U.S. Pioneer Electronics Corp

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IN THE MATTER OF U.S. PIONEER ELECTRONICS CORP.

MODIFYING ORDER IN REGARD TO ALLEGED VIOLATION OF SEC, 5 OF THE FEDERAL TRADE COMMISSION ACT AND ORDER TO SHOW CAUSE Docket C-2755. Consent Order, Oct. 24, 1975--Modifying Order and Order to Show Cause, April 8, 1992 This order reopens the proceeding and modifies, in part, the Commission's consent order issued in 1975 [86 FTC 1002], by allowing the company to withhold cooperative advertising allowances from dealers and to unilaterally terminate dealers who have advertised its products at prices other than those suggested by the company. In addition, the Commission ordered the respondent to show cause why additional modification to paragraph I.10. should not be made. ORDER GRANTING IN PART AND DENYING IN PART REQUEST TO REOPEN AND MODIFY ORDER ISSUED OCTOBER 24, 1975, AND ORDER TO SHOW CAUSE Pioneer Electronics (USA) Inc., the successor corporation to U.S. Pioneer Electronics ("Pioneer"), has filed a Petitions 1 9 1 2 8 1779 1843 35 29 96.670296 to5 1 9 1 2 9 1840 1838 149 44 96.015144 Reopen4 1 9 1 3 0 655 1889 1333 50 -1 5 1 9 1 3 1 655 1895 232 44 96.518188 Proceedings5 1 9 1 3 2 902 1895 66 34 96.421211 ands 1 9 1 3 3 982 1900 35 29 96.983521 to5 1 9 1 3 4 1030 1894 142 45 96.597382 Modify5 1 9 1 3 5 1186 1894 155 35 96.649719 Consents 1 9 1 3 6 1354 1895 111 34 92.903503 Orders 1 9 1 3 7 1478 1889 226 48 70.084579 (Petition")’ in Docket No.

C-2755, pursuant to Section 5(b) of the Federal Trade Commis-sion Act, 15 U.S.C. 45(b), and Section 2.51 of the Commission's Rules of Practice and Procedure, 16 CFR 2.51. Pioneer asks the Commission to reopen and modify the consent order issued by the Commission on October 25, 1975 ("order"), U.S. Pioneer Electronics Corp., 86 FTC 1002 (1975). The order was previously reopened by the Commission on November 5, 1982, 100 FTC 526 (1982), pursuant to an order to show cause and modified on March 18, 1983, 101 FTC 372 (1983).? 1 Pioneer submitted a Memorandum in Support of Petition to Reopen Proceedings and to Modify Consent Order ("Petition Memo") with its Petition. The Commission modified paragraph 1.11. to allow Pioneer to prevent transshipment of its products to outlets that do not provide adequate point of sale promotions and service.

U.S. PIONEER ELECTRONICS CORPORATION 447 446 Modifying Order Pioneer asks the Commission to set aside and modify several provisions contained in paragraph I of the order, each of which limits Pioneer's ability to impose restrictions on its dealers’ advertised prices in connection with the sale of consumer electronics products. In support of its Petition, Pioneer argues that the modifications are warranted by changed conditions of law and fact, and by the public interest. Pioneer's Petition was placed on the public record for thirty days, pursuant to Section 2.51 of the Commission's Rules. No public comments were received.

For the reasons discussed below, the Commission has determined that Pioneer has not shown that changed conditions of law or fact require reopening the order but that Pioneer has demonstrated that it is in the public interest for the order to be reopened and modified in part. The Commission has, therefore, reopened and modified the order. Also, pursuant to Section 3.72 of the Commission's Rules, the Commission is issuing an Order to Show Cause why it is not in the public interest for the Commission to modify the order further to remove restrictions regarding Pioneer's ability to terminate a dealer who does not comply with suggested resale prices. I.

The Complaint and Order The complaint in this case alleged that Pioneer violated Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45, by engaging, in combination with its dealers, in courses of action to unlawfully fix, establish, stabilize or maintain the suggested retail prices at which its products were resold.’ The complaint listed seven specific acts and practices in which Pioneer engaged in furtherance5 1 5 1 6 8 1532 2314 56 36 95.936371 of those courses of action, including, for example, establishing agreements, under- At about this same time, the Commission issued a number of similar vertical price fixing complaints and orders against Pioneer's competitors. See United Audio Products, Inc., C-2828, 88 FTC 24 (1976); Nikko Electronic Corporation of America, C-2829, 88 FTC 31 (1976); Sansui Electronics Corporation, C-2754, 86 FTC 995 (1975); Sherwood Electronic Laboratories, Inc., C-2753, 86 FTC 988 (1975); TEAC Corporation of America, C-2752, 86 FTC 981 (1975). Modifying Order 115 F.T.C.

standings, or arrangements with its dealers, as a condition precedent to granting or retaining a dealership, that such dealers will maintain certain resale or retail prices, and soliciting and obtaining its dealers' cooperation and assistance in identifying and reporting any dealer who advertises, offers to sell, or sells products at prices lower than certain resale prices, 86 FTC at 1003. The order prohibits Pioneer, its successors and assigns, from engaging in any of twelve specified acts and practices related to vertical price fixing. Jd. at 1005-6. Pioneer consented to the Commission's order. II.

Pioneer's Petition The prohibitions at issue in the Petition relate to the advertising restrictions in paragraphs 1.2., 1.5., 1.6., 1.8., and 1.10. of the order. Specifically, Pioneer requests the Commission to delete paragraph 1.6.* (which refers to cooperative advertising restrictions) and modify 4 Paragraph J.6. prohibits Pioneer from:

Threatening to withhold or withholding earned cooperative advertising credits or allowances from any dealer because said dealer advertises respondent's products at retail prices other than that which respondent deems appropriate or has approved.

U.S. PIONEER ELECTRONICS CORPORATION 449 446 Modifying Order paragraphs I.2., I.5., 1.8., and I.10.° by removing all other advertising restrictions.

Pioneer argues that the relief it is seeking is required by changed conditions of law and fact, and by the public interest. Pioneer asserts that Minimum Advertising Price ("MAP") programs prohibited by the order ares 1 3 2 4 4 833 929 62 29 95.968300 not5 1 3 2 4 5 910 923 47 46 96.624100 by5 1 3 2 4 6 975 923 216 35 96.384712 themselves5 1 3 2 4 7 1210 929 222 40 95.884949 agreements5 1 3 2 4 8 1450 929 36 29 96.946938 to5 1 3 2 4 9 1503 923 53 35 96.349464 fix5 1 3 2 4 10 1573 923 127 46 96.415337 prices.5 1 3 2 4 11 1734 923 141 35 96.585419 Instead4 1 3 2 5 0 539 981 1335 49 -1 5 1 3 2 5 1 539 983 82 45 96.336617 they5 1 3 2 5 2 637 992 57 25 96.825699 ares 1 3 2 5 3 709 982 133 45 93.268700 merely5 1 3 2 5 4 858 981 214 49 74.932304 'fencing-in'5 1 3 2 5 5 1085 981 214 46 96.811287 provisions.5 1 3 2 5 6 1327 983 52 34 96.812508 As5 1 3 2 5 7 1394 982 84 45 96.789162 long5 1 3 2 5 8 1493 992 37 25 96.905823 as5 1 3 2 5 9 1546 981 95 36 96.597176 there5 1 3 2 5 10 1655 981 30 36 96.476578 is5 1 3 2 5 11 1701 992 47 25 96.954727 no5 1 3 2 5 12 1762 981 112 36 96.992050 resale4 1 3 2 6 0 538 1040 1335 46 -1 5 1 3 2 6 1 538 1040 97 46 96.884087 prices 1 3 2 6 2 648 1040 246 36 96.595848 maintenance5 1 3 2 6 3 907 1040 180 41 96.561882 behavior,5 1 3 2 6 4 1102 1040 68 35 96.972931 ands 1 3 2 6 5 1184 1040 96 35 96.771843 there5 1 3 2 6 6 1294 1046 127 30 96.999504 cannot5 1 3 2 6 7 1435 1040 44 35 96.894493 be5 1 3 2 6 8 1492 1040 107 46 96.144455 given5 1 3 2 6 9 1613 1040 57 36 96.144455 thes 1 3 2 6 10 1684 1040 95 36 96.042542 clears 1 3 2 6 11 1792 1051 81 25 96.877228 case4 1 3 2 7 0 538 1098 1336 47 -1 5 1 3 2 7 1 538 1099 69 35 96.652336 laws 1 3 2 7 2 625 1098 94 36 96.651207 from5 1 3 2 7 3 736 1099 58 35 96.410515 thes 1 3 2 7 4 813 1098 172 46 96.554855 Supreme5 1 3 2 7 5 1002 1098 111 36 96.486786 Courts 1 3 2 7 6 1130 1109 37 25 96.565796 as5 1 3 2 7 7 1186 1099 82 35 96.534882 wells 1 3 2 7 8 1287 1109 37 25 95.841583 as5 1 3 2 7 9 1342 1099 58 35 96.860428 thes 1 3 2 7 10 1417 1098 203 47 96.761063 provisions5 1 3 2 7 11 1639 1099 42 36 96.967293 of5 1 3 2 7 12 1695 1099 58 35 97.007904 thes 1 3 2 7 13 1771 1100 103 35 96.626060 order4 1 3 2 8 0 538 1157 1336 47 -1 5 1 3 2 8 1 538 1157 119 36 96.355492 which5 1 3 2 8 2 676 1157 136 36 96.355492 remains 1 3 2 8 3 830 1157 36 35 96.650406 in5 1 3 2 8 4 886 1157 120 42 96.920158 effect,5 1 3 2 8 5 1026 1157 100 36 93.250137 these5 1 3 2 8 6 1147 1157 216 46 44.798325 'fencing-in’5 1 3 2 8 7 1381 1157 204 46 96.769073 provisions5 1 3 2 8 8 1605 1169 58 25 96.900810 ares 1 3 2 8 9 1682 1169 47 25 96.715645 no5 1 3 2 8 10 1748 1158 126 46 96.436768 longer4 1 3 2 9 0 537 1215 1334 47 -1 5 1 3 2 9 1 537 1216 223 46 95.405960 necessary. Petition Memo at 15. Pioneer asserts that under decisions rendered by the Supreme Court and the Commission since entry of the order in 1975, non-price vertical restrictions are to be governed by the rule of reason, and are no longer considered per se violations of the law.

