Clinique Laboratories, Inc

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF CLINIQUE LABORATORIES, INC.

MODIFYING ORDER IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket C-3027. Consent Order, July 23, 1980--Modifying Order, February 8, 1993 This order reopens the proceeding and modifies a 1980 consent order (96 FTC 51) by deleting a provision that restricts the respondent’s ability to prescribe to dealers the prices at which they should advertise their products, in connection with cooperative advertising and promotional programs. The Commission concluded that reopening the order and deleting the provision of paragraph IIJ(2) is in the public interest.

ORDER GRANTING PETITION TO REOPEN AND MODIFY ORDER Clinique Laboratories, Inc. (““Clinique”’) has filed a Petition To Reopen Proceeding And Modify Consent Order (“Petition”) in Docket No. C-3027, pursuant to Section 5(b) of the Federal Trade Commission Act, 15 U.S.C. 45(b) (‘FTC Act’), and Section 2.51 of the Commission’s Rules of Practice and Procedure, 16 CFR 2.51 (“Rules”). Clinique asks the Commission to reopen and modify the consent order issued by the Commission on July 23, 1980, 96 FTC 51 (“order”). Specifically, Clinique requests that the Commission delete paragraph II(2) of the order, which prohibits Clinique from suggesting to its dealers the prices to be included in any advertising, mailer, or promotional material unless Clinique informs the dealers, in writing, that they may change the prices Clinique has suggested. 96 FTC at 56.' In support of its petition, Clinique argues that the modification is warranted by changed conditions of law and by the public interest. Clinique’s petition was placed on the public record In the alternative, Clinique asks that the Commission modify paragraph III(2) of the order to4 1 11 1 2 0 598 2605 1339 32 -1 5 1 11 1 2 1 598 2608 99 22 96.693756 excludes 1 11 1 2 2 706 2607 151 30 96.954224 cooperatives 1 11 1 2 3 867 2606 141 30 96.392967 advertising5 1 11 1 2 4 1018 2606 45 23 96.614639 ands 1 11 1 2 5 1073 2606 132 30 96.614639 promotions 1 11 1 2 6 1217 2606 59 23 95.932816 from5 1 11 1 2 7 1288 2606 26 23 95.152809 its5 1 11 1 2 8 1324 2606 88 23 92.572586 reach. Public Record ("PR") p.4. The Public Record includes Clinique's petition, supporting affidavits and other materials. CLINIQUE LABORATORIES, INC. 127 126 Modifying Order for thirty days, pursuant to Section 2.51 of the Commissions Rules. No public comments were received. For the reasons discussed below, the Commission has determined that Clinique has not shown that changed conditions of law or fact require reopening the order, but that Clinique has demonstrated that it is in the public interest to reopen and modify the order by deleting paragraph III(2). I. The Complaint And Order The complaint in this case alleged that Clinique violated Section 5 of the FTC Act, 15 U.S.C. 45, by engaging, in combination with some of its dealers, in courses of action “to fix and maintain certain specified uniform prices at which products will be resold.” 96 FTC at 53. Paragraph I of the order prohibits Clinique, its successors and assigns, from engaging in any of nine specified acts and practices related to vertical price fixing.” 96 FTC at 55. Paragraph II(3) of the order also prohibits Clinique from suggesting or recommending to any dealer any resale price on any list or order form, or in any catalog or stock control book, unless it “conspicuously state[s]” on each page that “THE RETAIL PRICES QUOTED HEREIN ARE SUGGESTED ONLY. YOU ARE COMPLETELY FREE TO DETERMINE YOUR OWN RETAIL PRICES.”

