Armstrong Corp Company

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IN THE MATTER OF ARMSTRONG CORK COMPANY MODIFYING ORDER, ETC. , IN REGARD TO ALLEDED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT AND SEC. 2(a) OF THE CLAYTON ACT Docket C-1010. Consent Order, Nuv. 3, 196' Modifying Order, Sept. 10, 1984 This Order reopens the proceeding and modifies an FTC Consent Order issued on November 3, 1965 68 F. C. 819, which alleged that a manufacturer and distributor of floor-cove ring products had conspired with its wholesalers to reduce competition by fixing resale prices and conditions of product sale to retailers and flooring contractors, and by discriminating in price between competing buyers. After considering company petitions, supporting materials and other relevant information the Commission concluded that hardships to the company and the public outweighed 8.ny benefit derived from the prohibition against imposing "terms or conditions" on resale of products, and deleted the language "terms or conditions from paragraphs 1 , 2, and 4 of Part I of the Order. The Commission also deleted the word "rebates" from paragraph 2 after finding that such modification would also be in the public interest since it would permit the company to funnel "directto-consumer" rebates through its wholesalers and retailers. However, the Commission declined to set or modify other parts of the Order, holding that the firm had failed to demonstrate any change oflaw, fact, or public interest consideration that would justify further modification.

ORDER REOPENING AND MODIFYING FINAL ORDER By petition of October 21, 1983, as supplemented and refied on February 28, 1984, Armstrong World Industries, Inc. (formerly Armstrong Cork Company and hereinafter "Armstrong ) asked the Commission to reopen and modify the Commission order issued against Armstrong on November 3 1965. Armstrong requested that the Commission (1) modify Part I ofthe order by (a) deleting provisions prohibiting certain non-price vertical restraints; and (b) limiting the geographic scope ofthe resale price maintenance prohibitions; (2) set aside Parts II and 1I of the order; (3) set aside or modify Part IV of the order; and (4) substitute "Armstrong World Industries, Inc. " for Armstrong Cork Company" as the respondent to the order. Armstrong s October 21, 1983 and February 28, 1984 submissions were placed on the public record and no comments were received. Upon consideration of Armstrong s petition and supporting materials, and other relevant information, the Commission finds that a modification of the order to delete the words "terms or conditions from paragraphs 1 , 2, and 4 of Part I is in the public interest. Armstrong has suffciently demonstrated that the prohibition against Armstrong s imposing any terms or conditions on the resale of its ARMSTRONG CORK CO. b41 540 Modifying Order products by Armstrong s customers has caused hardships to Armstrong and the public that outweigh any benefits that may be derived from the prohibition. The "terms or conditions" language ofthe order which was intended to reach only price terms, not non-price restraints, was overly broad in this case. Thus, modification ofthe order to delete the words "terms or conditions" is both in the public interest and consistent with the treatment of non-price vertical restraints in Continental T. V Inc. v. GTE-Sylvania, Inc. 433 U. S. 36 (1977). The Commission also finds that deletion ofthe term "rebates'! from paragraph 2 of Part I ofthe order is in the public interest. Armstrong states that it views the presence of the term "rebates" in that paragraph as prohibiting it from funnellng "direct-to-consumer" rebates through wbolesalers and retailers. Armstrong has demonstrated that permitting it to offer rebates in this manner wil benefit both Armstrong and consumers. And, permitting Armstrong to funnel "directto-consumer" rebates through wholesalers and retailers should not affect the wholesalers' and retailers' ability to independently determine the resale price of the product. Moreover, if Armstrong should use the rebates to engage in resale price maintenance, it would violate the order provisions prohibiting resale price fixing. Thus, because deleting "rebates" from paragraph 2 of Part I of the order should benefit both Armstrong and consumers without permitting resale price maintenance, granting Armstrong s requested modifica6on is in the public interest.

However, the Commission has denied Armstrong s request to set aside paragraph 3 of Part I ofthe order. That paragraph is an integral part ofthe order s prohibition of resale price maintenance and Armstrong has demonstrated no change of law or fact or public interest considerations suflcient to require setting it aside. The Commission has also declined to set aside paragraph 5 of Part I of the order. That paragraph does not require Armstrong to incur the costs it states it has incurred in fashioning a program to comply with the order. Nor does the order prohibit wholesalers from supplying inventory information in the least costly fashion possible. Rather the order simply prohibits Armstrong from requiring or requesting purchasers of its products to supply Armstrong with information concerning the resale prices charged by these purchasers. On the other hand, permitting Armstrong to request or require its purchasers of Armstrong s products to provide reports showing the prices at which they resell these products could affect its purchasers' pricing practices because they could view such reports as a means of monitoring their pricing. Thus, the benefits of this provision outweigh its minimis costs, particularly when tbe order does not require either Armstrong or its customers to incur such costs. Modifying Order 104 F. Additionally, the Commission has refused Armstrong s request to limit the geographic scope of tbe order s resale price maintenance provisions to "within the United States." The Foreign Trade Antitrust Improvements Act of 1982, which clarified the extraterritorial application of domestic antitrust laws and the Federal Trade Commission Act, substantially addressed the concerns expressed by Armstrong in its petition. Moreover, Armstrong has failed to demonstrate any need to impose a limitation on the extraterritorial application of the order beyond that provided by statute. The Commission also has found it unnecessary to set aside Parts II and III of the order. By their terms these provisions impose no prospective obligations on Armstrong.

Armstrong also asked the Commission to set aside or modify Part IV of the order, but the Commission has declined to do so because Armstrong has not demonstrated a change of law or fact or public interest considerations suffcient to require setting aside or modifying that Part. Part IV of the order only requires that Armstrong treat competing customers equally or be able to justify any differences in treatment by means of one of the statutory defenses or the defense applicable to sales to the United States government. See Federal Trade Commission v. Ruberoid Co. 343 U.s. 470 (1952). Thus, the Commission sees no need to set aside or limit the term of Part IV. Moreover, if Armstrong is uncertain whether a proposed course of conduct would violate Part IV of the order, Armstrong may ask the Commission lor an advisory opinion under Section 2.41 of the Commission s Rules, 16 C. R. 2.41 (1984).

Finally, Armstrong asked that the order be modified to substitute Armstrong World Industries, Inc. " for "Armstrong Cork Company as the respondent to the order. The Commission finds that this modification is unnecessary because the order expressly binds the successors and assigns of Armstrong Cork Company and Armstrong s request therefore is denied.

Accordingly, It is ordered That this matter be reopened and that paragraphs 1 , and 4 of Part I of the order in Docket No. C-loi0 be modified, ofthe date of service ofthis order. Those paragraphs will now provide: 1. Engaging in, participating in, continuing, carrying out or enforcing any contract, agreement, arrangement or understanding, with any wholesalers, distributors, or other purchasers of Armstrong floor covering products, which directly or indirectly establishes, maintains or fixes prices of resale of such products by such wholesalers, distributors, or other purchasers.

? R.. .f..rr' ,rht n.. a tt.::'1'ntirHT tf' "'n tyr"'" the: ""t) ('r nr l,.""," or Q1HHT.:U:. 540 Modifying Order ed prices or discounts for the resale of Armstrong floor covering products.

4. Circulating to or exchanging with any wholesaler or distributor or other purchaser, any circulars, price lists, suggested price lists, policy letters or other information, the effect of which is to create a contract, agreement, arrangement, or understanding which fixes or establishes a price or prices at or upon which any Armstrong floor covering products shall be resold.

544 FEDERAL TRAD)' COMMISSION DECISIONS Modifying Order 104 F.