[Federal Register Volume 59, Number 3 (Wednesday, January 5, 1994)]
[Notices]
[Pages 585-587]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-154]
[[Page Unknown]]
[Federal Register: January 5, 1994]
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FEDERAL TRADE COMMISSION
[File No. 921-0070]
Personal Protective Armor Association, 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 acts and practices and unfair methods of competition, this
consent agreement, accepted subject to final Commission approval, would
prohibit, among other things, a Baltimore-based association for
manufacturers of body armor in North America from restricting its
members from engaging in comparative advertising or offering product-
liability insurance, guarantees or warranties on soft body armor, and
from placing any restraints on member advertising, including price
disclosure, product liability, and body armor performance
characteristics.
DATES: Comments must be received on or before March 7, 1994.
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:
Paul Nolan, FTC/S-2624, Washington, DC 20580. (202) 326-2770.
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 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
Sec. 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 the Personal Protective Armor
Association, Inc., and it now appearing that Personal Protective Armor
Association, Inc., hereinafter sometimes referred to as proposed
respondent, is willing to enter into an agreement containing an Order
to cease and desist from engaging in the acts and practices being
investigated,
It is hereby agreed by and between the proposed respondent and its
attorney and counsel for the Federal Trade Commission that:
1. Proposed respondent Personal Protective Armor Association, Inc.
(``PPAA'') is a corporation organized, existing and transacting
business under and by virtue of the laws of the State of Tennessee,
with its office and principal place of business located at 3623 Falls
Road, Baltimore, Maryland 21222.
2. PPAA admits all of the jurisdictional facts set forth in the
draft of Complaint here attached.
3. PPAA 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 into 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 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 of Complaint here attached.
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 of Practice, the Commission may, without further notice to
proposed respondent, (1) Issue its Complaint corresponding in form and
substance with the draft of Complaint here attached 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 as 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 draft of Complaint and
Order contemplated hereby. It 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 the purposes of this order, the following definitions shall
apply:
A. ``Respondent'' means the Personal Protective Armor Association,
its directors, trustees, councils, committees, officers,
representatives, delegates, agents, employees, successors, or assigns.
B. ``Soft body armor'' means concealable bullet-resistant vests
generally worn by civilians and law enforcement personnel.
II
It is ordered, That Respondent, directly, indirectly, or through
any device, in connection with activities in or affecting commerce, as
``commerce'' is defined by the Federal Trade Commission Act, as
amended, cease and desist from:
A. Entering into, attempting to enter into, organizing, continuing,
or acting in furtherance of any agreement or combination, or carrying
out any agreement between or among Respondent's members, either express
or implied, that prohibits, restricts, impedes, interferes with,
restrains, places limitations on, or advises against:
1. Engaging in comparative advertising, including, but not limited
to prohibiting any member from advertising that any type of soft body
armor meets or fails to meet any ballistic resistance standard; or
2. Offering or providing products liability insurance, guarantees,
or warranties on softly body armor.
B. Restricting, regulating, impeding, declaring unethical,
interfering with, restraining, or advising against the advertising,
publishing, or dissemination by any person of the prices, terms,
availability, characteristics, or conditions of sale of soft body armor
through any means, including, but not limited to, adopting or
maintaining any rule or policy that restricts or prohibits a member
from:
1. Engaging in comparative advertising, including, but not limited
to prohibiting any member from advertising that any type of soft body
armor meets or fails to meet any ballistic resistance standard; or
2. Offering or providing products liability insurance, guarantees,
or warranties on soft body armor.
Provided, That nothing contained in this Paragraph II shall
prohibit Respondent from formulating, adopting, disseminating to its
members, and enforcing reasonable ethical guidelines governing the
conduct of its members with respect to representations, including
unsubstantiated representations, that Respondent reasonably believes
would be false or deceptive within the meaning of section 5 of the
Federal Trade Commission Act.
III
It is further ordered, That Respondent:
A. Distribute by first-class mail a copy of this Order and the
Complaint to each of its members within thirty (30) days after the date
this Order become final.
B. For a period of five (5) years after the date this Order becomes
final, provide each new member who joins PPAA with a copy of the Order
and Complaint within thirty (30) days of membership into PPAA.
C. File a verified, written report with the Commission within sixty
(60) days after the date this Order becomes final, and annually
thereafter for five (5) years on the anniversary of the date this Order
becomes final, and at such other times as the Commission may, by
written notice to PPAA, require, setting forth in detail the manner and
form in which it has complied and is complying with the Order.
D. For a period of five (5) years after the date this Order becomes
final, maintain and make available to Commission staff for inspection
and copying upon reasonable notice, records adequate to describe in
detail any action taken in connection with any activity covered by Part
II of this Order.
IV
It is further ordered, That PPAA shall notify the Commission at
least thirty (30) days prior to any change in the corporation such as
dissolution, assignment, or sale, resulting in the emergence of a
successor corporation, the creation or dissolution of subsidiaries, and
any other change that may affect compliance with this order.
Analysis of Proposed Consent Order To Aid Public Comment
The Federal Trade Commission has accepted an agreement to a
proposed consent order from Personal Protective Armor Association
(``PPAA''), which is located in Baltimore, Maryland. The agreement
would settle charges by the Commission that the proposed respondent
violated section 5 of the Federal Trade Commission Act by engaging in
practices that restricted competition among PPAA members.
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 or make final the agreement's proposed
order.
The Complaint
The complaint prepared for issuance by the Commission along with
the proposed order alleges that PPAA and its members have engaged in
acts and practices that have unreasonably restrained competition among
manufacturers of soft body armor. The complaint alleges that PPAA
members have maintained a policy against comparative advertising and
have adopted a policy not to compete in offering products liability
insurance to law enforcement agencies.
