Rouse Company

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IN THE MATTER OF THE ROUSE COMPANY CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket C-2663. Complaint, May 1975-Decision, May, 1.97, Consent order requiring a Columbia, Md., based regional shopping center developer among other things to cease controllng the pricing and advertising practices of its tenants.

Appearances For the Commission: James D. Tangires and Gary M. Ladn. For the respondent: Lews A. Noonberg, Piper Marbury, Baltimore, Md.

COMPLANT Pursuant to the provisions of the Federal Trade Commssion Act (15 C. et seq. and by viue of the authority vested in it by said Act, the Federal Trade Commssion, having reason to believe that the corporation named as respondent in the caption hereof, and more parieularly designated and described hereinafter, has violated and is now violating the provisions of Section 5 of the Federal Trade Commssion Aet as amended, and it appearing to the Commission that a proceeding by it in respect thereof is in the public interest, hereby issues its complaint, stating the following: PARAGRAPH 1. For the purpse of this eomplait the following definitions shall apply:

(a) The term "respondent" refers to The Rouse Company, a corporation, its successors and assigns, any corporation, subsidiary, . .

848 Complaint division or other device, their officers, agents, representatives and employees.

(b) The term "shopping center" refers to a group of retail outlets in the United States of America, planned, developed and managed as a unit in relation to a trade area which the development is intended to serve and providing on-site parking in some definite relationship to the types and sizes of stores in the development. (c) The term "tenant" refers to any occupant or potential oeeupant of retail space in a shopping center, whether as lessee or owner of such space.

(d) The term "retailer" refers to a tenant which sells merchandise or servees to the public.

(e) The terms "price or prices range of prices" and "price rage refer to such descriptive words as "popular priced " Ilrnernum priced high priced better priced the sale of merchandise not to exceed $10 " and "the sale of merchandise not less than 99 cents. PAR. 2. Respondent, The Rouse Company is a eorpration organed existing and doing business under and by viue of the laws of the State of Marland with its principal offee and place of business located at The Rouse Company Headquarters Bldg. in Columbia, Md. The Rouse Company s subsidiares are eng-aged in the acquisition, development and ownership of income producing real estate in the United States and Canada. The term "Rouse" used hereinafter includes The Rouse Company and its subsidiares.

The following Rouse subsidiares have developed regional shopping eenters in the United States:

(a) Almeda Mall, Inc. - Almeda Mall Houston, Tex. (b) Charlottetown, Ine. - Charlottetown Mal Charlotte, N. C. (e) Cherr Hil Center, Ine. - Cherr Hill Mall Cherr Hill, N. J. (d) Columbia Mall, Ine. - Columbia Mal Columbia, Md. (e) Eastfield Mall, Incorprated - Eastfield Mall Sprigfeld, Mass. (f) Echelon Mall, Ine. - Eehelon Mal Echelon, N. J. (g) Exton Square, Ine. - Exton Mal Exton, Pa. (h) Frankln Park Mall, Ine. - Frankln Park Mal Toledo, Ohio (i) Greengate Mall, Ine. - Greengate Mall Greensburg, Pa. U) Hardale Mall, Inc. - Hardale Mall Glen Bure, Md. (k) Austin Mall, Ine. - Highland Mall Austin, Tex. (I) Louisville Shopping Center, Ine. - Louisville Mall Louisville, Ky. (m) North Sta Mall, Ine. - North Star Mal San Antonio, Tex. (n) Northway Mall, Inc. - Northway Mall Pittsburgh, Pa. (0) Northwest Mall, Ine. - Northwest Mall Houston, Tex. (p) Parmus Park, Ine. - PardIus Park Mall Paramus, N. (q) Perimeter Mall, Ine. - Perieter Mall Atlanta Ga. 850 F;;OERAL TRADE COMMISSION DECISIONS Complaint H5 F.

(r) Plymouth Meeting Mall, Ine. - Plymouth Meeting Mall Montgomery County, Pa.

(s) Salem Mall, Ineorporated - Salem Mall Dayton, Ohio (t) The Wilowbrook Corporation - Wilowbrook Mall Wayne, N. J. (u) Woodbridge Center, Ine. - Woodbridge Mall Woodbridge, N. J. The property on which the aforesaid regional shopping centers were developed by Rouse is held in fee, leasehold, in fee and leasehold, and in fee by joint venture. For the fiscal year ending May 31, 1973, Rouse had total revenues which exceeded $57 000 , of which approximately $35 000 000 was eared or received from its regional shopping center operations.

