not violate any provision of the

Order, and the dismissal or ruling is either not appealed or upheld on

appeal, then the Order will terminate according to this paragraph as

though the complaint was never filed, except that the Order will not

terminate between the date such complaint is filed and the later of the

deadline for appealing such dismissal or ruling and the date such

dismissal or ruling is upheld on appeal.

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission has accepted an agreement, subject to

final approval, to a proposed consent order from respondent Hyde

Athletic Industries, Inc.

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

sixty (60) days for reception of comments by interested persons.

Comments received during this period will become part of the public

record. After sixty (60) days, the Commission will again review the

agreement and the comments received and will decide whether it should

withdraw from the agreement and take other appropriate action or make

final the agreement's proposed order.

This matter concerns advertising and promotional practices related

to the sale of athletic shoes. The Commission's complaint charges that

respondent falsely represented that all of its athletic shoes sold in

the United States are made in the United States.

The proposed consent order contains a provision which is designed

to remedy the advertising violation charges and to prevent the

respondent from engaging in similar acts and practices in the future.

Part I of the proposed order prohibits the respondent from

misrepresenting that footwear made wholly abroad is made in the United

States. The proposed order would allow respondent, in connection with a

truthful representation about domestic production of its footwear, to

make one of the following disclosures, if truthful, in a clear and

conspicuous manner: (a) ``Most Saucony products are made in the USA'';

(b) ``Models ____ are not made in the USA''; (c) ``Only models ____ are

imported''; or (d) ``____% of Saucony footwear is made in the USA.''

This order provision provides that if Hyde chooses to make

affirmative disclosures in its advertising it can do so if they are

truthful and nondeceptive. Although several of the disclosures set out

in Part I of the proposed order contain the phrase ``Made in USA,''

this provision is not intended to address the standard for when, if at

all, a product that is made partly from domestic parts and labor and

partly from foreign parts and labor may appropriately be labeled ``Made

in USA''; that issue is the subject of a separate, ongoing review by

the Commission. Rather, Part I is addressed to the circumstance in

which some of the company's products are made entirely abroad.

Part II of the proposed order requires the respondent to maintain

materials relied upon in disseminating any representation covered by

the order. Part III of the proposed order requires the respondent to

distribute copies of the order to certain company officials and

employees. Part IV of the proposed order requires the respondent to

notify the Commission of any change in the corporation which may affect

compliance obligations under the order. Part V of the proposed order

requires the respondent to file one or more compliance reports. Part VI

of the proposed order is a provision whereby the order, absent certain

circumstances, terminates twenty years from the date of issuance.

The purpose of this analysis is to facilitate public comment on the

proposed consent order. It is not intended to constitute an official

interpretation of the agreement and proposed order or to modify in any

way their terms.

Donald S. Clark,

Secretary.

Dissenting Statement of Commissioner Roscoe B. Starek III in the

Matter of Hyde Athletic Industries, Inc.

I would have preferred to have accepted the original consent

agreement rejected by the Commission last fall. As I have consistently

stated, case-by-case enforcement--rather than a regulatory proceeding--

is the appropriate means to evaluate the ``Made in USA''

standard.1 Since a majority of the Commission has opted to conduct

a broad review of the ``Made in USA'' standard, however, it is

premature for the Commission to condone use of the Made in USA claims

set forth in the safe harbor until it proclaims what the standard is.

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

\1\ See Request for Public Comment in Preparation for Public

Workshop Regarding ``Made in USA'' Claims in Product Advertising and

Labeling, 60 FR 53923, 53930 (October 18, 1995) (Dissenting

Statement of Commissioner Roscoe B. Starek III); Hyde Athletic

Industries, Inc., File No. 922-3236 (Dissenting Statement of

Commissioner Roscoe B. Starek III).

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

[FR Doc. 96-23922 Filed 9-17-96; 8:45 am]

BILLING CODE 6750-01-P