Subparagraph II(2) of the order, prohibits Clinique from suggesting . . . any resale price to any dealer for use or inclusion in 2 Specifically, Clinique is prohibited from (1) fixing the resale prices at which any dealer may advertise, promote, offer for sale or sell any product; (2) requesting or requiring any dealer to adopt or adhere to any resale price; (3) requesting or requiring dealers to report dealers who deviate from any resale price; (4) requesting or requiring that dealers refrain from or discontinue selling or advertising any product at any resale price; (5) hindering the lawful use of Clinique's name or trademarks in connection with the sale or advertising of any product at any resale price; (6) conducting surveillance programs to4 1 7 1 7 0 610 2464 1339 33 -1 5 1 7 1 7 1 610 2469 40 26 96.856888 fix,5 1 7 1 7 2 662 2469 117 26 96.856888 maintain,5 1 7 1 7 3 790 2468 89 23 93.493988 controls 1 7 1 7 4 890 2475 26 16 96.264153 or5 1 7 1 7 5 925 2467 106 24 82.584274 enforce”5 1 7 1 7 6 1044 2468 73 23 96.835510 resales 1 7 1 7 7 1127 2467 83 30 96.844322 prices;5 1 7 1 7 8 1222 2467 34 27 96.753677 (7)5 1 7 1 7 9 1267 2467 148 29 96.902443 terminating5 1 7 1 7 10 1426 2473 44 23 96.975693 any5 1 7 1 7 11 1480 2466 79 22 96.873100 dealers 1 7 1 7 12 1570 2466 102 22 96.712852 because5 1 7 1 7 13 1682 2465 28 23 96.963226 of5 1 7 1 7 14 1719 2465 37 23 96.911400 thes 1 7 1 7 15 1768 2464 73 24 96.516113 resales 1 7 1 7 16 1853 2464 63 30 96.714066 prices 1 7 1 7 17 1927 2468 22 19 96.714066 at4 1 7 1 8 0 610 2503 1338 33 -1 5 1 7 1 8 1 610 2508 75 23 96.892212 which5 1 7 1 8 2 697 2508 37 22 96.801758 thes 1 7 1 8 3 744 2508 78 22 95.960754 dealers 1 7 1 8 4 832 2508 40 22 95.960754 has5 1 7 1 8 5 883 2507 51 23 96.350189 sold5 1 7 1 8 6 944 2514 27 16 96.350189 or5 1 7 1 8 7 980 2507 131 23 96.907394 advertised5 1 7 1 8 8 1120 2513 45 23 96.506561 any5 1 7 1 8 9 1176 2507 105 29 96.544601 product;5 1 7 1 8 10 1293 2506 35 27 96.492256 (8)5 1 7 1 8 11 1340 2506 147 29 96.939163 threatening5 1 7 1 8 12 1498 2510 22 18 96.296928 to5 1 7 1 8 13 1532 2505 115 22 96.850685 withholds 1 7 1 8 14 1657 2512 27 15 97.008965 or5 1 7 1 8 15 1694 2504 158 29 96.219772 withholding5 1 7 1 8 16 1862 2503 86 23 96.236191 earned4 1 7 1 9 0 609 2542 1339 35 -1 5 1 7 1 9 1 609 2547 153 30 96.150154 cooperatives 1 7 1 9 2 775 2546 145 29 96.145493 advertising5 1 7 1 9 3 932 2545 85 24 96.403755 credits5 1 7 1 9 4 1030 2552 26 16 96.801826 or5 1 7 1 9 5 1069 2546 143 22 96.336861 allowances5 1 7 1 9 6 1227 2545 60 23 96.131615 from5 1 7 1 9 7 1300 2551 46 23 96.776657 any5 1 7 1 9 8 1360 2545 86 24 96.450317 dealer,5 1 7 1 9 9 1459 2551 27 15 95.245316 or5 1 7 1 9 10 1498 2544 101 29 95.245316 limiting5 1 7 1 9 11 1612 2544 38 22 96.995834 thes 1 7 1 9 12 1664 2543 60 29 