| 9910038 B262991 UNITED STATES OF AMERICA In the Matter of
Docket No. C-3902 COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act, as amended, 15 U.S.C. § 41 et seq., and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that the individuals and corporations named above, hereinafter respondents, have violated Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues this complaint, stating its charges as follows: PARAGRAPH ONE: Respondent Pools by Ike, Inc., a California corporation, is a licensed swimming pool contractor with its office and principal place of business at 1730 Art Street, Bakersfield, California 93312. PARAGRAPH TWO: Respondent Isaac W. Hornsby II is an individual and the president of Pools by Ike, Inc, a California corporation, a licensed swimming pool contractor with its office and principal place of business at 1730 Art Street, Bakersfield, California 93312. PARAGRAPH THREE: Respondent Ricky Sneed, an individual doing business as Aloha Pools, is a licensed swimming pool contractor, with his office and principal place of business at 119 Garden Drive, Bakersfield, California 93307. PARAGRAPH FOUR: Respondent Crystal One, Inc., a California corporation doing business as Crystal Pools, is a licensed swimming pool contractor with its office and principal place of business at 217 Mount Vernon Avenue, Suite 11, Bakersfield, California 93307. PARAGRAPH FIVE: Respondent Mario F. Medina is an individual and the president of Crystal One, Inc., a California corporation doing business as Crystal Pools, a licensed swimming pool contractor with its office and principal place of business at 217 Mount Vernon Avenue, Suite 11, Bakersfield, California 93307. PARAGRAPH SIX: Respondent Swimco Pools, Inc., a California corporation doing business as Executive Pools and Service, is a licensed swimming pool contractor with its office and principal place of business at 5650 District Boulevard, Suite 105, Bakersfield, California 93313. PARAGRAPH SEVEN: Respondent Brad L. Ward is an individual and the president of Swimco Pools, Inc., a California corporation doing business as Executive Pools and Service, a licensed swimming pool contractor with its office and principal place of business at 5650 District Boulevard, Suite 105, Bakersfield, California 93313. PARAGRAPH EIGHT: Respondent Neudeck Pools, Inc., a California corporation, is a licensed swimming pool contractor with its office and principal place of business at 509 Ming Avenue, Bakersfield, California 93307. PARAGRAPH NINE: Respondent Robert D. Hamilton is an individual and the president of Neudeck Pools, Inc., a California corporation, a licensed swimming pool contractor with its office and principal place of business at 509 Ming Avenue, Bakersfield, California 93307. PARAGRAPH TEN: Respondent Capri Pools, Inc., a California corporation, is a licensed swimming pool contractor with its office and principal place of business at 2810 Case Street, Bakersfield, California 93308. PARAGRAPH ELEVEN: Respondent M. Kirt Campbell is an individual and the president of Capri Pools, Inc., a California corporation, a licensed swimming pool contractor with its office and principal place of business at 2810 Case Street, Bakersfield, California 93308. PARAGRAPH TWELVE: Respondent Randall R. Arvizu, an individual doing business as Pacific Pools and Spas, is a licensed swimming pool contractor with his office and principal place of business at 12308 Clementa Avenue, Bakersfield, California 93312. PARAGRAPH THIRTEEN: Respondent Robbie Smith, an individual doing business as Robbie Smith Construction and Pools by Robbie, is licensed swimming pool contractor with his office and principal place of business at 8416 Rockport Drive, Bakersfield, California 93312. PARAGRAPH FOURTEEN: Respondent Rock Bottom, Inc., a California corporation, is a licensed swimming pool contractor with its office and principal place of business at 801 Angus Lane, Bakersfield, California 93312. PARAGRAPH FIFTEEN: Respondent Chuck D. Holmes is an individual and the president of Rock Bottom, Inc., a California corporation, a licensed swimming pool contractor with its office and principal place of business at 801 Angus Lane, Bakersfield, California 93312. PARAGRAPH SIXTEEN: Respondent W.W. Harper Enterprises, a California corporation doing business as WW Harper Pools & Spas, is a licensed swimming pool contractor with its office and principal place of business at 2400 K Street, Bakersfield, California 93301. PARAGRAPH SEVENTEEN: Respondent Michael J. Harper is an individual and the president of W.W. Harper Enterprises, a California corporation doing business as WW Harper Pools & Spas, a licensed swimming pool contractor with its office and principal place of business at 2400 K Street, Bakersfield, California 93301. PARAGRAPH EIGHTEEN: Respondent Michael A. Severini, an individual doing business as Severini Pools and Spas, is a licensed swimming pool contractor with his office and principal place of business at 661 Delfino Lane, Bakersfield, California 93304. PARAGRAPH NINETEEN: Respondent Caribbean Enterprises Construction Co., a California corporation doing business as Caribbean Pools & Spas, is a licensed swimming pool contractor with its office and principal place of business at 5330 Office Center Court, #30, Bakersfield, California 93309. PARAGRAPH TWENTY: Respondent Michael Webb is an individual and the president of Caribbean Enterprises Construction Co., a California corporation doing business as Caribbean Pools & Spas, a licensed swimming pool contractor with its office and principal place of business at 5330 Office Center Court, #30, Bakersfield, California 93309. PARAGRAPH TWENTY-ONE: Respondent Sunburst Pools, Inc., a California corporation doing business as Sunnyside Pool Service, is a licensed swimming pool contractor with its principal office and place of business at 5630 District Blvd., Bakersfield, California 93313. PARAGRAPH TWENTY-TWO: Respondent Keith E. Kelley is an individual and the president of Sunburst Pools, Inc., a California corporation doing business as Sunnyside Pools Service, a licensed swimming pool contractor with its principal office and place of business at 5630 District