Pioneer states that the requested modifications are necessary because it is ones 1 3 3 2 5 917 1563 42 35 96.891525 of5 1 3 3 2 6 976 1563 84 46 96.552956 only5 1 3 3 2 7 1081 1574 19 25 95.994484 a5 1 3 3 2 8 1120 1563 72 36 95.994484 few5 1 3 3 2 9 1212 1564 279 35 96.554161 manufacturers5 1 3 3 2 10 1512 1564 36 35 96.772499 in5 1 3 3 2 11 1569 1565 57 35 96.703468 thes 1 3 3 2 12 1646 1565 108 35 93.298927 homes 1 3 3 2 13 1774 1566 93 34 93.082771 elec-4 1 3 3 3 0 533 1620 1336 49 -1 5 1 3 3 3 1 533 1620 133 36 96.542152 tronics5 1 3 3 3 2 691 1620 160 47 96.838776 industry5 1 3 3 3 3 875 1621 72 35 96.133812 that5 1 3 3 3 4 970 1628 130 29 96.211716 cannot5 1 3 3 3 5 1124 1622 125 46 91.320534 adopt MAP programs, i.e., Pioneer cannot compete on a level playing field. That unequal playing field Pioneer requests that the Commission delete the bracketed words from the followiag order paragraphs. Paragraph I.2.: Fixing, establishing, controlling or maintaining the prices at which dealers may (advertise, promote, offer for sale or] sell respondent's products. Petition at 1. Paragraph 1.5.:

Refusing to sell or threatening to refuse to sell to any dealer who desires to engage in the sale of respondent's products for the reason that such dealer will not enter into an understanding or agreement with respondent to [advertise or] sell said products at respondent's established or suggested retail price. Petition at 2. Paragraph 1.8.:

Securing or attempting to secure any promises or assurances from dealers or prospective dealers regarding the prices at which such dealers will [advertise or] sell respondent's products [or requesting or requiring any dealer or prospective dealer to obtain approval from respondent for prices offered by said dealers in advertisements for respondent's products]. Petition at 2-3. Paragraph I.10.:

Terminating, threatening, intimidating, coercing, delaying shipments, or taking any other action to prevent the sale of respondent's products by a dealer because said dealer has [advertised or] sold, is {advertising or] selling, or is suspected of {advertising or] selling such products at other than prices that respondent may deem to be appropriate or has approved.

Petition at 3.

Modifying Order 115 F.T.C.

impairs interbrand competition by disadvantaging Pioneer when competing for dealers because dealers find Pioneer brands less profitable than those of manufacturers with MAP programs, and damaging competition for consumers because the public often5 1 3 1 4 9 1895 806 111 36 96.566948 forms4 1 3 1 5 0 672 861 1334 49 -1 5 1 3 1 5 1 672 872 43 25 96.972801 an5 1 3 1 5 2 727 861 172 36 96.732544 incorrect5 1 3 1 5 3 910 862 211 46 96.542564 impressions 1 3 1 5 4 1133 862 42 36 96.888245 of5 1 3 1 5 5 1184 863 57 35 97.009338 thes 1 3 1 5 6 1253 863 132 46 96.637894 quality5 1 3 1 5 7 1398 863 41 36 96.968819 of5 1 3 1 5 8 1448 863 147 36 96.711800 Pioneers 1 3 1 5 9 1606 864 164 46 96.711800 products5 1 3 1 5 10 1783 865 153 35 96.517220 because5 1 3 1 5 11 1949 865 57 35 96.497742 thea 1 3 1 6 0 671 920 1339 49 -1 5 1 3 1 6 1 671 920 204 36 96.505791 advertised5 1 3 1 6 2 890 920 151 36 96.801300 Pioneers 1 3 1 6 3 1054 920 98 47 96.555214 prices 1 3 1 6 4 1168 921 30 36 96.842888 is5 1 3 1 6 5 1215 921 98 36 96.788979 often5 1 3 1 6 6 1330 922 82 35 96.751709 wells 1 3 1 6 7 1428 922 118 35 96.868301 below5 1 3 1 6 8 1562 923 58 34 96.702179 thes 1 3 1 6 9 1636 923 201 35 96.502716 advertised5 1 3 1 6 10 1852 923 99 46 96.934792 prices 1 3 1 6 11 1967 923 43 37 96.757004 of4 1 3 1 7 0 670 980 1336 47 -1 5 1 3 1 7 1 670 980 59 34 96.880905 thes 1 3 1 7 2 748 980 229 45 96.098793 comparable5 1 3 1 7 3 995 980 150 46 92.475151 products 1 3 1 7 4 1165 1009 6 6 89.995110 .5 1 3 1 7 5 1193 1009 6 6 89.995110 .5 1 3 1 7 6 1222 1009 19 12 91.271629 .,5 1 3 1 7 7 1260 980 135 46 96.565948 though5 1 3 1 7 8 1414 980 58 36 96.651344 thes 1 3 1 7 9 1491 981 115 36 96.732544 actual5 1 3 1 7 10 1626 981 92 36 96.668869 sales5 1 3 1 7 11 1736 981 117 46 96.914955 prices5 1 3 1 7 12 1873 981 57 36 96.665962 for5 1 3 1 7 13 1947 983 59 35 96.050575 thea 1 3 1 8 0 669 1037 1013 46 -1 5 1 3 1 8 1 669 1037 169 46 96.739937 products5 1 3 1 8 2 854 1048 57 24 97.008614 ares 1 3 1 8 3 926 1037 121 46 96.398956 nearly5 1 3 1 8 4 1063 1037 58 36 96.578255 thes 1 3 1 8 5 1136 1038 129 35 79.621956 same. Petition Memo at 7.

Pioneer states that dealers must invest a large amount of money, space and resources when adding a new brand of electronics for sale. These investments will only be made if there5 1 3 2 3 9 1687 1214 31 36 96.928871 is5 1 3 2 3 10 1746 1224 19 24 95.675301 a5 1 3 2 3 11 1792 1214 211 35 95.959351 reasonable4 1 3 2 4 0 669 1270 1334 47 -1 5 1 3 2 4 1 669 1280 192 25 96.895470 assurances 1 3 2 4 2 889 1270 43 35 96.939369 of5 1 3 2 4 3 956 1280 19 25 96.132233 a5 1 3 2 4 4 1002 1270 202 46 96.824944 profitable,5 1 3 2 4 5 1234 1271 84 45 96.794868 long5 1 3 2 4 6 1347 1277 88 28 96.355934 terms 1 3 2 4 7 1462 1271 232 46 96.355934 relationships 1 3 2 4 8 1722 1271 86 35 96.625015 with5 1 3 2 4 9 1836 1271 58 35 96.862381 thes 1 3 2 4 10 1922 1282 81 25 96.939789 new4 1 3 2 5 0 668 1328 1333 48 -1 5 1 3 2 5 1 668 1328 186 46 94.557922 supplier. Petition Memo at 8. This relationship depends upon getting consumers to the store. In the electronics field, that is done predominantly through advertising.