96.306633 rights 1 7 1 9 13 1736 2543 29 23 96.306633 of5 1 7 1 9 14 1775 2550 45 22 97.011101 any5 1 7 1 9 15 1834 2542 79 23 96.956894 dealers 1 7 1 9 16 1925 2547 23 18 96.956894 to4 1 7 1 10 0 610 2581 1339 35 -1 5 1 7 1 10 1 610 2586 136 30 94.358940 participates 1 7 1 10 2 761 2586 21 22 96.752525 in5 1 7 1 10 3 797 2592 45 22 96.875427 any5 1 7 1 10 4 856 2584 153 30 96.344933 cooperatives 1 7 1 10 5 1023 2584 143 30 96.922020 advertising5 1 7 1 10 6 1182 2591 117 23 96.746399 program,5 1 7 1 10 7 1315 2584 102 23 96.888947 because5 1 7 1 10 8 1430 2582 29 24 96.984970 of5 1 7 1 10 9 1471 2583 37 22 97.004196 thes 1 7 1 10 10 1523 2583 74 22 95.837212 resales 1 7 1 10 11 1611 2582 64 30 95.837212 prices 1 7 1 10 12 1689 2587 22 18 96.850220 at5 1 7 1 10 13 1725 2581 77 24 96.799988 which5 1 7 1 10 14 1818 2581 38 23 96.993607 thes 1 7 1 10 15 1870 2581 79 23 96.957497 dealer4 1 7 1 11 0 610 2621 1339 33 -1 5 1 7 1 11 1 610 2625 126 23 96.825912 advertises5 1 7 1 11 2 745 2632 25 15 95.137535 or5 1 7 1 11 3 778 2624 56 23 95.137535 sells5 1 7 1 11 4 843 2631 44 23 96.721992 any5 1 7 1 11 5 898 2624 103 30 96.968163 product,5 1 7 1 11 6 1010 2630 26 17 96.982430 or5 1 7 1 11 7 1044 2630 113 23 96.789406 proposes5 1 7 1 11 8 1167 2627 23 20 96.974876 to5 1 7 1 11 9 1198 2623 43 24 95.890594 sells 1 7 1 11 10 1250 2630 27 17 95.841286 or5 1 7 1 11 11 1285 2623 115 23 95.841286 advertises 1 7 1 11 12 1410 2629 44 23 96.818115 any5 1 7 1 11 13 1465 2623 105 29 95.851494 product;5 1 7 1 11 14 1580 2622 44 22 96.966515 ands 1 7 1 11 15 1635 2621 34 28 96.787315 (9)5 1 7 1 11 16 1679 2621 95 29 96.787315 making5 1 7 1 11 17 1783 2627 46 23 96.435020 any5 1 7 1 11 18 1838 2625 111 25 96.849594 payment4 1 7 1 12 0 610 2659 1336 35 -1 5 1 7 1 12 1 610 2668 23 19 95.686882 to5 1 7 1 12 2 643 2671 45 23 95.686882 any5 1 7 1 12 3 699 2664 79 23 96.332901 dealers 1 7 1 12 4 788 2664 102 22 96.631638 because5 1 7 1 12 5 901 2662 28 24 96.631638 of5 1 7 1 12 6 937 2663 37 23 96.910660 thes 1 7 1 12 7 986 2663 73 23 96.981514 resales 1 7 1 12 8 1071 2663 62 29 96.981514 prices 1 7 1 12 9 1144 2668 21 18 96.905701 at5 1 7 1 12 10 1177 2662 78 24 96.761154 which5 1 7 1 12 11 1266 2669 45 23 96.903458 any5 1 7 1 12 12 1322 2662 67 23 96.456322 others 1 7 1 12 13 1399 2662 80 22 96.850441 dealers 1 7 1 12 14 1489 2661 41 23 96.850441 has5 1 7 1 12 15 1541 2661 52 23 96.996651 sold5 1 7 1 12 16 1604 2668 26 15 96.945084 or5 1 7 1 12 17 1640 2660 134 23 96.881012 advertised5 1 7 1 12 18 1785 2667 44 22 96.816856 any5 1 7 1 12 19 1841 2659 105 30 90.384056 product.4 1 7 1 13 0 608 2703 180 24 -1 5 1 7 1 13 1 608 2703 32 24 94.679787 965 1 7 1 13 2 650 2703 57 23 94.679787 FTC5 1 7 1 13 3 718 2708 22 18 89.591377 at5 1 7 1 13 4 751 2703 37 23 89.591377 55. Modifying Order H16F.T.C.

