Sensormatic Electronics Corporation; and Checkpoint Systems, Inc.Analysis to Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 951-0083]

Sensormatic Electronics Corporation; and Checkpoint Systems,

Inc.--Analysis to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreements.

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SUMMARY: The consent agreements in these matters settle alleged

violations of federal law prohibiting unfair or deceptive acts or

practices or unfair methods of competition. The attached Analysis to

Aid Public Comment describes both the allegations in the draft

complaints that accompany the consent agreements and the terms of the

consent orders--embodied in the consent agreements--that would settle

these allegations.

DATES: Comments must be received on or before March 27, 1998.

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

Room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

William Baer or Michael Antalics, FTC/H-374, Washington, D.C. 20580.

(202) 326-2932 or 326-2821.

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

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the

Commission's rules of practice (16 CFR 2.34), notice is hereby given

that the above-captioned consent agreements containing consent orders

to cease and desist, having been filed with and accepted, subject to

final approval, by the Commission, have been placed on the public

record for a period of sixty (60) days. The following Analysis to Aid

Public Comment describes the terms of the consent agreements, and the

allegations in the complaints. An electronic copy of the full text of

the consent agreement packages can be obtained from the FTC Home Page

(for January 21, 1998), on the World Wide Web, at ``http://www.ftc.gov/

os/actions/htm.'' A paper copy can be obtained from the FTC Public

Reference Room, Room H-130, Sixth Street and Pennsylvania Avenue, NW.,

Washington, DC 20580, either in person or by calling (202) 326-3627.

Public comment is invited. Such comments or views will be considered by

the Commission and will be available for inspection and copying at its

principal office in accordance with Sec. 4.9(b)(6)(ii) of the

Commission's rules of practice (16 CFR 4.9(b)(6)(ii)).

Analysis of Proposed Consent Orders To Aid Public Comment

The Federal Trade Commission has accepted agreements to proposed

consent orders from Sensormatic Electronics Corporation

(``Sensormatic'') and Checkpoint Systems, Inc. (``Checkpoint'').

Sensormatic's principal place of business is located at 951 Yamato

Road, Boca Raton, Florida. Checkpoint's principal place of business is

located at 101 Wolf Drive, Thorofare, New Jersey.

The proposed consent orders have been placed on the public record

for 60 days for reception of comments by interested persons. Comments

received during this period will become part of the public record.

After 60 days, the Commission will again review the agreements and the

comments received, and will decide whether it should withdraw from the

agreements or make final the agreements' proposed orders.

Sensormatic and Checkpoint are the two largest manufacturers and

sellers of electronic article surveillance (``EAS'') systems in the

United States and the world. Their combined worldwide sales exceed 70

percent of total EAS industry sales.

EAS systems are used primarily by retailers to deter and detect

shoplifting and employee theft. Bits of reactive metal or electronic

transmitters called ``tags'' are attached to products sold in retail

stores. When a product is purchased, the tag is removed or deactivated

by the cashier. If a tag passes through an EAS system's sensors at a

store exit without being deactivated, it sets off an alarm. EAS systems

are also commonly found in libraries and video stores.

The complaint alleges that Sensormatic and Checkpoint entered a

written agreement on June 27, 1993 to refrain from ``negative

advertising or other negative selling, promotional activities or other

communications with respect to the other party or the other party's

products and services,'' including ``statements that the other party's

products or services cause or may cause harm to customers, consumers or

merchandise.'' The complaint further alleges that the respondents have

construed the June 27, 1993 agreement to restrict comparative

advertising relating to the performance and effectiveness of the

proposed respondents' EAS systems.

The complaint alleges that the June 27, 1993 agreement deprives

retailers, other customers who purchase EAS systems, and consumers of

comparative information about the characteristics of EAS systems that

they would find helpful. In particular, the complaint alleges that

retailers and other EAS customers have an interest in obtaining

comparative information relevant to their purchasing decisions. The

complaint further alleges that certain information about EAS systems,

such as the potential harm to retail products and information about

possible interactions between certain medical devices and EAS

equipment, is relevant to consumers. Finally, the complaint alleges

that the June 27, 1993 agreement is an agreement among competitors to

refrain from making truthful, non-deceptive claims, including

comparisons, criticisms, or disparaging statements in advertising, and

that this agreement constitutes an unfair method of competition in

violation of Section 5 of the Federal Trade Commission Act.

On many occasions, the Commission has prohibited groups of

horizontal competitors from agreeing to refrain from making truthful,

non-deceptive claims, including comparisons, criticisms, or disparaging

statements in advertising. The Commission has recognized that one of

the benefits of competition is that competitors may be driven to

provide consumers with information that makes for better educated,

effective consumers.\1\ The alleged conduct engaged in by Sensormatic

and Checkpoint and the terms of the proposed orders are similar to the

conduct alleged and the relief obtained in Personal Protective Armor

Association, Inc., 117 F.T.C. 104 (1994).

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\1\ See generally Commission Policy Statement in Regard to

Comparative Advertising, 16 CFR 14.15 (1997) (comparative

advertising assists consumers in making rational purchase decisions,

encourages product improvement or innovation, and can lead to lower

market prices).

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Sensormatic and Checkpoint have signed consent agreements

containing the proposed consent orders. The proposed consent orders

require Sensormatic and Checkpoint to declare null and void the

negative advertising provision of the June 27, 1993 agreement. The

proposed consent orders also prohibit Sensormatic and Checkpoint from

entering into any agreement that prohibits, restricts, impedes,

interferes with, restrains, places limitations on, or advises against

engaging in truthful, non-deceptive advertising, comparative

advertising, promotional and sales activities for twenty years after

the date the order becomes final. In addition, the proposed consent

orders require that Sensormatic and Checkpoint provide copies of the

orders to their respective executives, and that Sensormatic and

Checkpoint file annual compliance reports with the Federal Trade

Commission.

[[Page 3748]]

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

proposed orders, and it is not intended to constitute an official

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

way their terms.

Donald S. Clark,

Secretary.

[FR Doc. 98-1802 Filed 1-23-98; 8:45 am]

BILLING CODE 6750-01-M