FTC Settles Charges with American Cyanamid; Agency Alleged Company Had Fixed Prices and Restricted Competition

The Federal Trade Commission announced today that it had reached an agreement with American Cyanamid settling charges that the company violated antitrust laws by fixing the resale prices of their agricultural chemical products. According to the FTC, American Cyanamid, which sold more than $1 billion of these chemicals in 1995, entered into agreements with its retail dealers offering substantial rebates if the dealers sold the company’s chemicals at or above specific prices. The proposed settlement would prohibit the company from entering into such agreements in the future.

“The antitrust laws are clear: when companies enter into agreements fixing resale prices, they are breaking the law,” said William J. Baer, Director of the FTC’s Bureau of Competition. "American Cyanamid and its dealers entered into a series of agreements designed to prop up prices paid by farmers and to keep dealers’ margins high.”

A multi-state taskforce made up of 50 states, the District of Columbia, and the Commonwealth of Puerto Rico, also announced a settlement with American Cyanamid today. The investigation by the states had been conducted in cooperation with the FTC.

"This is another in a series of resale price-fixing cases we have brought in close cooperation with the states," Baer said. "This kind of joint effort helps us make the most of government resources, and sends a clear and consistent message that this type of conduct won’t be tolerated."

American Cyanamid is a major manufacturer of crop protection chemicals--herbicides and insecticides--widely used in commercial agriculture to protect growing crops from weed infestation and insect damage. The company’s principal place of business is in Parsippany, New Jersey. On November 21, 1994, it became a wholly-owned subsidiary of American Home Products Corp. In 1995, American Cyanamid sold its products to over 2500 retail dealers located throughout the United States.

In 1995, American Cyanamid was the leading producer of crop protection chemicals in three domestic markets: soybean broadleaf herbicides, soybean grass herbicides, and corn soil insecticides. In addition, American Cyanamid is the country’s second-largest producer of cotton grass herbicides.

According to the FTC complaint detailing the charges in this case, for approximately five years beginning in 1989, American Cyanamid operated two rebate programs for its retail dealers. Under these programs, the company entered into written agreements with the dealers whereby it offered to pay the dealers substantial rebates on each sale if they sold American Cyanamid’s crop protection chemicals at or above specified minimum resale prices. The pre-rebate prices paid by the dealers for the crop protection chemicals were equal to the specified minimum resale prices. Under the terms of the agreements, a dealer was not entitled to, and did not receive, any rebate on sales made below the specified minimum price; therefore, sales below American Cyanamid’s specified minimum resale prices were made at a loss to the dealer. The dealers overwhelmingly accepted American Cyanamid’s offer by selling at or above the specified minimum prices, according to the FTC complaint.

The settlement would prohibit American Cyanamid from conditioning the payment of rebates or other incentives on the resale prices its dealers charge for its products. American Cyanamid would also be prevented from agreeing with its dealers generally to control or maintain resale prices.

For three years from the date on which the settlement order becomes final, American Cyanamid would have to include a statement, posted clearly and conspicuously, on any price list, advertising, or catalogue where it has suggested a resale price for any product to any dealer.

The required statement would explain that while American Cyanamid may suggest resale prices for its products, dealers remain free to determine on their own the prices at which they will sellAmerican Cyanamid’s products. The company would have to mail a letter containing this statement and a copy of the proposed settlement to all of its current dealers, distributors, officers, management employees, and sales representatives.

Finally, the order contains various record keeping and reporting provisions designed to assist the FTC in monitoring American Cyanamid’s compliance with the terms of the settlement agreement.

The Commission vote to approve the settlement was 4-1, with Commissioner Roscoe B. Starek, III, dissenting.

In his dissenting statement, Commissioner Starek said, "On several grounds . . . acceptance of the consent agreement in this matter represents a poor policy choice by the Commission. From a legal perspective, AmCy’s conduct does not constitute an illegal agreement to maintain resale prices; from an economic perspective, the evidence points to the conclusion that AmCy’s conduct was procompetitive; and from a policy perspective, the Commission’s decision hardly delineates a clearer distinction (and in fact seriously blurs the line) between conduct likely to be subject to per se condemnation and conduct that is not. Instead of reaching for ways to expand the application of the per se rule to conduct that is plainly procompetitive, enforcers should reserve their heavy hand for conduct that falls within standards for per se illegality clearly enunciated by the Supreme Court. Accordingly, I cannot support the proposed enforcement action made public today."

A statement issued by Chairman Robert Pitofsky and Commissioners Janet D. Steiger and Christine A. Varney in response to Commissioner Starek explained that this proposed agreement was consistent with legal precedent. "If an agreement to forego one’s entire profit margin if [a dealer] departs from the specified price does not constitute a price maintenance agreement, then nothing remains of the per se rule."

Commissioner Mary L. Azcuenaga concurred in the decision to accept the agreement for public comment, but did not join the majority statement, observing that her views "are contained entirely within the four corners of the decisional document." She added: "If the majority wants to revise or expand its decision, the proper course is to revise the decisional document."

An analysis of 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 FTC, Office of the Secretary, 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 $11,000.

Copies of the complaint, proposed consent agreement, and an analysis of the agreement to assist the public in commenting are available on the FTC’s web site at http://www.ftc.gov and also from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. Proposed consent agreements also are available by calling 202-326-3627. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. 951 0106)