Adoption of penalty clause which inhibits competitors

No. 271. Adoption of penalty clause which inhibits competitors. The Commission advised a requesting party that his proposal if adopted, would violate Section 5 of the Federal Trade Commission Act. The plan and its background were described as follows: It is customary in the specified market for seIlers of components furnished by a single supplier to offer free design services to architects and engineers engaged in pJanning new .construction. When the contracts arc let, however, that seIler of components who has provided the free design services is not always the successful biJder. It was proposed, therefore, that the supplier contract and agree with all whom he supplies that a money penalty be imposed on any successful bidder who had not provided the free design services. The prescribed penalty would be paid over to that unsuccessful bidder who in fact provided free design services, failing which the supplier might at his option, cut the offending bidder off. The Commission noted that any direct, or indirect, agreement between competitors which interferes with the free establishment of a market price whether that price be expressed in money, service, or in any other manner, is unlawfu1. (File No. 683 7137 relcased Aug. 17, 1968.