Compliance advisory opinion as to legality of a promotional program under modified order, 73 F. C. 1026…

Compliance advisory opinion as to legality of a promotional program under modified order, 73 F. C. 1026 (Docket 7492).

Opinion Letter
August 6, 1976
Dear Mr. Hinckle:

The Commission has considered the request in your letter of January , 1976 for advice as to whether your client, Fred Meyer, Inc., may engage in a proposed course of action withovt violating the modified order issued by the Commission in the above-captioned matter on June , 1968.

88 F.

From your letter it appears that Fred Meyer, Inc. proposes to initiate promotional program identical to one utilized by a competitor, Ernst Home Centers. The Ernst's " Show Me How Garden and Patio Fair" on which Meyer wants to base its program is the one that was conducted by Ernst from January 30, 1975 through February 2, 1975. As you stated in your letter of January 23, 1976 Meyer plans to conduct an identical show. Using the pattern of the Ernst progyam Meyer plans to solicit many of its suppliers to participate in its promotional program. In preparation for the Fair, Meyer will send to suppliers letters of solicitation setting out the details of the program. In order to participate each supplier would agree to pay Meyer a specified sum for booth space at the Fair. Each supplier will be given the opportunity to display several products and also will be requested to distribute coupons allowing the holder to purchase a particular one of the supplier products at a reduced price at a Meyer store. The Fair will be heavily promoted in newspaper, radio, and television advertising with Meyer identified as the sponsor of the Fair.

You are advised that it would be necessary to conduct an extensive field investigation to determine \vhether the progyam proposed by Fred Meyer, Inc. or utilized by Ernst Home Centers would be a violation of the law or order issued in Docket 7492. Consequently, pursuant to Sec. 61(d) of the Commission s Rules of Practice and Procedures, a request for advice is inappropriate \\There "the proposed course of action or its effects may be such that an informed decision cannot be made or could be made only after extensive investigation, clinical study, testing, or collateral inquiry. " The Commission hereby declines to issue an advisory opinion on the facts submitted.

By direction of the Commission.

Letter of Request

January 23 1976 Dear Sir:

This office represents Fred Meyer , Inc. ("the company ). We are writing to seek an advisory opinion, pursuant to 16 CFR ~3. , with respect to a promotional program which the company proposes to carry out, provided we can obtain an assurance of its legality. The company is subject to a "Modified Order" issued by the Federal Trade Commission on June 13, 1968, Docket No. 7492, which became ADVISORY OPINIONS 1015

final by operation of law on July 13 1968. In pertinent part, that order prohibits the company from:

Inducing or receiving anything of any value from any supplier as compensation for or in consideration of advertising, promotion, or display services or facilities furnished by or through Fred Meyer , Inc., in connection with any promotional scheme consisting of distribution of coupons to and return of coupons by consumers in connection with the purchase by consumers of products offered for resale in retail outlets of respondent Fred Meyer, Inc. , or in connection with any comparable program, or in connection with any actual or purported promotion or special sale of particular products to be conducted by or on behalf of respondent Fred Meyer, Inc. when respondents know or should know that such compensation or consideration is not being offered or otherwise made available by such supplier on proportionally equal terms to all of its other customers, including retailer customers who do not purchase directly from such supplier, who compete with respondent Fred Meyer Inc., in the sale of such supplier s products. The company is engaged in the retail sale of a wide range of general merchandise through a chain of 51 stores in Oregon, Washington and Montana. Ten of its stores are in the gTeater Seattle-Tacoma area of Washington, where one of its major competitors is the Ernst Home Centers, a division of Pay 'n Save Corporation. Since the promotional program that the company proposes to carry out is identical to promotional programs conducted each year by Ernst in the Seattle area, the following description of the Ernst progTam constitutes at the same time a description of the company s proposal for its own progTam. The most recent Ernst promotional progTam was conducted in October 1975. The progTams have been variousl:y styled, but the progTam for which we have most complete information was carried out from January 30, 1975 through February 2, 1975, as the "Ernst Show Me How Garden and Patio Fair " (the "Fair ). This Fair was conducted in the Seattle Center Display and Exhibition Hall. Ernst solicits many of its suppliers to participate in its promotional programs. In preparation for the Fair, for example, Ernst sent a letter of solicitation dated October 30, 1974, setting out the details of the program. A copy of this letter, with its attachments, is attached hereto as Exhibits A-I through A-9. According to the terms of the proposal each supplier was to pay Ernst the sum of $540 for booth space at the Fair (see Exhibit A-6). The more than 50 suppliers that participated in the Fair are listed on a chart of booth locations, attached hereto as Exhibit " " Each supplier is given the opportunity to display several products, but is asked to distribute coupons allowing the holder to purchase a particular one of the supplier s products at a reduced price at an Ernst store. Ernst's letter of solic.itation \\lith respect to the coupon program is attached hereto as Exhibit " " and samples of

88 F.

coupons that were distributed during the 1975 Fair are attached hereto as Exhibits " " and " " The Fair is heavily promoted in newspaper, radio, and television advertising, with Ernst identified as the sponsor of the Fair. (See Exhibit "

Following the pattern of this Ernst Show Me How Fair, the company proposes to rent a large exhibit hall; invite its suppliers to participate with a booth; charge each participating supplier a certain feefor booth space at the show; carry out extensive advertising in the media prior to and during the show; and encourage its suppliers to issue coupons providing for the purchase of a product at a reduced price at a Fred Meyer store.

Fred Meyer, Inc.' requests the Commission s advice as to the following: (1) Would its sponsorship of such a home show or fair be consistent with its obligations under the 1968 Order? (2) If the answer to (1) is in the negative, could Fred Meyer, Inc. sponsor such a home show in the Seattle area, where it is in direct competition with Ernst, on the theory that conduct which might otherwise violate the Order is permissible if it is based solely on an attempt to "meet competition ? (See G. v. Ruberoid Go. 343 US 470 (1952), where the Supreme Court held that the defenses available under the RobinsonPatman Act "are necessarily implicit in every order" issued by the Commission based on that Act; and Exquisite Form Brassiere , Inc. F. T. 301 F2d 499 (DC Cir 1961), cert. denied 369 US 888 (1962), where the court held that the "meeting competition" defense was available to

a charge of violating ~2(d).
Thank you for your assistance.
Very truly yours

Isl Charles F. Hinkle