any advertising, mailer or promotional material which said dealer intends to disseminate to consumers, unless [Clinique], in connection with each advertising, mailer or promotional material makes a written request to said dealer to review said advertising, mailer or promotional material for its resale price(s), and discloses therein in a clear and conspicuous manner the following: CLINIQUE DEALERS ARE COMPLETELY FREE TO SPECIFY RETAIL PRICES OF THEIR OWN CHOOSING FOR INCLUSION IN THIS [ADVERTISING, MAILER OR PROMOTIONAL MATERIAL]. YOU MAY CHANGE THE PRICES WE HAVE SUGGESTED.

96 FTC at 56.

II. Clinique’s Petition Clinique asks the Commission to delete paragraph III(2) of the order. Clinique argues that the relief it is seeking is required by “changes in the law on cooperative advertising,” PR, p. 4, and by the public interest. PR, pp. 9-11. Clinique asserts that under decisions of the Supreme Court and of the Commission since entry of the order in 1980, price-restrictive cooperative advertising programs are to be governed by the rule of reason and are no longer considered per se violations of the law. Clinique further argues that the restriction it asks the Commission to delete is inconsistent with the state of the law.’ In support of its Petition, Clinique cites the following Commission decisions involving, among other things, price-restrictive cooperative advertising issues: The Advertising Checking Bureau, 109 FTC 146 (1987); The Magnavox Company, 55 Fed. Reg. 12,898 (1990); and U.S. Pioneer Electronics Corp., 5 Trade Reg. Rep. (CCH) paragraph 23, 172 (1992). Clinique also cites the court decisions in Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717 (1988); In re Nissan Antitrust Litigation, 577 F, 2d 910 (Sth Cir. 1978) cert. denied, 439 U.S. 1072 (1979); and Jack Walters & Sons Corp. v. Morton Buildings, Inc., 737 F. 2d 698 (7th Cir.), cert. denied, 469 U.S. 1018 (1984). In addition, Clinique cites the Commission's 1987 statement concluding, among other things, that “price restrictions in cooperative advertising programs, standing alone, are not per se unlawful." Withdrawal Of 1980 Policy Statement Regarding Price Restrictions In Cooperative Advertising Programs, reprinted in 6 Trade Reg. Rep. (CCH) paragraph 39, 057 (announced May 21, 1987). CLINIQUE LABORATORIES, INC. 129 126 Modifying Order Clinique asserts that the requested modification is needed “to allow Clinique to compete on a level playing field, and is in the public interest.” PR, p. 9. According to Clinique, the paragraph III(2) constraint on price-restrictive cooperative advertising impairs interbrand competition: “By ‘free-riding’ on a coordinated, multidealer cooperative advertising or promotional campaign to highlight price differences among dealers of the same brand, dealers who insert their own prices can destroy Clinique’s ability to mount effective cooperative campaigns.” PR, p. 42. Clinique states that its competitors are not subject to similar prohibitions and that they are “free to organize regional or national cooperative advertising and promotional campaigns that promote their brands without creating confusion or distraction over which dealer is running the ads or distributing the materials exhibiting the lowest prices.” PR, p. 43.* This ability “to run a coordinated campaign,” according to Clinique, confers a “distinct [competitive] advantage” on its competitors, and the “public interest would be better served by modifying the order to permit Clinique to introduce the same kinds of cooperative advertising and promotional programs that its competitors are permitted to employ.” PR pp. 10-11, 43.

III. Standards For Reopening And Modification Section 5(b) of the FTC Act, 15 U.S.C. 45 (b), provides that the Commission shall reopen an order to consider whether it should be modified if the respondent “makes a satisfactory showing that changed conditions of law or fact” require such modification. A satisfactory showing sufficient to require reopening is made when a request to reopen identifies significant changes in circumstances and shows that the changes eliminate the need for the order or make ‘ According to Clinique, its obligation under the order to afford its dealers an opportunity to modify each cooperative advertising and promotional program. among other things. (i) hinders its ability to implement such programs in a manner it believes best responds to rapidly changing market conditions, and (ii) prevents Clinique from taking advantage of seasonal marketing opportunities in a timely manner. PR, pp. 51-54.

Modifying Order 116 F.T.C.

continued application of it inequitable or harmful to competition. Louisiana-Pacific Corp., Docket No. C-2956, Letter to John C. Hart (June 5, 1986), at 4.

