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UNITED STATES v. OLIN SKI CO.

November 25, 1980

UNITED STATES of America, Plaintiff,
v.
OLIN SKI COMPANY, INC., a corporation, and Olin Corporation, a corporation, Defendants



The opinion of the court was delivered by: SOFAER

The United States brings this action pursuant to section 16(a) of the Federal Trade Commission ("FTC") Act, 15 U.S.C. § 56(a), alleging that the defendants violated an FTC consent order. The Government seeks both civil penalties and injunctive relief as provided by section 5(l ) of the FTC Act, 15 U.S.C. § 45(l ). Defendants are Olin Corporation and its wholly owned subsidiary, Olin Ski Company ("Olin Ski").

Between 1973 and 1975, the FTC conducted an investigation of the relationship between Olin Ski, a manufacturer of skis and skiing equipment, and its independent retail dealers. The FTC determined that various Olin Ski practices violated section 5 of the FTC Act, 15 U.S.C. § 45. Specifically, the FTC concluded that Olin Ski, in conjunction with some dealers, had attempted "to fix, establish and maintain certain resale or retail prices at which said products are resold to the general public." FTC Complaint at 2.

 In 1975, the FTC proposed that Olin Ski enter into a consent agreement designed to end the alleged illegality. On April 19, 1976, following lengthy negotiations, Olin Ski executed a consent order. Over a year later, on August 8, 1977, the FTC signed the order. In the interim between the signing dates, Olin Ski entered into a program of voluntary compliance with the terms of the order.

 On December 15, 1978, the United States filed this suit, alleging that Olin Ski and Olin had violated the consent order. The case was assigned to Judge Robert W. Sweet. Both parties moved for summary judgment the United States solely on the issue of liability; the defendants on issues of liability and appropriate relief. On June 5, 1980, Judge Sweet issued an opinion in which he granted defendants' motion. On the same day, however, Judge Sweet discovered a potential conflict of interest and withdrew his opinion. The motions must now be reconsidered anew.

 The Government asserts that Olin Ski violated paragraph I(H) of the consent order by including suggested retail price information in brochures sent to authorized dealers but intended for ultimate distribution to retail customers. Paragraph I(H) prohibits Olin Ski from:

 
For two (2) years from the date on which this order becomes final, publishing or circulating any suggested resale or retail price for any of said products by price list, discount schedule, invoicing procedure, or pre-pricing of commodities or their containers, or by any other such means, to any reseller or authorized dealer.

 The Government contends that the brochures were "price lists" within the meaning of paragraph I(H). In particular, it points to the fact that one group of brochures, containing information about accessory ski equipment, included an order form with the retail price for each item listed. The Government also argues that, even if these brochures are not deemed to be price lists, their distribution nevertheless constitutes dissemination of suggested retail price information by "other such means," in violation of the consent order.

 The Supreme Court has held that the scope of a consent order "must be discerned within its four corners." United States v. Armour & Co., 402 U.S. 673, 682, 91 S. Ct. 1752, 1757, 29 L. Ed. 2d 256 (1971). Where there is a dispute as to the meaning or the scope of an order, however, it "must be interpreted in light of its principal purpose." United States v. J. B. Williams Co., 498 F.2d 414 (2d Cir. 1974), quoted in United States v. Ancorp National Services, Inc., 516 F.2d 198, 201 (2d Cir. 1975).

 Using this approach, the term "price list" should be defined narrowly to include only documents sent to dealers for the purpose of conveying wholesale prices. The consent order was designed to prohibit Olin Ski from bringing pressure on its dealers to adopt specified retail prices by barring communications of retail or resale prices that would tend to have a coercive effect. Including retail price information on wholesale price sheets, for example, or on discount schedules or invoicing procedures, would appear to make adoption of the designated price a condition of the wholesale arrangement between Olin Ski and its dealers. Similarly, the pre-pricing of merchandise or containers (where a manufacturer ships goods to dealers with retail price tags attached) might convey the impression to the dealers that they were bound to follow Olin Ski's price dictates. The inclusion of suggested retail prices in brochures intended for distribution to retail customers is not the same type of activity, even where dealers are likely to come into some contact with the brochures before they get to the customers.

 For the same reason, the Olin Ski brochures did not disseminate the retail or resale price information "by any other such means." That clause of the consent order must have been intended to modify the list of methods of communication specifically prohibited by paragraph I(H). Had the parties intended to prohibit Olin Ski absolutely from communicating price information in any form, including the word "such" would have been unnecessary. Under the consent order, not every communication of suggested retail prices to dealers was improper. Olin Ski was permitted to communicate such prices to authorized dealers orally. Furthermore, it was allowed to include suggested retail price information in advertisements appearing in nationally circulated consumer ski magazines, even though dealers undoubtedly would be exposed to the price information. The "other such means" language therefore does not appear to have been intended to prevent dealers from ever coming into contact with Olin Ski's suggested retail prices. The clause should be read to prohibit only those communications with potentially coercive effect.

 The Government relies heavily on the Tenth Circuit's decision in United States v. Browning, 518 F.2d 714 (10th Cir. 1975), where a consent order was signed prohibiting the defendant from:

 
Publishing, disseminating or circulating to any dealer, any price lists, price books, price tags or other documents indicating any resale or retail prices without stating on such lists, books, tags, or other documents that the prices are suggested or approximate.

 The Government claimed there that the defendants violated the order by sending price information to dealers, allegedly intended for ultimate distribution to retail customers, without the required statement that the prices were suggested or approximate. Defendant contended that, because the information was actually intended for customers, and not for the dealers, its actions were not prohibited by the consent order. The Court rejected defendant's argument, holding that "(t)he fact that the documents here in question were to be in turn distributed by the dealers to the ultimate customer does not bring it out from under the mandate of the order." Id. at 717.

 While the facts of this case are similar to those in Browning, there are crucial differences. The object of the order in Browning, requiring defendant to inform dealers that retail prices were suggested or approximate, was to prevent defendant from giving dealers the impression that retail prices were in any way fixed or inflexible. Communicating this information by any method without the required qualifying language would violate the purpose of the order. In this case, by contrast, the order was intended to prevent price information from being distributed in a manner that would appear coercive to dealers. *fn1" Defendants were permitted to disseminate price information, without any qualifying language, through such ...


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