[Federal Register Volume 79, Number 145 (Tuesday, July 29, 2014)]
[Notices]
[Pages 44030-44033]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-17785]
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FEDERAL TRADE COMMISSION
[File No. 141 0036]
Mr. Jacob J. Alifraghis, Also Doing Business As
InstantUPCCodes.com, and 680 Digital, Inc., Also Doing Business As
Nationwide Barcode, and Philip B. Peretz; Analysis to Aid Public
Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreements.
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SUMMARY: The consent agreements in this matter settle alleged
violations of federal law prohibiting unfair methods of competition.
The attached Analysis to Aid Public Comment describes both the
allegations in the draft complaints and the terms of the consent
orders--embodied in the consent agreements--that would settle these
allegations.
DATES: Comments must be received on or before August 18, 2014.
ADDRESSES: For InstantUPCCodes.com, interested parties may file a
comment at https://ftcpublic.commentworks.com/ftc/instantupccodesconsent online or on paper, by following the
instructions in the Request for Comment part of the SUPPLEMENTARY
INFORMATION section below. Write ``InstantUPCCodes.com--Consent
Agreement; File No. 141 0036'' on your comment and file your comment
online at https://ftcpublic.commentworks.com/ftc/instantupccodesconsent
by following the instructions on the web-based form. For Nationwide
Barcode, interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/barcodeconsent online or on paper, by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Write ``Barcode Resellers
Release--Consent Agreement; File No. 141 0036'' on your comment and
file your comment online at https://ftcpublic.commentworks.com/ftc/
[[Page 44031]]
barcodeconsent by following the instructions on the web-based form. If
you prefer to file your comment on paper, mail your comment to the
following address: Federal Trade Commission, Office of the Secretary,
600 Pennsylvania Avenue NW., Suite CC-5610 (Annex D), Washington, DC
20580, or deliver your comment to the following address: Federal Trade
Commission, Office of the Secretary, Constitution Center, 400 7th
Street SW., 5th Floor, Suite 5610 (Annex D), Washington, DC 20024.
FOR FURTHER INFORMATION CONTACT: Matthew Accornero, Bureau of
Competition, (202-326-3102), 600 Pennsylvania Avenue NW., Washington,
DC 20580.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34,
notice is hereby given that the above-captioned consent agreements
containing consent orders to cease and desist, having been filed with
and accepted, subject to final approval, by the Commission, have 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 agreements, and the allegations in the complaints. An
electronic copy of the full text of the consent agreement packages can
be obtained from the FTC Home Page (for July 21, 2014), on the World
Wide Web, at http://www.ftc.gov/os/actions.shtm.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before August 18, 2014.
Write ``InstantUPCCodes.com--Consent Agreement; File No. 141 0036'' or
``Barcode Resellers Release--Consent Agreement; File No. 141 0036'' 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 privileged or confidential,'' as discussed 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/instantupccodesconsent or https://ftcpublic.commentworks.com/ftc/barcodeconsent by following the instructions on the web-based forms. 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 ``InstantUPCCodes.com--
Consent Agreement; File No. 141 0036'' or ``Barcode Resellers Release--
Consent Agreement; File No. 141 0036'' on your comment and on the
envelope, and mail your comment to the following address: Federal Trade
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW., Suite
CC-5610 (Annex D), Washington, DC 20580, or deliver your comment to the
following address: Federal Trade Commission, Office of the Secretary,
Constitution Center, 400 7th Street SW., 5th Floor, Suite 5610 (Annex
D), Washington, DC 20024. 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 August 18, 2014. 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 To Aid Public Comment
The Federal Trade Commission (``Commission'') has accepted, subject
to final approval, an agreement containing consent order (``Consent
Agreement'') from Mr. Jacob J. Alifraghis, who operates
InstantUPCCodes.com (``Instant''), and a separate Agreement from Philip
B. Peretz and 680 Digital, Inc., also d/b/a Nationwide Barcode
(``Nationwide''). These individuals and entities are collectively
referred to as ``Respondents.'' The Commission's complaints
(``Complaints'') allege that each Respondent violated Section 5 of the
Federal Trade Commission Act, as amended, 15 U.S.C. 45, by inviting
certain competitors in the sale of barcodes to join together in a
collusive scheme to raise prices.