Rouse is one of the nation s largest shopping center developers having built regional shopping eenters in at least 12 States. The regional shopping centers developed by Rouse have approximately 664 130 square feet of leasable area. Rouse own approximately 260 130 square feet of this leasable area, with the balance of leasable area owned or operated by major tenants in the regional shopping centers. The stores or businesses which lease or occupy space in Rouse s shopping centers offer to sell a variety of consumer goods and servees. The annual retail sales to eonsumers of these varous goods and services in Rouse s shopping eenters exeeeds $1 00. PAR. 3. In the course and conduct of its business, Rouse has, and is now engaged in negotiating and executing agreements, leases, and building agreements with persons located in varous States throughout the country with respect to eonstructing, leasing, and operating retail stores in Rouse shopping centers. In the coure and eonduet of the negotiation and execution of these agreements, lea..,es, and building agreements, exchanges of information and communcations have taken place between Rouse headquarters in Maryland and persons referred to above in varous other States. Rouse has disseminated, and caused to be disseminated, certain advertisements and promotional materials concerning occupancy in its shopping centers through the use of varous news media in commerce. Correspondence with respect to the approval of tenants for inclusion in Rouse shopping eenters passes between varous States by use of the United States mail. Tenants in Rouse shopping eenters purchase consumer products from suppliers located throughout the United States, advertise these products in newspapers eirculated in varous States, and resell these products in substatial quantities to consumers, including some who cross State lines to transact business in Rouse shopping eenters. By and through the aforesaid course and conduct of its business, Rouse has eng-aged and is now engaged in commerce as "commerce" is defined in the Federa Trade Commission Aet.

THt; !U)U cu. 851 848 Complaint PAR. 4. The movement of population from the eentral city to the suburbs has precipitated the growth of shopping eenters in suburban areas. In 1972, retail sales in shopping eenters in the United States were approximately $128.5 bilion and aeeounted for approximately 44 percent of the total retail sales in the United States. Retail sales for regional shopping eenters aeeounted for 45 percent of the total retail sales in shopping eenters. In 1972, over 20 percent of the total retail sales, amounting to approximately $56 bilion, were made in regional shopping eenters.

Regional shopping eenters are the most eeonomieally signfieant type of shopping center. They reproduee to a substantial extent the retail facilities once available only in downtown business districts, and are displaeing and replaeing the central, downtown business distriets as primary outlets for retail distribution of goods and servees. PAR. 5. Except to the extent that competition has been hindered lessened and eliminated as set forth in this complaint, retailers selling goods and servees in the respondent's shopping centers are in competition with each other and with other retailers; and Rouse is in substantial competition in comreree with others eng-dged in the development of shopping eenters.

PAR. 6. In the course and conduct of its business, respondent is and has been engaged in unfair methods of competition and unfair acts and practices in eommeree in that it has unairly and unlawfully inserted restrictive provisions in its leasing argements, operating agreements, contracts, or understandings entered into with tenants in shopping eenters which tend to maintain, control, fix and establish the retail selling prices of goods and servces by these tenants. Tyieal and ilustrative of said restrietive provisions, but not all inclusive thereof are the following:

Tenant will not operate or cause to be operated a discount house or discount business on the Jeased premises. "Discount house" or "discount business " for the purpses of this lease, shan mean a retail establishment which regularly sells the major portion of its merchandise off-price or at prices below normal usual retail prices, or advertises or holds itself out to the public as a discount house or as one regularly selling off-price. The leased prcmises shall be used by Tenant solely for the purpse of costume jewelry and watches not to exceed $10 in price.

The leased premises shall be used by Tenant solely for the purpose of conducting therein the business of sale, at retail, of medium to better priced costume jewelry (not Jess than 99 cents for any onc item), women s handbags and light accessories. PAR. 7. The aforesaid lease .provisions, operating agreements eontrdets, or understandings between the respondent and its tenants set forth in Pamgraph Six have had and continue to have the tendency to restrain trade and commerce. Included among the effects of such restraints are the following:

(a) fixing, eontrolling and maintaining retail prices; H52 FEDERAL TRADE COMMISSION DECISIONS Decision and Order 85 F. (b) eliminating, hindering, and discouraging discount advertising, discount pricing, and discount sellng;

(c) denying the right to determine the prices or range of prices at which tenants may sell their goods and servees in shopping eenters; (d) denying the public the benefit of price competition. The aforesaid lea..,€ provisions, operating agreements, contracts, or understandings, respondent' s acts, praetiees and method of competition in connection therewith, and the adverse competitive effects resulting therefrom constitute unfair methods of competition in eommeree within the intent and meaning of Section 5 of the Federal Trde Commission Act.

DECISION AND ORDER The Federal Trade Commission having initiated an investig-dtion of certain acts and practices of the respondent named in the caption hereof, and the respondent having been furnished thereafter with a copy of complaint which the Washington, D.C. Regional Offee proposed to present to the Commission for its consideration and which if issued by the Commssion, would charge respondent with violation of the Federal Trade Commssion Act; and The respondent, its attorney and counsel for the Commission having thereafter executed an agreement contang a consent order, an admission by the respondent of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement puroses only and does not constitute an admission by respondent that the law has been violated as alleged in such complaint, and waivers and other provisions as required by the Commission s rules; and The Commission having thereafter considered the matter and having determined it had reason to believe that the respondent has violated the said Aet, and that complaint should issue stating its charges in that respect, and having thereupon aeeepted the executed eonsent agreement and placed such agreement on the public record for a period of sixty (60) days, now in furher eonformty with the procedure prescribed in Section 2.34(b) of it rules, the Commission hereby issues its complaint, makes the following jurisdictional findings, and enters the following order:

1. Respondent The Rouse Company is a corporation organd existing and doing business under and by viue of the laws of the State of Maryland, with its offee and principal place of business located at The Rouse Company Headquarters Bldg. in Columbia, Md. 2. The Federal Trde Commssion has jurisdiction of the subject 848 Decision and Order matter of this proceeding and of the respondent, and the proceeding is in the public interest.

