American Cyanamid Company

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IN THE MATTER OF AMERICAN CYANAMID COMPANY CONSENT ORDER, ETC., INREGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket C-3739. Complaint, May 12, 1997--Decision, May 12, 1997 This consent order prohibits, among other things, a New Jersey-based distributor of agricultural herbicides and insecticides from conditioning the payment of rebates or other incentives on the resale prices its dealers charge for their products, and from agreeing with its dealers to control or maintain resale prices. The consent order requires the respondent, for three years, to post clearly and conspicuously a statement, on any price list, advertising or catalogue that contains a suggested resale price, that dealers remain free to determine on their own the prices at which they sell the company's products. In addition, the respondent must mail a letter containing this statement to all current dealers, distributors, officers, management employees and sales representatives.

Appearances For the Commission: Michael Antalics and Sarah O. Allen. For the respondent: Daniel K. Mayers, Wilmer, Cutler & Pickering, Washington, D.C.

COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act, (15 U.S.C. 41 et seg.), and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that American Cyanamid Company, a corporation (hereinafter Am4 1 10 1 5 0 559 2193 1649 60 -1 5 1 10 1 5 1 559 2199 92 54 96.601624 Cy or respondent), has violated the provisions of Section 5 of the Federal Trade Commission Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues this complaint, stating its charges as follows: PARAGRAPH 1. Respondent American Cyanamid Company is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Maine, with its principal office and place of business at One Campus Drive, Parsippany, New Jersey. Respondent is a wholly-owned subsidiary of American Home Products Corporation, a corporation organized, existing and doing business under and by virtue of the laws of the State of Delaware, with its principal office and place of business at Five Giralda Farms, Madison, New Jersey.

Complaint 123 F.T.C.

PAR. 2. Respondent is now, and for some time has been, engaged in the offering. for sale, sale, and distribution of crop protection chemicals, such as herbicides and insecticides used in commercial agriculture, to over 2500 retail dealers located throughout the United States. In 1995, Am Cy sold at retail more than $1 billion of its crop protection chemicals.

PAR. 3. In 1995, Am Cy was the market share leader in three domestic crop protection chemical markets: soybean broadleaf herbicides, soybean grass herbicides, and corn soil insecticides. In addition, Am Cy had the second-largest share of the domestic cotton grass herbicide market.

PAR. 4. Respondent's acts and practices, including the acts and practices alleged herein, are in or affect commerce, as commerce is defined in the Federal Trade Commission Act. PAR. 5. For approximately five years beginning in 1989, Am Cy operated two rebate programs for its retail dealers. From 1989-1992, the plan was called the Cash5 1 3 4 3 7 1134 1485 185 43 96.488609 Rewards 1 3 4 3 8 1335 1498 61 29 96.006317 on5 1 3 4 3 9 1410 1483 327 43 93.011131 Performance ("C.R.O.P.") program, and was renamed the Awards 1 3 4 4 7 1370 1553 69 43 95.897179 for5 1 3 4 4 8 1452 1552 308 44 95.897179 Performances 1 3 4 4 9 1776 1552 292 43 96.293022 Excellence ("A.P.E.X.") program in late 1992 through August 1995. Pursuant to the written agreements respondent entered into with its dealers under these programs, Am Cy offered to pay the dealers substantial rebates on each sale if the dealers sold Am Cy's crop protection chemicals at or above specified minimum resale prices. The specified minimum resale prices were equal to the wholesale prices paid by the dealers for the crop protection chemical products. Under the terms of the agreements, a dealer was not entitled to, and did not receive, any rebate on sales made below the specified minimum price; therefore, sales below Am Cy's specified minimum resale prices were made at a loss to the dealer. The dealers overwhelmingly accepted Am Cy's offer by selling at or above the specified minimum prices. PAR. 6. Am Cy also included certain nonprice performance criteria in its C.R.O.P. and A.P.E.X. programs that could increase the amount of the rebate, but compliance with those performance criteria was neither necessary nor, by itself, sufficient to obtain rebates. For example, if the dealer did not meet any of Am Cy's performance criteria, but sold the product at or above the specified minimum resale price, the dealer nonetheless received a rebate on that sale. On the other hand, if the dealer met all of the performance criteria, but sold the product below’ Am Cy's specified minimum resale price, the dealer received no rebate on that sale.

AMERICAN CYANAMID COMPANY 1259 1257 Decision and Order PAR. 7. The purpose, effects, tendency, or capacity of the acts and practices described in paragraphs five and six are and have been to restrain trade unreasonably and hinder competition in the provision of crop protection chemicals in the United States. PAR. 8. The aforesaid acts and practices of the respondent were and are to the prejudice and injury of the public. These acts and practices constitute unfair methods of competition in or affecting commerce in violation of Section 5 of the Federal Trade Commission Act. These acts and practices may recur in the absence of the relief requested.

Commissioner Starek dissenting.

DECISION AND ORDER The Federal Trade Commission ("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 the respondent with violation of the Federal Trade Commission Act; and The respondent, its attorney, 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 Act, and that a 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 described in Section 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order:

Decision and Order 123 F.T.C.

1. Respondent American Cyanamid Company is a corporation organized, existing and doing business under and by virtue of the laws of the State of Maine, with its principal office and place of business at One Campus Drive, Parsippany, New Jersey. Respondent is a wholly-owned subsidiary of American Home Products Corporation, a corporation organized, existing and doing business under and by virtue of the laws of the State of Delaware, with its principal office and place of business at Five Giralda Farms, Madison, New Jersey.

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 I.

For purposes of this order, the following definitions shall apply: (A) Respondent or Am5 1 6 1 1 5 1325 1608 93 55 95.697380 Cy means American Cyanamid Company, its directors, officers, employees, agents and representatives, predecessors, successors (including American Home Products Corporation) and assigns, and its subsidiaries, divisions, groups, and affiliates controlled, directly or indirectly, by American Cyanamid Company, and the respective directors, officers, employees, agents and representatives, successors and assigns of each.

(B) Commission means the Federal Trade Commission. (C) “Product" or Products means any crop protection chemicals, such as herbicides and insecticides used in commercial agriculture, that are manufactured, offered for sale, sold, or distributed by Am Cy to retail dealers or consumers located in the United States of America.

(D) Dealer means any person, corporation or entity not owned by Am Cy that in the course of its business purchases from Am Cy or a distributor and sells any Product in or into the United States of America.

(E) Resales 1 6 5 1 3 897 2863 157 55 94.168030 price means any price, price floor, minimum price, maximum discount, price range, or any mark-up formula or margin of profit used by any dealer for pricing any Product. Resales 1 6 5 3 12 2029 2997 143 58 87.575066 price includes, but is not limited to, any established or customary resale price.

AMERICAN CYANAMID COMPANY 1261 1257 Decision and Order Il.

It is ordered, That Am Cy, directly or indirectly, or through any corporate or other device, in connection with the manufacturing, offering for sale, sale, or distribution of any Product in or into the United States of America in or affecting commerce, as defined by the Federal Trade Commission Act, forthwith cease and desist from: (A) Conditioning the payment of any rebate or other incentive to any dealer, in whole or in part, directly or indirectly, on the resale price at which the dealer offers for sale or sells any Product; and (B) Otherwise agreeing with any dealer to control or maintain the resale price at which the dealer may offer for sale or sell any Product. Ii.

It is further ordered, That, for a period of three (3) years from the date on which this order becomes final, Am Cy shall clearly and conspicuously state the following on any list, advertising, book, catalogue, or promotional material where it has suggested any resale price for any Product to any dealer:

ALTHOUGH AMERICAN CYANAMID MAY SUGGEST RESALE PRICES FOR PRODUCTS, DEALERS ARE FREE TO DETERMINE ON THEIR OWN THE PRICES AT WHICH THEY WILL SELL AMERICAN CYANAMID PRODUCTS.

IV.

It is further ordered, That respondent shall: (A) Within thirty (30) days after the date on which this order becomes final, mail by first class mail the letter attached as Exhibit A, together with a copy of this order, to all of its officers, management employees, dealers, distributors, and agents or representatives having sales or policy responsibilities with respect to Am Cy's Products sold in or into the United States of America; (B) For a period of three (3) years after the date on which this order becomes final, mail by first class mail the letter attached as Exhibit A, together with a copy of this order, to each person who becomes an officer, management employee, or agent or representative having sales or policy responsibilities with respect to Am Cy's Products sold in or into the United States of America, within thirty Decision and Order 123 F.T.C.

(30) days of the commencement of such person's employment or affiliation with Am Cy; and (C) For a period of three (3) years after the date on which this order becomes final, require each of its officers, management employees, and agents or representatives having sales or policy responsibilities with respect to Am Cy's Products sold in or into the United States of America, to sign and submit to Am Cy 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 American Cyanamid Company to penalties for violation of the order.

V.

It is further ordered, That respondent shall: (A) Within sixty (60) days after the date on which this order becomes final, and annually thereafter for three (3) years on the anniversary of the date this order becomes final, and at such other times as the Commission shall request, file with the Commission a verified written report setting forth in detail the manner and form in which Am Cy has complied and is complying with this order; (B) For a period of three (3) years after the order becomes final, maintain and make available to Commission staff‘for inspection and copying, upon reasonable notice, all records of communications with dealers, distributors, and agents or representatives having sales or policy responsibilities with respect to Am Cy's Products sold in or into the United States of America relating to any aspect of retail pricing in the United States of America, and records pertaining to any action taken in connection with any activity covered by paragraphs II, IU, IV, and V of this order; and (C) Notify the Commission at least thirty (30) days prior to any proposed changes in Am Cy 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. AMERICAN CYANAMID COMPANY 1263 1257 Decision and Order VI.

It is further ordered, That this order shall terminate on May 12, 2017.

Commissioner Starek dissenting.

