Ykk (U.S.A.) Inc.

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IN THE MATTER OF YKK (U.S.A.) INC.

CONSENT ORDER, ETC., INREGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket C-3445. Complaint, July l, 1993--Decision, July 1, 1993 This consent order prohibits, among other things, a New Jersey-based manufacturer and seller of zippers from requesting, suggesting, or advocating that any competitor: raise, fix or stabilize prices or price levels; cease providing free equipment or other discounts; cease providing any services or products or engage in any other pricing action. In addition, the respondent is prohibited from entering into, attempting to enter into, adhering to, or maintaining any combination, conspiracy, agreement, plan or program with any competitor to fix, raise, establish, maintain or stabilize prices or service levels. Appearances For the Commission: Richard B. Dagen, Michael E. Antalics and James C. Egan.

For the respondent: James Lundquist, Barnes, Richardson & Colburn, Washington, D.C.

COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act, and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that YKK (U.S.A.) Inc., a corporation, hereinafter sometimes referred to as respondent or “YKK,” has violated the provisions of said Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. Respondent YKK (U.S.A.) Inc. is a corporation organized, existing and doing business under and by virtue of YKK (U.S.A.) INC. 629 628 Complaint the laws of the State of New York, with its office and principal place of business located at 1251 Valley Brook Avenue, Lyndhurst, New Jersey.

PAR. 2. Respondent is now, and for some time has been, engaged in the manufacture, advertising, offering for sale, sale and distribution of zippers and related products; and the leasing of equipment for installing zippers. Zippers and related products means slide fasteners, including, but not limited to, fastener chains, sliders and separating end components.

PAR. 3. Respondent maintains and has maintained a substantial course of business, including the acts and practices as hereinafter set forth, which are in or affect commerce, as “commerce” is defined in the Federal Trade Commission Act.

PAR. 4. At all times relevant herein, YKK and Talon, Inc. were competitors in the manufacture, advertising, offering for sale, sale and distribution of zippers and related products. YKK and Talon, Inc. together account for approximately 82 percent of all zippers manufactured and/or sold in the United States. PAR. 5. On July 1, 1988, an attorney for YKK sent a letter to the President of Talon accusing Talon of “unfair and predatory sales” tactics in the sale of zippers and related products along with a request that Talon stop engaging in these “unfair” practices by taking immediate action to cease offering free equipment to customers and to withdraw outstanding offers of free equipment to customers purchasing at the same time chain, sliders and other zipper components.

PAR. 6. At a meeting on October 21, 1988, YKK’s attorney asked an attorney for Talon to urge Talon to desist from offering free installation equipment.

PAR. 7. Talon’s provision of free installation equipment to such customers is a form of discounting. An agreement between Talon and YKK to cease this form of discounting would have constituted an unreasonable restraint of competition. PAR. 8. The aforesaid acts and practices constitute unfair methods of competition in or affecting commerce in violation of Section 5 of the Federal Trade Commission Act. The acts and Decision and Order 116 F.T.C.

practices herein alleged are continuing and will continue in the absence of the relief herein requested.

Commissioner Azcuenaga dissenting.

DECISION AND ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondent named in the caption hereof, and the respondent having been furnished thereafter with a copy of a draft of complaint which the Bureau of Competition proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge respondent with violation of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 45; and The respondent, its attorneys, and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by 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 purposes 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 that it had reason to believe that the respondent has violated the said Acts, and that complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order:

1. Proposed respondent YKK (U.S.A.) Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the State of New York, with its office and principal place of business located at 1251 Valley Brook Avenue, Lyndhurst, New Jersey.

YKK (U.S.A.) INC. 631 628 Decision and Order 2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondent, and the proceeding is in the public interest.

ORDER For purposes of this order, the following definitions shall apply: A. “Respondent” means YKK (U.S.A.), Inc., its predecessors, subsidiaries, divisions, groups, and affiliates controlled by YKK (U.S.A.), Inc., and their respective directors, officers, employees, agents and representatives, and their respective successors and assigns.

B. “Zippers and related products” means slide fasteners, including, but not limited to, fastener chains, sliders and separating end components.

II.

It is ordered, That respondent, directly or indirectly, through any corporation, subsidiary, division or other device, in connection with the manufacture, advertising, offering for sale, sale or distribution of any zippers and related products, and leasing of installation equipment, in or affecting commerce, as “commerce” is defined in the Federal Trade Commission Act, forthwith cease and desist from: A. Requesting, suggesting, urging, or advocating that any competitor raise, fix or stabilize prices or price levels, cease providing free equipment or other discounts, cease providing any services or product, or engage in any other pricing action; B. Entering into, attempting to enter into, adhering to, or maintaining any combination, conspiracy, agreement, understanding, plan or program with any competitor to fix, raise, establish, maintain or stabilize prices, price levels, or service levels. Decision and Order 116 F.T.C.

Provided, however, that YKK shall remain free to request that a competitor refrain from engaging in illegal conduct. Il.

It is further ordered, That respondent shall: A. Within thirty (30) days of the date on which this order becomes final, provide a copy of this order to all of its directors, officers, and management employees;

B. For a period of five (5) years from the date on which this order becomes final, and within ten (10) days after the date on which any person becomes a director, officer, or management employee of respondent provide a copy of this order to such person; and C. Require each person to whom a copy of this order is furnished pursuant to subparagraphs IIJ.A and B of this order to sign and submit to YKK within thirty (30) days of the receipt thereof a statement that: (1) acknowledges receipt of the order; (2) represents that the undersigned has read and understands the order; and (3) acknowledges that the undersigned has been advised and understands that non-compliance with the order may subject YKK to penalties for violation of the order.

IV.

It is further ordered, That respondent shall: A. Within sixty (60) days from the date on which this order becomes final, and annually thereafter for five (5) years on the anniversary date of this order, and at such other times as the Commission may by written notice to the respondent require, file with the Commission a verified written report setting forth in detail the manner and form in which respondent has complied and is complying with this order; and B. For a period of five (5) years after the order becomes final, maintain and make available to the staff of the Federal Trade Com- YKK (U.S.A.) INC. 633 628 Dissenting Statement mission for inspection and copying, upon reasonable notice, all records of communications with competitors of respondent relating to any aspect of pricing or services for zippers, related products, and installation equipment, and records pertaining to any action taken in connection with any activity covered by parts II, II and IV, of this order.

C. Notify the Commission at least thirty days prior to any change in corporate respondent such as dissolution, assignment or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries, or any other change in the corporation that may affect compliance obligations arising out of this order.

Commissioner Azcuenaga dissenting.

DISSENTING STATEMENT OF COMMISSIONER MARY L. AZCUENAGA The Commission today accepts a consent order that significantly inhibits the ability of an attorney fully to represent the interests of his or her client. The order also suggests a view of the Robinson- Patman Act with which I cannot join.

The theory of violation is that an attorney for YKK, on behalf of his client, invited Talon, through its attorney, to fix prices.' The attorney for YKK, a member of a private law firm who also is a member of YKK's board of directors, believed that Talon was providing free zipper assembly machinery to some but not other customers and that this practice was unlawful.?, YKK’s attorney requested that Talon cease engaging in this practice. The complaint alleges that the attorney's request violated Section 5 of the Federal Trade Commission Act.

