[Federal Register Volume 77, Number 58 (Monday, March 26, 2012)]
[Notices]
[Pages 17479-17481]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-7234]
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FEDERAL TRADE COMMISSION
[Docket No. 9351]
Star Pipe Products, Ltd.; Analysis of Proposed Consent Order To
Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement.
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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the complaint and
the terms of the consent order--embodied in the consent agreement--that
would settle these allegations.
DATES: Comments must be received on or before April 20, 2012.
ADDRESSES: Interested parties may file a comment online or on paper, by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Write ``Star Pipe, Docket No.
9351'' on your comment, and file your comment online at https://ftcpublic.commentworks.com/ftc/starconsent, by following the
instructions on the web-based form. If you prefer to file your comment
on paper, mail or deliver your comment to the following address:
Federal Trade Commission, Office of the Secretary, Room H-113 (Annex
D), 600 Pennsylvania Avenue NW., Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Linda M. Holleran (202-326-2267), FTC,
Bureau of Competition, 600 Pennsylvania Avenue NW., Washington, DC
20580.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and 3.25(f) the
Commission Rules of Practice, 16 CFR 3.25(f), notice is hereby given
that the above-captioned consent agreement containing a consent order
to cease and desist, having been filed with and accepted, subject to
final approval, by the Commission, has been placed on the public record
for a period of thirty (30) days. The following Analysis to Aid Public
Comment describes the terms of the consent agreement, and the
allegations in the complaint. An electronic copy of the full text of
the consent agreement package can be obtained from the FTC Home Page
(for March 20, 2012), on the World Wide Web, at http://www.ftc.gov/os/actions.shtm. A paper copy can be obtained from the FTC Public
Reference
[[Page 17480]]
Room, Room 130-H, 600 Pennsylvania Avenue NW, Washington, DC 20580,
either in person or by calling (202) 326-2222.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before April 20, 2012.
Write ``Star Pipe, Docket No. 9351'' on your comment. Your comment--
including your name and your state--will be placed on the public record
of this proceeding, including, to the extent practicable, on the public
Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm. As a
matter of discretion, the Commission tries to remove individuals' home
contact information from comments before placing them on the Commission
Web site.
Because your comment will be made public, you are solely
responsible for making sure that your comment does not include any
sensitive personal information, like anyone's Social Security number,
date of birth, driver's license number or other state identification
number or foreign country equivalent, passport number, financial
account number, or credit or debit card number. You are also solely
responsible for making sure that your comment does not include any
sensitive health information, like medical records or other
individually identifiable health information. In addition, do not
include any ``[t]rade secret or any commercial or financial information
which is obtained from any person and which is privileged or
confidential,'' as provided in Section 6(f) of the FTC Act, 15 U.S.C.
46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2). In particular, do
not include competitively sensitive information such as costs, sales
statistics, inventories, formulas, patterns, devices, manufacturing
processes, or customer names.
If you want the Commission to give your comment confidential
treatment, you must file it in paper form, with a request for
confidential treatment, and you have to follow the procedure explained
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept
confidential only if the FTC General Counsel, in his or her sole
discretion, grants your request in accordance with the law and the
public interest.
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\1\ In particular, the written request for confidential
treatment that accompanies the comment must include the factual and
legal basis for the request, and must identify the specific portions
of the comment to be withheld from the public record. See FTC Rule
4.9(c), 16 CFR 4.9(c).
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Postal mail addressed to the Commission is subject to delay due to
heightened security screening. As a result, we encourage you to submit
your comments online. To make sure that the Commission considers your
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/starconsent by following the instructions on the web-based form. If
this Notice appears at http://www.regulations.gov/#!home, you also may
file a comment through that Web site.
If you file your comment on paper, write ``Star Pipe, Docket No.
9351'' on your comment and on the envelope, and mail or deliver it to
the following address: Federal Trade Commission, Office of the
Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue NW.,
Washington, DC 20580. If possible, submit your paper comment to the
Commission by courier or overnight service.
Visit the Commission Web site at http://www.ftc.gov to read this
Notice and the news release describing it. The FTC Act and other laws
that the Commission administers permit the collection of public
comments to consider and use in this proceeding as appropriate. The
Commission will consider all timely and responsive public comments that
it receives on or before April 20, 2012. You can find more information,
including routine uses permitted by the Privacy Act, in the
Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.