According to the complaint, advertising, including comparative
advertising and advertising of warranties and products liability
insurance, enables firms to inform consumers as to the quality, price,
and terms of sale of the product. Consumers consider terms of sale such
as products liability insurance and certification that the soft body
armor passes applicable performance standards. Comparative advertising
and advertising of warranties and products liability insurance enables
firms to inform consumers about these factors and increases the
information available to consumers.
The complaint states that, during some periods, from 1986 to the
present, PPAA has maintained a policy against comparative advertising,
including a policy which declares it unethical for any member to make
any representation that another member's vests have failed
certification testing. The complaint also states that, during some
periods, from 1986 to the present, PPAA adopted a policy to respond
uniformly to bids by not offering products liability insurance in
competing for contracts from law enforcement agencies.
The complaint alleges that the purposes or effects of the
challenged act or practice have been to restrain competition
unreasonably:
a. By frustrating and restraining competition in the marketing and
sale of soft body armor on the basis of price, service, and quality;
b. By depriving consumers of the benefits of truthful information
about the performance of soft body armor;
c. By depriving consumers of the potential value of warranties,
including products liability insurance, in the purchase of soft body
armor.
The Proposed Consent Order
Part I of the order covers definitions. These definitions make
clear that the consent order applies to directors, trustees, councils,
committees, officers, representatives, delegates, agents, employees,
successors, or assigns of PPAA. The order also defines ``soft body
armor'' as concealable bullet-resistant vests generally worn by
civilians and law enforcement personnel.
Part II of the order describes the conduct prohibited by the order.
Part II prevents PPAA from entering into or carrying out any agreement
between or among its members that restricts engaging in comparative
advertising or restricts offering or providing products liability
insurance. Part II also prevents PPAA from restricting or interfering
with the advertising or dissemination of prices, terms, availability,
characteristics, or conditions of sale of soft body armor by adopting a
policy which restricts or prohibits a member from engaging in
comparative advertising or offering or providing products liability
insurance.
Part III of the order requires PPAA to furnish a copy of the
Commission's order to each of its members; to provide each new member
who joins PPAA with a copy of the Order and complaint; and to file
compliance reports for five years.
Benjamin I. Berman,
Acting Secretary.
Concurring Statement of Commissioner Roscoe B. Starek, III
I concur in the Commission's decision to accept for public
comment the Consent Order in this matter. The evidence demonstrates
that ten companies, representing more than 90% of U.S. sales of
protective body armor, engaged in unreasonable restraints of trade
in violation of section 5 of the Federal Trade Commission Act, 15
U.S.C. 45. The agreements here restrain significant dimensions of
competitive rivalry among body armor manufacturers. Therefore, they
appear likely, absent an efficiency justification, to restrict
output. The respondent has not proffered any efficiency
justification for the restraints. Under the standards set forth in
the Commission's decision in Massachusetts Board of Registration in
Optometry,\1\ and its progeny, this ``inherently suspect'' conduct
is appropriately condemned without a full rule of reason analysis.
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\1\110 F.T.C. 549, 604 (1988).
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In my view, however, it may have been appropriate to name as
respondents the members of the Personal Protective Armor Association
(``PPAA''). This case is not typical of the Commission's cases
challenging anticompetitive conduct of state licensing boards and
trade associations. In most such cases, the board or association
represents hundreds or thousands of competing entities.\2\ Naming
individual members as respondents in such cases is generally
impracticable: It may unnecessarily complicate litigation or create
intractable problems for settlement negotiations.\3\ More
importantly, naming members is often unnecessary: The respondent
board or association is typically the only (or only effective) means
by which the multitude of competitors can reach and enforce an
agreement restraining competition.
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\2\See, e.g., American Medical Association, 94 F.T.C. 701, 702
(1979) (membership consisting of approximately 170,000 medical
doctors); Mass. Board, 110 F.T.C. at 560 (more than 1350
optometrists subject to the Board's restraints); Detroit Auto
Dealers Association, Inc., 111 F.T.C. 475, 419 (1989) (membership
consisting of 231 automobile dealerships).
\3\But see Detroit Auto Dealers, 111 F.T.C. at 518-521 (addenda
to final order) (naming as respondents the association, 17
constituent associations, 96 member dealerships, and 81
individuals).
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By contrast, competitors in the relatively concentrated
protective body armor industry may be able to collude effectively
outside the auspices of the PPAA or any other formal trade
association.\4\ If so, the proposed Consent Order, which names only
the PPAA as a respondent, may provide an insufficient remedy. So
long as the PPAA is not involved,\5\ the same body armor
manufacturers could engage in collusive conduct falling squarely
within the core cease and desist provisions of the Order without
exposure to civil penalties under section 5(l) of the FTC Act, 15
U.S.C. 45(l).\6\
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\4\Thus, unlike many cases involving association restraints in
which the respondent association itself is a critical first mover,
the conduct at issue here constitutes archetypal cartel behavior in
which this particular association's involvement may be merely
detail.
\5\Under the Order, respondent PPAA is defined to include any
association that can be held to be a legal successor. The evidence
does not clearly indicate whether or not PPAA has any structural,
legal, or historical advantage that would impede the creation of a
new, non-successor body armor trade association.
\6\Of course, this conduct would expose these firms to private
and state actions for damages under section 4 of the Clayton Act, 15
U.S.C. 15. Such exposure, however, apparently did not deter the
conduct that led to the Commission's action in this matter.
In determining the optimal scope of any future enforcement
actions against anticompetitive restraints facilitated by a trade
association, the necessity of the particular association to
effective collusion among its members should be considered
carefully.
[FR Doc. 94-154 Filed 1-4-94; 8:45 am]
BILLING CODE 6750-01-M
