Proposed Dealer Purchase Stimulation Plan Whereby Dealers Earn Points in Order To Qualify for an Expense Paid…

ADVISORY OPINIONS WITH REQUESTS THEREFOR 1633. Proposed Dealer Purchase Stimulation Plan Whereby Dealers Earn Points in Order To Qualify for an Expense Paid Trip.

(File No. 713 7021)
Opinion Letter
Marcu 11, 1971
Dear Mr. JANKELL:

This is with further reference to your request for an advisory opinion regarding Miida’s proposed dealer purchase stimulation plan whereby dealers might earn points in order to qualify for an expense paid trip to Rio de Janeiro or London.

Based on the available information, the Commission is of the view that an advisory opinion would be inappropriate in this matter inasmuch as an informed decision thereon could be made only after extensive investigation and collateral inquiry. In these circumstances, the request is inappropriate under Section 1.1(c) of the Commission’ s

rules.
By direction of the Commission.
Letter of Request
Drcremper 28, 1970
GENTLEMEN :

We are the attorneys for Marubeni- Tida (America), Inc., who among other things, distributes cameras, photographic equipment and accessories. The company has recently begun marketing a broad line of such merchandise in the low and moderate price ranges under its brand name “Miida”, through six regional distributors who sell the Miida line to approximately 12,000 photography stores and retailers who carry photographic supplies.

Marubeni wishes to institute a sales incentive program to promote the Miida line, and in accordance with the Commission’s Procedures and Rules of Practice covering Industry Guidance, desires a staff review of the proposed course of action. The proposed course of action has not yet been implemented and it is not currently being followed by the company. At a conference held with Joseph P. Dufresne, Esq. of the Commission’s staff, we have been advised that the same or substantially the same course of action is not under investigation and is not and has not been the subject of a current proceeding, order, or decree initiated or obtained by the Commission or another governmental agency. It is the considered opinion of the company and this

1634 FEDERAL TRADE COMMISSION DECISIONS.

office that an informed decision on the proposed course of action and its effects can be made without recourse to extensive investigation, clinical study, testing or collateral inquiry. The proposed sales incentive program is designed to stimulate sales of all items in the Miida line. At the start of the program, each item would receive a predetermined point value. Point values would not. be principally determined by price nor will they fluctuate as a function of price. Rather, in considering point values for each item, consideration would be given to such factors as: The item’s ability to create and build brand image; brand name identification ; percentage of markup; and age and size of inventory. Some examples of point value assignments are: Cameras (assorted prices and styles) 15 point; Binoculars (assorted prices and styles) 10 points; interchangeable camera lens»s, depending on size and type, from one point to 20 points; and slide projectors 15 points. From time to time, the company may change or reassess point values for certain items or certain types of items in order to stimulate or increase sales of those item lines or particular types of items within a line, but no change would become effective without full and adequate prior notice to all existing and potential Miida retailers.

Every retailer who now carries the Miida line, and all others who wish to carry the line, will be given stamp books similar to these currently issued by the trading stamp companies. The point vaiue of all items purchased by a retailer will be determined and the retailer will receive one “Miida Stamp” for each point. It is anticipated that the first promotion would commence in mid January, 1971, and continue until mid December of the same year. Each retailer who had accumulated 2,500 stamps during the promotion period would receive a ten-day all expense paid trip to Rio de Janeiro in mid February, 1972. The trip is being obtained by the Company at group package rates of approximately $750. per person. A copy of the proposed itinerary is attached. Those retailers who acquired sufficient additional stamps could bring their wives or friends. For those retailers who are unable to acquire sufficient stamps to obtain a second ticket, provision will be made for the purchase of the second ticket at the Company’s cost. It was stated earlier that point values were being assigned to items based upon factors other than price. Depending, therefore, upon the mix of the Miida line merchandise purchased by a retailer, 2,500 stamps could be acquired for an aggregate of purchases ranging between $14,000 and $20,000. A “typical” composite order which indicates the modest scope of the purchase requirements is attached. Based upon Marubeni’s years of experience in the distribution of photographic equipment and accessories, the Company estimates that

ADVISORY OPINIONS WITH REQUESTS THEREFOR 1635 even a small full line photography shop of the “ma and pa” variety spends at least $10,000.00 per year on the types and price ranges of merchandise covered by the Miida line. Retailers who failed or were unable to acquire the requisite number of stamps during the eleven months promotion period would have the right to apply them towards the 2,500 stamps required for the trip being offered in the next annual promotion. It is anticipated that the promotions would continue annually for at least five years and even a small “ma and pa” photography shop could, with a minimum of effort, acquire sufficient stamps in less than half that time.

The Company recognizes that the world of business is fraught with many risks and that there may come a time when the Company is unable or unwilling to renew the promotion for the next ensuing year. The Company can obtain at group rates, and in the event of nonrenewal, would offer a trip to London for 1,000 stamps, to those who had not attained, and were unable to attain, during the remainder of the promotion period, the 2,500 stamps. A copy of that proposed itinerary is also attached.t The Company would, of course, give all retailers plenty of advance notice of the non-renewal and creation of alternative trips so that each retailer could check his stamp status, determine which plan was attainable for him, and plan his purchases during the balance of the promotion period, It is to be noted that the London trip could be acquired for an aggregate of purchases of as little as $3,600.00. .

It must, at this juncture, also be noted that the market share of both the Miida line and the Company’s entire photographic materials distribution are negligible considering that they compete with Kodak, Ansco, Bell and Howell, Honeywell and all of the well known foreign lines, as well as a host of private labels. It is, therefore, in Marubeni’s best interests to make every retailer who carries a line of photographic equipment and accessories aware of the promotion and the Miida line. The Company will extensively advertise the promotion in the trade publications and follow up with personal contact by the distributors. Notices of any changes or amendments would be handled in a similar manner, and, in addition, would be supported by mailings to all participating retailers. Marubeni feels that by these means it has evolved a promotion concept whereby every retailer, small and large, has the ability to qualify.. The Company trusts that the Commission, after review of the foregoing, will concur, and awaits the Commission’s comments. 1 Because of its length, this attachment has not been included.

Should the Commission desire any further information or clarification of any aspect of the proposed course of action, please contact the

undersigned.
Very truly yours,
Ratuuemm, Horrman, Kassen & Sinverman,
(S) Ricwarp JANKELL.