Pioneer claims that the use of blow-out advertisements -advertisements of well-known products that are offered near dealer cost to build store traffic -- destroys the attractiveness of Pioneer as a product line for virtually5 1 3 3 4 6 1234 1680 45 33 96.461220 all5 1 3 3 4 7 1297 1680 168 34 81.820755 dealers. Petition Memo at 9. Asa result, Pioneer alleges, dealers5 1 3 3 5 5 1332 1737 112 34 96.522095 either5 1 3 3 5 6 1465 1737 119 34 96.712051 refuses 1 3 3 5 7 1606 1743 37 28 96.463661 to5 1 3 3 5 8 1666 1747 99 35 96.640602 carry5 1 3 3 5 9 1787 1737 152 34 96.640602 Pioneers 1 3 3 5 10 1960 1747 40 24 96.850220 or4 1 3 3 6 0 666 1794 1332 46 -1 5 1 3 3 6 1 666 1795 131 45 95.866951 simply5 1 3 3 6 2 823 1795 46 35 96.719231 do5 1 3 3 6 3 895 1801 61 29 96.683083 not5 1 3 3 6 4 980 1806 99 33 95.964699 carry5 1 3 3 6 5 1104 1794 25 35 96.444466 it5 1 3 3 6 6 1153 1794 36 35 96.842537 in5 1 3 3 6 7 1214 1794 189 46 95.918861 quantities5 1 3 3 6 8 1429 1806 40 24 96.056938 or5 1 3 3 6 9 1492 1801 162 39 96.652336 promotes 1 3 3 6 10 1678 1794 26 36 95.666496 it5 1 3 3 6 11 1729 1805 37 25 96.485100 as5 1 3 3 6 12 1791 1794 144 45 96.179489 heavily5 1 3 3 6 13 1960 1806 38 24 96.858589 as4 1 3 3 7 0 664 1852 1335 47 -1 5 1 3 3 7 1 664 1853 208 46 96.607269 competing5 1 3 3 7 2 886 1853 168 46 96.441444 products5 1 3 3 7 3 1070 1852 118 35 96.465614 which5 1 3 3 7 4 1204 1853 90 34 96.166458 have5 1 3 3 7 5 1309 1853 106 34 95.892555 MAPS 1 3 3 7 6 1429 1852 214 46 88.297890 programs. /d. Retailers are harmed by the low advertised prices because the customers will buy the products at the stores with the lower price, whether or not another retailer would have matched the price, and customers may decide that the higher priced retailer is not competitive generally and refuse to shop there. Petition Memo at 10. Pioneer states that MAP programs are especially important for “high-end' 'big ticket’ products” such as projection televisions because of the greater need for retailer investment in sales and service training. Petition Memo at 10. Pioneer also cites the lack of MAP programs as harming its ability to distribute through channels4 1 3 4 6 0 663 2491 1333 47 -1 5 1 3 4 6 1 663 2493 42 36 96.730194 of5 1 3 4 6 2 726 2494 98 34 96.837921 trades 1 3 4 6 3 850 2493 100 35 96.604263 others 1 3 4 6 4 973 2493 82 35 96.267731 than5 1 3 4 6 5 1079 2492 100 36 96.734070 retails 1 3 4 6 6 1204 2492 168 35 95.636993 dealers. Jd. The only different retail channel Pioneer discusses is a nation-wide catalog distributed thrice yearly. The catalog chooses to limit the Pioneer products it carries to step-up products because they are less often blow-out advertisement targets.

U.S. PIONEER ELECTRONICS CORPORATION 451 446 Modifying Order Pioneer also claims that controlling5 1 3 1 1 6 1343 628 217 46 96.574188 advertising5 1 3 1 1 7 1574 629 116 45 96.601608 prices5 1 3 1 1 8 1706 629 126 35 96.806549 allows5 1 3 1 1 9 1849 640 19 24 96.923630 a4 1 3 1 2 0 532 686 1335 47 -1 5 1 3 1 2 1 532 686 258 36 96.478737 manufacturers 1 3 1 2 2 801 693 35 29 96.802010 to5 1 3 1 2 3 847 686 156 46 96.554596 positions 1 3 1 2 4 1015 686 67 36 96.806915 ands 1 3 1 2 5 1094 692 160 40 96.022049 promotes 1 3 1 2 6 1264 686 171 46 96.315445 high-ends 1 3 1 2 7 1447 686 164 46 96.362015 products5 1 3 1 2 8 1623 687 163 46 96.711342 properly5 1 3 1 2 9 1799 687 68 35 96.855156 anda 1 3 1 3 0 532 745 1335 46 -1 5 1 3 1 3 1 532 752 36 28 96.536407 to5 1 3 1 3 2 581 745 184 35 96.547897 introduces 1 3 1 3 3 778 756 79 25 95.838371 news 1 3 1 3 4 869 745 198 46 93.209129 products. Petition Memo at 11. Pioneer states that a damaged reputation in the electronics industry is especially difficult to rehabilitate because of the constant inflow of entirely new products onto the market. Pioneer and its customers have been harmed the most because, Pioneer alleges, it is a leading innovator in the home electronics industry and it has5 1 3 1 8 6 1154 1036 69 35 96.995491 lost5 1 3 1 8 7 1237 1046 107 36 96.930283 many5 1 3 1 8 8 1360 1036 92 35 96.717476 sales5 1 3 1 8 9 1468 1036 69 35 96.828308 ands 1 3 1 8 10 1552 1037 43 34 95.706390 its5 1 3 1 8 11 1610 1037 200 45 96.630905 reputations 1 3 1 8 12 1825 1047 38 25 96.039085 as4 1 3 1 9 0 529 1094 1333 46 -1 5 1 3 1 9 1 529 1104 20 25 96.758163 a5 1 3 1 9 2 566 1094 86 45 96.319267 high5 1 3 1 9 3 670 1094 136 46 96.603218 quality5 1 3 1 9 4 823 1094 190 35 96.528717 innovators 1 3 1 9 5 1028 1094 63 35 96.528717 has5 1 3 1 9 6 1110 1094 91 35 95.928894 been5 1 3 1 9 7 1219 1094 175 46 95.928894 seriously5 1 3 1 9 8 1412 1094 176 46 96.275368 damaged5 1 3 1 9 9 1605 1094 47 46 93.298645 by5 1 3 1 9 10 1670 1095 192 36 92.069374 advertise-4 1 3 1 10 0 529 1151 1332 47 -1 5 1 3 1 10 1 529 1157 115 30 96.560188 ments5 1 3 1 10 2 661 1151 43 36 96.289291 of5 1 3 1 10 3 716 1152 101 35 96.822212 these5 1 3 1 10 4 832 1162 80 25 96.640816 news 1 3 1 10 5 926 1152 169 46 96.583458 products5 1 3 1 10 6 1111 1158 34 29 96.583458 at5 1 3 1 10 7 1159 1151 115 47 96.792732 prices5 1 3 1 10 8 1291 1158 44 36 96.973274 at,5 1 3 1 10 9 1352 1163 39 25 97.001846 or5 1 3 1 10 10 1405 1152 130 42 96.690659 below,5 1 3 1 10 11 1552 1153 120 35 96.926613 dealers 1 3 1 10 12 1686 1154 108 34 80.105049 cost. Jd.

As a result, dealers will shy away from investing in the products and, Pioneer claims, customers ultimately will be harmed. Finally, Pioneer notes that the inconsistent5 1 3 1 13 6 1266 1333 185 30 96.735924 treatments 1 3 1 13 7 1471 1327 42 36 96.541481 of5 1 3 1 13 8 1529 1328 280 35 96.766022 manufacturers5 1 3 1 13 9 1830 1328 30 36 96.440559 is4 1 3 1 14 0 526 1384 1333 46 -1 5 1 3 1 14 1 526 1384 200 45 96.608475 magnified5 1 3 1 14 2 744 1385 47 45 96.942719 by5 1 3 1 14 3 810 1385 58 34 96.791588 thes 1 3 1 14 4 886 1384 73 36 96.414009 facts 1 3 1 14 5 976 1385 73 35 95.958191 that5 1 3 1 14 6 1067 1395 207 25 95.958191 consumers5 1 3 1 14 7 1294 1395 58 25 96.329803 ares 1 3 1 14 8 1370 1392 61 28 96.270729 not5 1 3 1 14 9 1450 1396 115 25 96.633102 aware5 1 3 1 14 10 1583 1386 42 35 96.786301 of5 1 3 1 14 11 1640 1386 58 35 93.278709 thes 1 3 1 14 12 1717 1386 142 36 91.920410 unlevel4 1 3 1 15 0 525 1442 1334 47 -1 5 1 3 1 15 1 525 1442 120 35 86.912605 field. Petition Memo at 13. Consumers, therefore, incorrectly conclude that Pioneer products are lowers 1 3 1 16 7 1405 1500 134 46 96.240952 quality5 1 3 1 16 8 1561 1512 40 24 96.748528 or5 1 3 1 16 9 1620 1502 71 34 93.299088 less5 1 3 1 16 10 1712 1502 146 34 91.973824 techno-4 1 3 1 17 0 524 1557 1333 48 -1 5 1 3 1 17 1 524 1557 170 46 96.130302 logically5 1 3 1 17 2 709 1557 272 46 96.382401 sophisticated when they see them advertised at only sales prices. Petition Memo at 13 (citing affidavit of Mark Smith, Senior Manager, Planning and Coordination, for the Home Electronics Division of Pioneer ("Smith Aff.") at {9 and {10). Il.

Standards for Reopening and Modification Section 5(b) of the FTC Act, 15 U.S.C. 45(b), provides that the Commission shall reopen an order to consider whether it should be modified if the respondent makes5 1 5 1 3 6 1272 2195 24 55 96.305992 a5 1 5 1 3 7 1335 2199 224 46 96.089409 satisfactory5 1 5 1 3 8 1589 2200 164 46 96.252884 showings 1 5 1 3 9 1783 2201 72 35 96.645195 that4 1 5 1 4 0 520 2254 1334 50 -1 5 1 5 1 4 1 520 2257 164 45 96.441261 changed5 1 5 1 4 2 704 2257 204 36 96.108131 conditions5 1 5 1 4 3 930 2257 43 36 96.900909 of5 1 5 1 4 4 990 2257 68 36 96.281303 laws 1 5 1 4 5 1079 2268 41 25 95.695618 or5 1 5 1 4 6 1139 2257 90 36 95.695618 fact require such modification. A satisfactory showing sufficient to require reopening is made when a request to reopen identifies significant changes in circumstances and shows that the changes eliminate the need for the order or make continued application of it inequitable or harmful to competition. Louisiana-Pacific Corp., Docket No. C-2956, Letter to John C. Hart (June 5, 1986), at 4.

The Commission may also modify an order pursuant to Section 5(b) when, although changed circumstances would not require reopening, the Commission determines that the public interest Modifying Order 115 F.T.C.

