[Federal Register Volume 64, Number 163 (Tuesday, August 24, 1999)]
[Notices]
[Pages 46201-46203]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-21919]
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FEDERAL TRADE COMMISSION
[File No. 991 0038]
Pools By Ike, Inc., et al.; Analysis 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 draft
complaint that accompanies the consent agreement 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 October 25, 1999.
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ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 600 Pennsylvania Ave., NW, Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Thomas Dahdouh or David Newman,
Federal Trade Commission, Western Regional Office, 901 Market St.,
Suite 570, San Francisco, CA 94103. (415) 356-5294 or 356-5280.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of
the Commission's Rules of Practice (16 CFR 2.34), 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 sixty (60) 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 August 18, 1999), on the World Wide Web, at ``http://www.ftc.gov/
os/actions97.htm.'' A paper copy can be obtained from the FTC Public
Reference Room, Room H-130, 600 Pennsylvania Avenue, NW, Washington, DC
20580, either in person or by calling (202) 326-3627.
Public comment is invited. Comments should be directed to: FTC/
Office of the Secretary, Room 159, 600 Pennsylvania Ave., NW,
Washington, DC 20580. Two paper copies of each comment should be filed,
and should be accompanied, if possible, by a 3\1/2\ inch diskette
containing an electronic copy of the comment. Such comments or views
will be considered by the Commission and will be available for
inspection and copying at its principal office in accordance with
Section 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR
4.9(b)(6)(ii)).
Analysis of Proposed Consent Order to Aid Public Comment
The Federal Trade Commission (``Commission'') has accepted, subject
to final approval, an Agreement Containing Consent Order (``Order'')
from fourteen swimming pool contractors in Bakersfield, California, a
city of 224,000 people in Kern County in the Central Valley of
California. As alleged in the Commission's proposed complaint, these
swimming pool contractors were part of an unlawful price-fixing and
group boycott combination that began in the Spring of 1998. The
proposed Order is designed to prevent the recurrence of these
anticompetitive practices engaged in by these swimming pool
contractors.
The Proposed Complaint
The proposed complaint alleges that, in the Spring of 1998,
fourteen swimming pool contractors formed an informal group, known as
the Southern Valley Pool Association (the ``Association''). The
complaint alleges that, through the Association meetings and other
communications, some of these swimming pool contractors agreed to
increase prices substantially to homeowners for swimming pool
construction. The proposed complaint also alleges that, as a result of
this combination, some of these contractors thereafter significantly
increased their prices to homeowners.
The proposed complaint also alleges that some of these swimming
pool contractors engaged in a group boycott designed to prevent
homeowners from escaping this collective price increase by turning to
alternative means for the construction of swimming pools. According to
the Commission's proposed complaint, homeowners usually hire a swimming
pool contractor to handle all aspects of constructing a swimming pool.
Some homeowners, however, may choose to enter into an arrangement,
known in the industry as an ``owner-builder'' arrangement, by which
they hire subcontractors directly or use swimming pool contractors as
consultants only in arranging for subcontractors. In this way,
homeowners who act as owner-builders are able to save substantial
amounts of money.\1\ Similarly, home construction developers and
contractors may hire swimming pool contractors to handle all aspects of
constructing a swimming pool, or they may hire subcontractors directly
for that purpose.
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\1\ In owner-builder arrangements, liability in the event of an
accident or injury during construction falls on the homeowner,
rather than on the pool contractor.
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According to the Commission's proposed complaint, owner-builders
were viewed as a major threat to the success of the collective efforts
by some swimming pool contractors to raise prices to homeowners.
Homeowners acting as owner-builders could work directly with
subcontractors or use pool contractors only as consultants and thereby
defeat the price increase. Similarly, home construction developers and
contractors could also work directly with subcontractors (rather than
with pool contractors) and similarly defeat the price increase. To
effectuate this group boycott, the proposed complaint alleges that,
beginning in early April 1998, a series of meetings was held, with some
of respondents and all or nearly all of each trade of subcontractors in
attendance. At these meetings, some respondents:
instructed the subcontractors to raise their prices to
owner-builders by 50 percent and to home construction developers and
contractors by 25 percent, substantial price hikes that were designed
to eliminate or reduce the savings homeowners and home construction
developers and contractors would normally realize by bypassing pool
contractors and dealing directly with subcontractors;
warned the subcontractors that the respondents would stop
subcontracting with them if the subcontractors did not increase their
prices to owner-builders and home construction developers and
contractors as set forth above; and
offered the subcontractors a quid pro quo whereby, if the
subcontractors agreed to increase prices to owner-builders and home
construction developers and contractors as set forth above, respondents
would agree to a specified increase (the amount of which varied
depending on the particular subcontracting work being done) in the
price subcontractors charged respondents for subcontractor services.
