Darvel, Inc

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

IN THE MATTER OF DARVEL, INC.

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket C-/1034. Complaint, Aug. 12, 1980-Decision, Aug. 12, 1980 This consent order requires, among other things, a Bellgarden, Calif. manufacturer and distributor of wearing apparel and related accessories to cease fixing or otherwise controlling the resale prices at which its products are sold or advertised; seeking the identity of dealers who fail to adhere to suggested resale prices and sales period; and taking any adverse action against them. Respondent is barred from restricting the lawful use of brand names and trademarks in the advertising and sale of its products, and from granting any consideration, service or benefit to any dealer because of the resale price that another dealer has advertised or sold a product. Additionally, the order prohibits the firm from suggesting retail prices for its products for a period of one year.

Appearances For the Commission: Jeffrey A. Klurfeld. For the respondent: J. Eddstepp Jr., Gibson, Dunn Crutcher, Los Angeles, Calif. and Hal L. Cofkey. Cofkey, Cofkey Boxer Los Angeles, Calif.

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 Darvel, Inc., a corporation, hereinafter sometimes referred to as respondent, 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 as follows: For purposes of this complaint, the following definitions shall apply:

Product" is defined as any item of wearing apparel or related accessory which is manufactured, offered for sale or sold by respondent.

Dealer" is defined as any person, partnership, corporation or firm which sells any product in the course of its business. Resale Price" is defined as any price, price floor, price ceiling, price range, or any mark-up, formula or margin of profit used by any Complaint 96 F.

dealer for pricing any product. Such term includes, but is not limited , any suggested, established or customary resale price as well as the retail price in effect at any dealer.

Sale Period" is defined as any time during which any dealer offers to sell any product at resale prices lower than those in effect during the usual and ordinary course of said dealer s business; or any suggested, authorized or customary time for selling or advertising any product at prices lower than the suggested, established or customary resale prices.

PARAGRAPH 1. Respondent Darvel, Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the State of California, with its offce and principal place of business located at 6891 Florence Place, Bellgarden, California. PAR. 2. Respondent is now, and for some time last past, has been engaged in the manufacture, advertising, offering for sale, sale and distribution of wearing apparel and related accessories. Sales by respondent for fiscal year 1978 exceeded $6 milion. 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. Respondent sells and distributes its products directly to more than 2 000 retail dealers located throughout the United States who in turn resell respondent' s products to the general public. PAR. 5. In the course and conduct of its business, and at all times mentioned herein, respondent has been, and now is, in substantial competition in or affecting commerce with corporations, firms and individuals engaged in the manufacture, advertising, offering for sale, sale and distribution of merchandise of the same general kind and nature as merchandise manufactured, advertised, offered for sale, sold and distributed by respondent.

PAR. 6. In the course and conduct of its business as above described, respondent has for some time last past effectuated and pursued a policy throughout the United States, and has employed various means and methods in furtherance thereof, the purpose or effect of which is and has been to fix, control, establish, manipulate and maintain the resale prices at which its dealers advertise, offer for sale and sell its products.

PAR. 7. The aforesaid acts and practices of respondent have been and are now having the effect of hampering and restraining competition in the resale and distribution of respondent's products, and, thus, are to the prejudice and injury of the public, and constitute unfair methods of competition in or affecting commerce or 145 Decision and Order unfair acts and practices in or affecting commerce in violation of Section 5 of the Federal Trade Commission Act. The acts and practices of respondent as herein alleged, are continuing and will continue in the absence of the relief herein requested. 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 San Francisco Regional Offce proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge 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 the 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 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. Respondent Darvel, Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the State of California, with its offce and principal place of business located at 6891 Florence Place, in the City of Bellgarden, State of California. 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 the purposes of this Order, the following definitions shall apply:

Product" is defined as any item of wearing apparel or related Decision and Order 96 F. accessory which is manufactured, offered for sale or sold by respondent.

Dealer" is defined as any person, partnership, corporation or firm which sells any product in the course of its business. Resale Price" is defined as any price, price floor, price ceiling, price range, or any mark-up, formula or margin of profit used by any dealer for pricing any product. Such term includes, but is not limited , any suggested, established or customary resale price as well as the retail price in effect at any dealer.