/e., to eliminate selective discounting in the form of providing free zipper assembly machinery to certain customers.

Allegations of unlawful pricing practices have surfaced in the U.S. zipper industry for years. Beginning in the 1970's, when YKK was entering the U.S. market, members of the U.S. zipper industry complained that YKK engaged in unlawful pricing practices, including the provision of free installation equipment. See In the Matter of Slide Fasteners, Report to the President in Inv. No. TA-201-6, USITC Publication 757 (1976): In the Matter of Certain Slide Fastener Stringers, ITC Inv. No. 337-TA-85. 1981 ITC LEXIS 212 (1981) (ITC opinion); 1980 ITC LEXIS 5! (1980) (ALJ opinion). Although the International Trade Commission took no action against YKK, the FTC in 1981 issued an order against YKK for alleged violations of Section 2(a) of the Robinson-Patman Act. 98 FTC 25 (1981). Dissenting Statement 116 F.T.C.

I have supported the general theory that invitations to collude may be challenged as unlawful unilateral conduct under Section 5 of the Federal Trade Commission Act when the evidence shows an unambiguous offer to fix prices and no justification is offered for the conduct.’ Neither of these circumstances exists in this case. First, the alleged invitation to collude is at best highly ambiguous, and the available evidence plainly resolves any ambiguity against liability. Second, the context of the alleged invitation -- a discussion of claims of law violations between two attorneys on behalf of their clients -suggests an important efficiency: the public interest in encouraging the negotiation and settlement of legal disputes. A request by an attorney on behalf of his client that one of his client’s competitors cease engaging in apparently unlawful conduct is legitimate conduct. Indeed, the order expressly provides that “YKK shall remain free to request that a competitor refrain from engaging in illegal conduct.” Although such requests clearly are permitted by the order, the complaint treats the request of YKK’s attorney not as a legitimate request to cease unlawful conduct but as an invitation to fix prices. This apparent inconsistency requires explanation.

Since the request alleged in the complaint cannot explain the basis for liability, we must look elsewhere for the allegedly unlawful invitation to collude. According to the Analysis of Proposed Consent Order To Aid Public Comment (“Analysis To Aid Public Comment”),* YKK’s attorney “went beyond” requesting that Talon cease the unlawful conduct or offering to refrain from suing if Talon ceased the unlawful conduct. Instead, according to the Analysis To Aid Public Comment, “the attorney representing YKK offered to Talon a quid pro quo that YKK would refrain from providing free equipment if Talon would.” Analysis To Aid Public Comment at 1. 3 In addition, the evidence of the alleged invitation should be independent of any testimony or material within the control of the competitor who received the offer. See Concurring Statement of Commissioner Mary L. Azcuenaga in Quality Running Gear, Inc.. Docket C-3403 (Nov. 5. 1992). An analysis is prepared in every consent case “to facilitate public comment on the proposed order. By its terms, an Analysis To Aid Public Comment is5 1 7 1 2 11 1337 2637 39 17 96.756485 not5 1 7 1 2 12 1386 2632 109 22 96.710625 intended5 1 7 1 2 13 1505 2636 23 18 95.314903 to5 1 7 1 2 14 1537 2631 124 23 95.314903 constitutes 1 7 1 2 15 1670 2638 28 15 96.957191 an5 1 7 1 2 16 1708 2631 91 23 96.537666 officials 1 7 1 2 17 1811 2631 171 29 96.537666 interpretation4 1 7 1 3 0 640 2671 984 31 -1 5 1 7 1 3 1 640 2673 29 23 96.957870 of5 1 7 1 3 2 677 2674 38 22 96.696007 thes 1 7 1 3 3 726 2678 136 24 96.696007 agreements 1 7 1 3 4 872 2673 45 22 96.587967 ands 1 7 1 3 5 928 2672 118 29 96.866135 proposed5 1 7 1 3 6 1057 2671 69 24 96.894417 orders 1 7 1 3 7 1135 2678 27 16 96.940178 or5 1 7 1 3 8 1172 2676 23 18 96.995773 to5 1 7 1 3 9 1207 2671 92 30 96.288246 modify5 1 7 1 3 10 1312 2671 20 22 96.288246 in5 1 7 1 3 11 1344 2677 44 23 96.932022 any5 1 7 1 3 12 1401 2677 52 23 96.836060 ways 1 7 1 3 13 1464 2671 59 22 96.924889 theirs 1 7 1 3 14 1533 2671 91 22 77.302055 terms. YKK (U.S.A.) INC. 635 628 Dissenting Statement It is not disputed that YKK’s attorney requested that Talon cease engaging in allegedly unlawful pricing practices.° It also is not disputed that YKK’s attorney told Talon’s attorney that YKK had “received advice from officials in Washington, that we, YKK, can meet” Talon’s discriminatory prices.° The apparent willingness of the majority to infer an unlawful invitation to collude from these statements fails to take account of the Robinson-Patman Act. Under the Robinson-Patman Act, a firm that is facing its competitor’s discriminatory prices may elect to meet those prices and defend against a price discrimination case by claiming the meeting competition defense provided in Section 2(b) of the Act.’ The statement by YKK’s attorney that YKK lawfully could meet Talon’s discriminatory prices is a paraphrase of the statutory meeting competition defense. The defense is available whether or not a lawyer, in whatever situation, mentions that the option exists. YKK could defend against liability under Section 2(a) of the Act (and against civil penalty liability under the 1981 order) if it could show that its differential prices were offered in “good faith to meet an equally low price of a competitor.”

5 The complaint identifies two instances in which the request was made: The first was a letter dated July 1, 1988, in which YKK'’s attomey “request[ed] that Talon stop engaging in these ‘unfair’ practices by taking immediate action to cease offering free equipment to customers . .. .". Complaint paragraph 5. The second was during a meeting on October 21, 1988, when YKK's attorney asked5 1 5 1 4 16 1738 1946 28 16 96.807556 an5 1 5 1 4 17 1777 1943 103 26 96.807556 attorneys 1 5 1 4 18 1891 1938 37 25 96.947632 fora 1 5 1 5 0 587 1974 1125 34 -1 5 1 5 1 5 1 587 1974 75 23 96.986816 Talon5 1 5 1 5 2 673 1978 24 19 96.381752 to5 1 5 1 5 3 708 1981 56 24 96.268303 urges 1 5 1 5 4 774 1974 75 24 96.268303 Talon5 1 5 1 5 5 860 1979 23 19 96.932823 to5 1 5 1 5 6 893 1974 73 25 96.628952 desist5 1 5 1 5 7 977 1974 61 25 96.483955 from5 1 5 1 5 8 1048 1975 105 30 96.789223 offerings 1 5 1 5 9 1164 1975 49 24 96.913147 free5 1 5 1 5 10 1223 1976 159 30 81.764198 equipment. Complaint paragraph 6.

