Business and Institutional Furniture Manufacturers Association

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ADVISORY OPINIONS 1031
1031
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Legality of use of mathematical model to forecast gross volume of shipments within furniture industry. [File No. 783 7011, Business and Institutional Furniture Manufacturers Association, September 19, 1978]

Advisory Opinion Letter
September 19, 1978
Dear Mr. Johnson:

This responds to your request for an advisory opinion on the use, by the Business and Institutional Furniture Manufacturers Association (BIFMA), of a model to forecast gross volume of shipments in the industry.

The Commission undertstands that BIFMA is a trade association with membership open to all firms in the industry upon payment of annual dues graduated according to firm size, and that current membership accounts for about 75% of industry sales. The Commission further understands that BIFMA proposes to engage an independent accounting firm to use a mathematical model, based entirely on publicly available economic indicators, attempting to forecast total quarterly office furniture shipments (i.e., forecasts will not be broken down by office furniture type or product category) for the ensuing twelve-month period. There will be no exchange or disclosure whatever of individual firm data. It is proposed that access to the forecast shipment data be limited to members of BIFMA. Shipment forecast arrangements by competitiors. in particular marketing environments could raise serious antitrust concerns. On the basis of available information indicating low industry concentration and the presence of differentiated products, however, the Commission is of the view that the likelihood of anticompetitive use of the proposed forecast data is remote. The Commission cautions that the forecasts must not be used by the Association or its members so as to restrict independent business decisions by any individual firm, to secure adherence to quotas of production or sales, or to effect any other such unlawful trade restraint. Accordingly, the Commission does not presently object to the proposed forecast of total shipments, subject to the above qualifications. By direction of the Commission.

92 F.T.C.
Letter of Request
May 10, 1977
Dear Mr. Secretary:

We are general counsel for the Business and Institutional Furniture Manufacturers’ Association (BIFMA) and in that connection we are submitting this request for an advisory opinion with respect to a proposed sales forecasting program. The proposed program is not currently under investigation by or the subject of any proceedings before the Commission. The program is scheduled for implementation in June of 1977. However, we are authorized to represent to the Commission that the program will not be instituted until we have received the requested opinion. Background BIFMA is a Michigan nonprofit corporation which was formally organized in June of 1973. Copies of the association’s Articles of Incorporation and Bylaws are enclosed as Exhibits A and B.* The association was organized for the benefit of members of the industry and the public, particularly in the areas of development and standardization of test methods and procedures, statistical compilation and reporting, and the development of material standards. Enclosed for your information as Exhibit C* is a current copy of the membershio list of BIFMA. It is estimated that current members account for over 75% of the national sales of the office furniture industry.

Under Article II, Section 1, of the corporation’s Bylaws, membership in the association is open to all manufacturers of business and institutional furniture. The association encourages manufacturers to become members and is currently campaigning to increase its membership. The annual dues for membership are graduated according to the size of the manufacturer in terms of annual sales volume, and are set forth in the following table:

Annual Sales Volume Annual Membership Dues
Under $1 million $ 540
$1 to $4.9 million 1,020
$5 to $9.9 million 1,500
$10 to $14.9 million 2,100
$15 to $24.9 million 2,700
$25 to $49.9 million 3,300
Over $50 million 4,200
* Not reproduced herein.

ADVISORY OPINIONS 1033 As an example of BIFMA’s activity, the association has developed standards for office chairs which have been accepted and published by the American National Standards Institute. BIFMA is actively pursuing similar standards with respect to the manufacture of other items of office furniture.

As an additional activity, BIFMA is sponsoring the collection, compilation and periodic reporting of industry new orders, shipments, unfilled orders and inventories as well as net sales, days’ accounts receivable are outstanding and inventory turnover information. Membership data is reported to Seidman & Seidman, certified public accountants, who are responsible for the compilation and reporting of the statistics. No other persons have access to the data of individual firms, and the reports contain no reference to individual firm data. Seidman & Seidman computes the arithmetic averages of the data in each category submitted by members and reports to each member that firm’s individual data and the arithmetic average of data for all reporting firms and for all reporting firms by three sales size categories (A - up to $10,000,000; B - $10,000,000 to $40,000,000; and C - over $40,000,000). No individual firm receives any data of or comparison with any other individual firm.

Proposed Course of Action We are enclosing herewith, marked as Exhibit D,* a document entitled “BIFMA Forecasting Research Program - A Consolidated Report.” This document sets forth the research that has been done by BIFMA and its consultants with regard to the development of a forecasting model to forecast office furniture shipments. At page 25 of this document, the forecasting model is set forth. BIFMA proposes to engage Seidman & Seidman to utilize this forecasting model and prepare on a quarterly basis a forecast of total office furniture shipments for the next twelve month period showing projected gross shipments on a calendar quarter basis during that twelve month period.

It is proposed that Seidman & Seidman will distribute the quarterly forecasts of office furniture shipments only to members and associate members of the association. This limitation is predicated upon the fact that all manufacturers in the business and institutional furniture industry are encouraged to become members, * Not reproduced herein.

there are no conditions of membership which would operate as a barrier to exclude any manufacturer, and upon the fact that the association has expended considerable amounts of money in developing the program and will expend considerable amounts of money in the future toward the production of the forecasts and further developments and refinements in the program which would be difficiult if not impossible to allocate on a basis which would result in a fair sharing of these costs by members and nonmembers of the association.

Request for Advisory Opinion We respectfully request that the Commission render its advisory opinion with respect to the legality of the above proposed course of action. In order to expedite this matter, we would be happy to supply any explanation or additional information to members of your staff at their convenience. In this regard, your staff should feel free to telephone the undersigned on a collect basis at any time.

Thank you for your consideration.
. Very truly yours,
VARNUM, RIDDERING, WIERENGO
& CHRISTENSON