Publication of dealer sales standards announcing a policy of not selling to dealers who advertise sale prices

No. 163. Publication of dealer sales standards announcing a policy of not selling to dealers who advertise sale prices. The Federal Trade Commission rendered an advisory opinion stating its objection to a propos'al by a seller of photographic products to announce to the trade its policy to sell only to dealers who advertise in a manner which will not damage the prestige of the seller, avoiding the use of characterizations such as "Sale Bargain Close-Out Clearance" or other similar terminology.

The seller advised that it propose,d to implement the standards b:y deIivering a copy to each existing dealer, not for the purpose of terminating any presently unsatisfactory dealers, but to upgrade them to a satisactory level. This the seller proposed to do by having its representatives work ',,"ith the dea.lersto see that they observe the sta,ndards and contended that. ,this is permissible since this is simply an advertising restriction, not mi effort at resale price. maintenance. It 'Tas further argued that although the price at 'which its products are sold is the prerogative of the de,aler, the seIler has a legitimate business interest in the manner in which its products are advertised by those dea.lel's. The Commission also noted that the standards con eluded witll the statmnent that evaluation of the progress of dea,lers 'IiI be made from tilne to time and those who are not keeping pace will be discontinued. The Commission advised that it could not give its clpproval to this proposal for the reason that its implementation as outlined would be likely to result in :an illegal restraint of trade. In the first place, the Com.missionaclvisecl that it could not vie.w the proposal as a simple restriction on advertising apart from the effect which that restriction would have on the pric.e at \\'hich those dealers sell. ,Vhile there is a difference between this and a policy of selling only to dealers who maintain the prices suggested by the seller, in that the dealers are ostensibly left free to sell -at any price they choose, still a restriction on their 'abality to advertise sale prices is certainly a grave handicap on their ability to seJI a,t prices below those suggested. Hence the provision, if not designed to maintain suggested prices, is one which will seriously laffect those prices.

The Commission further advised that its vie,v of the pr€;sent state of the law in this area was that a seller not acting to Cl"elate or maintain l11onopoly may make a unilateral announcement of his policy to those with whom he will deal, including policies affecting: price, and he may refuse to deal with those \\'ho do not observe. that poJic.y. 11o\\'ever, when the seller s actions, as they would under this proposal, go \ ) , , ,

1294 FEDERAL TRADE CO::\1MISSION DECISIONS beyond a meTe announcement of his policy and the sirD.pIc refusal to de:al , a.nel he employs other me'ans which effect adherence to his policy, he is in seTious danger of having put togelther a combination in violation of the antitrust laws. Thus, the Commission stated, the line bei\-veen legal and illegal conduct here is a very narrow one and if the seller chooses to walk that line., he must do so at his peril. (File :No. 683 7063, released Jan. 31 , 1968.