[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] ----------------------------------------------------------------------- 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. ----------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \1\110 F.T.C. 549, 604 (1988). --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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). --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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