Precision Moulding Co., Inc

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IN THE MATIER OF PRECISION MOULDING CO., INC.

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket C-3682. Complaint, Sept. 3, 1996--Decision, Sept. 3, 1996 This consent order prohibits, among other things, a California-based supplier of wood products used to construct frames for artists' canvases from r~questing, suggesting, urging or advocating that any competitor raise, flx or stabilize prices or price levels, and from entering into any agreement or conspiracy to flx, raise or maintain prices. · Appearances For the Commission: Michael Antalics, rVilliam Lanning and William Baer.

For the respondent: Bruce Ryan; Paul, Hastings, Janoftky & Walker, Wa,shington, D.C.

COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act, and by virtue of the authority vested·in it by said Act, the Federal Trade Commission, having reason to believe that Precision Moulding Co., Inc., a corporation, hereinafter sometimes referred to -.· as respondent. or "Precision," has violated the provisions. of said Act, and it appearing to the Commission that a proceeding .by it in respect thereof would be in the public interest, hereby issues its complaint, stating its charges in that respect as follows: PARAGRAPH L Respondent Precision Moulding Co., Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the State of California with its office and principal place of business located at 3308 Cyclone Court, Cottonwood, California, and its mailing address at P.O. Box 406, Cottonwood, California. \ PAR. 2. Respondent is now, and for some time has been, engaged in the manufacture, advertising, offering for sale, sale and distribution of stretcher bars and other wood products. A "stretcher bar" is an art PRECISION MOULDING CO., INC. 105 104 Complaint supply wood product which when assembled with three other 'stretcher bars comprises a rectangular frame over which a canvas used for painting is stretched. Stretcher bars come in various lengths and widths, but are usually between 6" to 120" in length. Precision is the dominant supplier of commercial stretcher bars in the United States.

PAR. 3. Respondent maintains and has maintained .a substantial course ofbusiness, 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. Between January and May of 1995, respondent became aware that a new competitor was soliciting the business of its customers. These cu.stomers provided respondent with written documentation that the competitor was offering stretcher bars at prices below those offered by respondent. Upon reviewing the information concerning the competitor's prices, the President of the respondent stated that the competitor's prices were "ridiculous." PAR. 5. At all times relevant herein, respondent perceived the competitor as a competitive threat because of the competitor's low prices. Between January and May of 1995, respondent intentionally delayed a scheduled across-the-board increase in the price of its stretcher bars because of the competitive threat posed by the competitor.

PAR. 6. In May of 1995, the President and General Manager of the respondent planned to travel to the eastern United States, in part, to make an unannounced visit to its competitor. PAR. 7. On or about June 23, 1995, the President and General Manager of respondent visited the headquarters of the new competitor and ·met with an officer thereof. During the meeting, the General Manager of respondent told the competitor that its prices for stretcher bars were "ridiculously ~ow." He also told the competitor that he did not "have to give the product away." This was understood by the competitor to be an invitation to fix prices. At this point, the competitor advised the respondent's representatives that he was aware that price fixing was illegal and did not want to get "contaminated." The competitor then implored the respondent's representatives to refrain from further discussion concerning prices. PAR. 8. After a brief discussion about equipment, the respop.dent's representatives returned to a discussion about prices. The General Manager of the respondent threatened the competitor Decision and Order 122 F.T.C. with a price war and told the competitor that the competitor would not be able to survive a price war with Precision. At this. point, the competitor reiterated that the respondent's discussion of prices was "dangerous" from a legal perspective, and the competitor advised the respondent that the conversation was over. . . PAR. 9. After the June 1995 meeting and throughout the remainder of 1995, respondent continued to delay the implementation of its scheduled across-the-board price increase (or its stretcher bars until it could ascertain whether the competitor would contin~e to be a competitive threat.