Under the terms of the proposed Consent Agreements, Respondents are
required to cease and desist from communicating with their competitors
about rates or prices. They are also barred from entering into,
participating in, inviting, or soliciting an agreement with any
competitor to divide markets, to allocate customers, or to fix prices.
The Commission anticipates that the competitive issues described in
the Complaints will be resolved by accepting the Proposed Orders,
subject to final approval, contained in the Consent Agreements. The
Consent Agreements have 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 review the Consent Agreements again
and the comments received, and will decide whether it should withdraw
from the Consent Agreements or make final the accompanying Decisions
and Orders (``Proposed Orders'').
The purpose of this Analysis to Aid Public Comment is to invite and
facilitate public comment. It is not
[[Page 44032]]
intended to constitute an official interpretation of the proposed
Consent Agreements and the accompanying Proposed Orders or in any way
to modify their terms.
The Consent Agreements are for settlement purposes only and do not
constitute an admission by Respondents that the law has been violated
as alleged in the Complaints or that the facts alleged in the
Complaints, other than jurisdictional facts, are true.
I. The Complaints
The allegations of the Complaints are summarized below:
Instant, Nationwide, and a firm we refer to as Competitor A sell
barcodes over the Internet. A firm we refer to as Competitor B also
sells barcodes over the Internet, but at higher prices than Instant,
Nationwide, and Competitor A. Price competition among these firms
caused the price of barcodes to decrease over time.
Prior to August 2013, Instant had never communicated with
Nationwide or Competitor A. On the evening of August 4, 2013, Mr.
Alifraghis of Instant sent a message to Mr. Peretz of Nationwide
proposing that all three competitors raise their prices to meet the
higher prices charged by Competitor B:
Hello Phil, Our company name is InstantUPCCodes.com, as you may
be aware, we are one of your competitors within the same direct
industry that you are in. . . . Here's the deal Phil, I'm your
friend, not your enemy. . . .
Here's what I'd like to do: All 3 of us--US, YOU and [Competitor
A] need to match the price that [Competitor B] has. . . . I'd say
that 48 hours would be an acceptable amount of time to get these
price changes completed for all 3 of us. The thing is though, we all
need to agree to do this or it won't work. . . . Reply and let me
know if you are willing to do this or not.
Mr. Alifraghis then sent a similar email message to Competitor A.
The next day, on August 5, Mr. Peretz forwarded Mr. Alifraghis' message
to Competitor A, asking for Competitor A's thoughts on the proposal to
raise and fix prices.
On August 6, Mr. Peretz emailed Mr. Alifraghis and Competitor A. He
stated that, rather than raise price within the next 48 hours as
proposed by Mr. Alifraghis, he would prefer to wait until Sunday,
August 11, to raise his prices. Mr. Peretz added a second condition: he
wanted Instant to raise its prices first:
We are open to what you suggest . . . and are willing to pull
the trigger on this at midnight Sunday, August 11th.
Competitor A did not respond to this email or to any emails in the
series. Not having heard from Competitor A, Mr. Alifraghis emailed Mr.
Peretz stating that he would have to hear from Competitor A directly
before any price increase could take place.
On August 7, Mr. Peretz sent an email to Mr. Alifraghis and
Competitor A, trying to overcome the lack of lack of trust that he
perceived as impeding efforts to coordinate a price increase.
On August 11, the price increase discussed by the barcode
competitors in multiple email messages failed to materialize. Two days
later, on August 13, Mr. Peretz wrote again to Mr. Alifraghis and
Competitor A. Mr. Peretz urged his competitors to continue their
dialogue and to take the opportunity presented to raise prices:
This is a dialog [. . .] a dialog is a very good thing and it
seems, regardless of how I feel about each of you and how you feel
about each other or me, this is an opportunity to increase
profitability. All it takes is conversation and a leap of faith.
This is the opportunity that we have all wanted [. . .] to be
able to increase our prices and to make some money.
In their correspondence, Mr. Alifraghis and Mr. Peretz also
threatened to lower their own prices if the other parties did not cede
to their demands to collectively increase pricing. For example, on
August 19, Mr. Peretz stated in an email to Instant and Competitor A:
Gentlemen,
Have we given up on this conversation?
This is the busiest time of year . . . and I am considering
meeting and/or beating your prices. Would like to see what your
thoughts are before I screw up our industry even more.