ORDER A. It is ordered That respondent The Rouse Company, a eorpration, its successors and assigns, and its officers, agents, representatives and employees, directly or through any corporation, subsidiar, division, joint venture or other device, do forthwith cease and desist from making, carng out, or enforcing, directly or indirectly, an agreement or provision of an agreement which: 1. speeifes that any retailer in any of respondent's shopping centers shall or shall not sell merchandise or servees at any parieuIar price or within any range of prices;

2. specifies that any retailer in any of respondent's shopping centers shall not be a diseounter or sell merchandise or services at discount prices;

3. specifies the content of or prohibits any typ of advertising by a retailer, other than advertising within any of respondent's shopping centers, except that respondent may require a tenant to include the name, insignia, or other identifying mark of any of respondent's shopping eenters in advertising pertaining to the tenant' s store in any of respondent's shopping eenters; or 4. prohibits price advertising within any of respondent's shopping centers or controls advertising within any of respondent's shopping eenters in such a way as to make it diffeuIt for consumers to diseern advertised prices from the common area of such shopping eenters provided that in all other respeets, respondent may make, car out and enforce reasonable standards for advertising within any of respondent' s shopping centers.

B. It is furthe ordered That respondent will within sixty (60) days after serviee of this order mail a copy of Letter " " attached hereto, to all tenants in respondent's shopping eenters whose leases make reference in the use clauses to the price or quality of the merchandise or servees to be sold.

C. It is That respondent cease and desist from further ordeed entering into any agreement with any tenant that said tenant may: 1. specify or control or may require respondent to speeify or control prices or price ranges of merchandise or servees sold by any other 2. control or may require respondent to eontrql diseounting by anyretailer; other retailer; or Decision and Order 85 B' 3. exe\ude any retailer from any of respondent's shopping eenters by reason of such retailer s discount sellng or discount advertising. D. It is further ordered That respondent advise the Commssion in wrting within sixty (60) days after respondent has knowledge of any oeeasion that:

1. a tenant disapproves the admission into any of respondent' shopping eenters of any other retailer;

2. a tenant refuses to approve the renewal of another retailer's lease in any of respondent's shopping eenters; 3. a tenant approves the admission of another retailer into any of respondent's shopping eenters subject to conditions imposed by the tenant relating to the pricing, price ranges, trade names, store names trade marks, brands or lines of merchandise, or the diseounting practices or methods of such other retailer; or 4. a tenant enters into an agreement with respondent to become a tenant in any of respondent's shopping eenters on condition that respondent refuse to renew the lease of another retailer. E. It is further ordered That respondent will not base its deeision to grant, renew or extend the lease of a tenant in any of respondent' shopping eenters upon the pricing practices of such tenant. It is fu.rther ordered That respondent shall: A. distribute a copy of this order to each of its operating divisions within thiry (30) days after service of this order; B. within thiy (30) days after servee of this order upon respondent, notify each tenant in any of respondent' s shopping eenters of this order by providing each tenant with a copy of this order by registered or certified mail;

C. within sixty (60) days after servee of this order upon respondent, file with the Commission a report showing the maner and form in which it has eomplied and is complying with each and every specife provision of this order; and D. notify the Commssion at least thiy (30) days prior to any proposed change in the corporate respondent such as dissolution, assignment or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiares or any other change in the corporation which may affect eomplianee obligations arising out of this order.

l\.::::Ul;li\.Ti'';:: lVUKTlil\ljl: CU 855 Decision and Order LETTER "

(On Official Stationery of The Rouse Company subsidiary or affliate operating the particular shopping centers affected by this order Gentlemen:

We have consented to the issuance by the Federal Trade Commission of an order which, among other things, prohibits us from specifying that our tenents shall or shall not sell merchandise or services at any particular price or within any range of prices. A copy of the order is enclosed.

Your lease may describe the merchandise or services you are to sell in terms such as popular priced medium priced high priced medium to better quality," or the like. Please be advised that such language is intended only as a description of the generdl quality of the merchandise or services you sell It is not intended and will not be enforced to affect the retail selling price of your merchandise or services. Pursuant to the terms of the order you are free to set the prices for your merchandise and services and are not required to adhere to any particular price or within any range of prices, expressed or implied, in your lease or in any other agreements with the shopping center. Neither this letter nor the attached order shall operate as a waiver of any rights which we may now have to require you to sell certain rnerchandi e or services at a general quality level or levels.

Sincerely, Vice President Rouse Subsidiary or Affiiate