EXHIBIT A [AMERICAN CYANAMID LETTERHEAD] Dear Dealer:

The Federal Trade Commission has conducted an investigation into American Cyanamid's sales policies, and in particular, American Cyanamid's C.R.O.P. and A.P.E.X. rebate programs, which were in effect from mid-1989 through August 1995. To expeditiously resolve the investigation and to avoid disruption to the conduct of its business, American Cyanamid has agreed, without admitting any violation of the law, to the entry of a Consent Order by the Federal Trade Commission prohibiting certain practices relating to resale prices. A copy of the order is enclosed. This letter and the accompanying order are being sent to all of our dealers, distributors, sales personnel and representatives. The order spells out our obligations in greater detail, but we want you to know and understand that you can sell our products at any price you choose. While we may send materials to you which contain suggested retail prices, you remain free to sell those products at any price you choose. We look forward to continuing to do business with you in the future. Sincerely yours, President Statement 123 F.T.C.

STATEMENT OF CHAIRMAN ROBERT PITOFSKY AND COMMISSIONERS JANET D. STEIGER AND CHRISTINE A. VARNEY The Commission today enters a consent order with American Cyanamid prohibiting it from engaging in conduct designed to prevent its dealers from making discounted sales below the minimum price that American Cyanamid specified. American Cyanamid entered into written agreements with its dealers that provided dealers with rebates each time they sold their product at or above a certain resale price (the floor transfer price). For dealers who sold at the specified price, this rebate constituted their entire profit margin. The Commission believes that this conduct amounted to an illegal resale price maintenance agreement.

Commissioner Starek, in his dissent, criticizes this enforcement action for a number of reasons. As explained below, we disagree with Commissioner Starek's reasoning.

First, the dissenting statement appears to conclude that a situation where a manufacturer and a dealer enter into an express agreement that the manufacturer will pay the dealer to adhere to the manufacturer's specified resale price, is not an agreements 1 4 3 4 9 1907 1668 60 29 96.913666 on5 1 4 3 4 10 1982 1653 142 44 96.799652 resale4 1 4 3 5 0 474 1716 1652 68 -1 5 1 4 3 5 1 474 1727 169 57 96.267960 prices but rather some form of voluntary behavior. Judge Posner responded to similar arguments in Khan v. State Oil.' In Khan, the court declared a maximum resale price arrangement per se illegal where the manufacturer permitted dealers to charge above a maximum price, but required them in such case to provide any resulting profit above the maximum price to the manufacturer. The voluntary nature of the arrangement did not detract from the finding that there was an agreement. Judge Posner noted that the arrangement was indistinguishable from an agreement not to exceed the maximum price, because the dealer was sanctioned for violating the agreement by having to remit any resulting profit to the manufacturer. In responding to State Oil's argument that there was no price fixing agreement, Judge Posner observed: Thes 1 4 4 11 8 1792 2559 157 55 96.058235 purely5 1 4 4 11 9 1968 2557 161 44 96.347107 formal4 1 4 4 12 0 477 2628 1653 57 -1 5 1 4 4 12 1 477 2632 216 44 96.628502 characters 1 4 4 12 2 706 2632 56 44 96.825874 of5 1 4 4 12 3 770 2633 72 42 96.265938 thes 1 4 4 12 4 857 2631 252 44 96.927055 distinctions 1 4 4 12 5 1124 2632 88 43 96.995865 that5 1 4 4 12 6 1227 2631 32 43 96.773506 it5 1 4 4 12 7 1274 2644 126 41 96.448410 urges5 1 4 4 12 8 1417 2644 81 29 96.448410 cans 1 4 4 12 9 1512 2630 56 43 96.856117 be5 1 4 4 12 10 1586 2643 103 29 96.438034 seen5 1 4 4 12 11 1704 2629 59 55 96.500923 by5 1 4 4 12 12 1780 2628 245 55 96.589828 imagining5 1 4 4 12 13 2042 2628 88 43 96.857544 that4 1 4 4 13 0 477 2695 1653 58 -1 5 1 4 4 13 1 477 2701 71 44 96.642044 thes 1 4 4 13 2 564 2707 189 38 96.885956 contracts 1 4 4 13 3 768 2702 87 42 95.621269 had5 1 4 4 13 4 872 2701 230 43 95.621269 forbidden5 1 4 4 13 5 1116 2702 130 42 96.420143 Khan5 1 4 4 13 6 1262 2707 43 36 96.629478 to5 1 4 4 13 7 1323 2700 163 42 96.615845 exceeds 1 4 4 13 8 1502 2699 72 43 96.615845 thes 1 4 4 13 9 1593 2698 240 55 96.391182 suggested5 1 4 4 13 10 1850 2697 142 43 96.772758 resales 1 4 4 13 11 2007 2695 123 57 96.866554 price4 1 4 4 14 0 479 2766 1654 60 -1 5 1 4 4 14 1 479 2771 85 43 96.358040 ands 1 4 4 14 2 592 2770 86 44 96.792084 had5 1 4 4 14 3 705 2770 216 56 95.354546 provided5 1 4 4 14 4 948 2770 90 43 96.559120 that5 1 4 4 14 5 1065 2770 42 43 96.331116 if5 1 4 4 14 6 1125 2770 56 43 96.939049 he5 1 4 4 14 7 1208 2769 195 43 96.453545 violated5 1 4 4 14 8 1429 2769 72 43 96.830673 thes 1 4 4 14 9 1527 2767 273 56 95.585655 prohibitions 1 4 4 14 10 1827 2767 74 42 96.808449 thes 1 4 4 14 11 1928 2766 205 43 96.669014 sanction4 1 4 4 15 0 477 2826 1466 74 -1 5 1 4 4 15 1 477 2839 151 44 96.356178 would5 1 4 4 15 2 642 2840 57 60 96.815376 be5 1 4 4 15 3 718 2841 69 41 96.910225 for5 1 4 4 15 4 803 2839 93 43 96.439537 him5 1 4 4 15 5 914 2845 43 37 96.990524 to5 1 4 4 15 6 977 2839 128 43 96.789131 remits 1 4 4 15 7 1123 2853 86 41 96.789131 any5 1 4 4 15 8 1225 2838 212 55 96.999054 resulting5 1 4 4 15 9 1453 2836 136 57 96.859917 profits 1 4 4 15 10 1604 2843 46 36 96.908264 to5 1 4 4 15 11 1670 2837 120 42 97.005859 States 1 4 4 15 12 1808 2826 135 53 79.409378 Oil.” 93 F.3d 1358 (7th Cir.), cert. granted, _S.Ct.__ (1996). . Id., at 1361. See also Isaksen v. Vermont Castings, Inc., 825 F.2d 1158, 1164 (7th Cir. 1987) (in finding a violation based on economic coercion, Judge Posner noted, It5 1 7 1 2 12 1643 3099 24 30 92.952240 is5 1 7 1 2 13 1680 3108 31 21 96.939827 as5 1 7 1 2 14 1725 3099 27 29 96.910324 if5 1 7 1 2 15 1761 3100 147 29 96.849968 Vermont5 1 7 1 2 16 1920 3098 142 37 96.720718 Castings5 1 7 1 2 17 2076 3098 57 28 97.015289 had4 1 7 1 3 0 478 3143 1656 42 -1 5 1 7 1 3 1 478 3147 60 30 93.296364 told5 1 7 1 3 2 552 3149 114 29 92.574860 Isaksen5 1 7 1 3 3 678 3148 60 28 96.932381 that5 1 7 1 3 4 748 3147 21 29 96.965744 it5 1 7 1 3 5 780 3149 98 28 96.965744 would5 1 7 1 3 6 890 3149 105 28 96.660599 reduces 1 7 1 3 7 1008 3148 35 29 96.794350 its5 1 7 1 3 8 1054 3147 158 31 96.417862 wholesale5 1 7 1 3 9 1223 3148 79 37 97.003494 prices 1 7 1 3 10 1314 3152 29 24 95.891708 to5 1 7 1 3 11 1353 3147 62 29 95.891708 him5 1 7 1 3 12 1426 3147 27 29 89.324593 if5 1 7 1 3 13 1458 3146 38 29 89.324593 he5 1 7 1 3 14 1507 3146 94 29 96.671600 raised5 1 7 1 3 15 1613 3145 43 30 96.402176 his5 1 7 1 3 16 1669 3145 79 29 95.966881 retails 1 7 1 3 17 1762 3145 93 37 96.681747 price,5 1 7 1 3 18 1868 3145 58 28 93.293602 ands 1 7 1 3 19 1940 3145 121 28 92.997818 Isaksen5 1 7 1 3 20 2075 3143 59 29 96.966637 had4 1 7 1 4 0 479 3193 670 38 -1 5 1 7 1 4 1 479 3194 141 37 96.815460 accepted5 1 7 1 4 2 634 3193 47 30 97.018562 thes 1 7 1 4 3 693 3193 80 29 96.850861 offers 1 7 1 4 4 783 3193 41 37 96.995079 by5 1 7 1 4 5 836 3194 111 37 96.702843 raising5 1 7 1 4 6 958 3195 47 29 93.200081 his5 1 7 1 4 7 1018 3193 131 38 90.219978 price.). AMERICAN CYANAMID COMPANY 1265 1257 Statement We agree with Judge Posner. In this case, the sanction was loss of the rebate for sales made below the floor transfer price. If an agreement to forego one's entire profit margin if one departs from the specified price does not constitute a price maintenance agreement, then nothing remains of the per se rule.

Second, the dissent seems to suggest that this case is one where agreement is being inferred from unilateral conduct. We cannot concur. American Cyanamid entered into written agreements which offered financial incentives for adherence to a minimum price schedule. Courts, both before and after Sharp,’ have held such arrangements unlawful where adherence to a suggested price was the quid pro quo for the financial inducements. Judge Posner's decision in Khan is consistent with this approach.’ Third, the dissenting statement, relying in large part on recent economic literature, argues that American Cyanamid's program should not be condemned without proof of a supplier cartel, dealer cartel, or market power.’ That view is inconsistent with the Supreme Court's view that resale price maintenance continues to be illegal per se and we reject the idea that the Supreme Court can be overruled by scholarly contributions to economic journals. Finally, we cannot agree with the suggestion that this enforcement action somehow creates uncertainty about the Commission's treatment of pass through rebates or cooperative advertising programs. As the analysis to aid public comment explains, pass through programs have always been permitted, as long as the dealer is free to discount to an even greater extent than the pass through amount. Similarly, both the courts and the Commission have judged cooperative advertising cases under the rule of reason, as long as the arrangements do not limit the dealer's right: (1) to discount below the advertised price, and (2) to advertise at any price when the dealer itself pays for the advertisement. Unlike those programs, American Cyanamid's rebate program controlled the actual prices charged and was structured to prevent dealers from pricing below the floor transfer price.

