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Price Fixing Study: Recent FTC Ruling - Essay Example

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In reviewing recent FTC rulings, a case similar to the situation in which we find ourselves, was reviewed. In this case, in particular, Nine West Group Inc.(here after NWG), who as you know is a leading supplier of women's footwear in the United States, recently settled a $34 million dollar overcharges complaint that it engaged in a retail price fixing scheme with retailers in certain sectors of the market…
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Price Fixing Study: Recent FTC Ruling
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RUNNING HEAD: PRICE FIXING STUDY Price Fixing Study: Recent FTC Ruling School Price Fixing Study: A Recent FTC Ruling
In reviewing recent FTC rulings, a case similar to the situation in which we find ourselves, was reviewed. In this case, in particular, Nine West Group Inc.(here after NWG), who as you know is a leading supplier of women's footwear in the United States, recently settled a $34 million dollar overcharges complaint that it engaged in a retail price fixing scheme with retailers in certain sectors of the market. This widespread case resulted in settlement both at the federal level with the FTC, but also on 56 individual states' charges lodged by their respective Attorney Generals.
According to the FTC Report on this particular case, NWG maintained high prices for their various brands of shoes by illegally coercing retailers to sign agreements banning them from selling NWG's brands at reduced or on sale prices at alternate periods, thereby eliminating market competition and ensuring consumers would not benefit from price competitiveness among retailer contrary to USC 15 Chapter 2.. As found in the FTC complaint "Nine West divisions entered into agreements with retailers that fixed retail prices for their shoes and restricted promotion periods - called 'clearance windows' - when retailers could promote sales or sell shoes at reduced prices" (NWG, 2000, screen 1). Through brand name recognition the shoes produced and distributed by Nine West are highly marketable to the buying public. Some of the brand names Nine West producers their women's footwear under include: "Nine West, Amalfi, Bandolino, 9 & Co., Calico, Easy Spirit, Evan-Picone, Pappagallo, Capezio, cK/Calvin Klein, Selby, Joyce, Westies, and Enzo Angiolini" (NWG, 2000, screen 1). Due to the high demand of these brands by the consumer, individual retailers were pressured by Nine West to conform to their pricing scheme or face penalties or suspension of further shipments.
By using this method of price fixing, Nine West forced retailers to knowingly violate anti-trust laws. The suit contends that even those retailers who initially resisted the imposed pricing plan and limited price reduction periods allowed by NWC were forced to communicate to NWC that they would abide by the set policy. This was achieved through the above method of refusal to supply additional stock until the retailer in question agreed to maintain the artificially high prices. To that end, the official FTC complaint stated "Nine West's practices artificially propped up the prices of Nine West products and restricted competition among retailers who sold Nine West brands in violation of federal law" (NWG, 2000, screen 1). This, in effect, resulted in artificially high prices passed on to the consumer for purchase of these various brands of highly popular ladies footwear.
In settling this particular case, NWG, although not admitting guilt, agreed to three main provisions in all future business dealings. Firstly, it delineates that NWG may NOT require set prices which retailers must abide by in any phase of their marketing of NWG products including advertising, promotions, sales or clearance. Secondly, NWG is banned from attaching stipulations which link the retail pricing of their product to any form of pressure or coercion aimed at retailers. Lastly, NWG is barred from "notifying dealers in advance that they are subject to a temporary or partial suspension of supply if they sell Nine West shoes below a designated price" (NWG, 2000, screen 1). Enforcement of the above stipulations will be assured by several means. All NWG price lists are required to contain a written disclaimer that the right to set pricing for resale of all NWG products is set by the individual retailer and the FTC will monitor pricing practices of NWG through auditing. The final ruling by the Commission was 5-0 in favor of the judgment although it appears we should further investigate the Colgate Doctrine (see Onkyo U.S.A. Corp., 122 F.T.C. 325, 326, n.3) which may afford us some protection.
References
"Nine west settles state and federal price fixing charges." (March 6, 2000). Federal Trade
Commission Website. File No. 981-0386. Accessed March 8, 2006 from
http://www.ftc.gov/opa/2000/03/ninewest.htm
Onkyo U.S.A. Corp., 122 F.T.C. 325, 326
USC 15 Read More
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