Reebok International, Ltd

FTC Alleges Reebok Conduct Raised Shoe Prices

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Reebok International Ltd. and its subsidiary, The Rockport Company, Inc., have agreed to settle Federal Trade Commission charges that they fixed the resale prices of their products. The FTC alleged that the challenged conduct restricted price competi- tion among retailers who sell Reebok and Rockport brand athletic and casual shoes. The settlement would prohibit both companies from fixing the prices at which dealers advertise or sell athletic or casual footwear products to consumers in the future.

Reebok, the second largest supplier of athletic and casual footwear in the United States with about 25 percent of the mar- ket, is based in Stoughton, Massachusetts. Rockport is based in Marlboro, Massachusetts. The FTC worked closely on this case with state Attorneys General, who also announced an agreement to settle similar allegations today. This is the second time in recent years that the FTC and the states have worked together in a challenge of alleged resale price-fixing by an athletic and casual shoe manufacturer.

According to the FTC complaint detailing its charges, Reebok and Rockport agreed with certain retailers to maintain at certain levels the resale prices at which the retailers sold their pro- ducts, in violation of federal antitrust law.

The proposed consent agreement to settle these charges, announced today for public comment, would prohibit Reebok and Rockport from fixing, controlling or maintaining the resale prices at which any dealer advertises, promotes or sells Reebok or Rockport brand athletic or casual footwear products. The settlement also would prohibit them from coercing or pressuring any dealer to maintain or adopt any resale price, and from attempting to secure their commitment to any resale price.

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In addition, for 10 years, the settlement would prohibit Reebok and Rockport from notifying a dealer in advance that it is subject to partial or temporary suspension or termination if it sells or advertises the respondents' products below a resale price that they designate, and that the dealer will be subject to some greater sanction if it continues or resumes selling or advertising the products below the designated resale price.

Finally, the order would require Reebok and Rockport to inform their dealers by letter and, for five years, on any materials in which they suggest a resale price, that dealers can advertise and sell Reebok and Rockport products at any price they choose.

The Commission vote to accept the proposed consent agreement for public comment was 3-1, with Commissioner Roscoe B. Starek, III, dissenting. In his statement, Starek said he believes that the "fencing-in" provisions related to resale price advertising and to Reebok's structured termination policy in the settlement "are unnecessarily broad and may enjoin efficient conduct."

The proposed consent agreement will be published in the Federal Register shortly and 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 the 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 an 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 actions. Each violation of such an order may result in a civil penalty of $10,000.

Copies of the complaint, consent agreement, an analysis of the agreement to assist the public in commenting, and Commis- sioner Starek's statement are available from the FTC's Public Reference Branch, Room 130, same address as above.

(FTC File No. 921 0117)                                                          

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