The Commission may also modify an order pursuant to Section 5(b) when, although changed circumstances would not require reopening, the Commission determines that the public interest requires such action. Therefore, Section 2.51 of the Commission's Rules of Practice invites respondents in petitions to reopen to show how the public interest warrants the requested modification. In the case of a request for modification based on this latter ground, a petitioner must demonstrate as a threshold matter some affirmative need to modify the order. Damon Corp., Docket No. C-2916, Letter to Joel E. Hoffman, Esq. (March 29, 1983), at 2. If the showing of need is made, the commission will balance the reasons favoring the requested modification against any reasons not to make the modification. Jd. The Commission will also consider whether the particular modification sought is appropriate to remedy the identified harm.

Whether the request to reopen is based on changed conditions or on public interest considerations, the burden is on the respondent to make the requisite satisfactory showing. The language of Section 5 (b) plainly anticipates that the petitioner must make a “satisfactory showing” of changed conditions to obtain reopening of the order. The legislative history also makes clear that the petitioner has the burden of showing, other than by conclusory statements, why an order should be modified.° If the Commission determines that the petitioner has made the required showing, the Commission must reopen the order to consider whether the modification is required and, if so, the nature and extent of the modification. The The Commission properly may decline to reopen an order if a request is “merely conclusory or otherwise fails to set forth specific facts demonstrating in detail the nature of the changed conditions and the reasons why these changed conditions require the requested modification of the order.” S. Rep. No. 96-500, 96th Cong., Ist Sess. 9-10 (1979). See also Rule 2.51(b), which requires affidavits in support of petitions to reopen and modify.

CLINIQUE LABORATORIES, INC. 131 126 Modifying Order Commission is not required to reopen the order, however, if the petitioner fails to meet its burden of making the satisfactory showing required by the statute. The petitioner's burden is not a light one given the public interest in the finality of Commission orders.° IV. Clinique Has Failed To Demonstrate Changed Conditions Of Law Or Fact That Require Reopening Of The Order The provision that Clinique seeks to have set aside is part of the order's overall prohibition on resale price maintenance (“RPM”). Nothing in the complaint or order suggests that the provision was included because the prohibited conduct itself, absent RPM, was deemed per se unlawful. Of course, RPM agreements remain per se unlawful. In Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36 (1977), the Supreme Court recognized that non-price vertical restraints are not inherently anticompetitive and must be judged under the rule of reason. The Court replaced the per se test for nonprice vertical customer restraints outside RPM with a rule of reason test, but the Court did not change the per se rule for non-price vertical restraints that are part of an RPM scheme.’ Clinique has failed to show that the conduct in which it wishes to engage has become lawful if part of RPM. Because paragraph III(2) of the order prohibits conduct that is unlawful if engaged in as part of RPM, and because Sylvania did not change the law as to such conduct, Clinique has failed to show a change in the law. Clinique has similarly not made the necessary showing that changed conditions of fact require the Commission to reopen and modify the order. Although Clinique alleges that the United States cosmetics, fragrances, soaps and related accessories market today 6 See Federated Department Stores, Inc. v. Moitie, 425 U.S. 394 (1981) (strong public interest considerations support repose and finality). 7 See Beltone Electronics Corporation, 100 FTC 68 (1982) (applying GTE Sylvania to non-price vertical restraints).

Modifying Order 116 F.T.C.

appears to be competitive, there is no evidence that this represents a change from conditions existing at the time the Commission issued the order.

V. Clinique Has Shown Public Interest Considerations That Warrant Reopening And Modifying The Order Clinique has shown that the public interest warrants reopening and modifying the order to delete paragraph III(2). Paragraph III(2) prohibits conduct that by itself may not be unlawful, and this prohibition is no longer necessary to ensure Clinique's compliance with the law.* Moreover, Clinique has shown that it is being injured in competing with other firms that are free to and do engage in pricerestrictive cooperative advertising and promotional programs. So long as Clinique continues to be prohibited by the core provisions of paragraph I of the order from engaging in RPM, the broader prohibition of paragraph III(2) now imposes costs that outweigh its continuing benefit. See generally Lenox, Inc., Order Granting in Part and Denying in Part Request To Reopen and Set Aside Order, 111 FTC 612 (1989).

