F.TC. antitrust sense

1170 FEDERAL TRADE COMMISSION DECISIONS
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91 F.TC.

antitrust sense. The proposed plan would have no adverse impact on interbrand competition; rather, the proposed plan would enhance. the integrity of the interbrand competitive bidding process. Moreover, the proposed plan would have no significant adverse impact on intrabrand competition because the special pricing would not be denied to any dealer who had a genuine interest in bidding the Company’s products. Accordingly, we believe that the proposed plan is consistent with the Commission’s outstanding Order and antitrust laws generally. Cf. Continental TV Inc v GTE Sylvania, Inc [Current Materials Binder]

Trade Reg Rptr 461,488 (U.S. Sup. Ct. 1977).
Thank you for your consideration.
Yours very truly,
VARNUM, RIDDERING, WIERENGO & CHRISTENSON
/s/ J. Terry Moran
Letter of Request
April 27, 1977
Dear Mr. Tobin:

In accordance with the Commission’s rules, we are writing on behalf of our client, Herman Miller, Inc., to request advice on the question of whether the following described proposed course of action will constitute compliance with the Commission’s order entered with the Respondent’s consent on June 30, 1967, effective December 1, 1967 in the above referenced matter.

That order provides with respect to the offer and sale of furniture products that the Respondent shall cease and desist inter alia from: Discriminating, directly or indirectly, in the price of such products of like grade and quality by selling such products to any purchasers at net prices higher than the net prices charged to any other purchaser who in fact competes in the resale or distribution of such products with the purchaser paying the higher price. * * * * * * * Notifying, or otherwise communicating to, its customers, directly or indirectly that one or more of its customers will be favored in terms of price or otherwise, with respect to bargaining with, or submitting bids or otherwise quoting prices to, particular consumers or users of such products.

ADVISORY OPINIONS 1171 1167 Interlocutory Order principally for office and institutional use since the date of that order. The Company’s products are distributed mainly through independent dealers who purchase products from the Company and resell those products to office and institutional users with some occasional sales for residential use. Currently the Company has approximately two hundred authorized dealers for its products throughout the United States.

The office furniture market on a national basis encompasses an estimated $1,450,000,000 in annual sales. There are an estimated two hundred fifty manufacturers making sales in this market principally through independent dealers. Herman Miller dealers are not exclusive dealers. Most of them handle one or more product lines competitive to Herman Miller products. In metropolitan marketing areas, the Company will typically have more than one dealer. Herman Miller is an industry leader in terms of innovation and design. An example of the Company’s leadership is its Action Office © product which pioneered the popular open-space office systems concept. Many competing manufacturers now market open plan systems. In recent times, the market for these products has become more price sensitive and purchasing of major quantities of these products systems by large institutions has become more bid-oriented. These large institutional sales involve substantial design, specification and sales efforts by dealers prior to the bid process. Generally a dealer will pursue these prebid activities on behalf of one manufacturer’s product line to the exclusion of other lines; in fact, the dealer may be competing for the “specification” against other dealers who are promoting a competing line of product. Frequently, when the specification is let for bid, it will encourage or permit bids for a named product line “or equal”. Such specifications call for product quantities, product mixes and differing finishes and fabrics so as to preclude sales out of dealers’ inventories, and dealers request special pricing and delivery quotations from manufacturers for the particular job. Manufacturers normally respond by pricing these jobs at an aggregate price lower than the sum of its regular prices for the variety of products which comprise the specification. (This is referred to as “special” pricing.) A manufacturer’s pricing is predicated in large part upon its judgment of what price level it anticipates will be offered by competing manufacturers. Accordingly, price competition on such bids basically is price competition between competing manufacturers, since the product cost to the dealer has an overwhelming influence on his bid price.

In bid situations, Herman Miller makes its special prices available to all its dealers who are competing for such bids. Pursuit of this policy in

1172 . FEDERAL TRADE COMMISSION DECISIONS some instances has placed the Company at a competitive disadvantage. In certain cases during the pre-bid process, a dealer who is a dealer both for Herman Miller and a competitive manufacturer may promote the competitor’s product line and succeed in obtaining the specification of that line. That dealer will then bid only the specified line. That dealer, however, will also request Herman Miller’s special pricing for the same job as an “equal”. Making Herman Miller prices available to that dealer in advance of the bid submission is tantamount to disclosing Herman Miller’s prices in advance to a competing manufacturer. That dealer is able to inform Herman Miller’s competitor of the exact price Herman Miller is quoting for that bid, and the bidding process if subverted to the detriment of Herman Miller and the dealer or dealers who are promoting Herman Miller’s products. On the other hand, in a reverse situation where a dual dealer obtains a Herman Miller specification, the competitive manufacturer will refuse to quote special prices to Herman Miller dealers who intend to bid the Herman Miller product.

Herman Miller desires to follow a policy equivalent to that of its competitors. Herman Miller proposes to notify its dealers that special pricing for specific bids will be granted to each dealer competing for such bid upon the condition that the dealer certify in advance: (a) That he will submit a bid on that specific job; and (b) That on that specific job he will not bid products competitive to those products for which he will obtain special price quotations from Herman Miller.

As a result of this proposal, combined with existing practices by other manufacturers, a dealer with multiple product lines will decide in advance which manufacturer he will represent on that specific bid, and will receive special pricing from that manufacturer only. It is our view that pursuit of such a policy by the Company, as well as other manufacturers, would not be a violation of the RobinsonPatman Act, nor would it constitute a violation of the aforementioned provisions of the Commission’s Order. Special pricing will be offered to all Herman Miller dealers on the same terms and conditions, subject only to the dealer’s election to take advantage of the offer. On this basis, the Company would not be “discriminating” against nor “favoring” any particular dealer within the meaning of the Commission’s Order. We believe that this conclusion is supported by the fact that the proposed course of action does not involve any aspect of the challenged conduct which resulted in the entry of the Commission’s Order in 1967, and, further, by the fact that such an interpretation of the Order would be consistent. with nrior determinations of the

ADVISORY OPINIONS 1178 and quantity discounts do not involve “discrimination” where functionally available to all customers. We respectfully request the Commission’s advice as to whether the proposed course of action outlined above will, if pursued by the Company, constitute compliance with the Commission’s outstanding