[Federal Register Volume 63, Number 16 (Monday, January 26, 1998)]
[Notices]
[Pages 3747-3748]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-1802]



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FEDERAL TRADE COMMISSION

[File No. 951-0083]


Sensormatic Electronics Corporation; and Checkpoint Systems, 
Inc.--Analysis to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreements.

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SUMMARY: The consent agreements in these matters settle alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaints that accompany the consent agreements and the terms of the 
consent orders--embodied in the consent agreements--that would settle 
these allegations.

DATES: Comments must be received on or before March 27, 1998.

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:
William Baer or Michael Antalics, FTC/H-374, Washington, D.C. 20580. 
(202) 326-2932 or 326-2821.

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 above-captioned consent agreements containing consent orders 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, have been placed on the public 
record for a period of sixty (60) days. The following Analysis to Aid 
Public Comment describes the terms of the consent agreements, and the 
allegations in the complaints. An electronic copy of the full text of 
the consent agreement packages can be obtained from the FTC Home Page 
(for January 21, 1998), on the World Wide Web, at ``http://www.ftc.gov/
os/actions/htm.'' A paper copy can be obtained from the FTC Public 
Reference Room, Room H-130, Sixth Street and Pennsylvania Avenue, NW., 
Washington, DC 20580, either in person or by calling (202) 326-3627. 
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)).

Analysis of Proposed Consent Orders To Aid Public Comment

    The Federal Trade Commission has accepted agreements to proposed 
consent orders from Sensormatic Electronics Corporation 
(``Sensormatic'') and Checkpoint Systems, Inc. (``Checkpoint''). 
Sensormatic's principal place of business is located at 951 Yamato 
Road, Boca Raton, Florida. Checkpoint's principal place of business is 
located at 101 Wolf Drive, Thorofare, New Jersey.
    The proposed consent orders have been placed on the public record 
for 60 days for reception of comments by interested persons. Comments 
received during this period will become part of the public record. 
After 60 days, the Commission will again review the agreements and the 
comments received, and will decide whether it should withdraw from the 
agreements or make final the agreements' proposed orders.
    Sensormatic and Checkpoint are the two largest manufacturers and 
sellers of electronic article surveillance (``EAS'') systems in the 
United States and the world. Their combined worldwide sales exceed 70 
percent of total EAS industry sales.
    EAS systems are used primarily by retailers to deter and detect 
shoplifting and employee theft. Bits of reactive metal or electronic 
transmitters called ``tags'' are attached to products sold in retail 
stores. When a product is purchased, the tag is removed or deactivated 
by the cashier. If a tag passes through an EAS system's sensors at a 
store exit without being deactivated, it sets off an alarm. EAS systems 
are also commonly found in libraries and video stores.
    The complaint alleges that Sensormatic and Checkpoint entered a 
written agreement on June 27, 1993 to refrain from ``negative 
advertising or other negative selling, promotional activities or other 
communications with respect to the other party or the other party's 
products and services,'' including ``statements that the other party's 
products or services cause or may cause harm to customers, consumers or 
merchandise.'' The complaint further alleges that the respondents have 
construed the June 27, 1993 agreement to restrict comparative 
advertising relating to the performance and effectiveness of the 
proposed respondents' EAS systems.
    The complaint alleges that the June 27, 1993 agreement deprives 
retailers, other customers who purchase EAS systems, and consumers of 
comparative information about the characteristics of EAS systems that 
they would find helpful. In particular, the complaint alleges that 
retailers and other EAS customers have an interest in obtaining 
comparative information relevant to their purchasing decisions. The 
complaint further alleges that certain information about EAS systems, 
such as the potential harm to retail products and information about 
possible interactions between certain medical devices and EAS 
equipment, is relevant to consumers. Finally, the complaint alleges 
that the June 27, 1993 agreement is an agreement among competitors to 
refrain from making truthful, non-deceptive claims, including 
comparisons, criticisms, or disparaging statements in advertising, and 
that this agreement constitutes an unfair method of competition in 
violation of Section 5 of the Federal Trade Commission Act.
    On many occasions, the Commission has prohibited groups of 
horizontal competitors from agreeing to refrain from making truthful, 
non-deceptive claims, including comparisons, criticisms, or disparaging 
statements in advertising. The Commission has recognized that one of 
the benefits of competition is that competitors may be driven to 
provide consumers with information that makes for better educated, 
effective consumers.\1\ The alleged conduct engaged in by Sensormatic 
and Checkpoint and the terms of the proposed orders are similar to the 
conduct alleged and the relief obtained in Personal Protective Armor 
Association, Inc., 117 F.T.C. 104 (1994).
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    \1\ See generally Commission Policy Statement in Regard to 
Comparative Advertising, 16 CFR 14.15 (1997) (comparative 
advertising assists consumers in making rational purchase decisions, 
encourages product improvement or innovation, and can lead to lower 
market prices).
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    Sensormatic and Checkpoint have signed consent agreements 
containing the proposed consent orders. The proposed consent orders 
require Sensormatic and Checkpoint to declare null and void the 
negative advertising provision of the June 27, 1993 agreement. The 
proposed consent orders also prohibit Sensormatic and Checkpoint from 
entering into any agreement that prohibits, restricts, impedes, 
interferes with, restrains, places limitations on, or advises against 
engaging in truthful, non-deceptive advertising, comparative 
advertising, promotional and sales activities for twenty years after 
the date the order becomes final. In addition, the proposed consent 
orders require that Sensormatic and Checkpoint provide copies of the 
orders to their respective executives, and that Sensormatic and 
Checkpoint file annual compliance reports with the Federal Trade 
Commission.

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    The purpose of this analysis is to facilitate public comment on the 
proposed orders, and it is not intended to constitute an official 
interpretation of the agreement and proposed orders or to modify in any 
way their terms.
Donald S. Clark,
Secretary.
[FR Doc. 98-1802 Filed 1-23-98; 8:45 am]
BILLING CODE 6750-01-M