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

Whether the request to reopen is based on changed conditions or on public interest considerations, the burden is on the respondent to make the requisite satisfactory showing. The language of Section 5(b) plainly anticipates that the petitioner must make a satisfactory4 1 3 2 5 0 679 1565 1330 47 -1 5 1 3 2 5 1 679 1566 182 46 96.021538 showing of changed conditions to obtain reopening of the order. The legislative history also makes it clear that the petitioner has the burden of showing, other than by conclusory statements, why an order should be modified.° If the Commission determines that the petitioner has made the required showing, the Commission must reopen the order to consider whether modification is required and, if so, the nature and extent of the modification. The Commission is not required to reopen the order, however, if the petitioner fails to meet its burden of making the satisfactory showing required by the statute. The petitioner's burden is not a light one given the public interest in repose and the finality of Commission orders.’ © The Commission may properly decline to reopen an order if a request is merely4 1 5 1 2 0 675 2487 1334 40 -1 5 1 5 1 2 1 675 2491 173 36 96.462128 conclusory5 1 5 1 2 2 864 2498 32 20 97.003975 or5 1 5 1 2 3 910 2489 152 29 96.620819 otherwise5 1 5 1 2 4 1078 2488 65 29 96.944168 fails5 1 5 1 2 5 1159 2494 29 23 96.944168 to5 1 5 1 2 6 1205 2494 41 23 96.941711 sets 1 5 1 2 7 1262 2488 74 29 96.725670 forth5 1 5 1 2 8 1353 2488 119 37 96.561264 specifics 1 5 1 2 9 1488 2488 72 28 97.012650 facts5 1 5 1 2 10 1576 2488 224 36 96.855682 demonstrating5 1 5 1 2 11 1816 2488 28 27 95.663155 in5 1 5 1 2 12 1861 2487 84 28 95.482597 details 1 5 1 2 13 1963 2488 46 27 96.987717 thea 1 5 1 3 0 676 2534 1333 38 -1 5 1 5 1 3 1 676 2542 94 23 97.001228 nature5 1 5 1 3 2 780 2536 34 29 96.846771 of5 1 5 1 3 3 821 2537 45 27 97.008430 thes 1 5 1 3 4 877 2536 127 36 96.576080 changed5 1 5 1 3 5 1015 2536 159 27 96.768959 conditions5 1 5 1 3 6 1185 2536 54 27 96.993690 ands 1 5 1 3 7 1249 2536 45 27 96.666054 thes 1 5 1 3 8 1304 2543 114 20 96.587082 reasons5 1 5 1 3 9 1429 2535 64 36 96.503845 why5 1 5 1 3 10 1504 2535 77 28 96.470444 these5 1 5 1 3 11 1591 2535 128 36 96.343559 changed5 1 5 1 3 12 1729 2534 160 28 96.796738 conditions5 1 5 1 3 13 1900 2534 109 36 95.872231 require4 1 5 1 4 0 675 2581 1334 39 -1 5 1 5 1 4 1 675 2584 45 28 96.127327 thes 1 5 1 4 2 730 2584 147 36 96.371925 requested5 1 5 1 4 3 888 2582 193 29 96.516266 modifications 1 5 1 4 4 1093 2582 33 28 96.957390 of5 1 5 1 4 5 1134 2582 44 28 97.001747 thes 1 5 1 4 6 1189 2581 103 29 76.761833 order. S. Rep. No. 96-500 96th Cong., Ist Sess. 9-10 (1979). See also Rule 2.51(b), which requires affidavits in support of petitions to reopen and modify.

’ See Federated Department Stores, Inc. v. Moitie, 425 U.S. 394 (1981) (strong public interest considerations support repose and finality). U.S, PIONEER ELECTRONICS CORPORATION 453 446 Modifying Order IV.

Pioneer Has Failed to Demonstrate Changed Conditions of Law or Fact That Require Reopening of the Order Pioneer has failed to show that the modifications it seeks are required by changes of law. The provisions that Pioneer seeks to have set aside are part of the order's overall prohibition on resale price maintenance. Nothing in the complaint or order suggests that the cooperative advertising restrictions or any of the other advertising restrictions were imposed because the prohibited conduct itself, absent resale price maintenance, was per se unlawful.* The Pioneer order is, in that sense, virtually identical to the order in The Magnavox Company, 78 FTC 1183 (1971). In its modification of the order in Magnavox ("1990 Magnavox Modification"), the Commission denied Magnavox's request for a reopening and modification of the “fencing-in provisions of the order on the basis of changed conditions of law. The Commission's denial of Pioneer's Petition based on change of law is consistent with the Commission's analysis in the 1990 Magnavox Modification.

Resale price maintenance schemes remain per se unlawful. Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36 (1977), which was decided two years after the Commission issued the order in this case, recognized that non-price vertical restraints are not inherently anticompetitive and must thus be judged under the rule of 8 Cf. Sharp Electronics Corporation, 112 FTC 303 (1989), in which the Commission set aside the order based on change of law. The Sharp Electronics order prohibited Sharp from engaging in only non-price vertical restraints, such as territorial restrictions; the non-price vertical restrictions were not a part of an overall order prohibiting resale price maintenance. At the time the order was entered all vertical restrictions were per se unlawful under U.S. v. Arnold Schwinn & Co., 388 U.S. 365 (1977). The Commission vacated the order based upon the change in law in Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36 (1977) and its progeny, which changed the test from per se to rule of reason analysis for non-price vertical restraints. The Commission noted that GTE Sylvania did not changes 1 7 1 10 10 1494 2605 44 28 96.388222 thes 1 7 1 10 11 1552 2615 55 26 96.388222 pers 1 7 1 10 12 1621 2615 31 19 96.846703 se5 1 7 1 10 13 1667 2606 60 29 96.954338 rules 1 7 1 10 14 1743 2607 110 37 96.963051 against4 1 7 1 11 0 518 2647 1334 36 -1 5 1 7 1 11 1 518 2647 92 27 96.969910 resales 1 7 1 11 2 622 2647 77 36 96.972191 prices 1 7 1 11 3 712 2647 221 29 85.742287 maintenance. 112 FTC at 306 fn. 3. The Pioneer order differs from the Sharp Electronics order in that the complaint against Pioneer was concerned with non-price conduct that was a part of resale price maintenance and the order prohibited non-price vertical restraints as a part of the prohibitions on resale price maintenance. Modifying Order 115 F.T.C.

reason.’ The Supreme Court, in GTE Sylvania, replaced the per se test for non-price vertical customer restraints outside resale price maintenance with a rule of reason test, but the Court did not change the per se rule for non-price vertical restraints that are part of a resale price maintenance scheme. Pioneer has failed to show that any of the actions in which it wishes to engage as a result of the proposed modification have become lawful if part of resale price maintenance. Because the provisions of paragraph I generally prohibit conduct that is unlawful if engaged in as part of resale price maintenance, and because GTE Sylvania did not change the law as to such conduct, Pioneer has failed to show that its request should be granted based upon a change in law.

Pioneer has similarly not made the necessary showing that changed conditions of fact require the Commission to reopen and modify the order. Although Pioneer has alleged that the United States consumer electronic products market today appears to be competitive, Petition Memo at 16-17, just as Magnavox did in its request, the record does not contain any evidence of market structure at the time the Commission issued the order, because the complaint was premised on a per se theory of resale price maintenance. Thus, based only upon Pioneer's description of today's consumer electronic products market, Pioneer has not shown that changed conditions of fact make those provisions for which it requests a modification no longer necessary or harmful to competition. Indeed, resale price maintenance would be unlawful today, even if Pioneer had shown that the market had changed from a concentrated to unconcentrated one since the order was issued.

V.

The Cooperative Advertising Restrictions (Paragraph I.6.) Although Pioneer has failed to demonstrate changed conditions of law or fact that require reopening of the order, Pioneer has shown * See In the Matter of Beltone Electronics Corporation, et al., 100 FTC 68 (1982) (illustrating that GTE Sylvania has significantly affected the Commission's analysis of non-price vertical restraints).

U.S. PIONEER ELECTRONICS CORPORATION 455 446 Modifying Order that the public interest warrants reopening and modifying the order to delete paragraph I.6. The provision Pioneer seeks to have deleted prohibits conduct that may be lawful if engaged in outside of a resale price maintenance scheme, and Pioneer has shown that it is being injured in competing with other firms that are free to and do engage in cooperative advertising programs.

Pioneer has requested that paragraph I.6. be deleted from the order to allow it to offer certain price-restrictive cooperative advertising programs. Pioneer has shown that its ability to compete is adversely affected by the order's restrictions concerning pricerestrictive cooperative advertising programs. Pioneer has demonstrated that many of its competitors currently use such programs with respect to consumer electronic product lines that are directly competitive with the Pioneer lines. For example, Mark Smith, Pioneer's Senior Manager, Planning and Coordination, for the Home Electronics Division of Pioneer Electronics (USA), states that Pioneer's competitors, Sony, Mitsubishi, Hitachi, JVC, and RCA, use MAPs to build dealer support. See Smith Aff. at 915. The competitors generally receive cooperative advertising allowances for maintaining MAP. According to the evidence submitted by Pioneer, some dealers are less inclined to carry a full line of Pioneer products because of the lack of a Pioneer price-restrictive cooperative advertising program. In light of Pioneer's competitors' use of programs that Pioneer cannot offer and the resulting injury caused to Pioneer's ability to attract and keep dealers, Pioneer has made a threshold showing of an affirmative need for paragraph I.6. to be deleted.