The evidence of the conversation between YKK’s attorney and Talon's attorney, including the quoted language, is based on a contemporaneous memorandum prepared by YKK's attorney ("YKK memorandum") and voluntarily provided to the Commission with YKK’s report of compliance with the 1981 order. The memorandum and the two requests identified in the complaint (see note 5 supra) are the evidence on which the alleged quid5 1 6 1 5 8 1156 2202 46 22 96.825897 pros 1 6 1 5 9 1217 2194 60 30 73.200607 quo”5 1 6 1 5 10 1294 2194 19 24 96.824089 is5 1 6 1 5 11 1330 2194 79 24 93.210838 based.5 1 6 1 5 12 1438 2195 70 23 92.603516 YKK5 1 6 1 5 13 1522 2195 42 24 96.965744 has5 1 6 1 5 14 1579 2196 103 23 96.642159 allowed5 1 6 1 5 15 1697 2196 133 24 96.814636 disclosures 1 6 1 5 16 1845 2196 28 24 96.976906 of5 1 6 1 5 17 1886 2196 39 24 96.984894 thea 1 6 1 6 0 586 2232 1338 34 -1 5 1 6 1 6 1 586 2232 182 22 96.504463 memorandum5 1 6 1 6 2 783 2232 94 30 96.741226 (savings 1 6 1 6 3 891 2232 38 23 96.710503 thes 1 6 1 6 4 943 2232 97 30 96.712227 identity5 1 6 1 6 5 1053 2232 29 23 97.015411 of5 1 6 1 6 6 1094 2232 144 24 96.848976 individuals5 1 6 1 6 7 1252 2233 133 28 96.170044 involved),5 1 6 1 6 8 1399 2234 126 30 96.530945 providing5 1 6 1 6 9 1539 2241 13 16 96.931137 a5 1 6 1 6 10 1565 2241 48 17 96.752396 rare5 1 6 1 6 11 1627 2235 152 31 96.901749 opportunity5 1 6 1 6 12 1794 2235 37 23 96.800438 for5 1 6 1 6 13 1843 2235 81 31 96.800438 publica 1 6 1 7 0 585 2270 1338 31 -1 5 1 6 1 7 1 585 2270 133 23 96.959900 discussions 1 6 1 7 2 727 2270 29 23 96.572060 of5 1 6 1 7 3 763 2271 37 22 96.866051 thes 1 6 1 7 4 810 2271 80 23 96.978638 records 1 6 1 7 5 899 2278 30 16 97.004471 on5 1 6 1 7 6 940 2271 77 23 96.262451 which5 1 6 1 7 7 1027 2278 12 16 96.650955 a5 1 6 1 7 8 1048 2271 162 24 96.640640 Commissions 1 6 1 7 9 1220 2277 98 19 96.746017 consents 1 6 1 7 10 1327 2273 68 23 96.419998 orders 1 6 1 7 11 1404 2273 18 23 96.411926 is5 1 6 1 7 12 1433 2273 78 23 96.411926 based.5 1 6 1 7 13 1528 2274 50 23 96.792351 Thes 1 6 1 7 14 1588 2274 81 23 96.901924 records 1 6 1 7 15 1679 2274 22 23 96.892967 in5 1 6 1 7 16 1711 2274 38 24 96.892967 thes 1 6 1 7 17 1758 2281 54 17 95.746918 cases 1 6 1 7 18 1822 2274 19 24 96.073784 is5 1 6 1 7 19 1851 2279 72 22 97.014122 scant,4 1 6 1 8 0 585 2309 844 32 -1 5 1 6 1 8 1 585 2309 44 23 96.277046 ands 1 6 1 8 2 641 2309 8 23 91.551132 I5 1 6 1 8 3 659 2316 44 16 91.551132 cans 1 6 1 8 4 714 2309 50 23 96.992546 finds 1 6 1 8 5 777 2316 30 16 96.220695 no5 1 6 1 8 6 817 2310 67 23 96.662148 others 1 6 1 8 7 892 2310 116 23 96.632599 evidences 1 6 1 8 8 1019 2310 46 23 97.004623 that5 1 6 1 8 9 1077 2311 113 30 96.648483 arguably5 1 6 1 8 10 1201 2316 109 25 96.936302 supports5 1 6 1 8 11 1323 2311 106 30 95.889969 liability.2 1 7 0 0 0 583 2349 1340 211 -1 3 1 7 1 0 0 583 2349 1340 211 -1 4 1 7 1 1 0 607 2349 1316 53 -1 5 1 7 1 1 1 607 2349 12 20 48.659420 75 1 7 1 1 2 645 2367 94 24 93.288895 Sections 1 7 1 1 3 749 2367 50 28 93.169212 2(a)5 1 7 1 1 4 808 2367 28 24 96.993324 of5 1 7 1 1 5 844 2368 37 23 93.291756 thes 1 7 1 1 6 890 2368 230 24 92.889000 Robinson-Patman5 1 7 1 1 7 1130 2370 52 25 95.879799 Act,5 1 7 1 1 8 1197 2369 24 23 87.906113 155 1 7 1 1 9 1232 2369 84 24 91.916946 U.S.C.5 1 7 1 1 10 1331 2370 69 28 91.420219 13(a),5 1 7 1 1 11 1411 2370 51 24 94.448227 bars5 1 7 1 1 12 1471 2370 81 24 94.448227 sellers5 1 7 1 1 13 1562 2370 60 24 96.898537 from5 1 7 1 1 14 1632 2371 185 31 96.714760 discriminating5 1 7 1 1 15 1828 2371 22 24 96.968674 in5 1 7 1 1 16 1860 2372 63 29 96.968674 price4 1 7 1 2 0 584 2409 1338 34 -1 5 1 7 1 2 1 584 2409 108 24 96.245323 between5 1 7 1 2 2 705 2410 138 30 96.802628 competing5 1 7 1 2 3 855 2415 139 22 96.689644 customers,5 1 7 1 2 4 1007 2411 92 30 96.876656 subjects 1 7 1 2 5 1111 2416 23 18 96.191154 to5 1 7 1 2 6 1146 2412 87 22 96.739777 certain5 1 7 1 2 7 1246 2416 113 27 96.801422 statutory5 1 7 1 2 8 1373 2412 177 31 95.866867 requirements.5 1 7 1 2 9 1563 2413 96 24 93.271515 Sections 1 7 1 2 10 1672 2414 53 29 92.734505 2(b)5 1 7 1 2 11 1737 2414 29 23 96.957863 of5 1 7 1 2 12 1775 2414 38 23 96.988792 thes 1 7 1 2 13 1825 2415 54 26 96.858185 Act,5 1 7 1 2 14 1895 2415 27 23 96.939621 154 1 7 1 3 0 583 2448 1340 35 -1 5 1 7 1 3 1 583 2448 87 24 93.024231 U.S.C.5 1 7 1 3 2 687 2449 73 27 92.312111 13(b),5 1 7 1 3 3 772 2449 96 30 96.817368 permits5 1 7 1 3 4 880 2457 12 16 96.255493 a5 1 7 1 3 5 904 2450 70 23 95.062767 sellers 1 7 1 3 6 985 2455 22 18 95.062767 to5 1 7 1 3 7 1019 2451 66 22 96.215034 rebuts 1 7 1 3 8 1096 2457 13 16 96.793533 a5 1 7 1 3 9 1118 2452 78 27 96.675652 prima5 1 7 1 3 10 1203 2451 68 29 96.765442 facie5 1 7 1 3 11 1282 2458 55 16 96.931374 cases 1 7 1 3 12 1348 2451 28 23 96.844727 of5 1 7 1 3 13 1385 2452 63 30 96.962914 prices 1 7 1 3 14 1460 2452 188 24 96.627502 discriminations 1 7 1 3 15 1661 2453 30 29 96.999153 by5 1 7 1 3 16 1703 2453 110 30 96.746933 showings 1 7 1 3 17 1825 2454 48 22 96.922974 that5 1 7 1 3 18 1884 2453 39 23 97.006470 thea 1 7 1 4 0 584 2487 1338 34 -1 5 1 7 1 4 1 584 2487 73 23 95.684891 lowers 1 7 1 4 2 667 2488 63 29 96.851364 prices 1 7 1 4 3 742 2493 23 18 94.718880 to5 1 7 1 4 4 776 2495 13 16 94.718880 a5 1 7 1 4 5 799 2492 120 19 96.370949 customers 1 7 1 4 6 929 2495 48 16 96.581390 was5 1 7 1 4 7 989 2489 68 23 96.141609 made5 1 7 1 4 8 1069 2489 22 23 96.180756 in5 1 7 1 4 9 1103 2490 64 29 96.973473 goods 1 7 1 4 10 1179 2489 57 23 96.985283 faith5 1 7 1 4 11 1249 2494 23 18 96.961967 to5 1 7 1 4 12 1284 2494 61 19 95.855606 meets 1 7 1 4 13 1356 2491 38 22 96.972427 thes 1 7 1 4 14 1404 2491 95 30 96.371208 equally5 1 7 1 4 15 1512 2491 46 23 96.657906 lows 1 7 1 4 16 1569 2491 64 30 96.736221 prices 1 7 1 4 17 1644 2491 28 24 96.911934 of5 1 7 1 4 18 1681 2499 13 16 96.652832 a5 1 7 1 4 19 1703 2492 149 29 96.258987 competitor.5 1 7 1 4 20 1872 2492 50 23 96.258987 Thea 1 7 1 5 0 583 2527 1032 33 -1 5 1 7 1 5 1 583 2527 115 23 96.814438 elements5 1 7 1 5 2 709 2527 28 23 97.013130 of5 1 7 1 5 3 745 2527 37 23 96.589561 thes 1 7 1 5 4 794 2527 103 30 96.741646 meetings 1 7 1 5 5 907 2528 155 29 96.730927 competitions 1 7 1 5 6 1073 2528 99 23 96.385834 defenses 1 7 1 5 7 1184 2533 62 19 96.906097 must5 1 7 1 5 8 1257 2530 28 22 96.652435 be5 1 7 1 5 9 1295 2530 90 30 96.912704 proved5 1 7 1 5 10 1396 2530 29 29 96.982910 by5 1 7 1 5 11 1438 2530 27 23 96.170677 its5 1 7 1 5 12 1476 2536 139 24 96.427635 proponent.2 1 8 0 0 0 607 2566 1313 53 -1 3 1 8 1 0 0 607 2566 1313 53 -1 4 1 8 1 1 0 607 2566 1313 53 -1 5 1 8 1 1 1 607 2566 11 21 91.620605 85 1 8 1 1 2 650 2584 24 24 91.419449 155 1 8 1 1 3 686 2584 84 24 87.791969 U.S.C.5 1 8 1 1 4 786 2585 70 28 88.797791 13(b).5 1 8 1 1 5 877 2585 118 31 67.247421 Meeting competition” under Section 2(b) is different from engaging in normal competition. The meeting competition defense arises when a firm offers price cuts to selected customers, i.e., discriminates in price.