Blvd., Bakersfield, California 93313. PARAGRAPH TWENTY-THREE: Respondent Pamela Gates, an individual doing business as Tiffany Pools, is a licensed swimming pool contractor with her office and principal place of business at 324 Oak Street, Suite N, Bakersfield, California 93304. PARAGRAPH TWENTY-FOUR: The acts and practices of respondents, including those herein alleged, are in or affect commerce within the meaning of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45. PARAGRAPH TWENTY-FIVE: Respondents are all swimming pool contractors who are licensed by the State of California to construct swimming pools and do business in and around Bakersfield, a city of 224,000 people in Kern County in the Central Valley of California. Except to the extent that competition has been restrained as herein alleged, respondents have been, and are now, in competition among themselves and with other pool contractors in the Bakersfield area. PARAGRAPH TWENTY-SIX: Building a swimming pool entails a series of discrete tasks. Although swimming pool contractors may perform some of the construction work themselves, they generally hire a variety of subcontractors to do the work. First, a digger excavates the area where the pool is to be installed. Second, a steel subcontractor builds the steel reinforcing cage that forms the pool. Plumbers and electricians next install plumbing and electrical conduits. Third, a gunite subcontractor "shoots" nearly dry concrete into the hole to create the pool's shell. Fourth, a tile setter subcontractor lays the tile. Fifth, a decking subcontractor pours and molds the concrete deck surrounding the pool. Sixth, plumbers complete the plumbing and electrical work. Finally, a plasterer applies a coat of plaster to finish the pool's surface. Other related work that may be subcontracted includes landscaping (including but not limited to installation of decorative features such as waterfall, rocks or boulders), security, and fence services related to swimming pools. PARAGRAPH TWENTY-SEVEN: Homeowners usually hire a pool contractor to
handle all these aspects of constructing a swimming pool. Some homeowners, however, may
choose instead to enter into an arrangement, known in the industry as an
"owner-builder" arrangement, by which they hire subcontractors directly or use
pool contractors as consultants only in arranging for subcontractors. In this way,
homeowners who act as owner-builders are able to save a substantial amount of money. In
such arrangements, however, liability in the event of an accident or injury during
construction falls on the homeowner, rather than on the pool contractor. PARAGRAPH TWENTY-NINE: Beginning in early March 1998, respondents and others, all competing pool contractors, began meeting on a regular basis in an informal group that later came to be known as the Southern Valley Pool Association, hereafter the "Association." Although one of the reasons respondents met was to discuss common concerns of the swimming pool construction trade, one of the subjects which developed was a belief that there was a lack of profitability in building swimming pools in Bakersfield. PARAGRAPH THIRTY: Through the Association meetings and other communications, some respondents, acting as a combination, acted to restrain competition by, among other things, facilitating, entering into, and implementing agreements among themselves, express or implied, to fix or increase the prices homeowners paid for swimming pool construction. PARAGRAPH THIRTY-ONE: As a result of this combination, some respondents significantly increased prices to homeowners for constructing a swimming pool. PARAGRAPH THIRTY-TWO: Through the Association meetings and other communications, some respondents, acting as a combination, also engaged in a group boycott aimed at owner-builders and home construction developers and contractors. Some respondents viewed owner-builders as a major threat to the success of their efforts to raise prices to homeowners, primarily based upon a belief that most such contracting was being performed on a cash basis. Homeowners acting as owner-builders could work directly with subcontractors or use pool contractors only as consultants and thereby defeat the price increase, many times by paying cash. Home construction developers and contractors could also work directly with subcontractors (rather than with pool contractors) and similarly defeat the price increase. Consequently, some respondents agreed to pressure their subcontractors to charge owner-builders 50 percent more (and to charge home construction contractors or developers 25 percent more) than the subcontractors were charging pool contractors. Some respondents set the price increases at these high levels in order to eliminate or reduce any savings homeowners and home construction developers and contractors would realize by bypassing pool contractors and dealing directly with subcontractors. Some respondents agreed among themselves to stop using subcontractors who refused to implement these price increases. Some respondents also agreed, as a further inducement to gain the subcontractors' agreement to this plan, to pay subcontractors a higher price for subcontractor services. PARAGRAPH THIRTY-THREE: In furtherance of the group boycott described in paragraph 32:
PARAGRAPH THIRTY-FOUR: The acts and practices of the respondents as described in this complaint have had the purpose, tendency, effect, and capacity to restrain trade unreasonably and hinder competition in the provision of swimming pool contracting and subcontracting services in California in the following ways, among others:
PARAGRAPH THIRTY-FIVE: The aforesaid acts and practices of the respondents are to the prejudice and injury of the public and constitute unfair methods of competition in or affecting commerce in violation of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45. The acts and practices of the respondents, as herein alleged, are continuing and will continue or recur in the absence of the relief requested. WHEREFORE, THE PREMISES CONSIDERED, the Federal Trade Commission on this first day of November, 1999, issues its complaint against said respondents. By the Commission. Donald S. Clark SEAL: |