FOR RELEASE: MARCH 25, 1993
FTC CHARGES THAT COUNTRY'S LARGEST ZIPPER MANUFACTURER
TRIED TO LIMIT DISCOUNTS;
Consent Agreement Would Settle Complaint
YKK (U.S.A.) Inc., the country's largest zipper
manufacturer, has agreed to settle Federal Trade Commission
charges that it invited its chief competitor, Talon, Inc., to
eliminate certain discounts to customers, the FTC said today.
According to the FTC analysis issued with the proposed
settlement, YKK offered to stop providing free installation
equipment for its zippers, if Talon would do the same. Under the
proposed settlement agreement, YKK would be prohibited from
fixing or attempting to fix prices for zippers and related
products.
According to the FTC's complaint detailing the charges, in
July 1988, an attorney for YKK sent a letter to Talon -- the
second largest zipper manufacturer in the U.S. -- accusing Talon
of unfair and predatory sales tactics in its sales of zippers and
related products. The letter requested that Talon immediately
cease offering free equipment to customers and withdraw
outstanding offers of free equipment to customers who purchase
zipper chain, sliders, and other zipper components at the same
time. The complaint also alleges that during an October 1988
meeting, YKK's attorney asked Talon's attorney to urge Talon to
cease offering free zipper-installation equipment to its
customers.
- more -
(YKK--03/25/93)
Talon's provision of free installation equipment to
customers is a form of discounting, according to the FTC's
complaint. An agreement between YKK and Talon to cease this form
of discounting would constitute an unreasonable restraint of
competition, the FTC charged.
Under the terms of the proposed consent agreement to settle
the charges, announced today for public comment, YKK would be
prohibited from asking a competitor to fix, raise, or stabilize
prices or price levels. YKK also would be prohibited from
requesting that a competitor stop providing free equipment or
other discounts on zippers or related products. In addition, the
order would prohibit YKK from entering into any agreement or
conspiracy with any competitor to fix, raise, or stabilize
prices, price levels or service levels for zippers. The order
would allow YKK to request that a competitor refrain from
engaging in illegal conduct.
YKK, Inc. is located in Lyndhurst, New Jersey, and Talon's
corporate headquarters is in New York City. The two companies
account for approximately 82 percent of all zippers manufactured
and/or sold in the United States.
The Commission vote to issue the consent agreement for
public comment was 4-1, with Commissioner Mary L. Azcuenaga
dissenting and three other Commissioners issuing concurring
statements. In her dissenting statement, Commissioner Azcuenaga
said that the consent "significantly encroaches on the ability of
an attorney fully to represent the interests of his or her
clients," and that it will make compliance with the Robinson-
Patman Act - which prohibits discriminatory pricing - more
difficult. Commissioner Azcuenaga said that YKK's attorney
simply asked Talon, through its attorney, to stop engaging in a
behavior -- a form of discriminatory pricing -- that he believed
was illegal, and that the communications between them were an
"assertion of his client's lawful alternatives, [and] they did
not constitute a naked invitation to collude."
Azcuenaga noted that under the approach described in the
Analysis To Aid Public Comment, an attorney could request that a
competitor stop engaging in allegedly discriminatory pricing,
threaten legal action, or offer to refrain from taking legal
action if the discriminatory pricing practices cease. Azcuenaga
said the case apparently would render it illegal, however, for
attorneys to ask competitors to stop engaging in discriminatory
pricing if they coupled that request with a statement that their
clients could lawfully discount their products to meet a competi-
tor's prices and a suggestion that their clients preferred not to
do this. "I cannot agree," said Azcuenaga.
(YKK--03/25/93)
Implicit in the theory of the complaint, as explained in the
Analysis to Aid Public Comment, Azcuenaga noted, is the notion
that YKK was trying to persuade a competitor to stop engaging in
beneficial competitive conduct by offering to agree to forgo the
same beneficial conduct. "This underlying theme," Azcuenaga
said, "has a strong superficial appeal, but it is fundamentally
invalid in this situation. The conduct at issue is
discriminatory pricing...YKK was not asking Talon to stop doing
something right but rather to stop violating [the law]."
In her concurring statement, Commissioner Deborah K. Owen
said that she found sufficient evidence in the investigative
record to believe that the "legal dispute" was simply "a pretext
for an invitation to engage in a naked price restraint (in the
form of ceasing certain discounts) where market power exists."
While she noted that she urged caution in these cases to avoid
deterring legitimate business activity, Owen said that she was
"thoroughly comfortable with the Commission's decision to accept
the proposed consent agreement for public comment."
In his concurring statement, Commissioner Roscoe B. Starek,
III noted that the evidence strongly suggests that YKK issued an
unambiguous invitation to one of its largest competitors to enter
into an agreement to discontinue a form of discounting that was
an important dimension of competition between the firms.
Although YKK's invitation arguably was intended as an offer of
settlement to resolve claims of unlawful discounting under the
Robinson-Patman Act, the invited agreement far exceeded the scope
of what was reasonably necessary to achieve a settlement, Starek
said. The potential effects of such an invitation are
unambiguously anticompetitive, he concluded.
Commissioner Dennis A. Yao also issued a concurring
statement. He noted his concern that this consent agreement
might be misinterpreted to mean that a simple discussion settling
alleged Robinson-Patman Act violations could lead to an FTC
enforcement action alleging an "invitation to collude" actionable
under Section 5 of the FTC Act. Commissioner Yao stressed that
the evidence shows that YKK's lawyer, a member of its board of
directors, went beyond discussing alleged violations of the
Robinson-Patman Act and offered Talon a quid pro quo at the
meeting whereby the parties would refrain from offering free
installation equipment, a form of price discounting. Yao
explained that "[a]bsent an offer to agree on a factor such as
price, a lawyer's bona fide threat of litigation standing alone
should not violate Section 5, even if the logical result of that
threat is that the other side would have to end a price discount
in order to settle the dispute. To suggest otherwise could
potentially chill settlement discussions in legal disputes."
(YKK--03/25/93)
The proposed consent agreement will be published in the
Federal Register. It will be subject to public comment for 60
days, after which the Commission will decide whether to make it
final. Comments should be addressed to: Office of the Secretary,
FTC, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C.
20580.
NOTE: A consent agreement is for settlement purposes only and
does not constitute admission of a law violation. When the
Commission issues a consent order on a final basis, it carries
the force of law with respect to future violations. Each
violation of such an order may result in a civil penalty of up to
$10,000.
Copies of the complaint, proposed consent agreement, an
analysis to aid public comment, and the Commissioners' statements
are available from the FTC's Public Reference Branch, Room 130,
same address as above; 202-326-2222; TTY for the hearing
impaired: 1-866-653-4261.
# # #
MEDIA CONTACT: Howard Shapiro, Office of Public Affairs
202-326-2176
STAFF CONTACT: Richard B. Dagen, Bureau of Competition
202-326-2628
(FTC File No. 911 0005)
(zippers)