New Balance To Settle Price-Fixing Charges

New Balance Athletic Shoe, Inc., has agreed to settle Federal Trade Commission charges that it fixed the resale prices of its shoes in violation of antitrust laws. According to the FTC, New Balance entered into agreements with some of its retailers to restrict price competition, thereby raising prices for consumers. The settlement would prohibit the company from fixing or controlling the prices at which retailers sell the company’s athletic footwear.

New Balance, based in Boston, Massachusetts, manufactures and distributes athletic footwear. The company specializes in marketing shoes that come in a variety of widths.

According to the FTC complaint detailing its charges, New Balance entered into agreements with certain dealers, pursuant to which such dealers agreed to raise retail prices on New Balance’s products, maintain certain prices or price levels set by New Balance, or refrain from discounting New Balance’s products for a certain period of time. As alleged in the complaint, New Balance induced dealers to enter into such price agreements by, among other things, surveillance of retailer prices, threatening to terminate or suspend shipments to discounting retailers, and demanding that retailers raise their prices. New Balance also assured retailers that New Balance would secure similar price agreements from other competing retailers or otherwise prevent unapproved discounting of New Balance athletic shoes.

The complaint also alleges that New Balance adopted a written policy stating that New Balance would give a “one-time warning” to a dealer who sells its products below designated prices, and that in the event of continued or subsequent violation of its policy, New Balance would discontinue selling to that dealer. Instead of enforcing this policy through termination of non-complying retailers, New Balance on occasion used the policy as a means to enter into agreements with discounting retailers with respect to resale prices.

The proposed consent agreement, announced today for public comment, would prohibit the company from fixing, controlling, or maintaining the resale prices at which retailers advertise, promote or offer for sale any New Balance athletic or casual footwear. The settlement also would prohibit New Balance from coercing or pressuring any retailer to maintain or adopt any resale price and from attempting to secure their commitment to any resale price.

In addition, the settlement would prohibit New Balance, for 10 years, from notifying a retailer in advance that it is subject to partial or temporary suspension or termination if it sells or advertises New Balance products below the company’s designated resale price, or that the retailer will be subject to greater sanction if it continues or renews selling any products below the designated resale price. The settlement also would require, for a period of five years, that New Balance clearly state in advertising, catalogs, or promotional materials where it suggests a resale price: “Although New Balance may suggest resale prices for products, retailers are free to determine on their own the prices at which they will advertise and sell New Balance products.”

This is the third time in recent years that the FTC has negotiated agreements to settle charges that athletic and casual shoe manufacturers fixed the resale prices of their products. Keds entered into a similar settlement with the agency in September of 1993, as did Reebok and its subsidiary, Rockport, in May of 1995.

The Commission vote to accept the proposed consent agreement for public comment was 4-1 with Commissioner Mary L. Azcuenaga issuing a separate concurring statement and Commissioner Roscoe B. Starek, III, dissenting. Commissioner Azcuenaga issued a separate statement to make clear her understanding “that the proposed complaint does not challenge the announcement or implementation by a supplier of a structured termination policy.....New Balance did not implement its structured termination policy, and the proposed complaint and order do not address the lawfulness of that policy.” In his dissent, Commissioner Starek said, “....certain provisions of the proposed Commission order are not required to prevent unlawful conduct and may instead unnecessarily restrain procompetitive conduct by New Balance..... Because the proposed order in this case mandates excessive restrictions upon the conduct of New Balance, I respectfully dissent.”

The proposed consent agreement will be published in the Federal Register shortly and will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the Office of the Secretary, FTC, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $10,000.

Copies of the complaint, consent agreement, and an analysis of the agreement to assist the public in commenting are available from the FTC’s Public Reference Branch, Room 130, same address as above; 202-325-2222; TTY for the hearing impaired 202-325- 2502. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov.

(FTC File No. 9210050)