Dissenting Statement 16 F.T.C.

The flip side of the Section 2(b) meeting competition defense is that it is not available except to meet a competitor’s offering. If Talon ceased its discriminatory pricing, YKK could no longer defend its differential prices under Section 2(b).’ As a consequence, any request that Talon cease allegedly unlawful discriminatory pricing implicitly included a “threat” that YKK could lawfully meet Talon’s competition as well as an “offer” that YKK would not meet Talon’s discriminatory price competition if Talon acceded to the request. The “threat” and the “offer” are products of the Robinson- Patman Act. The Act creates a mutuality that exists whether or not it is described out loud, and it is from this that the majority apparently infers an unlawful offer of a “quid pro quo.” The evidence makes clear that the attorneys for YKK and Talon were concermed with mutual allegations of unlawful pricing practices and that their discussion was grounded in these provisions of the Robinson-Patman Act. YKK’s attorney said that a recent “Talon promotion raised a number of questions about fair competition” and described “YKK’s position that [Talon’s] targeting certain of [YKK’s] customers . . . with very low prices . . . constituted an unfair trade practice.”'° Talon’s attorney replied that Talon had “not engaged in any free placement of equipment, since’” the July 1988 letter from YKK’s attorney'' but that Talon would continue to meet the low prices of its competitors. YKK's attorney said that “if Talon continues or restarts any of its programs to give free machines for one year, we have received advice from officials in Washington, that we, YKK, can meet such competition.” YKK memorandum. YKK also was engaging in unlawful pricing, Talon’s attorney continued, claiming “‘‘that YKK not only sells at low prices in order ° For the sake of exposition, the text assumes that YKK and Talon were the only competitors in the zipper market.

0 “Unfair trade practice" has been used by the Commission to refer to “unfair methods of competition ..or other illegal practices,” including unlawful price discrimination. E.g., FTC, Trade Practice Rules for the Slide Fastener Industry (June 21, 1958), rescinded, 42 Fed. Reg. 19,859 (March 16, 1977). Talon's discontinuance of its free equipment program after receiving the request from YKK's lawyer may have reflected a concern that the program could not withstand challenge under the Robinson-Patman Act.

YKK (U.S.A.) INC. 637 628 Dissenting Statement to target-and-take Talon customers, but that YKK beats, rather [than] simply meets our competition.’” Talon’s attorney claimed to have “hard evidence that YKK . .. h[ad] giv[en] away equipment to meet and beat competition from Talon" and “opened a file and began to read from ‘evidence’ that YKK priced... ‘below YKK’s list and also, below Talon's prices.’” YKK’s attorney said that “the reports [if] true... could not be actionable because . . . there was other competition besides head-to-head operations by Talon and YKK...’ YKK memorandum.

YKK’s attorney also said that “YKK would consider it ‘a plus ... if Talon would continue its current policy of not giving away free equipment to their customers.” YKK memorandum. It is hardly surprising and, under the circumstances, not especially troubling that YKK's attorney would view it as “a plus” if Talon acceded to his request and discontinued its discriminatory pricing program. If Talon in fact ceased the practice, as Talon’s attorney claimed it had, YKK would no longer face the costs of potential litigation and of documenting its compliance with the meeting competition defense. At the close of the discussion, YKK’s attorney said that YKK had “no intention . . . at this time to file a complaint against Talon.” Talon's attorney said “that Talon does not have any intention of preparing legal action against YKK, if the status quo continues.” After the meeting, YKK’s attorney advised his client in terms of the Robinson-Patman Act and the Act's meeting competition defense: “If, as Talon has alleged, we are beating rather than simply meeting competition, they would have grounds for a complaint unless we could prove affirmatively that we were not meeting a Talon price but a price by some other competitor that was very low.” YKK’s attorney also told his client that “[w]e have good defenses and they should be reviewed soon.”'* YKK memorandum. The majority apparently would distinguish between threats to litigate and threats to meet discriminatory prices under Section 2(b). Under the approach described in the Analysis To Aid Public 2 The availability of the meeting competition defense likely was particularly important to YKK’'s attorney, because of YKK's potential liability for civil penalties for unlawful price discrimination under the Commission's 1981 order against YKK.