2 Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717 (1988). “93 F.3d at 1362.

> Although we do not fully detail our disagreement with the description of the facts in the dissent, we believe that a full trial would have shown that an overwhelming portion of sales were made at or above the minimum resale price. Moreover, a dealer's advisory council voted to advise American Cyanamid to retain the program in order to protect its margins. Statement 123 F.T.C.

ANALYSIS TO AID PUBLIC COMMENT ON THE PROPOSED CONSENT ORDER The Federal Trade Commission ("the Commission") has accepted an agreement to a proposed consent order from American Home Products Corporation ("AHP"), through its wholly-owned subsidiary, American Cyanamid Company ("American Cyanamid"), located in Parsippany, New Jersey. The agreement would settle charges by the Commission that American Cyanamid violated Section 5 of the Federal Trade Commission Act by engaging in practices that restricted competition in the domestic markets for crop protection chemicals, which are herbicides and insecticides widely used in commercial agriculture.

The proposed consent order has been placed on the public record for sixty (60) days for receipt of comments by interested persons. Comments received during this period will become part of the public record. After sixty (60) days, the Commission will again review the agreement and the comments received and will decide whether it should withdraw from the agreement or make final the agreement's proposed order.

The purpose of this analysis is to invite public comment concerning the consent order and any other aspect of American Cyanamid's alleged anticompetitive conduct relating to its C.R.O.P. and A.P.E.X. rebate programs. This analysis is not intended to constitute an official interpretation of the agreement and order or to modify its terms in any way.

The Complaint The complaint prepared for issuance by the Commission along with the proposed order alleges that American Cyanamid has engaged in acts and practices that have unreasonably restrained competition in the sale and distribution of crop protection chemicals in the United States. In 1995, the Commission's proposed complaint alleges, American Cyanamid sold at retail more than $1 billion of its crop protection chemicals and was the market share leader in three domestic crop protection chemical markets: soybean broadleaf herbicides, soybean grass herbicides, and corn soil insecticides, as well as being the second-largest domestic producer of cotton grass herbicides.

AMERICAN CYANAMID COMPANY 1267 1257 Statement According to the complaint, American Cyanamid operated two cash rebate programs for its retail dealers for approximately five years. From 1989-1992, the plan was called the Cash5 1 2 1 3 10 1799 470 189 44 95.713425 Rewards 1 2 1 3 11 2009 483 60 30 95.713425 on4 1 2 1 4 0 429 540 1639 57 -1 5 1 2 1 4 1 429 541 329 43 91.461311 Performance ("C.R.O.P.") program, and was renamed the Award4 1 2 1 5 0 430 607 1636 58 -1 5 1 2 1 5 1 430 610 68 44 96.038727 for5 1 2 1 5 2 526 611 308 43 96.860451 Performances 1 2 1 5 3 864 612 285 42 93.245865 Excellence ("A.P.E.X.") program in late 1992 through August 1995. The complaint states that American Cyanamid entered into written agreements with its dealers under these programs, pursuant to which American Cyanamid offered to pay its dealers substantial rebates on each sale of its crop protection chemicals that was made at or above specified minimum resale prices. According to the complaint, the dealers overwhelmingly accepted American Cyanamid's rebate offer by selling at or above the specified minimum resale prices.

The complaint further alleges that the wholesale prices in the agreements were set at a level equal to the specified minimum resale prices, and because a dealer received no rebate on sales below the specified prices, those sales were made at a loss to the dealer. The complaint further states that although American Cyanamid included certain non-price performance criteria in its rebate programs that could increase the amount of the rebate, a dealer's compliance with these performance criteria was neither necessary nor, by itself, sufficient to obtain rebates. As examples, the complaint alleges that if a dealer met all of American Cyanamid's performance criteria, but sold the product for less than American Cyanamid's specified minimum resale price, that dealer received no rebate on the sale. On the other hand, if the dealer met none of the performance criteria, but sold the product at or above American Cyanamid's specified minimum resale price, the dealer nonetheless received a rebate on that sale.

American Cyanamid's conditioning of financial payments on dealers' charging a specified minimum price amounted to the guid pro quo of an agreement on resale prices. In cases where this issue has arisen, both before and after the Supreme Court examined the per se rule against resale price maintenance in Monsanto and Sharp,' courts have treated such agreements as per se illegal. See Lehrman v. Gulf Oil Corp., 464 F.2d 26, 39, 40 (Sth Cir.), cert denied, 409 U.S. 1077 (1972) (stating that". . adherence to a suggested price schedule was the quid pro quo for Lehrman's receiving Gulf's TCAs [temporary competitive allowances]" and there5 1 2 4 10 5 1289 2973 35 42 88.773201 is5 1 2 4 10 6 1339 2986 57 29 88.773201 no5 1 2 4 10 7 1412 2972 277 55 95.500336 comparable5 1 2 4 10 8 1698 2970 293 56 95.500336 justifications 1 2 4 10 9 2006 2970 68 43 96.491623 for2 1 3 0 0 0 422 3045 730 6 -1 3 1 3 1 0 0 422 3045 730 6 -1 4 1 3 1 1 0 422 3045 730 6 -1 5 1 3 1 1 1 422 3045 730 6 95.000000 2 1 4 0 0 0 423 3096 1646 88 -1 3 1 4 1 0 0 423 3074 1646 110 -1 4 1 4 1 1 0 488 3096 1581 38 -1 5 1 4 1 1 1 488 3097 142 28 96.692894 Business5 1 4 1 1 2 643 3097 187 29 96.650146 Electronics5 1 4 1 1 3 846 3097 89 37 93.276695 Corp.5 1 4 1 1 4 954 3107 22 18 93.188690 v.5 1 4 1 1 5 994 3097 97 37 96.922920 Sharp5 1 4 1 1 6 1107 3098 185 29 93.295555 Electronics5 1 4 1 1 7 1308 3097 98 37 93.094162 Corp.,5 1 4 1 1 8 1423 3097 60 29 95.688522 4855 1 4 1 1 9 1500 3097 67 28 95.473038 U.S.5 1 4 1 1 10 1584 3097 59 28 95.473038 7175 1 4 1 1 11 1659 3096 120 36 96.367714 (1988);5 1 4 1 1 12 1794 3096 166 28 96.492706 Monsanto5 1 4 1 1 13 1976 3096 52 28 85.053284 Co.5 1 4 1 1 14 2047 3104 22 19 92.896286 v.4 1 4 1 2 0 423 3147 777 37 -1 5 1 4 1 2 1 423 3147 170 36 91.899513 Spray-Rite5 1 4 1 2 2 604 3147 120 28 91.767899 Services 1 4 1 2 3 738 3147 99 36 91.767899 Corp.,5 1 4 1 2 4 852 3148 60 28 96.349396 4655 1 4 1 2 5 928 3148 68 28 95.247009 U.S.5 1 4 1 2 6 1011 3148 58 28 96.695557 7525 1 4 1 2 7 1083 3148 117 36 94.934784 (1984). Statement 123 F.T.C.

conditioning wholesale price support upon adherence to a schedule of minimum retail prices." (emphasis in original)); Butera v. Sun Oil Co., Inc., 496 F.2d 434, 437 (1st Cir. 1974). By offering financial inducements in return for selling at specified minimum prices, a manufacturer seeks the acquiescence5 1 4 1 5 5 1405 691 51 31 96.531631 or5 1 4 1 5 6 1473 690 229 42 95.895012 agreement of its dealers in a resale price-fixing scheme. Monsanto, 465 U.S. at 764 n. 9. The dealer, in turn, accepts the manufacturer's offer by selling at or above the specified minimum prices. See Isaksen v. Vermont Castings, Inc., 825 F.2d 1158, 1164 (7th Cir. 1987) (Posner, J.) (an obvious resale price-fixing agreement is found" . . . if [the manufacturer] had told [the dealer] that it would reduce its wholesale price to him if he raised his retail price, and [the dealer] had accepted the offer by raising his price."). See also Khan v. State Oil Co., 93 F.3d 1358, 1360-61 (7th Cir. 1996) (Posner, J.), petition for cert. pending (No. 96-871) (agreement on price found where dealership agreement on its face allowed dealer to charge any resale price it wished, but distributor tied financial consequences to dealers' not charging the resale prices it suggested). As a result, incentives to reduce price below the specified level were substantially affected by American Cyanamid's rebate scheme.

