State Attorneys' General Settlement Obtains $34 Million In Overcharges
Nine West Group Inc., one of the country's largest suppliers of women's shoes, has agreed to settle charges that it engaged in resale price fixing with certain dealers in violation of federal and state antitrust laws. Nine West sells shoes under the brand names Nine West, Amalfi, Bandolino, 9 & Co., Calico, Easy Spirit, Evan-Picone, Pappagallo, Capezio, cK/Calvin Klein, Selby, Joyce, Westies, and Enzo Angiolini. Nine West entered into separate settlements with the Federal Trade Commission and the Attorneys General for 56 U.S. states, territories, commonwealths, and possessions. The FTC's order will prevent Nine West from engaging in these illegal practices in the future. In addition, Nine West's settlement with the Attorneys General requires Nine West to pay $34 million. The money the Attorneys General collect will be used to fund women's health, educational, vocational, and safety programs.
"This is a good example of effective enforcement resulting from federal and state agency cooperation. The combination of an injunction and a $34 million payment sends a strong signal to companies that fixing resale prices violates the law and will result in enforcement actions," said Richard G. Parker, Director of the FTC's Bureau of Competition.
According to the FTC's complaint, Nine West divisions entered into agreements with retailers that fixed retail prices for their shoes and restricted promotion periods - called "clearance windows" - when retailers could promote sales or sell shoes at reduced prices. Retailers who deviated from Nine West's policies were threatened or penalized. In response, retailers communicated to Nine West that they would not deviate from the policy in the future.
The FTC alleged that Nine West's practices artificially propped up the prices of Nine West products and restricted competition among retailers who sold Nine West brands in violation of federal law.
The FTC's settlement will bar Nine West from fixing the price at which dealers may "advertise, promote, offer for sale or sell any product." It also bars Nine West from "requiring, coercing or otherwise pressuring dealers to maintain, adopt or adhere to any resale price." Finally, the settlement bars Nine West from notifying dealers in advance that they are subject to a temporary or partial suspension of supply if they sell Nine West shoes below a designated price. Nine West will be required to use disclaimers on price lists reaffirming retailers' freedom to set their own prices. The settlement also contains certain record-keeping provisions to allow the FTC to monitor compliance.
Nine West, based in White Plains, New York, was recently acquired by Jones Apparel Group Inc. The illegal conduct alleged in the complaint occurred before Jones acquired Nine West.
The Commission vote to accept the proposed consent agreement for public comment was 5-0, with Commissioners Orson Swindle and Thomas B. Leary issuing a separate statement. In their statement the Commissioners said, "We have voted to accept the consent agreement for public comment because we have reason to believe that the conduct engaged in by Nine West falls outside the limited zone of protection afforded by the Colgate doctrine, and thus is per se illegal under current law. We do not mean to indicate agreement, however, with the artificial analysis mandated by the Colgate doctrine or with the overbroad per se condemnation of minimum resale price maintenance ("RPM"), which the Colgate doctrine mitigates to some degree.
"We do not know what conclusion we might have reached had Nine West's behavior been analyzed under the rule of reason, because that question did not arise. Nevertheless, one can easily posit instances of minimum RPM that involve a mixture of procompetitive and anticompetitive effects, like any other vertical restraint, and undercut the continuing validity of the per se rule against the practice. Several years ago, the Supreme Court took the beneficial step of reexamining and overruling the doctrine that condemned maximum RPM as per se illegal. When an appropriate case arises, we believe that the Court should continue this healthy trend by reassessing the even hoarier per se treatment of minimum RPM."
An announcement regarding the proposed consent agreement will be published in the Federal Register shortly. The agreement will be subject to public comment for 30 days, until April 5, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 600 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 $11,000.
Copies of the complaint, consent agreement, the Commissioners' separate statement and an analysis to aid public comment 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, D.C. 20580; toll free at 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
(FTC File No. 981-0386)
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