Dissenting Statement 116 F.T.C.

Comment, an attorney can request that the allegedly discriminatory pricing cease, threaten legal action or offer to “refrain from taking legal action,’”'? Analysis To Aid Public Comment at 1, if the discriminatory pricing practices cease. But a statement by an attorney that his client can lawfully avail itself of the statutory meeting competition defense, along with a suggestion that his client would prefer not to be placed in the position of doing so, will be construed by the Commission as an unlawful invitation to fix prices. I see no basis in principle for this approach. Both litigation and meeting competition are lawful options available to a firm meeting discriminatory prices in the marketplace, and a lawyer surely would advise a client charged with or facing discriminatory prices of the availability of these options."

Implicit in the theory of the complaint, as explained in the Analysis To Aid Public Comment, is the notion that YKK was trying to persuade a competitor to stop engaging in beneficial competitive conduct by offering to agree to forgo the same beneficial conduct. This underlying theme has a strong superficial appeal, but it is fundamentally invalid in this situation. The conduct at issue is discriminatory pricing and, by definition under the Robinson- Patman Act, the conduct is not good. Although it may seem counter-intuitive, YKK was not asking Talon to stop doing something right but rather to stop violating Section 2(a).'° 3 For example, the statement in the Analysis To Aid Public Comment that thes 1 5 1 1 15 1702 2024 106 26 92.816101 attorneys 1 5 1 1 16 1819 2025 130 25 93.009544 represent-4 1 5 1 2 0 609 2056 1343 36 -1 5 1 5 1 2 1 609 2056 39 30 93.273361 ings 1 5 1 2 2 661 2057 69 23 92.115303 YKK5 1 5 1 2 3 741 2061 63 19 96.751076 went5 1 5 1 2 4 816 2058 95 29 79.294243 beyond5 1 5 1 2 5 913 2052 11 44 61.728535 .5 1 5 1 2 6 940 2077 4 4 61.728535 .5 1 5 1 2 7 957 2077 4 4 72.930405 .5 1 5 1 2 8 973 2065 28 16 96.408073 an5 1 5 1 2 9 1012 2058 64 24 96.372047 offers 1 5 1 2 10 1086 2058 47 24 93.303665 that5 1 5 1 2 11 1144 2059 68 23 91.596825 YKK5 1 5 1 2 12 1225 2060 79 23 96.937431 would5 1 5 1 2 13 1316 2060 85 23 96.998657 refrains 1 5 1 2 14 1414 2060 61 23 96.867790 from5 1 5 1 2 15 1487 2061 80 30 96.870293 taking5 1 5 1 2 16 1579 2061 60 30 96.904541 legal5 1 5 1 2 17 1651 2061 79 24 96.948112 actions 1 5 1 2 18 1742 2062 92 30 96.778023 against5 1 5 1 2 19 1844 2062 75 24 96.400711 Talon5 1 5 1 2 20 1932 2062 20 24 96.400711 if4 1 5 1 3 0 607 2096 1339 35 -1 5 1 5 1 3 1 607 2096 73 23 96.920670 Talon5 1 5 1 3 2 690 2096 85 23 95.880898 ceased5 1 5 1 3 3 784 2096 77 31 95.880898 illegal5 1 5 1 3 4 871 2097 113 23 92.201996 conduct implies that litigation threats are protected. See Coastal States Marketing, Inc. v. Hunt, 694 F.2d 1358, 1367 (5th Cir. 1983) (“If litigation is in good faith, a token of that sincerity is a warning that it will be commenced and a possible effort to compromise the dispute."). 4 United States v. United States Gypsum Co., 438 U.S. 422 (1978), is inapposite. In that case, the Court rejected a defense, asserted by firms indicted on criminal price-fixing charges, that their explicit exchanges of price information were necessary to verify each other's prices in order to comply with Section 2(b) of the Robinson-Patman Act. The point is not that YKK should be able to avoid liability under Section 5 by asserting a spurious need to comply with the Robinson-Patman Act but that the majority has derived its alleged unlawful invitation to collude from a recitation of a statutorily created defense.

15 YKK's attorney had a valid interest in protecting his client against unfair competition by attempting to persuade Talon to stop violating Section 2(a). Neither YKK nor Talon, of course, would be barred by the Act from granting across-the-board price discounts to customers on the same functional level; the Act bars price discrimination, not lower prices. We cannot assume, however. that either firm could offer these discounts to all customers without risking its financial health and ability to stay in business. YKK (U.S.A.) INC. 639 628 Dissenting Statement Also implicit in the theory of the complaint, as explained in the Analysis To Aid Public Comment, is the notion that the better way to level the playing field between YKK and Talon is for YKK to emulate the behavior of Talon and offer its own selective discounts under cover of the Section 2(b) defense.'® This assumption ignores real world costs and risks of significant dimension. If a firm wants to undertake the risk and cost of documenting conduct in the hope of establishing the protection of Section 2(b), that is one thing. It is quite another for the Commission implicitly to require that course of action in preference to requesting a competitor to cease violating Section 2(a).