The rebate programs challenged in this case are unlike situations where manufacturers are permitted to condition a discount or other incentive on that discount being passed5 1 4 2 3 7 1548 1926 204 56 94.474174 through to consumers, which prevents a dealer from simply pocketing the discount. In these types of cases, the dealer is free to sell at even lower prices than the amount of the direct pass5 1 4 2 6 7 1294 2137 208 55 96.621490 through of the discount or other incentive. Discounts cannot be conditioned, therefore, on the dealers' adherence to specified minimum prices. See AAA Liquors, Inc. v. Joseph E. Seagram and Sons, Inc., 705 F.2d 1203, 1206 (10th Cir. 1982), cert. denied, 461 U.S. 919 (1983) (Seagram's requirement of passing through its discount [did]5 1 4 2 11 6 1347 2492 78 38 96.857513 not5 1 4 2 11 7 1440 2484 192 57 96.507431 prohibits 1 4 2 11 8 1647 2484 72 43 96.688744 thes 1 4 2 11 9 1734 2484 253 43 96.846748 wholesalers 1 4 2 11 10 2004 2483 113 43 96.509438 from4 1 4 2 12 0 489 2553 1628 59 -1 5 1 4 2 12 1 489 2556 179 56 95.865150 making5 1 4 2 12 2 685 2563 166 49 96.343025 greater5 1 4 2 12 3 865 2556 245 44 96.193314 reductions5 1 4 2 12 4 1127 2557 44 43 96.193314 in5 1 4 2 12 5 1186 2556 117 56 96.729828 prices 1 4 2 12 6 1320 2556 103 43 96.758499 than5 1 4 2 12 7 1440 2556 73 42 96.799973 thes 1 4 2 12 8 1530 2554 201 43 93.296730 discounts 1 4 2 12 9 1746 2553 270 56 90.663185 provides.). See also Acquaire v. Canada Dry Bottling Co., 24 F.3d 401, 409-10 (2d Cir. 1994); Lewis Service Center, Inc. v. Mack Trucks, Inc., 714 F.2d 842, 845-47 (8th Cir. 1983) (because dealers could discount more than Mack's sales assistance, the court found that thes 1 4 2 16 10 1860 2845 188 42 96.669289 purposes 1 4 2 16 11 2070 2831 57 43 96.669289 of4 1 4 2 17 0 489 2902 1629 59 -1 5 1 4 2 17 1 489 2905 174 43 96.255875 Mack's5 1 4 2 17 2 700 2904 207 48 96.255875 discounts 1 4 2 17 3 939 2919 205 42 96.375343 programs 1 4 2 17 4 1181 2905 126 55 96.247581 [was]5 1 4 2 17 5 1344 2911 77 37 96.667946 not5 1 4 2 17 6 1455 2909 45 38 96.667946 to5 1 4 2 17 7 1536 2904 119 43 96.724602 forces 1 4 2 17 8 1690 2902 232 43 96.446640 adherence5 1 4 2 17 9 1954 2906 44 39 96.446640 to5 1 4 2 17 10 2034 2915 84 41 96.875565 any4 1 4 2 18 0 488 2974 894 57 -1 5 1 4 2 18 1 488 2974 235 56 96.431641 particulars 1 4 2 18 2 738 2974 123 57 96.477890 prices 1 4 2 18 3 879 2976 177 43 96.189117 schemes 1 4 2 18 4 1074 2976 57 42 93.190796 of5 1 4 2 18 5 1139 2974 243 54 90.581146 Mack's.). AMERICAN CYANAMID COMPANY 1269 1257 Statement The Proposed Consent Order Part I of the proposed order covers definitions. These definitions make clear that the consent order applies to the directors, officers, employees, agents and representatives of American Cyanamid. The order also defines the terms product, dealer and resale price. Part II of the order contains two major operative provisions: Part II(A) deals with the specific conduct at issue in this case. It prohibits American Cyanamid from conditioning the payment of rebates or other incentives on the resale prices its dealers charge for its products. Part II(B) prevents American Cyanamid from otherwise agreeing with its dealers generally to control or maintain resale prices. Neither of these provisions should be construed to prohibit lawful cooperative advertising programs or pass5 1 3 4 2 6 1692 1212 210 53 95.192940 through discount programs that are not otherwise part of an unlawful resale price maintenance scheme. The Commission has previously determined that order provisions prohibiting agreements on resale prices do not restrict a company's ability to implement otherwise lawful cooperative advertising and pass5 1 3 4 7 5 1323 1556 206 55 96.803246 through rebate plans because such programs do not, in themselves, constitute agreements on resale prices. See, e.g., In Re Magnavox Co., 113 FTC 255, 263, 269-70 (1990). ;

Part II of the order requires that for a period of three (3) years from the date on which the order becomes final, American Cyanamid shall include a statement, posted clearly and conspicuously, on any price list, advertising, catalogue or other promotional material where it has suggested a resale price for any product to any dealer. The required statement explains that while American Cyanamid may suggest resale prices for its products, dealers remain free to determine on their own the prices at which they will sell American Cyanamid's products.

Part IV of the order requires that for a period of three (3) years from the date on which the order becomes final, American Cyanamid shall mail the letter attached to the order as Exhibit A and a copy of this order to all of its current dealers, distributors, officers, management employees, and agents or representatives with sales or policy responsibilities for American Cyanamid's products. American Cyanamid also must mail the letter and order to any new dealer, distributor or employee in the above positions within thirty (30) days after the commencement of that person's affiliation or employment with American Cyanamid. All of the above dealers, distributors and employees must sign and return a statement to American Cyanamid Dissenting Statement 123 F.T.C, within thirty (30) days of receipt that acknowledges they have read the order and that they understand that non-compliance with the order may subject American Cyanamid to penalties for violation of the order.

Part V of the order requires that American Cyanamid file with the Commission an annual verified written report giving the details of the manner and form in which American Cyanamid is complying and has complied with the order. In addition, Part V of the order also requires American Cyanamid to maintain and make available to the Commission upon reasonable notice all records of communications with dealers, distributors, and agents or representatives relating to resale prices in the United States, as well as records of any action taken in connection with activities covered by the rest of the order. Finally, American Cyanamid must inform the Commission at least thirty (30) days before any proposed changes in the corporation, such as dissolution or sale.

CONCURRING STATEMENT OF COMMISSIONER MARY L. AZCUENAGA I concur in the decision to issue the consent order, but decline to join the separate statement of Chairman Pitofsky and Commissioners Steiger and Varney. The consent agreement, which includes the consent order and the complaint on which it is based, constitutes the decisional document of the Commission. My substantive views on this matter are contained entirely within the four corners of the decisional document. If the majority wants to revise or expand its decision, the proper course is to revise the decisional document. See Dissenting Statement of Commissioner Mary L. Azcuenaga in Dell Computer Corp. at 21-23 (Docket No. 3658, May 20, 1996). DISSENTING STATEMENT OF COMMISSIONER ROSCOE B, STAREK, III [ respectfully dissent from the Commission's decision to issue a consent order against American Cyanamid Company ("AmCy"), a producer of agricultural chemicals. The complaint claims that certain aspects of AmCy's compensation arrangement with its dealers constitute per se illegal resale price maintenance ("RPM"), in violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45. I do not agree that AmCy's dealer rebate policies constitute the functional and legal equivalent of RPM agreements. Consequently, I conclude that the decision to challenge AmCy's distribution policies would expand substantially the range of activities AMERICAN CYANAMID COMPANY 1271 1257 Dissenting Statement condemned by the Commission as illegal per se. This policy is illadvised and runs contrary to twenty years of case law in which the scope of vertical arrangements subject to per se condemnation has been steadily narrowed. This case is an especially poor vehicle for expanding the scope of the per se rule, for it would be difficult to find conduct that better exemplifies the economic deficiencies of that standard.

Condemning certain conduct as illegal per se normally is rationalized by the belief that the conduct in question is so frequently pernicious that one cannot justify the cost of attempting to identify the few instances in which it is not. Whether RPM warrants characterization as per se illegal conduct has increasingly been called into question by antitrust scholars,’ indeed, it would be difficult to find an antitrust economist who would defend this enforcement standard.” RPM remains illegal per se, however, and, consistent with this standard, I have voted to support enforcement actions against RPM agreements when I have been convinced that (1) the conduct in question plainly constituted an illegal agreement on price -(as construed by contemporary case law), and (2) the relief was appropriately tailored to deter future illegal conduct. Notwithstanding the continued per se treatment of RPM -- and my willingness to support RPM cases in the limited circumstances identified above -- 1 cannot ignore the persistent accumulation of economic evidence demonstrating the potentially procompetitive (or, at worst, economically neutral) nature of RPM agreements, At minimum, this evidence counsels against expanding the boundaries ’ There is a substantial body of economic literature demonstrating that RPM frequently can be socially beneficial. See, e.g. Michael L. Katz, Vertical5 1 5 1 2 9 1541 2325 190 29 96.461388 Contractual5 1 5 1 2 10 1761 2324 178 36 87.315407 Relations, in Richard Schmalensee and Robert D. Willig, 1 Handbook of Industrial Organization 655 (1989). The existing empirical literature fails to find evidence supporting an anticompetitive characterization of RPM. See, e.g., Pauline M. Ippolito & Thomas R. Overstreet, Jr., Resales 1 5 1 5 11 1586 2463 82 29 96.235199 Prices 1 5 1 5 12 1686 2463 219 29 96.296181 Maintenance:5 1 5 1 5 13 1925 2464 46 28 96.296181 An5 1 5 1 5 14 1989 2462 164 29 96.152687 Economic4 1 5 1 6 0 508 2508 1646 39 -1 5 1 5 1 6 1 508 2514 191 28 96.415230 Assessments 1 5 1 6 2 712 2511 38 29 96.971924 of5 1 5 1 6 3 760 2512 48 29 96.676025 thes 1 5 1 6 4 823 2512 117 29 96.752808 Federal5 1 5 1 6 5 954 2512 94 29 96.184547 Trades 1 5 1 6 6 1062 2511 228 31 96.164490 Commission's5 1 5 1 6 7 1305 2511 78 30 96.730484 Cases 1 5 1 6 8 1397 2511 127 36 96.724998 Against5 1 5 1 6 9 1539 2510 47 29 96.636391 thes 1 5 1 6 10 1599 2509 134 37 96.172562 Corning5 1 5 1 6 11 1747 2509 87 30 96.696808 Glass5 1 5 1 6 12 1848 2509 134 34 95.664413 Works, 39 J.L. & Econ 285 (1996) (evidence convincingly rejects anticompetitive theories and suggests instead that RPM increased sales of Coming's products); Pauline M. Ippolito, Resales 1 5 1 8 11 1826 2601 82 29 96.701332 Prices 1 5 1 8 12 1932 2600 221 30 96.235062 Maintenance:4 1 5 1 9 0 509 2647 1648 40 -1 5 1 5 1 9 1 509 2649 153 38 95.772858 Empirical5 1 5 1 9 2 675 2649 147 30 96.590851 Evidences 1 5 1 9 3 836 2650 74 28 96.656868 from5 1 5 1 9 4 921 2649 177 37 95.679558 Litigation, 34 J.L. & Econ. 263 (1991) (empirical evidence cannot support a collusive explanation for the use of RPM), - I also emphasize that in none of the RPM actions brought by the Commission during my, tenure could one have plausibly characterized the condemned conduct as having an anticompetitive effect (indeed, in several instances, procompetitive rationales for the restrictions were plainly evident). In only one instance, Nintendo of America Inc., 114 FTC 702 (1991), could one have plausibly ascribed market power to the manufacturer that was party to the agreement. Without manufacturer market power, RPM agreements between a single manufacturer and its dealers cannot harm consumers. Of course, it cannot be overemphasized that market power is only a necessary, but not a sufficient, condition for vertical restraints to reduce consumer welfare; by itself, market power does not establish that the conduct is anticompetitive. Even when a manufacturer possesses substantial market power, all of the procompetitive rationales for vertical restraints remain potentially valid. Dissenting Statement 123 E.T.c.