Mr. Peretz and Mr. Alifraghis continued to exchange communications
about price levels into January 2014, until they learned of the FTC's
investigation.
II. Analysis
The term ``invitation to collude'' describes an improper
communication from a firm to an actual or potential competitor that the
firm is ready and willing to coordinate on price or output or other
important terms of competition. Mr. Alifraghis' August 4 email to his
competitors outlining a mechanism by which the three companies can and
should fix the price of barcodes is a clear example of an invitation to
collude. The ensuing private communications among barcode sellers
outlined in the Complaints establish a series of subsequent
invitations, with each Respondent repeatedly communicating its
willingness to raise and fix prices for barcodes, contingent on other
competitors doing so, and soliciting rivals to participate in a common
scheme.
For 20 years, the Commission has held that an invitation to collude
may violate Section 5 of the FTC Act.\2\ Several legal and economic
justifications support the imposition of liability upon a firm that
communicates an invitation to collude, even where there is no proof of
acceptance. First, difficulties exist in determining whether a
competitor has or has not accepted a particular solicitation. Second,
even an unaccepted solicitation may facilitate coordinated interaction
by disclosing the solicitor's intentions or preferences. Third, the
anti-solicitation doctrine serves as a useful deterrent against
potentially harmful conduct that serves no legitimate business
purpose.\3\
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\2\ See, e.g., In re Quality Trailer Prods., 115 F.T.C. 944
(1992); In re AE Clevite, 116 F.T.C. 389 (1993); In re Precision
Moulding, 122 F.T.C. 104 (1996); In re Stone Container, 125 F.T.C.
853 (1998); In re MacDermid, 129 F.T.C (C-3911) (2000); see also In
re McWane, Inc., Docket No. 9351, Opinion of the Commission on
Motions for Summary Decision at 20-21 (F.T.C. Aug. 9, 2012) (``an
invitation to collude is `the quintessential example of the kind of
conduct that should be . . . challenged as a violation of Section
5''') (citing the Statement of Chairman Leibowitz and Commissioners
Kovacic and Rosch, In re U-Haul Int'l, Inc., 150 F.T.C. 1, 53
(2010). This conclusion has been affirmed by leading antitrust
scholars. See, P. Areeda & H. Hovenkamp, VI ANTITRUST LAW ] 1419
(2003); Stephen Calkins, Counterpoint: The Legal Foundation of the
Commission's Use of Section 5 to Challenge Invitations to Collude is
Secure, ANTITRUST Spring 2000, at 69. In a case brought under a
state's version of Section 5, the First Circuit expressed support
for the Commission's application of Section 5 to invitations to
collude. Liu v. Amerco, 677 F.3d 489 (1st Cir. 2012).
\3\ Valassis Communications, Inc., Analysis of Agreement
Containing Consent Order to Aid Public Comment, 71 FR 13976, 13978-
79 (Mar. 20, 2006).
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If the invitation is accepted and the competitors reach an
agreement, the Commission will refer the matter to the Department of
Justice for a criminal investigation. In this case, the complaint does
not allege that Nationwide, Instant, and Competitor A reached an
agreement.
An invitation to collude, which, if accepted, would constitute a
per se violation of the Sherman Act, is a violation of Section 5.
Although this case involves particularly egregious conduct, less
egregious conduct may also result in Section 5 liability. It is not
essential that the Commission find such explicit invitations to
increase prices. Nor must the Commission find repeated misconduct
attributable to the principals of firms.
III. The Proposed Consent Orders
The Proposed Orders have the following substantive provisions:
Section II, Paragraph A of the Proposed Orders enjoin Respondents
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from communicating with their competitors about rates or prices, with a
proviso permitting public posting of rates and a second proviso that
permits Respondents to buy or sell barcodes.
Section II, Paragraph B prohibits Respondents from entering into,
participating in, maintaining, organizing, implementing, enforcing,
inviting, offering, or soliciting an agreement with any competitor to
divide markets, to allocate customers, or to fix prices.
Section II, Paragraph C bars Respondents from urging any competitor
to raise, fix or maintain its price or rate levels or to limit or
reduce service terms or levels.
Sections III-VI of the Proposed Orders impose certain standard
reporting and compliance requirements on Respondents.
The Proposed Orders will expire in 20 years.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2014-17785 Filed 7-28-14; 8:45 am]
BILLING CODE 6750-01-P