Announced Actions for November 14, 2003

For Your Information

Commission approval of amicus brief filing: The Commission has approved the filing of an amicus brief in the following matter: Brentwood Academy v. Tennessee Secondary School Athletic Association, Nos. 03-5245, 03-5278, which is currently pending before the Sixth Circuit Court of Appeals. The brief, which is available on the FTC’s Web site as a link to this press release, addresses whether the Sixth Circuit should reverse the district court’s ruling that the Tennessee Secondary School Athletic Association (TSSAA) is shielded from antitrust liability under the state action doctrine of Parker v. Brown, 317 U.S. 341 (1943).

The pending case concerns TSSAA, a non-profit membership corporation organized to regulate interscholastic athletic competition among private and public high schools in Tennessee that belong to it. In 1997, Brentwood Academy, a private parochial school and member of TSSAA sued the association, alleging that TSSAA’s conduct in enforcing its rule prohibiting member schools from recruiting prospective student-athletes violated the First and Fourteenth Amendments of the U.S. Constitution. In addition, Brentwood’s complaint alleged Sherman Act antitrust violations, based on TSSAA’s conduct in imposing sanctions on Brentwood for purported violations of the recruiting rule. Brentwood later added an antitrust claim based on TSSAA’s implementation of a rule creating a Division I/Division II classification, pursuant to which schools that provide need-based financial aid to student-athletes cannot participate in Division I competition. The district court initially addressed only the constitutional claims, ruling that TSSAA was a “state actor” for constitutional purposes. That ruling was appealed up to the Supreme Court, which affirmed the district court’s ruling.

After the case was remanded to the district court, the court granted summary judgment for TSSAA on Brentwood’s antitrust claims, finding that TSSAA was entitled to protection from antitrust scrutiny under the Parker state action doctrine, and that “TSSAA, for all practical purposes, is a state subdivision regarding its regulatory activity over interscholastic athletics and acts pursuant to clearly articulated and affirmatively expressed state policy.” As support for its conclusion, the district court referred to its prior decision and the decision of the Supreme Court, which held that TSSAA is a state actor for constitutional purposes.

In its brief, the FTC argues that the district court erred in holding that, because TSSAA previously had been deemed a state actor for constitutional purposes, it was protected by the antitrust state action doctrine. The brief explains that, although the term is the same, “state action” has a different legal significance in the constitutional and antitrust contexts. In the antitrust context, “state action” narrowly refers only to actions undertaken in conformity with a policy clearly articulated by the sovereign state itself – i.e., the state legislature or state supreme court – to displace competition. The brief further explains that TSSAA’s alleged anticompetitive conduct is not protected by the state action doctrine, because the Tennessee legislature has not clearly articulated a policy to displace competition, nor has it clearly articulated its intent to allow a subordinate state agency to shield TSSAA from the federal antitrust laws.

The Commission vote approving the amicus brief and authorizing the staff to file it with the court was 5-0. (FTC File No. P042102, staff contact is Michele Arington, Office of General Counsel, 202-326-3157.)

Issuance of staff opinion letter: The staff of the FTC’s Bureau of Competition has issued an opinion letter to the American Down & Feather Section (AD&FS) of the Home Fashion Products Association. The letter, which was issued on October 2, 2003 and is available as a link to this press release on the FTC’s Web site, concerns whether the Commission’s staff would likely recommend, based on the facts provided by the Association, bringing an enforcement action challenging AD&FS’s proposed labeling compliance program. According to the letter, the staff would not recommend such an enforcement action at this time.

AD&FS is a voluntary association of dealers, buyers, sellers, and processors of raw feathers and down in home fashion products. As of June 2003, it had 21 members, of which 18 were manufacturers of finished products containing down and feathers; two were importers of finished products; and one was a supplier of down and feathers. In its letter to the FTC staff, AD&FS proposes implementing a labeling compliance program with two stated goals: 1) “to assure that all members and non-members are in compliance with industry standards adopted by the ADA . . . and reaffirmed by the majority vote of the AD&FS,” and 2) “to further assure that all representations and claims made on the product, on the packing, and in advertising are truthful and in accordance with industry standards and the law.” Accordingly, the proposed compliance program would involve the physical testing of product, upon receipt of a member complaint, to ensure that the product meets industry standards. In addition, AD&FS proposes to impose various sanctions for non-compliance with industry standards.

In presenting an analysis of the proposed compliance program, the FTC staff letter states that “the antitrust laws do not forbid legitimate self-regulation that benefits consumers,” and that “voluntary private standards generally have the potential to promote competition by providing useful information to consumers and making it easier for them to select among providers of a product or service.” Competitive concerns can arise in certain circumstances – for example, when competitors abuse or distort the standard-setting process for the purpose of restricting competition – and as a result of efforts to enforce standards. The letter states that two questions can be asked to address the concerns: 1) do the procedures themselves present any risk of unreasonably retraining competition, and 2) are the proposed sanctions likely to result in a substantial lessening of competition.

As explained in the letter, based on the FTC staff’s understanding of the proposed program, the staff has “no present intention” to recommend a law enforcement challenge by the Commission. In reaching this decision, the staff concluded that the expulsion of a member from AD&FS based on non-compliance with industry standards would not result in the denial of “access to an element essential to effective competition.” Further, according to the staff, “although the members of AD&FS represent a sizeable percentage of the manufacturers and importers of products containing down and feathers, the information presently before us does not suggest that competition in the industry would be significantly affected by the expulsion of one member. (FTC File No. P002501, staff contact is Alden F. Abbot, Assistant Director for Policy and Evaluation, 202-326-2881.)

Copies of the documents mentioned in this release are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Call toll-free: 1-877-FTC-HELP.

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