The reasons in favor of a modification to delete paragraph I.6. outweigh the reasons not to modify the order. The Commission reopened and modified the Magnavox order in 1990 to delete similar provisions relating to the restrictions on cooperative advertising allowances.!° In making that decision, the Commission followed the 10 The Commission, among other things, deleted paragraph I.H. from the Magnavox order, which read as follows:

I.H. Threatening to withhold or withholding earned cooperative advertising credits from dealers for the reason that they advertise its products at retail prices other than established or suggested retail prices. The Magnavox Company, 78 FTC 1183, 1189 (1971). Modifying Order 115 F.T.C.

reasoning in its 1987 decision to vacate the order in The Advertising Checking Bureau, Inc., 93 FTC 4 (1979). The 1979 Advertising Checking Bureau, Inc. order had prohibited the respondent from auditing cooperative advertising programs that required dealers to advertise at a specified price, or not to advertise at discount prices, as a condition of receiving advertising allowances or credits. In support of its determination to set aside The Advertising Checking Bureau, Inc. order, the Commission relied on the Supreme Court's decisions in Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36 (1977) and Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752 (1984), noting, among other things, that those decisions makes 1 3 1 11 9 1760 1202 26 36 96.565712 it5 1 3 1 11 10 1801 1202 97 36 96.994942 clears 1 3 1 11 11 1913 1203 72 35 96.694771 that4 1 3 1 12 0 651 1260 1334 46 -1 5 1 3 1 12 1 651 1261 57 35 97.007805 thes 1 3 1 12 2 720 1261 74 35 96.830299 rules 1 3 1 12 3 806 1260 42 36 96.418732 of5 1 3 1 12 4 856 1271 125 25 96.518150 reasons 1 3 1 12 5 994 1260 127 36 96.160767 should5 1 3 1 12 6 1133 1260 44 36 96.046486 be5 1 3 1 12 7 1189 1260 140 45 96.922997 applied5 1 3 1 12 8 1342 1260 34 35 96.401939 in5 1 3 1 12 9 1390 1260 230 46 96.401939 determining5 1 3 1 12 10 1633 1261 155 35 93.298805 whether5 1 3 1 12 11 1800 1261 185 45 93.152664 non-price4 1 3 1 13 0 650 1318 1335 47 -1 5 1 3 1 13 1 650 1319 147 36 96.759644 vertical5 1 3 1 13 2 812 1319 179 35 96.393379 restraints5 1 3 1 13 3 1007 1318 261 47 96.356461 unreasonably5 1 3 1 13 4 1283 1318 146 36 96.652000 restrains 1 3 1 13 5 1444 1319 233 46 96.143326 competitions 1 3 1 13 6 1693 1319 69 35 96.694633 ands 1 3 1 13 7 1777 1319 133 36 96.432076 violates 1 3 1 13 8 1926 1319 59 36 97.010277 thea 1 3 1 14 0 650 1377 1332 45 -1 5 1 3 1 14 1 650 1377 159 36 97.007889 antitrust5 1 3 1 14 2 823 1377 118 36 93.004089 laws. The Advertising Checking Bureau, Inc., No. C-2947, 109 FTC 146 (1987)."’ The Commission also noted that [t]he5 1 3 1 15 11 1912 1437 73 35 96.878052 fact4 1 3 1 16 0 650 1494 1333 45 -1 5 1 3 1 16 1 650 1495 72 35 96.439415 that5 1 3 1 16 2 736 1506 19 24 96.958549 a5 1 3 1 16 3 769 1494 259 36 96.609451 distributional5 1 3 1 16 4 1042 1494 159 35 96.493034 restraints 1 3 1 16 5 1216 1505 80 34 96.381569 may5 1 3 1 16 6 1312 1494 89 35 96.693436 have5 1 3 1 16 7 1416 1505 43 24 95.856628 an5 1 3 1 16 8 1475 1494 191 35 95.856628 incidental5 1 3 1 16 9 1681 1494 112 35 96.610992 effects 1 3 1 16 10 1807 1505 48 24 96.667694 on5 1 3 1 16 11 1869 1494 114 35 96.490845 resale4 1 3 1 17 0 649 1552 1333 47 -1 5 1 3 1 17 1 649 1554 115 45 96.705864 prices5 1 3 1 17 2 789 1554 29 34 96.440674 is5 1 3 1 17 3 842 1560 61 28 97.004410 not5 1 3 1 17 4 925 1554 47 45 96.940460 by5 1 3 1 17 5 994 1552 101 36 95.734093 itself5 1 3 1 17 6 1114 1553 142 45 95.734093 enough5 1 3 1 17 7 1279 1560 36 27 96.747025 to5 1 3 1 17 8 1338 1553 176 34 95.155182 condemns 1 3 1 17 9 1537 1554 58 33 96.343842 thes 1 3 1 17 10 1617 1553 156 45 96.874413 practices 1 3 1 17 11 1796 1564 38 23 96.506607 as5 1 3 1 17 12 1853 1564 71 33 96.506607 pers 1 3 1 17 13 1943 1565 39 22 96.883171 se4 1 3 1 18 0 649 1611 1333 46 -1 5 1 3 1 18 1 649 1611 202 36 94.788452 unlawful. Jd. With respect to price-restrictive cooperative advertising programs specifically, the Commission held that such programs would5 1 3 1 20 2 802 1734 61 29 96.833130 not5 1 3 1 20 3 875 1728 46 45 96.316757 by5 1 3 1 20 4 934 1728 214 34 96.466690 themselves5 1 3 1 20 5 1162 1727 188 34 96.466690 constitutes 1 3 1 20 6 1363 1733 218 39 96.604347 agreements5 1 3 1 20 7 1595 1733 36 28 96.961578 to5 1 3 1 20 8 1643 1727 51 34 96.665497 fix5 1 3 1 20 9 1708 1727 113 34 96.784149 resales 1 3 1 20 10 1833 1727 146 45 95.737389 prices. Id. Moreover, the Commission recognized that price restrictive cooperative advertising programs are in fact likely5 1 3 1 22 8 1860 1849 36 29 93.889320 to5 1 3 1 22 9 1937 1844 44 34 93.889320 be4 1 3 1 23 0 646 1901 1334 47 -1 5 1 3 1 23 1 646 1902 297 46 84.958450 procompetitive5 1 3 1 23 2 959 1902 106 35 60.259266 ...in5 1 3 1 23 3 1080 1908 92 28 96.668640 most5 1 3 1 23 4 1186 1912 173 24 76.325317 cases...5 1 3 1 23 5 1375 1902 119 45 38.130440 by...5 1 3 1 23 6 1511 1901 214 46 38.130440 channeling5 1 3 1 23 7 1741 1902 58 34 97.004204 thes 1 3 1 23 8 1814 1902 166 35 96.020920 retailer's4 1 3 1 24 0 648 1959 1332 47 -1 5 1 3 1 24 1 648 1960 218 46 96.359444 advertising5 1 3 1 24 2 896 1959 126 37 96.595169 efforts5 1 3 1 24 3 1053 1959 35 36 96.858841 in5 1 3 1 24 4 1118 1959 192 36 96.356812 directions5 1 3 1 24 5 1341 1960 71 35 96.817818 that5 1 3 1 24 6 1441 1960 58 34 96.423874 thes 1 3 1 24 7 1529 1959 263 36 96.308464 manufacturers 1 3 1 24 8 1819 1959 161 36 96.308464 believes4 1 3 1 25 0 647 2018 1333 46 -1 5 1 3 1 25 1 647 2030 211 25 96.547729 consumers5 1 3 1 25 2 878 2019 75 35 96.269012 will5 1 3 1 25 3 972 2018 77 35 96.411003 finds 1 3 1 25 4 1068 2029 98 24 96.442940 more5 1 3 1 25 5 1186 2018 219 46 96.577118 compelling5 1 3 1 25 6 1424 2019 68 34 96.598648 ands 1 3 1 25 7 1511 2018 192 35 91.752647 beneficial5 1 3 1 25 8 1726 2047 5 6 91.490517 .5 1 3 1 25 9 1755 2047 5 6 80.856186 .5 1 3 1 25 10 1783 2047 6 6 80.856186 .5 1 3 1 25 11 1813 2018 111 43 89.355705 [t]his,5 1 3 1 25 12 1945 2018 35 35 97.003166 in4 1 3 1 26 0 647 2076 1332 47 -1 5 1 3 1 26 1 647 2084 89 35 96.455154 turn,5 1 3 1 26 2 763 2088 82 35 96.455154 may5 1 3 1 26 3 871 2077 178 36 95.925781 stimulates 1 3 1 26 4 1075 2076 120 36 96.344391 dealers 1 3 1 26 5 1218 2076 203 46 96.638702 promotions 1 3 1 26 6 1447 2076 67 35 96.560188 ands 1 3 1 26 7 1540 2076 215 36 96.240952 investments 1 3 1 26 8 1781 2076 80 41 96.228119 and,5 1 3 1 26 9 1888 2076 91 41 96.976089 thus,4 1 3 1 27 0 646 2128 838 52 -1 5 1 3 1 27 1 646 2136 137 35 93.306145 benefits 1 3 1 27 2 798 2136 200 34 92.558083 interbrand5 1 3 1 27 3 1013 2135 264 45 95.122025 competition. Jd. at 3.”

In conjunction with the Commission's decision to set aside the order in The Advertising Checking Bureau, Inc., the Commission also announced that it had withdrawn its 1980 policy statement regarding price restrictions in cooperative advertising programs, which had stated the Commission's intention to challenge as per se '! Of course, Sylvania did not change the per se rule against resale price maintenance, the conduct that the orders against Magnavox and Pioneer were designed to end.

'2 The Commission set aside The Advertising Checking Bureau, Inc. order on public interest grounds.