One irony pervades this case: YKK is the only zipper firm under a Robinson-Patman order. Because of the Commission's 1981 order against YKK, YKK’s attorney must be particularly sensitive to the need for his client, to avoid liability for civil penalties under the Commission's order, to limit differential price offers to meeting competition situations. Indeed, YKK’s attorney sought and obtained advice from the FTC that YKK lawfully could meet discriminatory prices offered by its competitors.'’ Then, when YKK’s attorney repeated the advice that he had received from the staff of the Commission about compliance with an order of the Commission under a law enforced by the Commission, the Commission alleges an unlawful solicitation to fix prices. YKK surely has been caught between the proverbial devil and the deep blue sea. The purpose of challenging invitations to collude under Section 5 presumably is to deter such conduct, because of the danger that it will ripen into actual collusion. Although such deterrence has value, we should remember that extending an invitation to fix prices, which is a unilateral act, involves less competitive harm than actual price fixing. This underscores the need scrupulously to protect lawful discussion in these cases. To ensure that legitimate communication is not inhibited we should challenge only naked invitations to 16 The choice to challenge the request by YKK’s attorney, while failing to examine Talon's allegedly unlawful pricing practices, suggests a willingness to tolerate discrimination against some customers so that other customers may benefit from discounting. 75 1 7 1 1 2 668 2707 49 22 96.815094 Thes 1 7 1 1 3 732 2707 53 23 94.898506 19815 1 7 1 1 4 800 2707 68 22 96.281815 orders 1 7 1 1 5 877 2707 58 22 96.281815 does5 1 7 1 1 6 945 2710 40 19 96.982712 not5 1 7 1 1 7 994 2705 121 30 96.876617 expressly5 1 7 1 1 8 1126 2704 85 30 93.291199 permits 1 7 1 1 9 1221 2704 69 23 92.235527 YKK5 1 7 1 1 10 1301 2710 24 18 96.652397 to5 1 7 1 1 11 1335 2704 71 23 96.914703 claims 1 7 1 1 12 1418 2704 37 22 96.948669 thes 1 7 1 1 13 1466 2708 113 24 96.948669 statutory5 1 7 1 1 14 1590 2702 111 24 96.022003 defenses5 1 7 1 1 15 1713 2702 22 23 96.134247 in5 1 7 1 1 16 1747 2702 37 23 93.306252 thes 1 7 1 1 17 1796 2701 135 24 92.307747 Robinson-2 1 8 0 0 0 592 2745 1133 33 -1 3 1 8 1 0 0 592 2745 1133 33 -1 4 1 8 1 1 0 592 2745 1133 33 -1 5 1 8 1 1 1 592 2749 96 23 91.850014 Patman5 1 8 1 1 2 698 2750 45 22 96.544128 Acts 1 8 1 1 3 755 2749 39 22 95.786034 but5 1 8 1 1 4 805 2749 103 29 93.296234 requires5 1 8 1 1 5 919 2748 70 23 93.249847 YKK5 1 8 1 1 6 1000 2752 22 18 97.002953 to5 1 8 1 1 7 1033 2755 68 15 96.730362 ceases 1 8 1 1 8 1112 2747 45 23 96.950592 ands 1 8 1 1 9 1168 2747 73 23 97.009094 desist5 1 8 1 1 10 1253 2746 60 24 96.558556 from5 1 8 1 1 11 1325 2746 105 29 96.627556 offerings 1 8 1 1 12 1440 2746 190 29 96.592621 discriminatory5 1 8 1 1 13 1641 2745 84 29 96.720551 prices. Concurring Statement 116 F.T.C.

collude, those that unambiguously solicit an unlawful agreement on price and have no other function. See United States v. American Airlines, Inc., 743 F.2d 1114, 1119 (5th Cir. 1984). Because the communications by YKK’s attorney were an assertion of his client's lawful alternatives, they did not constitute a naked invitation to collude.'* The proposed consent order infringes on legitimate communications by an attorney on behalf of his or her client and is inconsistent with the public interest.

I dissent.

CONCURRING STATEMENT OF COMMISSIONER DEBORAH K. OWEN I share the concern that our efforts in the invitation to collude area should not encompass, and thereby deter, legitimate business activity (or legal representation related thereto), and have repeatedly urged caution by the Commission in this regard.' One of the difficulties in the Commission’s efforts to explore the frontiers of Section 5 law through consent agreements is that much of the pertinent evidence supporting the Commission’s action is not ordinarily a matter of public record. I have found reason to believe that a violation occurred in this matter based on an investigative record which, in my view, is replete with inculpatory evidence that far outweighs any that might be interpreted as exculpatory. This case involves, in my judgment, activity by a corporate official, who incidentally happened to wear a legal hat, that was not in fact a good faith effort to resolve a legal dispute; rather, I find reason to believe that the legal dispute served simply as a pretext for an invitation to engage in a naked price restraint (in the form of ceasing certain discounts) where market power exists. I am therefore thoroughly comfortable with the Commission’s decision to issue as final the consent agreement in this matter.”

Another puzzling aspect of this case is that the order is imposed on the client for the conduct of its attomey, apparently leaving the attorney free, were he so inclined, to engage in similar conduct for other clients.

See Concurring Statements of Commissioner Deborah K. Owen in Quality Trailer Products Corporation, C-3403 (Nov. 5, 1992) and AE Clevite, Inc., C-3429 (June 8, 1993). 2 As in the cases cited in note | supra, I have accepted certain provisions in the Commission's order here, which could preclude some otherwise legal conduct, as fencing-in relief. This should not be interpreted as a finding that otherwise legitimate joint activity that involves ancillary price discussions thereby becomes illegal.

YKK (U.S.A.) INC. 641 628 Concurring Statement CONCURRING STATEMENT OF COMMISSIONER ROSCOE B. STAREK, III I concur in the Commission’s decision to issue the complaint and accord final approval to the consent order in this matter. Given the unusual factual context of the “invitation to collude” that forms the gravamen of the complaint, and the paucity of information that would otherwise appear in the final record of this decision, I feel compelled to explain the analysis underlying my vote. The consent order in this matter settles charges that YKK solicited an agreement from its largest competitor whereby the firms mutually would refrain from offering free installation equipment with the sale of their zipper products. Such an agreement -- like an agreement mutually to forbear on pricing or any other significant dimension of competition -- is conduct “that appears likely, absent an efficiency justification, to ‘restrict competition and decrease output,’” and is, therefore, “inherently suspect” under the standards set forth in the Commission’s decision in Massachusetts Board of Registration in Optometry.' An unambiguous solicitation of such an agreement is likewise “inherently suspect.” I find reason to believe that YKK invited such an anticompetitive agreement and that no plausible efficiency justification exists for this conduct. YKK’s invitation, however, arguably was the consequence of settling allegations of unlawful price discrimination under the Robinson-Patman Act.’ Indeed, settlement of a competitor's claim of primary line injury for unlawful price discounting implies that the discounting will cease. This could suggest that prosecution of anticompetitive restraints must make an accommodation for such restraints imposed for the purpose of settling such a claim. The context of private settlement, however, does not remove from antitrust scrutiny inherently suspect conduct that lacks an efficiency justification. In civil cases generally, a legitimate intent or | 110 FTC 549, 604 (1988).

~ See Quality Trailer Products Corp., Docket C-3403 (Nov. 5, 1992) (consent order based on invitation to agree to fix prices of certain axle products in violation of Section 5 of the FTC Act.). 3 15 U.S.C. 13a, et seq.

Concurring Statement 116 F.T.C.

purpose would not justify a restraint that has unreasonably anticompetitive effects.* Moreover, even a good faith attempt to avoid Robinson-Patman liability will not excuse anticompetitive conduct that is clearly inconsistent with the broader purposes of the U.S. antitrust laws.° In United States v. U.S. Gypsum Co., 438 U.S. 422 (1978), the Supreme Court held that an exchange of information concerning current prices was per se unlawful, even though the stated purpose was to assure compliance with the “meeting competition” defense of Section 2(b) of the Robinson-Patman Act. In that case, the defendants asserted that exchanges of price information allowed each seller to verify that any discriminatory prices it offered were necessary to meet a competitor's price. The Court held, however, that the agreement was not necessary to avoid Robinson-Patman liability. Interseller verification was not necessary to invoke the defense; a “good faith belief, rather than an absolute certainty” that a price concession was being offered by a competitor was all that was necessary to invoke Section 2(b).° Noting the potential tension between the rationales underlying the Sherman and Robinson- Patman Acts, the Court held that the requirements of the Robinson- Patman Act should be construed so as to ensure its coherence with the Sherman Act.’ Similarly, the anticompetitive conduct in this matter cannot be justified by an attempt to comply with, or settle claims under, the Robinson-Patman Act. The evidence strongly suggests that YKK 4 See, e.g., Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 25-26 nn. 41 & 42 (1984); Appalachian Coals, Inc. v. United States, 288 U.S. 344, 372 (1933) ("[g]ood intentions will not save a plan otherwise objectionable").

