[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