U.S. PPONEER ELECTRONICS CORPORATION 457 446 Modifying Order unlawful cooperative advertising programs restricting reimbursement for the advertising of discounts. The Commission announced its new policy as to price restrictions in cooperative advertising programs as follows:

The Commission now concludes that price restrictions in cooperative advertising programs, standing alone, are not per se unlawful. The per se rule applies to conduct that is so plainly anticompetitive that it is conclusively presumed to be unreasonable without an elaborate inquiry into competitive effects. Cooperative advertising programs that restrict reimbursement for the advertising of discounts do not appear to fall into this category....

6 Trade Reg. Rep. (CCH) J 39,057.

This change in Commission policy is further supported by recent court decisions. In in re Nissan Antitrust Litigation, 577 F.2d 910 (Sth Cir. 1978), cert. denied, 439 U.S. 1072 (1979), the court held that agreements that withhold cooperative advertising allowances from dealers that advertise discounted prices are analyzed under the rule of reason. Additionally, the Supreme Court's recent decision in Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717 (1988), supports the Commission's decision. That decision sought to draw a clear line between vertical restraints concerning price, which are per se illegal, and non-price vertical restraints, which are judged under the rules 1 7 1 11 4 836 1958 42 35 96.564476 of5 1 7 1 11 5 888 1969 126 24 96.333138 reasons 1 7 1 11 6 1029 1958 193 41 88.595100 standard, by holding that an agreement or conspiracy between a manufacturer and a complaining retailer to terminate a discounter because of his price cutting was not sufficient to constitute conduct which is per se unlawful unless the agreement included some agreement on price or price levels. The approach followed by the Commission in the 1990 Magnavox Modification and in adopting the new cooperative advertising policy by setting aside the order in The Advertising Checking Bureau, Inc. is equally applicable to Pioneer's request that the Commission set aside paragraph I.6. of the order. This provision prohibits price restrictions that Pioneer might want to impose on its dealers in connection with its cooperative advertising programs. Such restrictions may not necessarily be part of an illegal resale price maintenance scheme and have now been recognized as reasonable in many circumstances. Of course, any cooperative advertising program Modifying Order 115 F.T.C.

implemented by Pioneer as part of a resale price maintenance scheme would be per se unlawful and would violate paragraph I.]. of the order.

Pioneer has further shown that setting aside this provision is not likely to result in Pioneer's engaging in unlawful conduct. The markets for most of the consumer electronic products sold by Pioneer appear to be competitive and fragmented with numerous competitors. See Petition Memo at Mark Smith Affidavit; and 1990 Magnavox Modification at 9. In those markets, Pioneer's use of price-restrictive cooperative advertising programs, without further agreement on the price or price levels to be charged by retailers, is not likely to restrict interbrand competition or reduce output. It is unlikely that the competitors in any of the unconcentrated markets would exercise market power through collusive activities because, as the Commission recognized, collusion5 1 3 2 12 4 1371 1434 29 36 96.624084 is5 1 3 2 12 5 1415 1434 158 47 97.003242 unlikely5 1 3 2 12 6 1586 1441 36 29 97.009743 to5 1 3 2 12 7 1635 1435 44 35 96.996201 be5 1 3 2 12 8 1693 1435 198 35 96.783714 successful5 1 3 2 12 9 1906 1435 35 35 96.881180 in5 1 3 2 12 10 1955 1446 44 25 96.943451 an4 1 3 2 13 0 665 1492 1331 46 -1 5 1 3 2 13 1 665 1492 294 35 91.934868 unconcentrated5 1 3 2 13 2 972 1492 161 35 82.570915 market. TEAC Corp. of America, 104 FTC 634, 635 (1984).’? Moreover, there have been numerous new entrants into all the markets for consumer electronic products since the Commission issued the order in this case,’* and there has been an influx of new products made by a number of manufacturers, e.g., CD players, laser disc players, large screen projection televisions.’> Thus, thes 1 3 2 18 9 1845 1784 152 34 96.895805 absence4 1 3 2 19 0 662 1839 1330 47 -1 5 1 3 2 19 1 662 1839 42 36 96.687263 of5 1 3 2 19 2 713 1839 147 36 96.687263 barriers5 1 3 2 19 3 874 1846 36 29 96.715897 to5 1 3 2 19 4 923 1846 98 39 96.956451 entry5 1 3 2 19 5 1036 1839 28 36 96.756310 is5 1 3 2 19 6 1080 1840 75 35 96.388947 also5 1 3 2 19 7 1170 1840 107 45 96.809067 likely5 1 3 2 19 8 1292 1847 35 28 96.998459 to5 1 3 2 19 9 1340 1847 146 39 96.583725 prevents 1 3 2 19 10 1499 1841 197 35 96.532303 successful5 1 3 2 19 11 1711 1841 207 35 92.471497 collusion. Jd.

at 637. Setting aside the order's restrictions on Pioneer's adoption and implementation of price-restrictive cooperative advertising programs would allow Pioneer to compete more effectively to the benefit of the consumers of Pioneer's electronic products. To the extent that price-restrictive cooperative advertising conduct -- now allowed by the removal of in paragraph I.6. pursuant to this Order Modifying Order -- might be in furtherance of an 3 See 1990 Magnavox Modification at 9 ("The markets for most of the consumer electronic products sold by Magnavox appear to be competitive and fragmented and have numerous competitors, none of which have a controlling market share."). ‘4 See Petition Memo at 17 (citing to the 1990 Magnavox Modification). Additionally, Pioneer states that Onkyo and Denon have entered the markets since the Commission entered the order in 1975.

'S In the projection screen television market, Pioneer's principal competitors are Sony, Mitsubishi, Magnavox, Hitachi, RCA and Zenith. U.S. PIONEER ELECTRONICS CORPORATION 459 446 Modifying Order unlawful scheme to fix resale prices, such conduct would be prohibited by the other provisions of the order. The Commission disagrees, however, that paragraph I.2. also should be modified."® The Commission addressed this specific concern in the 1990 Magnavox Modification. In deleting the cooperative advertising restriction paragraph in the Magnavox order, which was nearly identical to paragraph I.6. of this order, the Commission did not disturb the language of paragraph I.B. of the Magnavox order which prohibited Magnavox from [f]ixing,5 1 3 1 9 5 1366 1082 244 46 96.624649 establishing,5 1 3 1 9 6 1646 1083 227 45 96.502129 controlling,4 1 3 1 10 0 541 1139 1331 48 -1 5 1 3 1 10 1 541 1139 234 46 92.965836 maintaining5 1 3 1 10 2 793 1169 6 7 74.236435 .5 1 3 1 10 3 820 1169 5 7 62.867085 .5 1 3 1 10 4 845 1169 5 6 62.867085 .5 1 3 1 10 5 868 1140 59 35 96.956512 thes 1 3 1 10 6 942 1140 99 35 96.848038 retails 1 3 1 10 7 1057 1140 116 45 96.461182 prices5 1 3 1 10 8 1190 1146 34 29 96.567497 at5 1 3 1 10 9 1240 1140 117 35 96.920158 which5 1 3 1 10 10 1373 1140 43 36 96.640831 its5 1 3 1 10 11 1432 1140 138 36 96.591103 dealers5 1 3 1 10 12 1586 1151 82 36 96.665329 may5 1 3 1 10 13 1685 1141 187 41 95.795776 advertise,4 1 3 1 11 0 539 1199 1334 46 -1 5 1 3 1 11 1 539 1205 177 39 96.284195 promote,5 1 3 1 11 2 737 1199 96 35 96.703407 offers 1 3 1 11 3 851 1199 57 35 96.181488 for5 1 3 1 11 4 926 1199 74 35 96.807907 sales 1 3 1 11 5 1020 1210 39 24 96.980011 or5 1 3 1 11 6 1078 1199 65 35 96.783829 sells 1 3 1 11 7 1163 1199 44 35 96.682533 its5 1 3 1 11 8 1226 1199 198 46 47.360184 products. 78 FTC at 1189. In granting Magnavox the right to have restrictions in its cooperative advertising programs, the Commission stated that it would: not construe the remaining portions of the modified order to prohibit Magnavox from establishing and maintaining cooperative advertising programs that included conditions as to the prices at which Magnavox offered consumer electronic products, so long as such advertising program were not a part of a resale price maintenance scheme. 1990 Magnavox Modification at 10. For those reasons, the Commission need not modify paragraph I.2. of the Pioneer order to make the deletion of paragraph I.6. effective. For the above reasons, therefore, the Commission has determined that Pioneer has demonstrated an affirmative need to reopen the order, and that the reasons to set aside paragraph I.6. of the order outweigh any reasons to retain it. See Lenox Inc., Docket No. 8718, 111 FTC 612 (1989), Order Granting in Part and Denying in Part Request to Reopen and Modify.

16 Pioneer requests that the Commission delete the bracketed words from paragraph I.2.:

Fixing, establishing, controlling or maintaining the prices at which dealers may (advertise, promote, offer for sale] or sell respondent's products. Petition at 1.

Modifying Order 115 F.T.C.

VI.

The Modifications Concerning Paragraphs I.2., 1.5., I.8. and Most of 1.10. Pioneer has requested that the order be modified to allow it to, among other things, fix the prices at which its products are advertised, refuse to deal with a dealer who does not enter into an agreement to advertise products at the established or suggested resale price and obtain dealers’ promises on the prices they will advertise for Pioneer's products. Additionally, Pioneer requests relief from the prohibition on threatening, intimidating, coercing or delaying shipments to a dealer who advertises Pioneer products at prices other than those Pioneer deems appropriate.'’ For the reasons discussed in Section IV, above, the Commission has determined that Pioneer has not shown changed conditions of law or fact that require reopening the order to modify these provisions. Also, for the reasons discussed, below, Pioneer has failed to show that it would be in the public interest to modify these provisions.

