Commission advised applicant it cannot approve a pro, posed partial acquisition of a direct competitor s…

No. 280. Commission advised applicant it cannot approve a pro, posed partial acquisition of a direct competitor s business that may substantially increase applicant' s market power. The Commission issued an advisory opinion to an applicant who sought premerger clearance to acquire a number of operating plants of a direct competitor.

According to the information submitted by the applicant, both companies purchase an agricultural product from growers and resell the partially processed product to further processors and canners. Both companies appear to be among the top four firms in the market and to have substantial shares of the market. The Commission expressed the opinion that it cannot approve the proposed acquisition because such an acquisition may substantially increase applicant's market power and thereby tend to produce anticompetitive effects in violation of the Clayton Act as amended. (File No. 683 7151, released Aug. 27, 1968.

)10. 281. Trade association recommendations with respect sales periods and services furnished by members and cash discounts by suppliers.

The Commission rendered an advisory opinion to a trade association of elothing retailers that its proposal to hold discussions conduct studies and make recommendations to its members and their suppliers with respect to three problems which confront the industry would probably be ilegal.

The association advised that competitive conditions have forced the retailers into longer and longer sales periods which squeeze profit margins in the stores and contribute to improper merchandise assortments for one-third of the year. Second , it was stated that the cost of alterations was creeping upward as labor costs increase, thus adding to overhead expense and that only a limited number of stores charge for these alterations. Third the association advised that manufacturers vary in the amounts of cash discounts they wil give and in the time periods during which they wjJ be allowed, thus confusing retailers and resulting in substantial clerical errors. The association felt that it would greatly simplify retailer record keeping if a uniform date of payment and uniform discount terms became an accepted practice in the industry. In an effort to find solutions to these problems, the association contemplated three steps concerning which an opinion was de- ADVISORY OPINION DIGESTS 1663 sired. First, it asked if it could include artic1es in its bulletins about the benefits of starting clearance sales at later dates and otherwise publishing information designed to show that stores better serve customers when they operate as a one price store for the maximum amount of time during the year. Second, it inquired as to whether it could include cost information on alterations showing the inequities of not applying reasonable charges for alterations and as to whether local merchants could discuss without specifics as to price, the merit of charging for alterations and urge local cooperation. Third, the association inquired as to whether it could include in its publications information on the desirability of uniform cash discounts, pass resolutions and urge manufacturers to cooperate.

The opinion advised that all three of these proposed courses of action would, in the Commission s view, be of questionable propriety under existing law. With respect to the passage of resolutions urging manufacturers to adopt uniform cash discount terms, it was the Commission s opinion that, even if unaccompanied by any intent to force the manufacturers to adopt the policies set forth therein, there was implicit in such resolutions by the retailers too grave a danger that they would serve as a device whereby the concerted power of the members of the association was brought to bear to coerce the manufacturers to conform their discount policies to the restrictive standards of the resolutions , or, at the very least, as an invitation to enter into agreements among themselves to do so. The other two proposals seemed to the Commission to .involve activities by the association which would lead to suppression of competition among the members. In the Commission s view, the time and duration of sales and the furnishing of alterations without additional charge are methods of competition among the retailers. The natural and probable result of what the association proposed to do would be to limit competition in these areas and thus would constitute an unlawful restraint of trade. While the steps which the association contemplated may not be the equivalent of an agreement among the members to follow the recommended procedures, still if they had the effect of persuading substantial numbers of those members to do so, it would raise a serious inference of such an agreement and hence would be of questionable propriety under the antitrust laws. Therefore, any actions by the association which would have a tendency to bring about that result could not, the Commission stated, meet with its approva1. (File o. 683 7141, released Aug. 27, 1968. 1664 FEDERAL TRADE COM MISSION DECISIONS