5 United States v. U.S. Gypsum Co., 438 U.S. 422, 447-459 (1978); Automatic Canteen Co. v. FTC, 346 U.S. 61, 74 (1953) (as a general rule, the Robinson-Patman Act should be construed so as to ensure its coherence with “the broader antitrust policies that have been laid down by Congress."). 6 438 U.S. at 451. The Court held that an exchange of information conceming current prices could not satisfy the “controlling circumstances" test where the stated purpose was to assure compliance with the meeting competition defense of Section 2(b) of the Robinson-Patman Act. /d. Settlement of the Robinson-Patman Act dispute in this matter similarly is not a “controlling circumstance” that would excuse the anticompetitive behavior.

? 438 U.S. at 458 (citing Automatic Canteen Co. v. FTC. 346 U.S. 61, 74 (1953)). YKK (U.S.A.) INC. 643 628 Concurring Statement issued an unambiguous invitation to one of its largest competitors to enter into an agreement mutually to discontinue a form of discounting that was an important dimension of competition between the firms. Although YKK’s invitation arguably was intended as an offer of settlement to resolve claims of unlawful discounting under the Robinson-Patman Act, the invited agreement far exceeded the scope of what was reasonably necessary to achieve a settlement. The potential effects of such an invitation are unambiguously anticompetitive.

Assuming arguendo that YKK’s threats of litigation were made in good faith,® the appropriate quid pro quo for the competitor’s commitment to cease from engaging in the putative violation was YKK's commitment to forgo initiating litigation. YKK, however, went further, offering to discontinue an important form of discounting in exchange for the competitor’s commitment to discontinue such discounting. This conduct poses a substantial threat to competition, particularly in cases such as this where the evidence strongly suggests that the relevant firms, acting in concert, have market power.”

Private settlement discussions of disputes between competitors alleging unlawful discounting do not provide the basis for a defense to anticompetitive conduct. On the contrary, the Supreme Court's analysis in U.S. Gypsum is more consistent with the view that such settlement discussions provide a context for anticompetitive behavior and should be carefully scrutinized.'® Price-fixing is an obvious means for competitors to resolve allegations of unlawful discounting. Given the potential for abuse in this context, the I do not find it necessary to determine whether YKK reasonably believed that its competitor was engaged in violations of the Act, since I believe that the solicitation far exceeds the scope of what was reasonably necessary to settle a legitimate Robinson-Patman Act claim. ° The complaint notes that YKK and Talon, the competitor that was the recipient of the unlawful solicitation account for more than 80% of zippers sold in the United States. The Court rejected even a limited Robinson-Patman compliance exception to unlawful exchanges of contemporaneous price information, finding that such an exception would removes 1 8 1 1 12 1735 2560 60 22 96.286621 from5 1 8 1 1 13 1807 2559 106 29 96.286621 scrutiny4 1 8 1 2 0 574 2598 1339 30 -1 5 1 8 1 2 1 574 2600 73 22 95.745682 under5 1 8 1 2 2 655 2599 37 23 95.745682 thes 1 8 1 2 3 703 2599 112 23 96.275787 Sherman5 1 8 1 2 4 826 2600 46 22 96.275787 Acts 1 8 1 2 5 880 2599 103 23 96.444916 conducts 1 8 1 2 6 993 2599 83 29 96.930389 falling5 1 8 1 2 7 1087 2606 53 15 95.229073 near5 1 8 1 2 8 1150 2599 27 22 95.229073 its5 1 8 1 2 9 1186 2605 55 16 96.237717 cores 1 8 1 2 10 1251 2599 55 22 97.006416 with5 1 8 1 2 11 1318 2606 30 15 96.803993 no5 1 8 1 2 12 1358 2605 132 17 96.848259 assurance,5 1 8 1 2 13 1500 2599 46 22 96.112946 ands 1 8 1 2 14 1557 2599 83 22 96.112946 indeed5 1 8 1 2 15 1651 2599 55 21 96.651947 with5 1 8 1 2 16 1717 2599 90 21 96.637665 serious5 1 8 1 2 17 1817 2598 96 25 96.159119 doubts,4 1 8 1 3 0 574 2636 1339 32 -1 5 1 8 1 3 1 574 2638 46 23 96.987984 that5 1 8 1 3 2 629 2638 135 30 96.472267 competing5 1 8 1 3 3 774 2638 104 23 96.531120 antitrust5 1 8 1 3 4 888 2638 98 30 96.879166 policies5 1 8 1 3 5 997 2638 79 22 97.009918 would5 1 8 1 3 6 1087 2638 28 22 97.009918 be5 1 8 1 3 7 1125 2638 82 22 96.649521 served5 1 8 1 3 8 1217 2638 116 29 73.592842 thereby.”5 1 8 1 3 9 1351 2637 46 23 96.693321 4385 1 8 1 3 10 1408 2638 55 22 89.898430 U.S.5 1 8 1 3 11 1474 2642 22 18 95.967880 at5 1 8 1 3 12 1505 2637 48 23 96.763168 4585 1 8 1 3 13 1564 2637 81 29 96.554916 (citing5 1 8 1 3 14 1654 2637 134 22 96.422295 Automatic5 1 8 1 3 15 1798 2636 115 26 96.810234 Canteen,4 1 8 1 4 0 574 2677 204 26 -1 5 1 8 1 4 1 574 2677 46 23 96.222168 3465 1 8 1 4 2 631 2677 55 23 87.792175 U.S.5 1 8 1 4 3 697 2682 22 17 94.427704 at5 1 8 1 4 4 729 2677 49 26 93.533012 74). Concurring Statement 116 F.T.C.