Pioneer has not Demonstrated that the Modifications are in the Public Interest.

Pioneer has failed to show the threshold injury required under the public interest standard. Even if Pioneer had made that showing, Pioneer failed to show that the reasons for modifying these provisions outweigh the reasons for not modifying them. Pioneer has Failed to Show an Affirmative Need for the Modifications.

Under the public interest standard for modification of paragraphs 1.2., 1.5., 1.8. and most of I.10., Pioneer has not shown an affirmative 75 1 11 1 1 2 784 2780 54 28 73.414772 Sees 1 11 1 1 3 850 2780 138 28 96.964439 Footnotes 1 11 1 1 4 1001 2780 26 31 96.927757 5,5 1 11 1 1 5 1041 2779 100 32 96.520287 above,5 1 11 1 1 6 1154 2779 45 28 96.823639 for5 1 11 1 1 7 1210 2779 46 27 96.450027 thes 1 11 1 1 8 1268 2779 213 28 95.805038 modifications5 1 11 1 1 9 1494 2779 119 27 96.436310 Pioneers 1 11 1 1 10 1624 2779 91 27 96.591347 seeks. U.S. PIONEER ELECTRONICS CORPORATION 461 446 Modifying Order need for the requested modifications.'’ Pioneer has not shown that its competitors use similar advertising restrictions and sanctions or that it is harmed by any such program. Although Pioneer has shown that its inability to employ some price-restrictive advertising program may be causing competitive injury, Pioneer has not demonstrated that it needs to institute MAP programs that require the fixing of advertised prices and that explicit agreements are required to remedy the alleged erosion of its dealer base.!? Pioneer, therefore, has not made a satisfactory showing of harm from the existing provisions and has not satisfied its burden of demonstrating why modification of the order would serve the public interest.

Moreover, Pioneer has not demonstrated that the use of a pricerestrictive cooperative advertising program would not adequately address its competitive concerns. Pioneer's Petition is unclear whether removal of the cooperative advertising restriction would be sufficient to remedy the alleged harm. Pioneer asserts that it should not be penalized for not gaining information on how its competitors enforce their MAP programs. Nevertheless, neither should Pioneer be rewarded for failing to meet its burden to make the adequate showing of need. Based upon Pioneer's submission, the information gained from the Commission's analysis of this Petition, and the Commission's determinations in the 1990 Magnavox Modification, Pioneer has not met its burden of showing an affirmative need for the reopening and modification of paragraphs I.2., 1.5., 1.8. and most of I.10. Even if Pioneer had Shown an Affirmative Need, the Reasons Against Such a Modification Outweigh the Reasons for a Modification. Even if Pioneer had shown an affirmative need for the reopening, the reasons against modifying the order outweigh those in favor of a '8 Pioneer has shown, however, that it is in the public interest for paragraph I.10. to be modified to remove the prohibitions on Pioneer unilaterally terminating a dealer for failing to follow a suggested advertised price. See Part VII of this Order Modifying Order.

In contrast, in the area of cooperative advertising restrictions, Pioneer has presented some evidence of its competitors’ practices to demonstrate its competitive injury.

Modifying Order 115 F.T.C.

modification. Paragraphs I.2., 1.5., 1.8. and most of 1.10. prohibit actions that, if used in the context of resale prices, as opposed to advertised prices, could be prohibited as per se unlawful resale price maintenance agreements depending on whether the conduct was found to be part of an agreement or conspiracy to fix resale prices at some level. In United States v. Colgate & Co., 250 U.S. 300 (1919), the Supreme Court held that a manufacturer can unilaterally announce its resale prices in advance and refuse to deal with those who fail to comply. Court decisions, however, have found coercion or threats by a manufacturer against a discounting retailer, even in the absence of complaining third-party retailers, to form the basis of per se unlawful resale price maintenance agreements. For example, in Isaken v. Vermont Castings, Inc., 825 F.2d 1159 (7th Cir. 1987) (Posner, J.) cert. denied, 486 U.S. 1005 (1988), the court found a manufacturer's threat to mix up a retailer's orders if the retailer did not raise prices to have resulted in an implicit, yet nonetheless per se unlawful, agreement.

Similarly, fixing advertised prices, entering into advertised price agreements with dealers, sanctioning dealers that fail to enter into advertising agreements and threatening, intimidating or coercing dealers that do not comply with suggested advertised prices are all conduct which, depending on the circumstances, could fall within the per se ban. Although advertising price arrangements standing alone may not be per se unlawful, restrictions on advertising similar to those identified in paragraphs I.2., I.5., 1.8. and most of I.10. may come dangerously close to or be used in conjunction with resale price maintenance activities. If the MAP agreements are such that they are used to gain the retailers'5 1 3 2 11 6 1226 2184 198 36 96.612732 adherence5 1 3 2 11 7 1442 2190 36 29 96.934280 to5 1 3 2 11 8 1496 2184 43 34 96.626945 its5 1 3 2 11 9 1559 2182 192 47 96.626945 suggested5 1 3 2 11 10 1768 2181 100 36 96.902466 retails 1 3 2 11 11 1886 2181 128 46 94.530060 price, United States v. Parke, Davis & Co., 362 U.S. 29 (1960), it is possible for them to be part of the per se illegal combination. In Parke, Davis & Co., Parke, Davis believed that selling at a discount would be deterred if all advertising of discount prices was discontinued. The Court noted that the agreement not to advertise prices was part of the combination that contained the price agreement. Business Electronics Corp. v. Sharp Electronics Corp., 717 U.S. at 735 (citing Parke, Davis). Although the conduct relating to advertising proscribed by paragraphs I.2.,.1.5., 1.8. and most of 1.10. may fall outside the per se ban, the very purpose of such fencing-in U.S. PIONEER ELECTRONICS CORPORATION 463 446 Modifying Order provisions is to steer a company found to have violated the law away from activities which could reasonably be found to constitute unlawful conduct.” Pioneer has not shown that the danger of such agreements leading to resale price maintenance no longer exists. The advertising restrictions in this case are part of the order's core resale price maintenance prohibitions, unlike the restrictions on cooperative advertising programs in paragraph I.6. It is reasonable for the Commission to deny the proposed modifications at this time to avoid the possibility of Pioneer using the freedom to fix all advertising prices -- through agreements, coercion, intimidations or sanctions -- as a way to circumvent the resale price maintenance prohibitions of the order. Pioneer alleges that advertising plays a big part in whether and at what price audio and video electronics products are ultimately sold. Pioneer asserts that mass media advertising is very important for the consumer in making his choice of electronics products (Smith Aff. at J] 7). Pioneer also strongly - asserts that consumers make decisions as to the quality of electronics products by virtue of their advertised prices. Because of the importance of advertising in this market, allowing Pioneer to fix advertised prices by agreement, to sanction dealers for noncompliance, or to intimidate or coerce dealers into complying with suggested advertised prices could be a precursor or a part of a resale price maintenance agreement.”! °0 See Federal Trade Commission v. Ruberoid Co., 343 U.S. 470, 473 (1952), where the Supreme Court affirmed the Federal Trade Commission's authority to use fencing-in provisions in orders to prevent illegal practices in the future: In carrying out this function the Commission is not limited to prohibiting the illegal practice in the precise form in which it is found to have existed in the past. If the Commission is to attain the objectives Congress envisioned, it cannot be required to confine its road block to the narrow lane the transgressor has traveled, it must be allowed effectively to close all roads to the prohibited goal, so that its order may not be by-passed with impunity.

*1 The Commission recently included restrictions on advertising, similar to those in the Pioneer order, in the Nintendo of America, Inc. order, Docket No. C-3350 (November 14, 1991). The advertising agreements, in that case, were part of an overall resale price maintenance scheme. Pioneer argued in its Petition Memo that Nintendo is different from the Pioneer case because Nintendo, unlike Pioneer, has the ability to interfere with interbrand pricing because of its high market share. The Commission Modifying Order 115 F.T.C.

Accordingly, this issue raises enough of a question to deny the modification, especially because Pioneer has not shown that its alleged competitive injury cannot be remedied by setting aside paragraph I.6., and modifying paragraph I.10. as discussed in Part VII of this Order Modifying Order.” Because of the on-going competitive concerns about these arrangements and because Pioneer failed to make a showing of an affirmative need for these modifications, the Commission has denied Pioneer's request to modify the order as to paragraphs I.2.,” 1.5., I.8. and most of 1.10. VI.

Pioneer has Shown that Paragraph I.10. Should be Modified to Allow Pioneer to Terminate Dealers Who Advertise Below a Suggested Advertised Price Paragraph I.2. of the order prohibits Pioneer from fixing, establishing, controlling or maintaining advertised prices. Under paragraph I.3. of the order, Pioneer may suggest a resale price for its home electronics products. Additionally, nothing in the order prohibits Pioneer from suggesting an advertised price for its home electronics products. Paragraph I.10., however, prohibits Pioneer from:

Terminating, threatening, intimidating, coercing, delaying shipments, or taking any other action to prevent the sale of respondent's products by a dealer because said dealer has advertised or sold, is advertising or selling, or is suspected of advertising or selling such products at other than prices that respondent may deem to be appropriate or has approved.

is not persuaded, however, that advertised price agreements in home electronics products could not be used in furtherance of resale price maintenance agreements. 2 The Commission considers, as part of the modification decision, whether the particular modification sought is appropriate to remedy the identified harm. See 1990 Magnavox Modification at 5.