Analysis of Agreement Containing Consent Order To Aid Public Comment
The Federal Trade Commission (``Commission: or ``FTC'') has
accepted, subject to final approval, an agreement containing a proposed
consent order (``Agreement'') from Star Pipe Products, Ltd. (``Star'').
The Agreement seeks to resolve in part an administrative complaint
issued by the Commission on January 4, 2012. The complaint charges that
Star and certain of its competitors violated Section 5 of the Federal
Trade Commission Act, 15 U.S.C. 45, by engaging in collusive acts and
practices in the market for ductile iron pipe fittings (``DIPF'').
The Commission anticipates that, with regard to Star, the
competitive issues described in the complaint will be resolved by
accepting the proposed order, subject to final approval, contained in
the Agreement. The Agreement has been placed on the public record for
30 days for receipt of comments from interested members of the public.
Comments received during this period will become part of the public
record. After 30 days, the Commission will again review the Agreement
and any comments received, and will decide whether it should withdraw
from the Agreement or make final the proposed order contained in the
Agreement.
The purpose of this Analysis to Aid Public Comment is to invite and
facilitate public comment concerning the proposed order. It is not
intended to constitute an official interpretation of the Agreement and
proposed order or in any way to modify its terms.
The proposed order is for settlement purposes only and does not
constitute an admission by Star that it violated the law, or that the
facts alleged in the complaint, other than jurisdictional facts, are
true.
I. The Complaint
The following allegations are taken from the complaint and publicly
available information.
A. Background
The largest sellers of DIPF in the United States are Star, McWane,
Inc. (``McWane''), and Sigma Corporation (``Sigma''). DIPF are used in
municipal water distribution systems to change pipe diameter or
pipeline direction. There are no widely available substitutes for DIPF.
Both imported and domestically produced DIPF are commercially
available.
DIPF suppliers distribute these products through wholesale
distributors, known as waterworks distributors, which specialize in
distributing products for water infrastructure projects. The end users
of DIPF are typically municipal and regional water authorities.
DIPF prices are based off of published list prices and discounts,
with customers negotiating additional discounts off of those list
prices and discounts on a transaction-by-transaction basis. DIPF
suppliers also offer volume rebates.
B. Challenged Conduct
Between January 2008 and January 2009, Star allegedly conspired
with McWane and Sigma to increase the prices at which DIPF were sold in
the United States. In furtherance of the conspiracy, and at the request
of McWane, Star changed its business methods to make it easier to
coordinate price levels, first by limiting the discretion of regional
sales personnel to offer price discounts, and later by exchanging
information documenting the volume of its monthly sales, along with
sales by McWane and Sigma, through an entity known as the Ductile Iron
Fittings Research Association (``DIFRA'').
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II. Legal Analysis
The January and June 2008 price restraints among Star, McWane, and
Sigma alleged in the complaint are naked restraints on competition that
are per se unlawful.\2\
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\2\ Federal Trade Commission & United States Department of
Justice, Antitrust Guidelines for Collaboration Among Competitors
(``Competitor Collaboration Guidelines'') Sec. 1.2 (2000); In re
North Texas Specialty Physicians, 140 F.T.C. 715, 729 (2005) (``We
do not believe that the per se condemnation of naked restraints has
been affected by anything said either in California Dental or
Polygram'').
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The June 2008 agreement, which was allegedly reached after a public
invitation to collude by McWane, illustrates how price fixing
agreements may be reached in public. Here, McWane's invitation to
collude was conveyed in a letter sent to waterworks distributors, the
common customers of Star, McWane, and Sigma. McWane's letter contained
a section that was meaningless to waterworks distributors, but was
intended to inform Star and Sigma of the terms on which McWane desired
to fix prices.\3\
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\3\ Because McWane's communication informed its rivals of the
terms of price coordination desired by McWane without containing any
information for customers, this communication had no legitimate
business justification. See In re Petroleum Products Antitrust
Litig., 906 F.2d 432, 448 (9th Cir. 1990) (public communications may
form the basis of an agreement on price levels when ``the public
dissemination of such information served little purpose other than
to facilitate interdependent or collusive price coordination'').
