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Pendleton Woolen Mills, Inc. has petitioned the Federal Trade Commission to modify a 1979 settlement order to allow the company to exert unilateral control over how its products are marketed and sold, and who sells them. The company states in its petition that both changes in the industry and the public interest warrant the requested modifications. The petition will be subject to public comment for 30 days, until Oct. 16, after which the Commission will make its determination.

Pendleton is a manufacturer of fabric, clothing and blankets, and is based in Portland, Oregon. The company has 14 mills and factories in the United States, and also does some manufacturing overseas. Pendleton signed the 1979 order at issue to settle FTC allegations that it had engaged in resale price maintenance -- which involves agreements with retailers about the prices at which they can advertise and sell its products -- in violation of federal antitrust laws. The order prohibits similar law violations, and also contains "fencing in" provisions that prohibit conduct that would otherwise be lawful but which could lead to resale price maintenance.

According to its petition, in recent years, Pendleton has faced increased competition from imported apparel and factory outlet stores, as well as growth in the amount of discounting at the expense of traditional apparel retailers, which "are the backbone of Pendleton's business." Pendleton states that it "has traditionally attempted to place its product with retailers who have a quality image and who provide a high level of service to the consumer," but "[y]esterday's traditional retailer in many cases has become today's discounter." Pendleton maintains that the order puts the company at a substantial disadvantage in competition with other manufacturers by prohibiting it from freely choosing with whom it will deal. As a result, the petition states, "[s]ince 1989, Pendleton has experienced a steady decline in sales as measured by both the number of units sold and inflation adjusted dollars." Pendleton also maintains that "it is no longer in the public interest to saddle a domestic producer with legal restrictions which do not apply to its competition," especially when that competition comes from imports and offshore production.

Accordingly, Pendleton has asked the Commission to modify the order to delete provisions that:

  • prohibit Pendleton from fixing or controlling the resale price at which any retailer may advertise or sell its product (the petition states that deleting this provision would remove any concern that the provision applies to unilateral decisions by Pendleton to terminate a dealer based on pricing, but adds that Pendleton would continue to be bound by antitrust laws prohibiting resale price maintenance agreements);
  • prohibit the company from conducting any surveillance program to determine whether any dealer is advertising or selling a product at a resale price other than that suggested or established by Pendleton, where the program is conducted to fix or enforce a retail price (Pendleton said this provision might be construed to restrict the company's legal right to review dealers' pricing and promotion practices);
  • prohibit Pendleton from terminating a dealer or taking any other action to restrict the sale of any product by a dealer because of the dealer's prices; and
  • require Pendleton to assure customers that its suggested prices are advisory only (the petition states that this requirement could confuse retailers about Pendleton's right to unilaterally control its distribution and subject the company to legal claims if it terminates a discounter).

Pendleton also seeks to modify a provision that prohibits the company from requiring or requesting that a dealer report other dealers who deviate from Pendleton's suggested pricing, and from acting on any such report by threatening or terminating the dealer. The requested modification would delete the phrase containing the language regarding how Pendleton acts on such reports because, according to the petition, unilateral determination of a dealer in response to price complaints by other dealers is lawful under the antitrust laws.

Comments on the petition should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue N.W., Washington, D.C. 20580. Copies of the petition and the 1979 order are available from the FTC's Public Reference Branch, Room 130, same address as above; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it happens, call the FTC's NewsPhone at 202-326-2710. FTC news releases and other documents also are available on the Internet at the FTC's World Wide Web Site at http://www.ftc.gov

 

(FTC Docket No. C-2985)

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