Sale Period" is defined as any time during which any dealer offers to sell any product at resale prices lower than those in effect during the usual and ordinary course of said dealer s business; or any suggested, authorized or customary time for selling or advertising any product at prices lower than the suggested, established or customary resale prices.

It is ordered. That respondent Darvel, Inc., a corporation, its successors and assigns, and respondent's officers, agents, representatives and employees, directly or indirectly, or through any corporation, subsidiary, division or other device, in connection with the manufacture, advertising, offering for sale, sale or distribution of any product in or affecting commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

1. Fixing, establishing, controllng or maintaining, directly or indirectly, the resale price at which any dealer may advertise promote, offer for sale or sell any product, or the sale period of any dealer.

2. Requesting, requiring or coercing, directly or indirectly, any dealer to maintain, adopt or adhere to any resale price or sale period. 3. Requesting or requiring, directly or indirectly, any dealer to report the identity of any other dealer who deviates from any resale price or sale period; or acting on any reports or information so obtained by threatening, intimidating, coercing or terminating said dealer.

4. Requesting or requiring that any dealer refrain from or discontinue sellng or advertising any product at any resale price. 5. Hindering or precluding the lawful use by any dealer of any brand name, trade name or trademark of respondent in connection with the sale or advertising of any product at any resale price. 6. Making any paYInent or granting any consideration, service or DARVEL, INC. 149 145 Decision and Order benefi to any dealer because of the resale price at which any other dealer has advertised or sold any product. 7. Conducting any surveilance program to determine whether any dealer is advertising, offering for sale or sellng any product at any resale price, where such surveilance program is conducted to fix, maintain, control or enforce the resale price at which any product is sold or advertised.

8. Terminating or taking any other action to restrict, prevent or limit the sale of any product by any dealer because of the resale price at which said dealer has sold or advertised, is selling or advertising, or is suspected of sellng or advertising any product. 1. For a period of one (1) year from the date of service of this Order, orally suggesting or recommending any resale price or sale period to any dealer.

2. For a period of one (1) year from the date of service of this Order, communicating in writing any resale price or sale period to any dealer; provided, however that after said one (1) year period respondent shall not suggest any resale price or sale period on any list, or in any advertising, book, catalogue or promotional material, unless it is clearly and conspicuously stated on each page where any suggested resale price or sale period appears, the following: THE (RESALE PRICES OR SALE PERIODS! QUOTED HEREIN ARE SUGGESTED ONLY. YOU ARE FREE TO DETERMINE YOUR OWN (RESALE PRICES OR SALE PERIODS).

It is further ordered, That respondent shall within ninety (90) days after service of this Order, mail a copy of the enclosure set forth in the attached Exhibit A to each of its present accounts. An affidavit shall be sworn to by an official of the respondent verifying that the attached Exhibit A was so mailed.

It is further ordered, That respondent shall forthwith distribute a copy of this Order to all operating divisions of said corporation, and to present or future personnel, agents or representatives having sales, advertising or policy responsibilities with respect to the subject matter of this order, and that respondent secure from each such person a signed statement acknowledging receipt of said Order. Decision and Order 96 F. It is further ordered, That respondent notify the Commission at least thirty (30) days prior to any proposed change in the 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 which may affect compliance obligations arising out of the Order. It is further ordered That respondent shall within sixty (60) days after service upon it of this Order, fie with the Commission a report in writing, setting forth in detail the manner and form in which it has complied with this Order.

EXHIBIT A Dear Retailer:

Without admitting any violation of the law, Darvel, Inc. has agreed to the entry of an Order by the Federal Trade Commission regulating certain distribution practices. In connection therewith. the Company is required to send you this letter describing the Order.

The Order provides, among other things, as follows: 1. You can advertise and sell DarveI and Zepplin products at any price you choose. 2. Darvel will not take any action against you, including termination, because of the price at which you advertise or sell Darvel and Zepplin products. 3. Darvel will not suggest retail prices for any product unti (1 year from the date of service of the Order).

4. The price at which you sell or advertise Daniel or Zepplin products wil not affect your right to use Darvel or Zepplin trademarks or other identification in your sale or advertising of products bearing DaTVei or Zepplin trademarks or identification. If you have any questions regarding the Order or this letter, please call for Darvel, Inc.

151 Final Order