PAR. 10. The conduct described in paragraphs seven·and eight constituted an implicit invitation by respondent to its competitor to raise prices of stretcher bars and refrain .from competiti.on. The invitation, if accepted, would have constituted an agreement in restraint of trade.

PAR. 11. The afores~id acts and practices cons~itute unfair methods of competition in or affecting commerce in violation of Section 5 of the Federal Trade Commission Act. The acts and practices herein alleged are continuing and will continue in the absence of the relief herein requested.

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 oftheFeder.al Trade Commission Act; and The respondent, their attorney, and counsel fo.r the Co1Il11l.ission having thereafter executed an agreement containing a consent order, an admission by respondent of ~11 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 Commissio~'s Rules; and · PRECISION MOULDING CO., INC. 107 104 Decision and Order 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:

1. Respondent Precision Moulding Co., Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the State of California, with its office and principal place of business located at 3308 Cyclone Court, Cottonwood, California, and its mailing address at P.O. Box 406, Cottonwood, 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 I.

For purposes of this order, the following definitions shall apply: . A. "Respondent" means Precision Moulding Co., Inc., its directors, officers, employees, agents and representatives, 'predecessors, successors and assigns; its subsidiaries, divisions, and groups, and affiliates controlled by Precision Moulding Co., Inc., and the respective directors,_ officers, employees, agents and representatives, successors, and assigns of each. B. "Stretcher bar products" ineans an art supply wood product which when assembled comprises a rectangular frame over which a canvas used for painting is stretched, and includes any size of stretcher bar.

II.

It is ordered, That respondent, directly or indirectly, through any corporation, subsidiary, division or other device, in connection with · Decision and Order 122 F.T.C. the mam1facture, advertising, offering for sale, sale or distribution of any stretcher bar products, in or affecting commerce, as "commerce" is defmed in the Federal Trade Commission Act, forthwith cease and desist from:

A. Requesting, suggesting, urging, or advocating that any competitor raise, fix·or stabilize prices or price levels, or engage in any other pricing action; and B. Entering into, attempting to enter into, adhering to, or maintaining any combination, conspiracy, agreement, understanding, plan or program with any competitor to fix, raise, establish, maintain or stabilize prices or price levels .

. Provided, that nothing in this order shall prohibit respondent from: (1) agreeing to sell or distribute its stretcher bar products to its - competitors, and (2) negotiating or agreeing upon the price which any of its stretcher bar products will be sold to its competitors. III.

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

B. For a period of three (3) years after the date on which this order becomes final, and within ten (1 0) days after the date on which any person becomes a director, officer, or management employee of respondent, provide a copy of this order to such person; and C. Require each person to whom a copy oi this order is furnished pursuant to subparagraphs III. A and B of this order to sign and submit to Precision Moulding Co., Inc. withing 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 Precision Moulding Co., Inc. to penalties for violation of the order. PRECISION MOULDING CO., INC. 109 104 Decision and Order IV.

It is further ordered, That respondent shall: A. Within sixty ( 60) days from the date on which this order becomes final, and annually thereafter for three (3) years on the _anniversary date of this order, and at such other times as the Commission may by written notice to the respondent require, file with the Commission a verified written report setting forth in detail the manner and form in which respondent has complied and is complying with this order;

. B. For a period of three (3) years after the order becomes final, maintain and make available to the staff of the Federal Trade Commission for inspection and copying, upon reasonable notice, all . records of communications with competitors of respondent relating I to any aspect .of pricing for stretcher bar products, and records pertaining to any action taken in connection with any activity covered by Parts II, III and IV, of this order; and C. Notify the Commission at least thirty (30) days prior to any change in respondent such as dissolution, assignment or sale resulting in the emergence of a successor corporation, the creation or -dissolution of subsidiaries, or any other change in the corporation that may affect compliance obligations arising out of this order. v.

It is further ordered, That this order shall terminate on September 3, 2016.

110 ·FEDERAL TRADE COMMISSION DECISIONS Interlocutory Order 122 F.T.C.