23 Ih the 1990 Magnavox Modification, the Commission did not remove, nor did Magnavox seek removal of, its prohibition on fixing, establishing, maintaining or controlling the retail prices at which its dealers may advertise, promote, offer for sale or sell its products (Paragraph I.B.).

U.S. PIONEER ELECTRONICS CORPORATION 465 446 Modifying Order Pioneer's Petition requests the removal of the advertising restrictions in paragraph I.10. As discussed in Section VI, above, the Commission has determined that Pioneer has not made a showing sufficient to warrant a modification of paragraph I.10. to remove the prohibition on threatening, intimidating, coercing, delaying shipments, or taking any other action to prevent the sale of Pioneer's products by a dealer because the dealer has advertised or is advertising Pioneer home electronics products at a price other than that suggested by Pioneer. Pioneer has made a showing, however, that it would be in the public interest to modify paragraph I.10. to remove the prohibition on Pioneer terminating a dealer for not following a suggested advertised price.

Other than the termination of a dealer, the conduct in paragraph 1.10. involves conduct that if engaged in with regard to resale prices could be considered resale price maintenance, and with regard to suggested advertised prices could be sufficiently close to resale price maintenance that it could lead to or be used as part of a resale price maintenance scheme.” Instead of granting Pioneer's request to delete the term advertising from paragraph I.10., the Commission believes that it is in the public interest for paragraph I.10. to be modified to delete the word terminating only as it relates to advertising.” Pioneer alleges that it is losing dealers who will supply a full line of its products, i.e., the products are widely distributed but also thinly distributed.”° Because of constant sales, Pioneer dealers are not likely to recover much of a profit on each item and, as a result, the dealers are not inclined to invest in Pioneer inventory, promotions and pre-sale services on Pioneer products.”’ 4 See 1990 Magnavox Modification at 12, fn. 20 ("The remaining part of subparagraph (T) will continue to prohibit Magnavox from harassing, threatening, or coercing its dealers (all actions which still may lead to agreements and which therefore remain unlawful)."). See also discussion in Section VI of this Order Modifying Order. °° The Commission, however, is issuing an Order to Show Cause why the order should not be further modified to remove the restriction on Pioneer to unilaterally terminate a dealer for not following suggested resale prices. 26 Petition Memo at Smith Aff. at J 8.

27 Petition Memo and declarations attached thereto. Modifying Order 11S F.T.C.

It is not unreasonable for Pioneer to want to protect the pre-sale services of its products, especially the high-end products and the new products through a plan that allows Pioneer to terminate a dealer who does not follow suggested advertised prices. Unilaterally terminating a dealer for advertising below suggested prices is less competitively threatening to interbrand competition than unilaterally terminating a dealer for failing to follow a suggested resale price. The latter, of course, is explicitly allowed under the teachings of Colgate, Monsanto and Sharp. Allowing Pioneer unilaterally to terminate a dealer for not following a suggested advertised price, however, does not venture nearly as close to resale price maintenance behavior as would granting Pioneer's request for modifications of paragraphs I.2., L.5., I.8. and most of I.10. Modifying those provisions would allow Pioneer to engage in conduct that is not unilateral and, instead, enter into agreements on advertised prices which could, depending on the circumstances, fall within the per se ban. The Commission, therefore, has determined that it is the public interest to modify paragraph I.10. to remove the restrictions on Pioneer terminating a dealer for not following suggested advertised prices. See Colgate, Sharp, Monsanto, and Lenox, Inc., Docket No. 8718, 111 FTC 612 (1989). To the extent that the conduct being allowed by the modifications might be in furtherance of an unlawful scheme to fix resale prices, such conduct would continue to be prohibited by the other provisions of the order. VII.

The Commission Issues an Order to Show Cause to Allow Pioneer to Terminate Dealers Who Sell Below a Suggested Resale Price The Commission is also issuing an Order to Show Cause why paragraph I.10. of the order should not further be modified so that Pioneer would not be prohibited from unilaterally terminating a dealer who sells Pioneer home electronics products at a price other than the suggested resale price. If this modification is to be made, an Order to Show Cause is necessary because Pioneer's Petition did not request this additional modification. The Commission generally will not use show cause proceedings to grant broader relief than requested U.S. PIONEER ELECTRONICS CORPORATION 467 446 Modifying Order by a respondent, and respondents have no right to obtain an Order to Show Cause.”* However, an Order to Show Cause is appropriate in this case given the particular showings made by Pioneer and the similarities between this case and the modification of the Magnavox order in 1990.

In this case the Commission has already considered the language of paragraph I.10. in deciding Pioneer's requested changes to the scope of that paragraph concerning unilateral dealer terminations for not following suggested advertised prices. Pioneer's showing in support of its request to remove the prohibition allowing it unilaterally to terminate a dealer for not following suggested advertised prices also strongly supports a finding that it would be in the public interest to remove the prohibition on terminating a dealer for failing to follow suggested resale prices. Pioneer has shown that its dealer base has been depleted and that those dealers carrying its products generally do not provide pre-sale and post-sale services suggested by Pioneer.

The change intended in the show cause proceeding is consistent with, and similar to, the modification made to the Magnavox order in 1990. Magnavox directly competes with Pioneer in most electronics markets and alleged similar competitive problems. Because of these particular factors, and because the conduct to be allowed is lawful under the Colgate doctrine, the Commission believes it is appropriate in this particular situation to grant somewhat broader relief than Pioneer has requested.” The Commission's reasoning in Magnavox is equally applicable in this case:

This modification will allow Magnavox to announce its resale prices for consumer electronic products in advance and refuse to deal with any dealer who fails to comply. It should therefore enable Magnavox to protect its full-service dealers from the activities of free-riding dealers and encourage its full-service dealers to provide the 28 . ae ips Respondents’ route to request relief through petitions to reopen and modify is set out in Section 5(b) of the Federal Trade Commission Act and Section 2.51 of the Commission's Rules of Practice.

See Orders 1 7 1 1 3 832 2620 166 36 96.555336 Reopening5 1 7 1 1 4 1010 2620 54 27 96.973709 ands 1 7 1 1 5 1076 2620 165 36 96.590073 Modifying5 1 7 1 1 6 1253 2620 90 28 96.583015 Orders 1 7 1 1 7 1354 2620 98 28 96.739090 Issued5 1 7 1 1 8 1465 2620 168 36 96.182373 September5 1 7 1 1 9 1644 2619 46 33 96.993896 26,5 1 7 1 1 10 1707 2619 82 33 96.803307 1978,5 1 7 1 1 11 1802 2620 55 27 96.914505 anda 1 7 1 2 0 523 2667 1334 34 -1 5 1 7 1 2 1 523 2667 92 28 96.664352 Orders 1 7 1 2 2 628 2672 30 23 96.035500 to5 1 7 1 2 3 673 2668 87 28 96.342873 Shows 1 7 1 2 4 775 2668 119 33 92.239479 Cause, Jnterco Inc., et al., Docket No. C-2929, 110 FTC 153, 156 (1988).

Modifying Order 115 F.T.C.

promotion and sales-related services that it believes are necessary to market Magnavox consumer electronic products efficiently. This modification retains all the order's provisions that prohibit Magnavox from engaging in resale price maintenance. The Commission may invoke them if Magnavox engages in conduct that goes beyond what is lawful under Monsanto.

1990 Magnavox Modification at 12 (emphasis added). Consistent with the 1990 Magnavox Modification, the modification of paragraph 1.10. -- to allow termination both for not following suggested advertising or sales prices -- is in the public interest. The unique circumstances of this case, therefore, have created a situation in which it is appropriate for the Commission not only to grant the requested modification of paragraph I.10. regarding unilateral termination of dealers not following suggested advertised prices, but also to issue an Order to Show Cause why the order should not also be modified to allow unilateral termination for not following suggested resale prices.

IX.

Conclusion Accordingly, /t is ordered, That this matter be reopened and that the Commission's modified order in Docket No. C-2755 be, and hereby is, modified, as of the effective date of this order, as follows: (a) Paragraph I.6. of the order is deleted; and (b) Paragraph I.10. of the order is modified to delete the word terminating as it relates to advertising, and paragraph 1.10. is rewritten in two parts as follows:

Threatening, intimidating, coercing, delaying shipments, or taking any other action (other than terminating) to prevent the sale of respondent's products by a dealer because said dealer has advertised, is advertising, or is suspected of advertising such products at other than prices that respondent may deem to be appropriate or has approved; or Terminating, threatening, intimidating, coercing, delaying shipments, or taking any other action to prevent the sale of respondent's products by a dealer because said dealer has sold, is selling, or is suspected of selling such products at other than prices that respondent may deem to be appropriate or has approved. U.S. PIONEER ELECTRONICS CORPORATION 469 446 Modifying Order X.

Order to Show Cause It is further ordered, That respondent Show Cause why paragraph 1.10. should not be additionally modified to read as follows: Threatening, intimidating, coercing, delaying shipments, or taking any other action (other than terminating) to prevent the sale of respondent's products by a dealer because said dealer has advertised or sold, is advertising or selling, or is suspected of advertising or selling such products at other than prices that respondent may deem to be appropriate or has approved.

In accordance with Section 3.72 of the Commission's Rules of Practice, 16 CFR 3.72, respondent has thirty (30) days from the date of service of this order to file an answer to this Order to Show Cause or be deemed to have accepted the action proposed herein. Commissioner Azcuenaga concurring in the result. Complaint IISF.T.C.