Advisory opinion letter to Ms

February 4, 1977 Dear Ms. Ring:

This is to confirm our telephone conversation of February 3, 1977, in which I requested that your firm provide this office with additional pertinent information in support of Mr. Wasserman’s request for confidential treatment of his January 3, 1977, advisory opinion request. 2 Tariff Act of 1930, §303, as amended (19 U.S.C. §1803). + Tariff Act of 1930, §337, as amended (19 U.S.C. §1337). * Letter to Hon. Daniel Minchew, Chairman U.S.LT.C., from Jonathan C. Rose, Deputy Assistant Attorney General, Antitrust Division, Department of Justice (January 25, 1977).

In particular, it is important, in my opinion, that you explain the nature, form, probable extent and impact of the “retaliatory action” which Mr. Wasserman mentioned in his letter as a justification for confidential treatment. In this regard, as I have advised you, there are limits on the Commission’s authority to withhold from the public, in whole or in part, agency records—particularly agency “opinions” — under the Freedom of Information Act, 5 U.S.C. 552, and Section 6(f) of the Federal Trade Commission Act, 15 U.S.C. 46(F). In addition, I requested in our conversation that your firm provide this office with as thorough an explanation as practicable of the use to which the information disseminated to participating members will be put. Such an explanation should include a description of how the information disseminated will alert participating members to “anticompetitive pricing policies” as well as what actions you believe those members are likely to take in the event such “anti-competitive pricing policies” are “discovered”. (See page 6 of Mr. Wasserman’s advisory opinion request.) Please feel free to call me if you have any questions about this

matter ((202) 523-3496).
Very truly yours,
Harry Hull
Attorney

Office of the General Counsel
Letter of Request
January 3, 1977
Gentlemen:

On behalf of the Independent Wire Producers Association (hereinafter the “Association”), we hereby request, pursuant to Section 1.2, Title 16, Code of Federal Regulation, (19 CFR 1.2), an advisory opinion by the Commission as to the legality under the antitrust laws of a proposed course of action by the Association. The course of action in question (a “raw material reporting system”) is not currently being followed and is not the subject of a pending investigation or other proceeding by the Commission or any other governmental agency. In order to understand the purpose of the proposed course of action to be taken by the Association, it is necessary to explain, briefly, the relatively unusual economic structure of the carbon steel wire. producing industry.

The member companies of the Association consist of “independent

ADVISORY OPINIONS 1187 company which converts carbon steel wire rod into wire. Wire rod — the raw material — is a steel mill product which is hot rolled from molten slabs of steel (“billets”) which are made in giant blast or electric furnaces. Only steel companies with substantial capital assets have the ability to produce the basic steel from which the vital raw material, wire rod, is made. .

A wire drawer manufactures wire by “drawing” wire rod through a series of dies. After wire has been produced through this drawing process, the wire is used (either by the wire drawer or other fabricators) to produce thousands of different wire products such as nails, barbed wire, fences, fabric for reinforcing concrete, and hundreds of other products.

Throughout the world, wire drawing companies are described as “integrated”, “affiliated” or “independent”. An “integrated” wire drawing company describes a company which has basic steel-making facilities, wire rod rolling facilities and wire drawing facilities.

An “affiliated” wire drawing company does not have the capacity to produce steel or wire rod, but is related directly or indirectly, to an integrated steel company through common ownership or participation in a cartel. Because of the United States antitrust laws, there are few affiliated wire drawing companies located in the United States. An “independent” wire drawing company has neither steel making capacity, wire rod making capacity nor an affiliation with an integrated steel company. Accordingly, an independent wire drawer must purchase its raw material, wire rod, from steel companies. Thus, integrated steel companies that produce wire rods and manufacture wire and wire products are — at the same time — suppliers of wire rod as well as competitors of those companies which purchase this raw material from them.* In light of the above-described nature of this industry, the Association is considering the implementation of an “imported wire rod ‘reporting system,” which would consist of the member companies of the Association reporting, on a regular basis, certain information to the statistical branch of a management firm, Smith, Bucklin & Associates, Inc. (“Smith-Bucklin”). Smith-Bucklin has recently entered into an agreement to manage the affairs of the Association. As contemplated, each member company would be permitted to * Economists describe an industry where suppliers are also competitors of their customers as a “dual distribution” industry. “Dual distribution” is an uncommon, but recognized economic concept. See “Dual Distribution” in Report to the President on the Economic Position of the Steel Industry (Cabinet Committee on Economic Policy, Washington, July 6, 1971) at page 41, containing special mention of the independent wire drawers. Also, see Dual Distribution, Hearings Before the Subcommittee on Antitrust and Monopoly of the Senate Committee on the Judiciary, 89th Cong., lst Sess. (1966); United States v. Aluminum Co. of America, 148 F.2d, 416 (1945).

elect, in its sole discretion, whether or not- to report the requested information. A member company which elects to participate would report the following information (on the Form attached hereto as Exhibit A)** concerning each offer it receives for imported carbon steel wire rod:

(i) the quantity of wire rod offered, (ii) the foreign country of origin of such wire rods, (iii) the date on which the offer was received and the date on which the offer was terminated, _ (iv) the diameter, carbon content and coil weight of such wire rods, (v) the calendar quarter of shipment, and (vi) the f.o.b. (foreign port of exportation) price of the ‘cif. (United States port of importation) price. The member company reporting this information would not report the name of the offerer or its acceptance or rejection of the offer. Thereafter, Smith-Bucklin would compile such information on an aggregate basis and would reveal neither the names of the specific member companies which supply the information nor the specific prices offered nor the name of the proposed seller. This aggregate information would then be provided on a monthly basis, free of charge, to all member companies of the Association that submitted data for that month.

The Association desires to implement the reporting system in order to survey the pricing policies of foreign steel producers. America’s independent wire producers are frequently at a competitive disadvantage in the worldwide markets for wire and wire products because of the “dual distribution” nature of the industry. America’s independent wire producers have long suspected (based upon the price of imported wire and wire products) that foreign steel producers have been selling wire rods to related or affiliated foreign wire drawing companies at prices lower than the prices at which they sell similar wire rods to nonrelated wire drawing companies. Furthermore, in certain areas of the United States where an insufficient amount of wire rod is produced to meet the demand, independent wire producers appear to pay a higher price for wire rod than independent wire producers located in other

ADVISORY OPINIONS 1189 areas of the country, without justification and despite the absence of similar price differences between imported wire and wire products. The Association believes that the dissemination of the information described in the proposed report is necessary to enable the member companies to act in the event of anti-competitive pricing policies by foreign suppliers.

- We would appreciate the Commission’s opinion concerning the legality of the proposed reporting system. Should you require further information, please do not hesitate to contact us. ‘Respectfully, /s/ Jack Gumpert Wasserman