California Pool Contractors Settle FTC Charges of Price-Fixing and Conspiracy

The Federal Trade Commission has agreed to accept a settlement of charges that 14 Central California pool construction contractors illegally joined together to soak unwary consumers with higher prices in a city-wide price-fixing and boycotting conspiracy. The settlement would prevent the contractors from engaging in similar illegal activities in the future.

According to the FTC's complaint, the contractors - all of whom operated in Bakersfield, California - joined together in the spring of 1998 to form the "Southern Valley Pool Association." Through association meetings, contractors conspired to raise swimming pool construction prices substantially, the complaint alleges. In addition, the complaint charges that they engaged in a variety of boycott and price-raising efforts designed to eliminate local owner-builders, whom they considered to be the main threat to their price-fixing conspiracy.

Owner-builders are typically homeowners who get a substantial price break by bypassing pool contractors and dealing directly with subcontractors. According to the FTC's complaint, because association members were concerned that consumers could get around the price-fixing conspiracy by dealing directly with subcontractors, they held a series of meetings with the subcontractors to tell them to raise the owner-builders' prices by 50 percent. Further, the complaint alleges that the members threatened to stop sending work to subcontractors that did not agree to raise the prices they charged owner-builders. The subcontractors allegedly also were told to raise the price of services provided to home construction developers by 25 percent, in an attempt to ensure that these jobs would be given to association members as well. Finally, the complaint charges that to encourage the subcontractors to join in their price-fixing scheme, the association's contractors agreed to pay them 10 to 15 percent more in labor fees. According to the Commission, some contractors substantially increased the prices charged to consumers in Bakersfield as a result of the conspiracy.

According to the Commission, the contractors involved in the price-fixing and boycott conspiracy were: Ike Hornsby of Pools by Ike, Inc.; Ricky Sneed of Aloha Pools; Mario Medina of Crystal Pools; Brad Ward of Executive Pools; Bob Hamilton of Neudeck Pools; Kirt Campbell of Capri Pools; Randy Arvizu of Pacific Pools; Robbie Smith of Pools by Robbie; Chuck Holmes of Rock Bottom Pools; Michael J. Harper of WW Harper Pools & Spas; Mike Severini of Severini Pools & Spas; Mike Webb of Caribbean Pools & Spas; Keith Kelley of Sunnyside Pools; and Pam Gates of Tiffany Pools.

Under the terms of the proposed agreement, the individuals named above (as well as nine corporate respondents) would be prohibited from:

• entering into any agreement relating to the price of swimming pool contracting or subcontracting services; or requesting, threatening, or attempting to persuade anyone else to alter prices or terms for such services in any way;

• entering into any agreement to refuse to deal with owner-builders or home construction contractors or developers;

• requesting, threatening or attempting to persuade any swimming pool contractor or subcontractor to refuse categorically to deal with owner-builders, home construction contractors or developers, or swimming pool contractors who act or want to act as consultants for owner-builders; and

• requesting, threatening or attempting to persuade any subcontractor regarding the terms of that subcontractor's dealings with owner-builders, home construction contractors or developers, or swimming pool contractors who act or want to act as consultants for owner-builders.

In addition, for five years following the settlement signing the respondents would be required to tape record any meetings of the association and maintain copies of these records for three years after each meeting. Finally, if they form a similar trade association or organization in the future, they would be required to incorporate the consent agreement's terms relating to price-fixing and conspiracies into the by-laws of those organizations and mail the by-laws to all new members.

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.

A summary of the proposed consent agreement will be published in the Federal Register shortly. The agreement 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, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.

The Commission vote to accept the proposed consent agreement was 4 to 0.

Copies of the complaint, proposed consent agreement, and an analysis of the proposed consent order to aid public comment, are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. 991-0038)