Clinique has shown that its ability to compete is adversely affected by the restriction in paragraph JII(2) concerning pricerestrictive cooperative advertising and promotional programs. PR, pp. 50-54. Clinique affirms by affidavit that many of its competitors currently use price-restrictive cooperative advertising and promotional programs with respect to cosmetic product lines that are directly competitive with the Clinique line. The order requirement that Clinique afford each of its dealers the opportunity to modify each advertising or promotional program to feature the dealer’s individual pricing strategy imposes financial and other costs on Paragraph ITI(2) of the order is in the nature of “fencing in" relief. Fencing in provisions in orders restrict otherwise lawful conduct, to prevent repetition of the violation or to mitigate the effects of prior unlawful conduct.

CLINIQUE LABORATORIES, INC. 133 126 Modifying Order Clinique that its competitors do not incur. PR, pp. 40-43, 45-47, 50- 54. In light of the use by Clinique’s competitors of advertising and promotional programs that Clinique cannot unconditionally offer and use, Clinique has made a threshold showing that the order is causing competitive injury. Deleting paragraph III(2) from the order may allow Clinique to compete more effectively, to the benefit of consumers of Clinique’s cosmetic products. The reasons in favor of modifying the order by deleting paragraph III(2) outweigh the reasons not to modify the order. In 1990, the Commission reopened and modified the Magnavox order to delete similar provisions relating to restrictions on cooperative advertising allowances.? On April 8, 1992, the Commission reopened and modified the Pioneer order to delete, among other provisions, a prohibition relating to cooperative advertising restrictions.'° In making these decisions, the Commission followed the reasoning in its 1987 decision to vacate the order in The Advertising Checking Bureau, Inc., 93 FTC 4 (1979), which had prohibited the respondent from auditing cooperative advertising programs that required dealers to advertise at a specified price, or not to advertise at discount prices, as a condition for receiving advertising allowances or credits. In support of its determination to set aside The Advertising Checking Bureau, Inc. order, the Commission relied on the Supreme Court’s decisions in GTE Sylvania and Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752 (1984), noting, among other things, that those decisions make it clear that the rule of reason should be applied in determining whether non-price vertical restraints unreasonably restrain The Commission, among other things, deleted paragraph I(H) from the Magnavox order, which prohibited the respondent from [t]hreatening5 1 5 1 2 6 1180 2419 22 18 97.009445 to5 1 5 1 2 7 1212 2414 113 25 96.822426 withholds 1 5 1 2 8 1333 2422 27 17 97.006317 or5 1 5 1 2 9 1367 2415 155 32 96.132050 withholding5 1 5 1 2 10 1531 2418 85 24 96.701172 earned5 1 5 1 2 11 1624 2419 150 30 96.619102 cooperatives 1 5 1 2 12 1783 2420 143 31 96.157486 advertising4 1 5 1 3 0 587 2447 1338 40 -1 5 1 5 1 3 1 587 2447 84 24 96.233673 credits5 1 5 1 3 2 682 2448 60 24 96.233673 from5 1 5 1 3 3 751 2449 89 24 95.885666 dealers5 1 5 1 3 4 850 2449 37 24 95.885666 for5 1 5 1 3 5 898 2451 36 22 97.001083 thes 1 5 1 3 6 945 2458 81 16 96.798729 reasons 1 5 1 3 7 1038 2452 47 23 95.827980 that5 1 5 1 3 8 1095 2452 53 30 96.937080 they5 1 5 1 3 9 1159 2453 115 24 95.311401 advertises 1 5 1 3 10 1285 2454 26 24 96.956192 its5 1 5 1 3 11 1322 2455 110 30 96.680313 products5 1 5 1 3 12 1443 2460 21 19 96.905800 at5 1 5 1 3 13 1476 2456 63 23 95.928535 retails 1 5 1 3 14 1551 2457 76 30 96.957581 prices5 1 5 1 3 15 1638 2458 68 23 96.979271 others 1 5 1 3 16 1716 2458 52 24 96.765442 than5 1 5 1 3 17 1780 2459 145 24 96.871933 established4 1 5 1 4 0 586 2488 1077 37 -1 5 1 5 1 4 1 586 2493 28 16 95.301071 or5 1 5 1 4 2 622 2488 127 29 96.166466 suggested5 1 5 1 4 3 760 2488 63 24 94.560577 retails 1 5 1 4 4 836 2488 96 31 69.989502 prices. The Magnavox Company, 78 FTC 1183, 1189 (1971). Paragraph 1(6) of the Pioneer order prohibited Pioneer from [t]hreatening5 1 6 1 1 11 1728 2560 23 18 96.226936 to5 1 6 1 1 12 1767 2557 116 23 95.812950 withholds 1 6 1 1 13 1899 2564 26 16 95.812950 or4 1 6 1 2 0 586 2587 1338 39 -1 5 1 6 1 2 1 586 2587 154 30 96.672218 withholding5 1 6 1 2 2 750 2589 86 22 96.995346 earned5 1 6 1 2 3 846 2590 152 30 96.529938 cooperatives 1 6 1 2 4 1009 2591 145 31 96.878540 advertising5 1 6 1 2 5 1165 2593 85 23 96.299515 credits5 1 6 1 2 6 1261 2600 25 16 96.299515 or5 1 6 1 2 7 1297 2594 145 23 96.381691 allowances5 1 6 1 2 8 1452 2595 62 23 96.846161 from5 1 6 1 2 9 1525 2603 44 23 96.322884 any5 1 6 1 2 10 1580 2596 79 24 97.015587 dealers 1 6 1 2 11 1670 2598 102 22 97.003799 because5 1 6 1 2 12 1783 2599 51 22 97.015465 said5 1 6 1 2 13 1844 2599 80 22 96.968460 dealer4 1 6 1 3 0 585 2626 1339 41 -1 5 1 6 1 3 1 585 2626 127 24 96.977112 advertises5 1 6 1 3 2 722 2628 158 29 96.206970 respondent's5 1 6 1 3 3 890 2629 110 30 96.452591 products5 1 6 1 3 4 1011 2635 21 18 95.862465 at5 1 6 1 3 5 1043 2630 62 23 78.843521 retails 1 6 1 3 6 1117 2631 76 29 96.824738 prices5 1 6 1 3 7 1204 2632 66 23 96.647972 others 1 6 1 3 8 1280 2633 54 23 96.843307 than5 1 6 1 3 9 1345 2634 47 22 96.843307 that5 1 6 1 3 10 1403 2634 78 23 96.925835 which5 1 6 1 3 11 1492 2635 142 30 96.735901 respondents 1 6 1 3 12 1645 2637 82 23 96.330132 deems5 1 6 1 3 13 1739 2638 148 29 96.521858 appropriate5 1 6 1 3 14 1897 2645 27 16 96.521858 or4 1 6 1 4 0 585 2665 1003 36 -1 5 1 6 1 4 1 585 2665 41 22 96.371353 has5 1 6 1 4 2 637 2667 139 28 90.793869 approved. U.S. Pioneer Electronics Corp., 86 FTC 1002, 1006 (1975). Modifying Order 116 F.T.C.

