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NEW YORK v. REEBOK INT'L LTD.

October 20, 1995

THE STATE OF NEW YORK, by ATTORNEY GENERAL DENNIS C. VACCO, et al., Plaintiff, against REEBOK INTERNATIONAL LTD., et al., Defendants.


The opinion of the court was delivered by: KOELTL

OPINION AND ORDER

 JOHN G. KOELTL, District Judge:

 The States have entered into a settlement with the defendants pursuant to a Settlement Agreement which is subject to court approval under 15 U.S.C. ยง 15c(c). The Court preliminarily approved the Settlement on June 5, 1995.

 Following preliminary approval, notice of the Settlement was given to affected consumers by nationwide publication during the period from July 9-14, 1995. Consumers were advised of the existence and terms of the proposed Settlement and were given the opportunity to request further detailed information relating to the terms and disposition of the Settlement. Affected consumers were apprised of their right to either exclude their claims ("opt out" provision) or to object to the terms of the Settlement by September 8, 1995. *fn1" Presently before the Court is the joint motion of all parties for final approval of the Settlement.

 The States' Complaint alleges that the Reebok and Rockport companies participated in a conspiracy to fix, raise, maintain, or stabilize the retail prices at which certain Reebok and Rockport brand products were sold to the public.

 The Complaint alleges that beginning in 1990, the defendants solicited agreements with dealers to set the minimum sale price for certain Reebok and Rockport products. In alleged furtherance of that conspiracy, defendant Reebok implemented its "Centennial Pricing Policy" in January 1993, which set forth minimum retail prices on certain of its Reebok brand footwear, including the highly promoted "Prestige" products. In July 1993, defendant Rockport instituted a similar pricing policy, entitled the "Marathon Program," which set forth minimum retail prices for certain Rockport brand footwear models. The Complaint further alleges that to effectuate these pricing policies, the defendants met with certain of their large retail accounts to discuss the terms and conditions of the policies and solicited and obtained agreements from these dealers not to advertise or sell below the minimum retail prices set forth in those policies. The Complaint alleges that Reebok and Rockport sales representatives monitored the retail prices at which Reebok and Rockport dealers advertised and sold certain products. When Reebok and Rockport representatives discovered that certain dealers were selling certain products at prices lower than the minimum retail prices set by the policies, these sales representatives solicited and obtained agreements from dealers to raise the selling prices to conform to the minimum prices Reebok and Rockport established.

 The States assert that as a result of the resale price maintenance conspiracy, the purchase prices of certain Reebok and Rockport footwear products were fixed, raised, maintained, or stabilized at artificial, noncompetitive levels and that price competition among authorized dealers for the sale of Reebok and Rockport products to the public was thereby restrained. The States maintain that as a result of this conspiracy, purchasers of certain Reebok and Rockport products paid more for these products than they would have paid in a competitive market.

 The plaintiffs have submitted the affidavit of Dr. Gary J. Dorman, an expert economist, in support of the Settlement. Dr. Dorman estimates that approximately 1,343,978 pairs of Reebok shoes were most affected by the Centennial Policy during the Reebok class damage period, January 1, 1993 through December 31, 1993, resulting in an average overcharge of $ 3.89 per pair, for a total of $ 5.2 million. (Dorman Aff. PP 15-17.) The Marathon policy during the Rockport class damage period of July 1, 1993 through December 31, 1993 most affected approximately 321,800 pairs of Rockport shoes at an average overcharge of $ 3.77 per pair for damages of $ 1,213,186. (Id. at P 19.) The total damages asserted in the evidence by the plaintiffs is $ 6.44 million. (Id. at P 21.)

 The defendants vigorously contest liability and assert that if this case went to trial, the plaintiffs would be unable to establish violations of the antitrust laws. Moreover, the defendants contend that the plaintiffs would be unable to establish that the policies in question had an actual market impact. The defendants point to factors such as the fact that when the disputed Reebok policies went into effect the average price for Reebok products covered by the disputed policy fell while the prices of certain non-Reebok products rose. While the same data is not available for Rockport, the defendants' expert economist Dr. Jerry A. Hausman concluded in his affidavit that "any impact resulting from the Rockport pricing policy was also likely to be negligible." (Hausman Aff. at P 8.)

 The Settlement Agreement requires the defendants to pay the plaintiffs $ 9.5 million, of which $ 8 million will be used for distribution in lieu of direct consumer restitution and $ 1.5 million will be used to cover costs of administration and attorneys' fees, including the cost of the published notice to the class of the proposed settlement.

 The Settlement Agreement requires Reebok to pay $ 8 million into a Settlement Account which will be used to fund a distribution in lieu of consumer restitution. The States participate in the Settlement Account on a pro rata basis based on the percentage of the United States population located in each State. Each State may elect to receive its pro rata share of this sum as a monetary payment or in Reebok products. Arizona and Puerto Rico have elected to receive their share of the Settlement distribution in Reebok products and, according to the Settlement Agreement, will receive products with a suggested retail price twice the amount they would have received in a monetary distribution. The remaining States will receive a monetary distribution for public and non-profit and/or charitable organizations with express conditions ensuring that the funds will be used for various athletic facilities, equipment, or services.

 In connection with the approval of the Settlement, each of the States has submitted to the Court a detailed plan for distribution of its share of the Settlement fund. For example, the $ 560,857.00 that the State of New York will receive will be divided among 58 separate organizations including the Association for Children with Down Syndrome, the New York State Special Olympics, and numerous Boys and Girls Clubs and Police Athletic Leagues throughout the State. The organizations must in turn submit quarterly reports outlining how the funds have been spent in accordance with the limitations on use in the Settlement Agreement.

 The State of California, for another example, proposes distributing approximately $ 360,000 to refurbish or renovate fields, basketball courts, tracks, and tennis courts operated by various public and non-profit, charitable entities, including municipal tennis courts; $ 100,000 to be used by the Governor's Council on Physical Fitness, a non-profit, voluntary agency organized under state law that is responsible for administering sports programs for high schools throughout California; and approximately $ 440,000 to be used by the California Interscholastic Federation ("CIF"), a non-profit voluntary agency organized under state law that administers sports programs throughout the state. In compliance with the terms of the Settlement ...


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