Bulova Watch Company, Inc

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IN THE MATTER OF BULOVA WATCH COMPANY, INC.

MODIFYING ORDER IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket C-1887. Consent Order, Aprill, 1971-Modifying Order, Dec. , 1983 This order reopens the proceeding and modifies the Commission s order issued on April 1, 1971 (78 F. C. 556), by deleting Paragraphs 2 and 4.8. from the order. The modification allows the company to prevent transshipping of its watch and clock products by its dealers.

ORDER REOPENING AND MODIFYING CEASE AND DESIST ORDER By petition of August 11, 1983, respondent Bulova Watch Company, Inc. ("Bulova ) requests that the Commission vacate its April 1, 1971 Order against Bulova in its entirety or, in the alternative, suspend the Order for a ten-year period, at the end of which period Bulova would have the burden of demonstrating that the Order should be permanently vacated. The Order in this matter prohibits Bulova from engaging in certain acts and practices, including resale price maintenance and restricting transshipment by sellers of its watch or clock products. Pursuant to Section 2.51 of the Commission Rules of Practice, Bulova s petition was placed on the public record for comnent. No comments were received.

Upon consideration of Bulova s petition and supporting materials, he Commission has determined that the petition makes a satisfactoy showing that changed conditions of fact and law and the public lterest require reopening the Order and modifying it by deleting its ansshipment provisions. The Supreme Court has now determined tat non-price vertical restraints such as transshipment restrictions e not per se ilegal, but instead should be evaluated pursuant to the Ie of reason. Continental T. V, Inc. v. GTE Sylvania, Inc. 433 U. , 57-59 (1977). From that perspective, the Commission has deterned that the transshipment provisions in the Order are no longer essary to prevent injury to competition in this industry, and that lova wil likely suffer significant competitive injury unless those .visions are eliminated. The Commission also finds that Bulova has ed to demonstrate that the remaining provisions of the Order uld be modified or set aside. Bulova s petition does not point to nges in law or fact or public interest considerations suffcient to lire modifying or deleting those provisions. accordingly, BULOVA WATCH CO., INC.

1834 Dissenting Statement It is ordered That this matter be reopened and that the order be modified, as of the effective date of this Order, by deleting paragraph 2 of the Order, which reads:

2. Entering into, maintaining, or enforcing any contract, agreement, combination understanding, or course of conduct which has as its purpose restricting the persons to whom any Bulova dealer or other person may resell Bulova watch or clock products. and by deleting paragraph 4.B. of the Order, which reads: B. because the dealer transshipped or sold Bulova watch or clock products to a retailer.

Commissioners Pertschuk and Bailey voted in the negative. DISSENTING STATEMENT OF COMMISSIONER PATRICIA P. BAILEY A Commission majority has voted to allow Bulova to impose transshipping bans on its dealers: that is, Bulova can now order its dealers not to sell to discounters. Indeed, Bulova admits that it wants the order modification for this very purpose. (Bulova petition, p. 9) My motion to reject Bulova s petition having failed, I now dissent from the majority s vote.

Bulova claims that it needs to ban transshipping in order to prevent free riding" on the pre- and post- sale services offered by authorized dealers. There is, however, nothing in Bulova s petition which demonstrates that its inabilty to prevent transshipment decreases dealer loyalty and sales eflorts.

There are only two pre-sale "services" which Bulova expects of its dealers: (1) that their displays be kept "clean and neat"; (2) a very nebulous commitment to its cooperative advertising program. The extent of this participation is determined by the retailer; Bulova requires only that the dealer be "capable" of using "some" ofthe compas advertising or promotion. The advertising samples included in the petition merely picture the watch, sometimes with a descriptior and price. This is not surprising. As I noted in Lenox, Inc., D. 8718 there are many products whose function or esthetic appeal is sell evident. Sales of these goods do not require a blandiloquent personal sales effort or major consumer education program. I would pu watches (both digital and mechanical) in this category. Authorize and non-authorized watch dealers advertise in the same way. The! are no special promotional efforts which are discouraged by tran shipping. ' It follows, then, that the only pre-sale "service" which . Even the seminal "Chicago School" exploration of the free rider theory limited its applicability to spr services " pedfic to the commodity and unrelated to the ret"iler ' methodg of generally doing business. .. argument appjje to products which are unfamiliar to the mass of con umers either because the proouct is (footIJoteco , Dissenting Statement 102 F, fostered by this ban on transshipping is a non-discountable price, which some would say conveys . an image of quality. I have never accepted this argument because it leads very logically to the position that resale price maintenance is an even stronger guarantee of that precious !!prestige image Bulova demands the following of its authorized dealers in post-sale service capabilities: "The Bulova dealer must be capable of servicing and repairing the Bulova product or to (sic) expeditiously forward the product to Bulova corporate headquarters for service . Sixty percent of Bulova s authorized dealers fulfill their service obligations via the mailbox option. (Bulova petition pp. 4-5) Under these circumstances I fail to see how a discount house s "no frils" sale tarnishes Bulova image by allegedly offering the consumer less than is provided by authorized dealers.

Ibodies new features) or because it is purchased infrequently by a relatively small proportion ofhol1seholds. Why Should Manufacturers Want Fair Trade " J. Law and Econ. 86, 89 105 (October, 1960). ....

1837 Vacating Order