of per se illegal conduct to envelop activities that (at best) only weakly satisfy the legal criteria for finding the existence of an agreement and, more important, appear to be procompetitive in both purpose and effect. Under these evaluative criteria, the present matter is a poor candidate for an enforcement action. The Supreme Court set forth the legal standard for finding an illegal RPM agreement in Monsanto Co. v. Spray-Rite Service Corporation:* The correct standard is that there must be evidence that tends to exclude the possibility of independent action by the manufacturer and distributor. That is, there must be direct or circumstantial evidence that reasonably tends to prove that the manufacturer and others had a conscious commitment to a common scheme designed to achieve an unlawful objective. Monsanto, 465 U.S. at 768. The court stated further that the concept4 1 4 1 2 0 425 1408 1645 59 -1 5 1 4 1 2 1 425 1411 56 43 93.216759 of5 1 4 1 2 2 504 1413 36 41 86.429039 'a5 1 4 1 2 3 553 1411 191 56 96.603851 meetings 1 4 1 2 4 760 1412 56 43 95.322571 of5 1 4 1 2 5 824 1412 72 43 93.288559 thes 1 4 1 2 6 910 1412 154 44 92.654106 minds'5 1 4 1 2 7 1081 1426 50 29 65.887344 or5 1 4 1 2 8 1146 1414 35 41 65.887344 'a5 1 4 1 2 9 1195 1425 215 30 96.502701 common5 1 4 1 2 10 1426 1411 191 43 21.789101 scheme’5 1 4 1 2 11 1637 1445 9 8 74.137009 .5 1 4 1 2 12 1667 1444 10 8 74.137009 .5 1 4 1 2 13 1698 1444 9 8 92.581512 .5 1 4 1 2 14 1726 1408 202 44 96.256653 includes5 1 4 1 2 15 1946 1423 124 29 96.877365 more4 1 4 1 3 0 425 1478 1642 58 -1 5 1 4 1 3 1 425 1480 102 43 96.919518 than5 1 4 1 3 2 543 1494 25 30 96.840652 a5 1 4 1 3 3 583 1480 200 56 95.950279 showings 1 4 1 3 4 798 1482 89 42 96.737350 that5 1 4 1 3 5 902 1482 70 43 96.793739 thes 1 4 1 3 6 987 1480 248 45 96.200859 distributors 1 4 1 3 7 1249 1479 259 45 96.698708 conformed5 1 4 1 3 8 1523 1485 46 38 96.865402 to5 1 4 1 3 9 1587 1479 74 43 96.616585 thes 1 4 1 3 10 1679 1479 239 55 96.507980 suggested5 1 4 1 3 11 1934 1478 133 56 96.558388 price.4 1 4 1 4 0 425 1548 1645 57 -1 5 1 4 1 4 1 425 1551 37 42 96.318130 It5 1 4 1 4 2 490 1564 155 29 96.318130 means5 1 4 1 4 3 677 1564 47 30 96.739937 as5 1 4 1 4 4 753 1550 105 44 96.739937 wells 1 4 1 4 5 886 1551 89 44 96.357353 that5 1 4 1 4 6 1005 1551 213 43 96.412918 evidences 1 4 1 4 7 1246 1555 119 38 96.501450 must5 1 4 1 4 8 1393 1549 57 44 96.821716 be5 1 4 1 4 9 1478 1548 235 57 95.342987 presented5 1 4 1 4 10 1739 1548 109 43 96.155022 both5 1 4 1 4 11 1875 1548 93 43 96.893509 that5 1 4 1 4 12 1998 1548 72 44 96.815681 thea 1 4 1 5 0 425 1617 1645 59 -1 5 1 4 1 5 1 425 1619 247 44 96.410431 distributors 1 4 1 5 2 684 1620 348 50 96.036896 communicated5 1 4 1 5 3 1046 1620 55 44 96.931747 its5 1 4 1 5 4 1116 1620 312 56 96.425621 acquiescence5 1 4 1 5 5 1442 1632 50 30 96.543724 or5 1 4 1 5 6 1505 1623 260 50 96.598251 agreement,5 1 4 1 5 7 1782 1617 85 44 96.964622 ands 1 4 1 5 8 1881 1617 91 44 96.793007 that5 1 4 1 5 9 1985 1617 85 44 96.947243 this4 1 4 1 6 0 423 1686 1628 58 -1 5 1 4 1 6 1 423 1702 93 29 96.934860 was5 1 4 1 6 2 534 1689 160 55 96.176193 sought5 1 4 1 6 3 709 1689 61 55 96.361969 by5 1 4 1 6 4 787 1690 73 43 96.790344 thes 1 4 1 6 5 875 1690 358 43 96.255966 manufacturer. Jd. at 764 n. 9 (emphasis added).

While it is true that AmCy entered into contracts with its distributors providing for compensation for sales at or above the wholesale purchase price, it is clear that there was no meetings 1 4 1 9 12 1931 1894 58 44 97.002563 of5 1 4 1 9 13 1998 1894 74 45 96.440849 thea 1 4 1 10 0 424 1964 1647 56 -1 5 1 4 1 10 1 424 1965 169 44 95.705139 minds or common5 1 4 1 10 4 966 1968 217 52 96.286728 scheme, and thus no illegal agreement, to maintain resale prices. At no time did AmCy tell its distributors that they must sell agricultural chemicals at specific prices or risk losing supplies; AmCy did not attempt to coerce or intimidate its distributors into selling at specific price levels; distributors did not communicate an agreement to sell at specific prices; no distributors were ever terminated for selling at prices below the wholesale price; and distributors remained free (as explicitly provided by contract) to resell products at any price of their choosing. That distributors sometimes sold at prices below the wholesale level without loss of supply or termination is testament to the unilateral nature of the distributors’ pricing decisions and to the absence of any agreement to , 465 U.S. 752 (1984).

eg ee AMERICAN CYANAMID COMPANY 1273 1257 Dissenting Statement maintain resale prices.* In this instance, all of the hallmarks of a per se illegal RPM agreement are lacking.