competition and violate the antitrust laws. In a vertical setting, the per se rule applies only to agreements to fix resale prices that prevent the dealer from making independent pricing decisions. See Monsanto, 465 U.S. at 764. The Advertising Checking Bureau, Inc., 109 FTC 146, 147 (1987).'! The Commission also noted that “[t]he fact that a distributional restraint may have an incidental effect on resale prices is not by itself enough to condemn the practice as per se unlawful.” Jd.

With respect to price restrictive cooperative advertising programs specifically, the Commission held that such programs “would not by themselves constitute agreements to fix resale prices.” Jd. Moreover, the Commission recognized that price restrictive cooperative advertising programs are in fact “likely to be procompetitive...in most cases...by... channeling the retailer’s advertising efforts in directions that the manufacturer believes consumers will find more compelling and beneficial.... This, in turn, may stimulate dealer promotion and investment and, thus, benefit interbrand competition.” Jd. See also Withdrawal Of 1980 Policy Statement Regarding Price Restrictions In Cooperative Advertising Programs, reprinted in 6 Trade Reg. Rep. (CCH) paragraph 39,057 (announced May 21, 1987). This change in Commission policy is consistent with recent court decisions.'” The approach followed by the Commission when it set aside the order in The Advertising Checking Bureau, Inc., adopted its new cooperative advertising policy, and modified the orders in Magnavox and Pioneer, is applicable to Clinique’s request that the Commission delete paragraph IIJ(2) of the order. This “fencing-in” provision prohibits price restrictions that Clinique might want to impose on its dealers in connection with its cooperative advertising 1 er . :