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The DIFRA information exchange was a component of the illegal price
fixing agreement. Specifically, the complaint alleges that the DIFRA
information exchange played a critical role in the 2008 price fixing
conspiracy, first as the quid pro quo for a price increase by McWane in
June 2008, and then by enabling Star, McWane, and Sigma to monitor each
others' adherence to the collusive arrangement through the second half
of 2008.
Evaluated apart from the price fixing conspiracy, Star's
participation in the information exchange is an independent violation
of the antitrust laws because this concerted action facilitated price
coordination among the three competitors.\4\
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\4\ The Commission articulated a safe harbor for exchanges of
price and cost information in Statement 6 of the 1996 Health Care
Guidelines. See Dep't of Justice & Federal Trade Comm'n, Statements
of Antitrust Enforcement Policy in Health Care, Statement 6:
Enforcement Policy on Provider Participation in Exchanges of Price
and Cost Information (1996). The DIFRA information exchange failed
to qualify for the safety zone of the Health Care Guidelines for
several reasons. Although the DIFRA information exchange was managed
by a third party, the information exchanged was insufficiently
historical, the participants in the exchange too few, and their
individual market shares too large to qualify for the permissive
treatment contemplated by the Health Care Guidelines. While failing
to qualify for the safety zone of the Health Care Guidelines is not
in itself a violation of Section 5, firms that wish to minimize the
risk of antitrust scrutiny should consider structuring their
collaborations in accordance with the criteria of the safety zone.
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III. The Proposed Order
The proposed order is designed to remedy the unlawful conduct
charged against Star in the complaint and to prevent the recurrence of
such conduct.
Paragraph II.A of the proposed order prohibits Star from
participating in or maintaining any combination or conspiracy between
any competitors to fix, raise or stabilize the prices at which DIPF are
sold in the United States, or to allocate or divide markets, customers,
or business opportunities.
Paragraph II.B of the proposed order prohibits Star from soliciting
or inviting any competitor to participate in any of the actions
prohibited in Paragraphs II.A.
Paragraph II.C of the proposed order prohibits Star from
participating in or facilitating any agreement between competitors to
exchange ``Competitively Sensitive Information'' (``CSI''), defined as
certain types of information related to the cost, price, output or
customers of or for DIPF. Paragraph II.D of the proposed order
prohibits Star from unilaterally disclosing CSI to a competitor, except
as part of the negotiation of a joint venture, license or acquisition,
or in certain other specified circumstances. Paragraph II.E of the
proposed order prohibits Star from attempting to engage in any of the
activities prohibited by Paragraphs II.A, II.B, II.C, or II.D.
The prohibitions on Star's communication of CSI with competitors
contained in Paragraphs II.C and II.D of the proposed order are subject
to a proviso that permits Star to communicate CSI to its competitors
under certain circumstances. Under the proposed order, Star may
participate in an information exchange with its competitors in the DIPF
market provided that the information exchange is structured in such a
way as to minimize the risk that it will facilitate collusion among
Star and its competitors. Specifically, the proposed order requires any
exchange of CSI to occur no more than twice yearly, and to involve the
exchange of aggregated information more than six months old. In
addition, the aggregated information that is exchanged must be made
publicly available, which increases the likelihood that an information
exchange involving Star will simultaneously benefit consumers. The
proposed order also prohibits Star's participation in an exchange of
CSI involving price, cost or total unit cost of or for DIPF when the
individual or collective market shares of the competitors seeking to
participate in an information exchange exceed specified thresholds. The
rationale for this provision is that in a highly concentrated market
the risk that the information exchange may facilitate collusion is
high. Due to the highly concentrated state of the DIPF market as
currently structured, an information exchange involving Star and
relating to price, output or total unit cost of or for DIPF is unlikely
to reoccur in the foreseeable future.
Paragraph III of the proposed order requires Star to cooperate with
Commission staff in the still-pending administrative litigation against
McWane.
The proposed order has a term of 20 years.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2012-7234 Filed 3-23-12; 8:45 am]
BILLING CODE 6750-01-P