Evidence that dealers did in fact resell AmCy products at or above the wholesale purchase price does not relieve the Commission of its obligation to demonstrate the existence of an illegal agreement. As made clear by Colgate, a unilateral, self-motivated decision by a distributor to accept a manufacturer's pricing policies, and thus sell products at a suggested retail price, does not constitute an illegal RPM agreement. In Monsanto, the Supreme Court stated: Under4 1 3 2 8 0 504 1005 1645 57 -1 5 1 3 2 8 1 504 1006 198 56 96.147087 Colgate,5 1 3 2 8 2 720 1008 75 42 96.673889 thes 1 3 2 8 3 812 1008 323 44 96.407837 manufacturers 1 3 2 8 4 1151 1022 81 30 96.804626 cans 1 3 2 8 5 1249 1022 229 31 96.475899 announces 1 3 2 8 6 1496 1008 55 44 96.791138 its5 1 3 2 8 7 1568 1008 142 44 96.936951 resales 1 3 2 8 8 1725 1006 146 56 96.588478 prices5 1 3 2 8 9 1889 1005 47 45 96.400421 in5 1 3 2 8 10 1953 1005 196 44 96.844429 advance4 1 3 2 9 0 504 1075 1645 58 -1 5 1 3 2 9 1 504 1077 84 42 96.729187 ands 1 3 2 9 2 602 1077 145 54 96.536903 refuses 1 3 2 9 3 762 1083 46 38 97.011703 to5 1 3 2 9 4 826 1078 97 43 96.457115 deals 1 3 2 9 5 938 1077 105 44 97.002869 with5 1 3 2 9 6 1058 1078 124 43 96.388458 those5 1 3 2 9 7 1197 1078 101 43 96.520966 who5 1 3 2 9 8 1316 1078 75 44 96.918190 fails 1 3 2 9 9 1408 1085 44 37 96.940163 to5 1 3 2 9 10 1468 1077 191 56 96.373230 comply.5 1 3 2 9 11 1677 1077 104 43 96.668167 Ands 1 3 2 9 12 1786 1071 23 68 96.957909 a5 1 3 2 9 13 1839 1075 255 44 96.743546 distributors 1 3 2 9 14 2111 1075 38 44 97.004631 is4 1 3 2 10 0 504 1143 1646 59 -1 5 1 3 2 10 1 504 1146 93 42 96.604935 free5 1 3 2 10 2 621 1152 47 37 96.888855 to5 1 3 2 10 3 696 1146 236 56 96.596710 acquiesce5 1 3 2 10 4 950 1143 52 48 96.557724 in5 1 3 2 10 5 1027 1147 73 44 96.748222 thes 1 3 2 10 6 1124 1147 354 45 96.538254 manufacturer's5 1 3 2 10 7 1503 1147 194 44 96.623283 demands 1 3 2 10 8 1722 1146 46 43 96.253868 in5 1 3 2 10 9 1792 1146 129 42 96.953125 orders 1 3 2 10 10 1944 1150 45 38 96.929268 to5 1 3 2 10 11 2017 1144 133 44 96.607857 avoid4 1 3 2 11 0 502 1214 1646 57 -1 5 1 3 2 11 1 502 1215 311 44 93.663925 termination. 465 U.S. at 761. As Monsanto and Colgate make clear, something more than mere acquiescence by a distributor in a manufacturer's pricing policies is necessary to convert a unilateral decision by a distributor into an agreement to maintain resale prices. I am therefore puzzled why the majority is so quick to infer the existence of a per se illegal RPM agreement from evidence that many distributors found it in their self-interest unilaterally to sell at or above the wholesale price and thereby receive rebates from AmCy. To infer the existence of a per se illegal RPM agreement in this context, when AmCy never announced minimum resale prices nor sought a commitment from distributors to sell at or above certain price levels, violates the fundamental principle of RPM law announced in Colgate. How can the majority find a per se illegal agreement here -- under arguably weaker factual circumstances than existed in Colgate -- and believe that it still seeks to enforce the rule announced in Colgate, and reiterated in Monsanto, that mere acquiescence by a distributor in the pricing policies of a manufacturer * Evidence suggests that distributors in fact sold specific products covered by the AmCy program at retail prices both above and below the wholesale transfer price. Wide variation in distributor resale prices runs contrary to usual evidence of a minimum resale price fixing agreement. As Chairman Pitofsky has stated: Thes 1 5 1 4 5 910 2670 56 20 96.815872 ones 1 5 1 4 6 977 2662 84 37 96.917252 points 1 5 1 4 7 1072 2662 59 29 96.805573 that5 1 5 1 4 8 1141 2671 130 28 96.271240 emerges5 1 5 1 4 9 1282 2661 107 37 96.271240 clearly5 1 5 1 4 10 1402 2661 27 29 96.961044 in5 1 5 1 4 11 1441 2670 56 28 96.452148 any5 1 5 1 4 12 1508 2660 104 29 92.184296 debates 1 5 1 4 13 1623 2660 177 37 33.498772 concerming5 1 5 1 4 14 1812 2660 47 29 96.965279 thes 1 5 1 4 15 1866 2670 59 28 96.435326 pers 1 5 1 4 16 1934 2670 34 18 96.435326 se5 1 5 1 4 17 1980 2660 62 29 92.166779 rules 1 5 1 4 18 2056 2660 24 29 96.163445 is5 1 5 1 4 19 2093 2661 62 28 97.007584 that4 1 5 1 5 0 502 2706 1651 38 -1 5 1 5 1 5 1 502 2706 154 29 96.124176 minimums 1 5 1 5 2 667 2706 117 29 96.124176 vertical5 1 5 1 5 3 797 2707 79 37 96.372040 prices 1 5 1 5 4 888 2712 180 32 96.372040 agreements5 1 5 1 5 5 1080 2708 63 29 96.988098 leads 1 5 1 5 6 1157 2712 28 25 97.013847 to5 1 5 1 5 7 1197 2708 108 36 96.967041 higher,5 1 5 1 5 8 1317 2707 56 29 96.967041 ands 1 5 1 5 9 1386 2706 112 37 96.538429 usually5 1 5 1 5 10 1510 2706 137 34 96.236183 uniform,5 1 5 1 5 11 1658 2706 91 29 96.900269 resales 1 5 1 5 12 1760 2706 120 37 96.359146 prices. Robert Pitofsky, In5 1 5 1 6 2 561 2751 130 30 96.765739 Defenses 1 5 1 6 3 704 2752 37 29 96.908089 of5 1 5 1 6 4 750 2751 204 31 96.605255 Discounters:5 1 5 1 6 5 969 2753 63 30 93.288765 Thes 1 5 1 6 6 1045 2754 148 29 92.814789 No-Frills5 1 5 1 6 7 1205 2754 78 29 96.517296 Cases 1 5 1 6 8 1297 2754 45 28 93.449257 for5 1 5 1 6 9 1353 2762 17 19 93.449257 a5 1 5 1 6 10 1382 2754 60 27 96.563354 Pers 1 5 1 6 11 1451 2753 37 29 96.538071 Se5 1 5 1 6 12 1502 2752 75 29 96.874969 Rules 1 5 1 6 13 1590 2751 128 38 96.744263 Against5 1 5 1 6 14 1728 2751 131 30 96.571693 Vertical5 1 5 1 6 15 1873 2752 83 29 96.830666 Prices 1 5 1 6 16 1970 2751 130 37 92.217033 Fixing, 71 Geo. L.J. 1487, 1488 (1983). The Commission's complaint does not allege, nor does it provide supporting evidence, that the rebate program resulted in higher retail prices for AmCy's products. Moreover, the wide dispersion in resale prices demonstrates the absence of the type of uniformity believed to be an indicator of a minimum resale price agreement. This dispersion in retail prices suggests that distributors were engaging in loss-leader programs out of a desire to increase future sales of AmCy products. In addition to encouraging distributors to provide valuable pre-sale services, AmCy's rebate program may have encouraged distributors to engage in loss-leader programs as a means of persuading customers to switch to AmCy products. > United States v. Colgate & Co., 250 U.S. 300 (1919). Dissenting Statement 123 F.T.C.

is insufficient as a matter of law to warrant inference of the existence of a per se illegal RPM agreement?® The majority's finding that AmCy entered into illegal RPM agreements with its distributors is nothing less than a retreat from the principles of vertical restraints analysis laid down by the Supreme Court in Colgate, Monsanto, Sylvania,’ and Sharp.* In cases involving allegations of concerted price fixing, thes 1 3 2 5 8 1721 787 187 44 96.966698 antitrust5 1 3 2 5 9 1923 787 203 56 96.111801 plaintiff4 1 3 2 6 0 489 856 1630 62 -1 5 1 3 2 6 1 489 867 121 38 96.911011 must5 1 3 2 6 2 628 867 179 51 96.975662 presents 1 3 2 6 3 825 861 211 44 96.415009 evidences 1 3 2 6 4 1056 861 225 44 96.669701 sufficient5 1 3 2 6 5 1299 866 45 38 96.956711 to5 1 3 2 6 6 1365 873 122 42 96.570351 carry5 1 3 2 6 7 1506 858 54 44 96.968475 its5 1 3 2 6 8 1578 858 164 44 96.812927 burdens 1 3 2 6 9 1758 858 56 43 96.667107 of5 1 3 2 6 10 1823 856 187 57 96.634560 proving5 1 3 2 6 11 2029 858 90 44 96.635834 that4 1 3 2 7 0 489 927 1631 60 -1 5 1 3 2 7 1 489 932 119 43 96.838646 there5 1 3 2 7 2 622 945 92 30 96.946274 was5 1 3 2 7 3 732 931 107 44 96.536507 such5 1 3 2 7 4 856 945 54 30 96.362915 an5 1 3 2 7 5 925 938 255 49 96.272827 agreement.5 1 3 2 7 6 1198 931 46 43 96.825150 If5 1 3 2 7 7 1253 945 54 29 96.825150 an5 1 3 2 7 8 1322 930 280 43 96.584084 interference5 1 3 2 7 9 1617 927 54 44 96.709373 of5 1 3 2 7 10 1680 927 103 44 96.669235 such5 1 3 2 7 11 1798 940 54 30 96.742104 an5 1 3 2 7 12 1869 932 251 50 96.630409 agreement4 1 3 2 8 0 489 996 1632 60 -1 5 1 3 2 8 1 489 1015 106 41 94.808861 may5 1 3 2 8 2 637 1002 57 42 94.808861 be5 1 3 2 8 3 738 1002 150 43 96.275131 drawn5 1 3 2 8 4 929 1001 115 43 96.402161 from5 1 3 2 8 5 1085 1000 154 56 96.624687 highly5 1 3 2 8 6 1282 999 265 56 96.570442 ambiguous5 1 3 2 8 7 1590 996 218 52 96.648857 evidence,5 1 3 2 8 8 1851 996 119 44 96.320999 there5 1 3 2 8 9 2013 996 38 44 96.726891 is5 1 3 2 8 10 2095 1011 26 30 96.957230 a4 1 3 2 9 0 489 1066 1632 59 -1 5 1 3 2 9 1 489 1070 309 44 96.640999 considerable5 1 3 2 9 2 821 1071 162 54 96.287140 dangers 1 3 2 9 3 1004 1071 91 42 96.752785 that5 1 3 2 9 4 1118 1071 72 42 96.583282 thes 1 3 2 9 5 1213 1069 220 44 96.542160 doctrines5 1 3 2 9 6 1458 1066 254 46 96.594337 enunciated5 1 3 2 9 7 1734 1066 46 43 96.596771 in5 1 3 2 9 8 1802 1066 210 55 96.454033 Sylvania5 1 3 2 9 9 2034 1067 87 44 96.907982 anda 1 3 2 10 0 490 1135 1628 59 -1 5 1 3 2 10 1 490 1140 192 54 96.008659 Colgate5 1 3 2 10 2 708 1140 95 43 96.391342 will5 1 3 2 10 3 827 1140 57 43 96.688156 be5 1 3 2 10 4 911 1140 217 54 96.203880 seriously5 1 3 2 10 5 1153 1138 198 44 96.396202 eroded. Monsanto, 465 U.S. at 763. I concluded that the standard set forth by Supreme Court for the finding of a price-fixing agreement has not been met. That the majority is willing to infer the existence of an agreement in this instance on the basis of such ambiguous evidence, and to rely primarily on pre-Sharp case law and post-Sharp dicta and one case not on point’ to justify its conclusion, represents an effort to : Although the majority's reply emphasizes written5 1 5 1 1 8 1401 1706 198 38 94.427513 agreements pursuant to which dealers were offered compensation for sales at prices above the wholesale transfer price (Statement of Chairman Robert Pitofsky and Commissioners Janet D. Steiger and Christine A. Varney in the Matter of American Cyanamid, at 2), the complaint in this case indicates that the Commission is willing -despite the clear warnings of Colgate and Monsanto to the contrary -- to infer the existence of per se illegal RPM agreements solely from the dealers' unilateral response to AmCy's offer. Complaint, at J 6 ("The dealers overwhelmingly accepted AmCy's offer by selling at or above the specified minimum prices.").

? Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36 (1977). ; Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717 (1988). - The majority relies heavily on Judge Posner's opinion in Khan vy. State Oil Co., 93 F.3d 1358 (7th Cir. 1996), cert. granted, 117 S. Ct. 941 (1997). Besides the obvious difference that Khan deals with maximum rather than minimum RPM, the facts of Khan are fundamentally different. The contract between State Oil (the supplier) and Khan (the dealer) provided that State Oil would announce a suggested retail price for gasoline and sell it to Khan for 3.25 cents per gallon less. The contract further required Khan to rebate to State Oil any profit received for sales above the suggested retail price. As Judge Posner noted, the contract eliminated any incentive for Khan to charge above the suggested retail price. Since absolute compliance was thus guaranteed under the facts of Khan, it is not surprising that a dealer challenged the program. AmCy, on the other hand, never announced suggested retail prices to its dealers, never established an explicit mark-up, and never required dealers to seek permission before lowering their price. The fact that AmCy's dealers frequently lowered retail prices below the wholesale purchase price indicates that AmCy did not implement its rebate program in order to eliminate dealers’ incentives to reduce prices (e.g., to develop new customers, to increase business with existing customers, or to encourage switching by customers from other manufacturers’ agricultural products to AmCy's products). The majority's reliance on Khan is therefore of doubtful relevance to this case, particularly in light of the Supreme Court's recent decision to review Khan and the Commission's decision to join with the Antitrust Division of the Justice Department in the filing of an amicus brief in that Court that seeks to overrule the precedent on which Khan relies, Albrecht v. Herald Co., 390 U.S. 145 (1968), and bring an end to the per se rule against maximum RPM. See Brief for the United States and the Federal Trade Commission as Amici Curiae Supporting Reversal, State Oil v. Khan, No. 96-871 (April 1997).

AMERICAN CYANAMID COMPANY 1275 1257 Dissenting Statement circumvent the law of RPM (and of vertical restraints in general) laid down by the Supreme Court over the last twenty years.'° The majority's decision to issue a consent order here also cannot be supported on economic grounds. The per se treatment of RPM usually is justified by the assertion that such agreements almost invariably are used to support collusion, either among manufacturers or among distributors.'' RPM could support manufacturer collusion for two reasons.” First, RPM may make it easier to detect cheating on a cartel agreement, because resale prices (presumably) are easier to observe than wholesale prices, and successful monitoring of prices is necessary for any successful collusive price agreement to work." Second, RPM may reduce the incentive to cheat on a cartel because a manufacturer cutting its wholesale price will not increase sales by very much if the corresponding resale price cannot fall.'* If RPM is being used to facilitate manufacturer collusion, we would expect to see other manufacturers adopting similar price restrictions; collectively, these manufacturers would have to account for sufficient total output to give them power over price." As far as I can tell, the manufacturers 1 3 3 1 9 1543 1618 152 43 96.088501 cartel theory is not relevant to the present case. The Commission's complaint does not allege, let alone provide supporting evidence, that AmCy attempted to collude with other agricultural chemical makers, such as Dupont, Monsanto, Ciba-Geigy, or BASF. There is also no evidence that these other firms used RPM, as is required for the theory to work. But even : Today's action by the Commission has by no means established a clearer and more certain legal tule for RPM cases than exists under the rule of Colgate and other Supreme Court decisions. Whereas a supplier before today's order might know with certainty that mere voluntary adherence by a distributor to a unilaterally announced resale price policy does not constitute illegal RPM, this same supplier must now worry that the Commission may henceforth use such voluntary adherence as evidence of a per se illegal agreement to maintain resale prices. Moreover, as a result of today's decision, the business community may be left wondering how the Commission can -~ and whether it will -- maintain the functional distinction it currently draws between, on the one hand, rebate-passthrough provisions and cooperative advertising programs -- programs that the Commission generally does not consider to be per se illegal -- and, on the other hand, other types of rebate programs that similarly impose restrictive conditions on the buyer. 11 :

Of course, much of the empirical literature on the actual uses of RPM (see note 1, supra) casts serious doubt upon the validity of this proposition. ie See Lester G. Telser, Why5 1 7 1 1 7 1088 2759 113 30 96.528458 Should5 1 7 1 1 8 1216 2757 235 30 96.399574 Manufacturers5 1 7 1 1 9 1464 2757 87 28 96.957191 Wants 1 7 1 1 10 1562 2754 66 30 93.275764 Fair5 1 7 1 1 11 1639 2755 137 34 86.906494 Trade?, 3 J.L. & Econ. 86 (1960). a See George J. Stigler, A5 1 8 1 1 7 1072 2839 116 35 96.815239 Theory5 1 8 1 1 8 1202 2838 37 29 96.732475 of5 1 8 1 1 9 1247 2835 191 38 96.197861 Oligopoly, in The Organization of Industry 39, 43 (1968) ("In general the policing of a price agreement involves an audit of the transactions prices."). This argument is subject to the obvious limitation that a manufacturer wishing to cheat on the collusive arrangement would have little incentive to enforce the RPM agreement. 2 Of course, all of the standard factors used to analyze market power and the ability to implement and maintain collusive pricing (e.g., ease of entry, heterogeneity of the products, and so forth) would also be relevant to judging the likelihood of successful supplier collusion. Dissenting’Statement 123 F.T.C.

putting aside the absence of such evidence, it is difficult to imagine an arrangement less suited to cartel stability than that which existed between AmCy and its distributors. Specifically, under the terms of AmCy's C.R.O.P.™ and A.P.E.X.™ programs, a dealer's compensation was tied explicitly to the share of chemical sales accounted for by AmCy's products. Given that a crucial element of cartel enforcement is the discovery of some means by which each member can commit credibly to maintaining -- but not increasing -- its market share,'* how could a program that explicitly rewards market share expansion plausibly be characterized as a cartel enforcement tool? ; Furthermore, the available evidence suggests that the C.R.O.P.™ and A.P.E.X.™ programs were extraordinarily successful in expanding AmCy's sales and market share, which grew substantially while the program was in use. Certainly, other factors (e.g., the successful introduction of several new product lines) may have accounted for a portion of this increase,'’ nevertheless, it is difficult (if not impossible) to reconcile the behavior of AmCy's output -- or of total market output -- during this period with any coherent theory of competitive harm involving collusion with other chemical makers. In the alternative, per se treatment sometimes is predicated on the characterization of RPM as an aid to dealer collusion. Under such a scenario, a group of dealers pressures the supplier to adopt RPM to achieve and maintain a collusive resale price arrangement among the dealers. When RPM is used for this purpose, we would expect to see coordinated pressure on the manufacturer to adopt RPM from a group of dealers with sufficient market power to credibly threaten the manufacturer. Moreover, to be effective, the dealer cartel must enter into similar arrangements with enough manufacturers to be able to affect market price; otherwise, the collusive retail price of pricemaintained products would be undermined by competition from products not subject to RPM agreements. Under such conditions, we would expect the manufacturer to be a reluctant participant in the scheme, though it would enforce the RPM agreement if the dealer threats were credible. Finally, it is unlikely that the colluding dealers would carry competing products not subject to RPM agreements, as 16 : , :

As Stigler (supra note 13, at 42) noted, [f]ixing5 1 5 1 2 10 1354 2928 113 30 96.808594 markets 1 5 1 2 11 1478 2928 102 30 96.948235 shares5 1 5 1 2 12 1593 2936 25 21 96.999916 is5 1 5 1 2 13 1629 2926 148 38 96.381332 probably5 1 5 1 2 14 1789 2925 49 31 96.950096 thes 1 5 1 2 15 1850 2929 81 25 96.978600 most5 1 5 1 2 16 1941 2925 138 29 96.812157 efficient5 1 5 1 2 17 2090 2925 39 29 96.925041 of4 1 5 1 3 0 472 2979 826 38 -1 5 1 5 1 3 1 472 2979 38 29 96.872749 all5 1 5 1 3 2 524 2979 136 29 96.277252 methods5 1 5 1 3 3 673 2979 38 29 96.684685 of5 1 5 1 3 4 718 2979 176 37 96.370132 combating5 1 5 1 3 5 906 2984 95 25 96.667435 secrets 1 5 1 3 6 1012 2980 80 37 96.538551 prices 1 5 1 3 7 1104 2980 194 30 94.498764 reductions. i The likelihood of successfully maintaining collusion in the face of product innovation (as was occurring in this instance) is, of course, quite small. Collusion is more likely to be successful, the greater the degree of similarity (e.g., in terms of cost, demand, and product characteristics) among the parties to the agreement.

AMERICAN CYANAMID COMPANY T2777 1257 Dissenting Statement that would be equivalent to cheating on the collusively-determined resale margin.