Commission should make clear that competitors attempting to resolve claims of unlawful discounting under the Robinson-Patman Act understand that any settlement or attempted settlement must pass scrutiny under U.S. antitrust laws forbidding unreasonable restraints of trade, including Section 5 of the FTC Act.!! CONCURRING STATEMENT OF COMMISSIONER DENNIS A. YAO I appreciate the concern that has prompted Commissioner Azcuenaga to dissent in this matter. I am disturbed by the possibility that this consent agreement may be misinterpreted to mean that a simple discussion settling alleged Robinson-Patman Act violations could lead to an FTC enforcement action alleging an “invitation to collude” actionable under Section 5 of the FTC Act. Price-cutting and alleged violations of the Robinson-Patman Act form two sides of the same coin because the Robinson-Patman Act seeks to forestall certain types of price discounts. Because charging that a competitor has violated the Robinson-Patman Act implies that, while the complainant is not discounting, the competitor is and must cease discounting or face a lawsuit, one could interpret a charge of a Robinson-Patman Act violation as an implicit “invitation” that the other side “agree” to end price discounting. Consequently, some might assume that discussions settling alleged Robinson-Patman Act violations could be construed by the FTC as an offer to agree to end price discounts and, hence, an “invitation to collude” by raising prices. To prevent this possible misconception from chilling efficient settlement discussions of legal disputes, it is necessary to explain in greater detail than usual why there is sufficient reason here to believe that YKK's behavior violated Section 5 of the FTC Act.! 1 A similar analysis would apply to purely private settlements of U.S. international trade law disputes. See U.S. Department of Justice, Antitrust Enforcement Guidelines for Intemational Operations (1988), reprinted in 4 Trade Reg. Rep. (CCH) paragragh 13,109, at Section 7 and Case 17. The Analysis of Proposed Consent Order to Aid Public Comment which the Commission has issued in this matter also provides a fuller description of this matter than is contained in the complaint and consent order. Because Analyses are not included in the bound final Commission decisions, I have appended the Analysis to my concurring statement for reference purposes. YKK (U.S.A.) INC. 645 628 Concurring Statement Most importantly, the lawyer’s actions here went beyond requesting that his client’s competitor cease an allegedly unlawful practice of offering free installation equipment to customers buying chain, slider and other zipper components. YKK’s lawyer, who is also a member of YKK’s board of directors, privately met with a lawyer for YKK's competitor, Talon, and suggested that YKK would refrain from providing free equipment if Talon agreed to cease offering free equipment. Because Talon’s provision of free equipment is a form of discounting, an agreement between Talon and YKK to cease this form of discounting would have violated the law.’ Consequently, an offer to agree that both parties end price discounts, as happened here, should similarly be unlawful.’ Absent an offer to agree on a factor such as price, however, a lawyer's bona fide threat of litigation standing alone should not violate Section 5, even if the logical result of that threat is that the other side would have to end a price discount in order to settle the dispute. To suggest otherwise could potentially chill settlement discussions in legal disputes. The evidence strongly suggests that such a quid pro quo offer was made. Although at the meeting YKK’s lawyer discussed his apparently good faith belief that Talon’s offering of free installation equipment violated the Robinson-Patman Act and other trade regulation rules, his own written description of the meeting demonstrates that he went beyond discussing alleged violations of the law and offered a guid pro quo. Specifically, he recounts that he told Talon’s lawyer that “it would be good for the industry if no one ‘gave away’ installation equipment” and, in the same sentence, that “YKK would consider it ‘a plus ...’ if Talon would continue its current policy of not giving free equipment to their customers.’” United States v. United States Gypsum Co., 438 U.S. 422, 448-59 & n. 23 (1978) (agreement among competitors to verify actual prices is actionable under Section | even if supposedly done to avoid Robinson-Patman Act violations).

3 See, e.g., Quality Trailer Products Corp., Docket C-3403 (Nov. 5, 1992) (FTC complaint charged that respondent violated Section 5 by making an unambiguous offer to fix prices of certain axle products).

(ellipsis in original). At an earlier point in the meeting. Talon's attorney had informed YKK’s attorney that Talon was no longer offering free installation equipment. Concurring Statement 116 F.T.C.

Further buttressing this case is the fact that this offer of a quid pro quo is not the product of disputed deposition testimony between competitors, but rather is described in explicit detail in a document written by YKK’s lawyer. While such documentary evidence -because of its rarity -- is not necessary in order to find clear evidence of an unlawful offer, it serves as a powerful counter to any argument that the evidence here is ambiguous. Finally, these two companies may have market power -- the complaint notes that YKK and Talon together account for approximately 82 percent of all zippers manufactured and/or sold in the United States. Market power increases the incentives of the parties to seek to fix prices (since collusion is more likely to be successful when the parties have market power) and thus increases the probability of an anticompetitive motive on the part of the offeror, further reducing any ambiguity in the evidence concerning the offer. Although the Commission must take care in cases like this to avoid any misimpression that mere settlement discussions could lead to a Section 5 action, the Commission cannot abdicate its responsibility to challenge an unlawful invitation to collude solely because it occurs during air otherwise lawful conversation. The evidence described above shows that YKK’s lawyer, a member of its board of directors, went beyond discussing alleged violations of the Robinson-Patman Act and offered Talon a quid pro quo at the meeting. Hence, I find that there is reason to believe that, in doing so, YKK violated Section 5.

Analysis of Proposed Consent Order To Aid Public Comment The Federal Trade Commission has accepted an agreement to a proposed consent order from YKK (U.S.A.) Inc. The proposed consent order has been placed on the public record for 60 days for reception of comments by interested persons. Comments received during this period will become part of the public record. After 60 days, the Commission will again review the agreement and the comments received and will decide whether it YKK (U.S.A.) INC. 647 628 Concurring Statement should withdraw from the agreement or make final the agreement’s proposed order.

The complaint alleges that Talon, a competitor of YKK (U.S.A.) in the sale of zippers, was engaged in a form of price discounting, by offering free installation equipment along with its sales of zipper components. An attorney representing YKK complained in a letter to the President of Talon about such offers, characterizing them as “unfair and predatory” sales tactics. At a subsequent meeting between attorneys for the two companies, YKK’s attorney then attempted to get Talon to cease this discounting. Specifically, the complaint alleges that, at a meeting on October 21, 1988, YKK’s attorney characterized Talon’s discounting as unlawful and asked an attorney for Talon to urge Talon to desist from offering free installation equipment. However, YKK’s attorney also told Talon’s attorney that YKK could lawfully meet Talon’s price discounts. The Commission has reason to believe that the attorney representing YKK went beyond a demand that Talon cease illegal conduct or an offer that YKK would refrain from taking legal action against Talon if Talon ceased illegal conduct. Rather, the Commission has reason to believe that the attorney representing YKK offered to Talon a quid pro quo that YKK would refrain from providing free equipment if Talon would. The complaint further alleges that an agreement between Talon and YKK to cease discounting would have constituted an unreasonable restraint of competition. Finally, the Commission has reason to believe that YKK’s invitation to Talon to enter into an agreement by which both parties would refrain from offering free equipment to customers violates Section 5 of the Federal Trade Commission Act. The complaint does not allege that Talon accepted YKK’s offered agreement to cease discounting.

YKK (U.S.A.) Inc. has signed a consent agreement to the proposed consent order. The order prohibits YKK (U.S.A.) Inc. from requesting, suggesting, urging, or advocating that any competitor raise, fix or stabilize prices or price levels, cease providing free equipment or other discounts, cease providing any services or products or engage in any other pricing action. The proposed consent Concurring Statement 16 F.T.C.

order, also prohibits YKK (U.S.A.) Inc. from entering into, attempting to enter into, adhering to, or maintaining any combination, conspiracy, agreement, understanding, plan or program with any competitor to fix, raise, establish, maintain or stabilize prices, price levels or service levels. The order, however, permits YKK to request that a competitor refrain from engaging in illegal conduct. The order’s provisions apply to zippers and related products, and installation equipment. Zippers and related products are defined as slide fasteners, including, but not limited to, fastener chains, sliders and separating end components.

The purpose of this analysis is to facilitate public comment on the proposed order, and it is not intended to constitute an official interpretation of the agreement and proposed order or to modify in any way their terms.

GRIFFIN BACAL, INC. 649 649 Complaint