As a direct result of these meetings, according to the proposed
complaint, most of the subcontractors raised their prices to pool
contractors by the specified amounts on or about May 15, 1998. Also as
a direct result of these meetings, some subcontractors began charging
or sought to charge owner-builders and home construction developers and
contractors substantially higher prices than they charged swimming pool
contractors. Other subcontractors stopped doing owner-builder jobs
altogether, because they were fearful of losing their work with
respondents.
According to the proposed complaint, the effects of these
collective actions are to increase prices for swimming pool
construction services and swimming pool subcontracting services and to
interfere with consumers' choice in deciding to build their swimming
pool in an owner-builder arrangement or through home construction
developers or contractors.
The Proposed Order
The proposed Order contains provisions designed to remedy the
violations charged and to prevent the proposed respondents from
engaging in similar acts and practices in the future.
Paragraph II of the proposed Order would prohibit the proposed
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respondents from (1) entering into any agreement, express or implied,
relating to the price for swimming pool contracting or subcontracting
services and (2) requesting, proposing, threatening, urging,
recommending, advocating, or attempting to persuade in any way anyone
else to alter in any way their price and terms for such services.
Paragraphs II.A.(1) and B.(1) These provisions will prevent future
efforts, whether by agreement or through requests to others, to raise
prices and alter terms for both swimming pool contracting and
subcontracting services.
Paragraph II would also prohibit the proposed respondents from
entering into any agreement to refuse to deal with owner-builders or
home construction contractors or developers. Paragraph II.A.(2). It
would bar them as well from requesting, proposing, threatening, urging,
recommending, advocating, or attempting to persuade in any way 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 wish to act as consultants for
owner-builders. Paragraphs II.B.(2) and (3). Finally, Paragraph II
would prohibit respondents from requesting, proposing, threatening,
urging, recommending, advocating, or attempting to persuade in any way
any subcontractor with respect to the terms of that subcontractor's
dealings with owner-builders, home construction contractors or
developers, or swimming pool contractors who act or wish to act as
consultants for owner-builders. Paragraph II.B.(4).
Together, these provisions will bar respondents, collectively as
well as individually, from seeking (1) to stop any subcontractor from
working for owner-builders, home contractors or developers, and
swimming contractors who act or desire to act as consultants for owner-
builders; (2) to change the prices and terms subcontractors charge
those homeowners and contractors; and (3) to stop other swimming pool
contractors from working for those homeowners and contractors. These
provisions, by barring individual efforts as well as collective ones,
fence in respondents from engaging in conduct similar or dangerously
close to the unlawful activity they engaged in earlier.
A proviso to Paragraph II makes it clear that nothing in this
Paragraph prohibits any respondents from discussing and/or entering
into a specific proposed or actual business transaction or project in
which those involved are or would be in a contractor/subcontractor or
other joint or cooperative working relationship.
Paragraph III of the Order requires respondents, for a period of
five years, to tape record all meetings and maintain copies of those
tape recordings and all materials distributed at the meetings. This
provision should have a prophylactic effect in ensuring that the
respondents do not seek to engage in such anticompetitive conduct
again.
The proposed Order also requires that, should the respondents turn
the Association into a more formal organization, they must incorporate
Paragraph II of this Order by reference in the by-laws of such
organization and distribute a copy of the by-laws to each of the
members of the organization. Paragraph IV. Finally, the Order contains
reporting requirements (Paragraphs V. and VI.) and provisions
guaranteeing Commission staff access should the need arise (Paragraph
VII.).
Opportunity for Public Comment
The proposed consent Order has been placed on the public record for
sixty (60) days for reception of comments by interested persons.
Comments received during this period will become part of the public
record. After sixty (60) days, the Commission will again review the
agreement and the comments received and will decide whether it should
withdraw from the agreement or make final the agreement's proposed
Order.
The purpose of this analysis is to invite public comment on the
proposed Order. This analysis is not intended to constitute an official
interpretation of the agreement and proposed Order or to modify their
terms in any way.
By direction of Commission.
[FR Doc. 99-21919 Filed 8-23-99; 8:45 am]
BILLING CODE 6750-01-M