This second anticompetitive theory fits the facts of this case no better than the first. The Commission's complaint does not allege that AmCy is the victim of a dealer cartel. As I already have noted, it does not appear that other manufacturers had similar arrangements with the members of any putative dealers 1 3 2 5 6 1263 765 168 52 95.937782 cartel, or that this cartel eschewed the products of rival manufacturers.'* Had AmCy been the victim of a cartel, its attitude toward the Commission and numerous state investigations should have been one of grateful acquiescence, because the enforcement agencies would be rescuing it from the clutches of its rapacious dealers. In fact, of course, AmCy unilaterally terminated the challenged provisions of the C.R.O.P.™ and A.P.E.X.” programs several years ago. So much for dealers 1 3 2 12 8 1444 1237 282 61 35.596939 coercion,” - Given that neither of the two traditional anticompetitive theories can be reconciled with the terms of the AmCy program, could the Commission's action be justified on some other basis? The Commission might attempt to seek refuge in some unilateral theory of market power, under which a manufacturer with substantial preexisting market power is hypothesized to use vertical restraints because, for some reason, it cannot extract the full value of its market power simply by raising its wholesale price. The economics literature certainly acknowledges such possibilities, but these theories provide a fragile basis for antitrust enforcement.”” As such models show, vertical restraints often can improve consumer welfare even when adapted by firms with substantial market power,” the models fail, however, to provide empirical criteria by which enforcers can * This is unsurprising, because over 2500 dealers participated in the C.R.O.P.™ and A.P.E.X.™ programs. It is fanciful to believe that a cartel could have been formed from among such a large number of dealers. If such a cartel exists, one might reasonably ask why the dealers that belong to it are not also named in the Commission's complaint. In its reply, the majority appears to suggest that the existence of a dealer cartel can be inferred from the allegation that a5 1 6 1 2 6 916 2542 116 31 93.273438 dealer's5 1 6 1 2 7 1044 2542 139 37 96.909096 advisory5 1 6 1 2 8 1194 2542 120 29 96.207375 councils 1 6 1 2 9 1328 2541 90 30 96.980774 voted5 1 6 1 2 10 1432 2545 30 25 96.851952 to5 1 6 1 2 11 1475 2539 105 31 96.922600 advises 1 6 1 2 12 1593 2539 156 29 93.200539 Americans 1 6 1 2 13 1762 2537 168 38 88.652649 Cyanamid5 1 6 1 2 14 1945 2541 28 25 97.012665 to5 1 6 1 2 15 1986 2535 94 31 96.939972 retains 1 6 1 2 16 2094 2535 49 30 97.011192 thea 1 6 1 3 0 492 2581 1651 46 -1 5 1 6 1 3 1 492 2598 134 29 96.190697 programs 1 6 1 3 2 637 2589 28 29 96.190697 in5 1 6 1 3 3 677 2588 84 30 96.840401 orders 1 6 1 3 4 772 2593 28 25 96.503441 to5 1 6 1 3 5 811 2593 111 33 96.301773 protects 1 6 1 3 6 933 2589 35 29 96.301773 its5 1 6 1 3 7 981 2589 155 37 95.059502 margins. Statement of Chairman Robert Pitofsky and Commissioners Janet D. Steiger and Christine A. Varney in the Matter of American Cyanamid, at note 5. Even if an advisory council furnished this advice to AmCy, communications of this nature between dealers and manufacturers do not establish that the dealers acted collusively. Moreover, the fact that dealers may have communicated this advice says nothing about the competitive effects of AmCy's rebate program. One would expect dealers to provide this same advice if AmCy's program were designed to prevent discounters from free-riding on the pre-sale services provided by other dealers. a See, e.g., Remarks of Commissioner Roscoe B. Starek, III, Reinventing5 1 7 1 1 12 1754 2933 147 29 96.952873 Antitrust5 1 7 1 1 13 1913 2932 232 29 96.246826 Enforcement?4 1 7 1 2 0 493 2982 1654 42 -1 5 1 7 1 2 1 493 2988 130 30 92.859497 Antitrut5 1 7 1 2 2 644 2992 29 25 96.951538 at5 1 7 1 2 3 694 2988 49 29 96.536781 thes 1 7 1 2 4 764 2988 72 29 96.218941 FTC5 1 7 1 2 5 858 2988 30 29 96.660545 in5 1 7 1 2 6 915 2988 75 29 95.687004 19955 1 7 1 2 7 1011 2988 59 29 95.908264 ands 1 7 1 2 8 1092 2988 153 36 90.547546 Beyond, before a conference on A5 1 7 1 2 14 1756 2984 79 28 95.747940 News 1 7 1 2 15 1856 2984 66 36 96.360588 Ages 1 7 1 2 16 1944 2982 38 29 96.721329 of5 1 7 1 2 17 1999 2982 148 29 96.494507 Antitrust4 1 7 1 3 0 494 3029 1271 40 -1 5 1 7 1 3 1 494 3034 219 30 93.289764 Enforcement:5 1 7 1 3 2 728 3033 109 30 43.619873 Antitri5 1 7 1 3 3 846 3038 27 24 43.619873 st5 1 7 1 3 4 884 3033 30 30 96.390137 in5 1 7 1 3 5 931 3034 91 28 96.450249 1995 (Marina del Rey, Califomia, Feb. 24, 1995). As I noted earlier (supra note 2), market power is a necessary, but not a sufficient, condition for vertical restraints to reduce consumer welfare. Dissenting Statement 123 F.T.C.

distinguish anticompetitive from procompetitive effects.” Thus, the practical utility of these theories is questionable even for conduct judged under the rule of reason; their inability to justify a policy of per se illegality appears self-evident.

On several grounds, therefore, issuance of the complaint and consent order in this matter represents a poor policy choice by the Commission. From a legal perspective, AmCy's conduct does not constitute an illegal agreement to maintain resale prices; from an economic perspective, the evidence points to the conclusion that AmCy's conduct was procompetitive; and from a policy perspective, the Commission's decision hardly delineates a clearer distinction (and in fact seriously blurs the line) between conduct likely to be subject to per se condemnation and conduct that is not. Instead of reaching for ways to expand the application of the per se rule to conduct that is plainly procompetitive, enforcers should reserve their heavy hand for conduct that falls within standards for per se illegality clearly enunciated by the Supreme Court.

22 ‘ 4 4 As Katz (supra note 1, at 713-14) notes, [much5 1 5 1 2 10 1314 2965 37 30 96.894203 of5 1 5 1 2 11 1359 2965 48 30 96.942535 thes 1 5 1 2 12 1422 2965 147 30 96.845695 literature5 1 5 1 2 13 1582 2973 39 21 96.845695 on5 1 5 1 2 14 1634 2964 123 29 96.947754 vertical5 1 5 1 2 15 1770 2967 150 26 96.964722 restraints5 1 5 1 2 16 1934 2962 53 31 96.964722 has5 1 5 1 2 17 1998 2964 81 28 96.990494 been2 1 6 0 0 0 425 3013 1654 217 -1 3 1 6 1 0 0 425 3013 1654 217 -1 4 1 6 1 1 0 426 3013 1652 41 -1 5 1 6 1 1 1 426 3016 168 30 96.789665 conducted5 1 6 1 1 2 610 3016 71 30 96.922775 with5 1 6 1 1 3 696 3016 48 30 96.285873 thes 1 6 1 1 4 756 3025 122 28 96.826019 express5 1 6 1 1 5 892 3016 61 29 95.655701 aims 1 6 1 1 6 965 3016 39 30 95.655701 of5 1 6 1 1 7 1011 3016 138 37 96.410683 deriving5 1 6 1 1 8 1161 3016 104 38 96.605934 policy5 1 6 1 1 9 1277 3015 201 30 96.416199 conclusions.5 1 6 1 1 10 1494 3015 59 29 96.951485 But5 1 6 1 1 11 1565 3015 29 29 96.971718 in5 1 6 1 1 12 1607 3024 102 27 96.410995 many,5 1 6 1 1 13 1722 3013 29 30 96.882339 if5 1 6 1 1 14 1758 3018 54 25 96.899643 not5 1 6 1 1 15 1824 3018 89 31 97.002602 most,5 1 6 1 1 16 1927 3013 151 30 96.642769 instances4 1 6 1 2 0 426 3060 1653 39 -1 5 1 6 1 2 1 426 3062 78 29 96.005081 there5 1 6 1 2 2 519 3061 24 30 96.597931 is5 1 6 1 2 3 557 3070 40 22 96.524040 no5 1 6 1 2 4 611 3062 184 37 96.566383 widespread5 1 6 1 2 5 810 3067 174 32 96.189598 agreements 1 6 1 2 6 997 3072 40 20 96.316399 on5 1 6 1 2 7 1053 3063 133 29 96.877411 whether5 1 6 1 2 8 1190 3056 16 48 96.785500 a5 1 6 1 2 9 1230 3062 156 37 96.083488 particulars 1 6 1 2 10 1400 3061 122 30 96.533340 vertical5 1 6 1 2 11 1537 3061 130 37 96.460434 practices 1 6 1 2 12 1683 3060 25 29 96.730675 is5 1 6 1 2 13 1723 3060 130 36 96.906105 socially5 1 6 1 2 14 1866 3060 164 29 96.785553 beneficial5 1 6 1 2 15 2045 3068 34 20 96.940811 or4 1 6 1 3 0 426 3105 1652 41 -1 5 1 6 1 3 1 426 3108 137 29 96.417374 harmful.5 1 6 1 3 2 583 3108 71 29 96.733879 This5 1 6 1 3 3 672 3109 141 37 96.340706 unhappy5 1 6 1 3 4 830 3112 74 25 96.713585 states 1 6 1 3 5 921 3109 39 29 96.998360 of5 1 6 1 3 6 972 3108 104 30 96.869125 affairs5 1 6 1 3 7 1095 3108 24 29 96.703346 is5 1 6 1 3 8 1137 3108 68 35 96.703346 due,5 1 6 1 3 9 1224 3108 30 29 96.675484 in5 1 6 1 3 10 1270 3112 71 33 96.905922 part,5 1 6 1 3 11 1359 3113 30 24 96.482269 to5 1 6 1 3 12 1407 3108 48 29 96.828453 thes 1 6 1 3 13 1473 3107 62 29 96.976440 facts 1 6 1 3 14 1551 3107 60 29 97.008224 that5 1 6 1 3 15 1629 3106 38 30 96.924004 all5 1 6 1 3 16 1686 3106 38 29 96.924004 of5 1 6 1 3 17 1736 3106 50 30 96.970970 thes 1 6 1 3 18 1803 3105 147 39 96.293213 practices5 1 6 1 3 19 1966 3114 56 20 96.435104 cans 1 6 1 3 20 2040 3105 38 29 96.981956 be4 1 6 1 4 0 425 3151 1653 39 -1 5 1 6 1 4 1 425 3153 159 30 96.644493 beneficial5 1 6 1 4 2 600 3154 28 29 96.944763 in5 1 6 1 4 3 642 3162 85 21 96.787575 some5 1 6 1 4 4 742 3154 148 29 95.917511 instances5 1 6 1 4 5 904 3154 59 30 96.772339 ands 1 6 1 4 6 977 3154 128 30 96.510612 harmful5 1 6 1 4 7 1121 3154 29 29 95.965210 in5 1 6 1 4 8 1164 3155 110 33 95.965210 others,5 1 6 1 4 9 1288 3153 55 29 96.671997 ands 1 6 1 4 10 1358 3153 22 29 96.863068 it5 1 6 1 4 11 1392 3162 70 28 96.857658 may5 1 6 1 4 12 1475 3153 39 29 96.708725 be5 1 6 1 4 13 1527 3151 163 38 96.033127 extremely5 1 6 1 4 14 1704 3151 136 31 96.862465 difficult5 1 6 1 4 15 1853 3156 29 25 96.932953 to5 1 6 1 4 16 1896 3151 182 37 96.770500 distinguish4 1 6 1 5 0 426 3200 386 30 -1 5 1 6 1 5 1 426 3200 131 28 95.864372 between5 1 6 1 5 2 571 3200 47 29 96.874580 thes 1 6 1 5 3 631 3204 59 25 95.535767 two5 1 6 1 5 4 703 3201 109 29 95.680946 cases. AMERICAN HOME PRODUCTS CORPORATION 1279 1279 Complaint