Of course, Sylvania did not change the per se rule against RPM. the conduct that the orders in Magnavox. Pioneer and Clinique were intended to prohibit. 5 1 6 3 1 2 668 2625 49 24 96.586510 See,5 1 6 3 1 3 730 2625 23 22 93.129593 In5 1 6 3 1 4 765 2632 24 15 93.129593 re5 1 6 3 1 5 799 2625 85 22 96.935341 Nissan5 1 6 3 1 6 895 2625 113 22 96.485229 Antitrust5 1 6 3 1 7 1018 2624 133 29 89.205589 Litigation,5 1 6 3 1 8 1162 2623 46 23 88.997986 5775 1 6 3 1 9 1220 2623 22 23 78.577934 F.5 1 6 3 1 10 1255 2623 29 23 77.559380 2d5 1 6 3 1 11 1295 2623 48 24 77.559380 9105 1 6 3 1 12 1354 2623 49 26 95.559967 (Sth5 1 6 3 1 13 1414 2623 48 23 95.958847 Cir.5 1 6 3 1 14 1480 2623 76 25 94.961182 1978).5 1 6 3 1 15 1568 2629 54 17 94.670738 cert.5 1 6 3 1 16 1636 2623 94 23 87.425705 denied.5 1 6 3 1 17 1741 2623 48 23 95.596474 4395 1 6 3 1 18 1800 2623 56 23 95.085075 U.S.5 1 6 3 1 19 1873 2623 57 22 96.514458 10724 1 6 3 2 0 591 2667 92 27 -1 5 1 6 3 2 1 591 2667 92 27 96.026665 (1979). CLINIQUE LABORATORIES, INC. 135 126 Modifying Order and promotional programs. Such restrictions may not necessarily be part of an illegal RPM scheme and have been recognized as reasonable in many circumstances. Of course, any cooperative advertising program implemented by Clinique as part of an RPM scheme would be per se unlawful and would violate the order even if modified as Clinique requests.

Clinique believes that at least one remaining order provision might be construed to prohibit Clinique from engaging in otherwise lawful price-restrictive cooperative advertising programs." Although Clinique does not expressly argue the point, it appears that Clinique is concerned that setting aside paragraph III(2) may not afford Clinique the relief it seeks unless the order makes clear that Clinique is permitted to engage in such conduct. PR, pp. 2-4. In light of the specific prohibition of paragraph III(2), the words “the resale price at which said dealer...proposes to...advertise any product,” 96 FTC at 55, in paragraph I(8) of the order may refer to the dealer’s own advertising, that is, advertising for which the dealer alone pays. These words, however, also may be construed to mean the prices at which the dealer proposes to advertise in Clinique’s cooperative advertising program. The Commission, therefore, would not construe paragraph I(8) and the remaining cooperative advertising and promotional programs that included conditions as to the prices at which its dealers offered Clinique’s products under the programs, so long as such programs are not part of a resale price maintenance scheme.

VI. Conclusion The Commission has determined that Clinique has made a satisfactory showing that reopening the order and deleting paragraph 3 See paragraph 1(8). 96 FTC at 55. Clinique does not ask the Commission to delete or modify this provision.

Modifying Order 116 F.T.C.

III(2) is in the public interest. Clinique has adequately demonstrated that the modification it seeks would enable Clinique to use what it considers the most efficient and cost effective cooperative advertising and promotional programs and put Clinique on an equal basis with its competitors. The modified order will continue to prohibit resale price maintenance. | Accordingly, it is ordered, that this matter be reopened and the Commission’s order in Docket No. C-3027 be, and it hereby is, modified, as of the effective date of this order, by setting aside paragraph III(2).

HAROLD A. HONCIKMAN, ET AL. 137 137 Modifying Order