b'CRAVATH\n\nSWAINE & MOORE LLP\nWORLDWIDE PLAZ\n\nGEORGE ... GILLEPIE , m\nTHOMAS R. BROME\n\nROBERT D. ,JOFFE\nALLN FINKELSON\n\nRONA S. ROLF\n\nPAUL C. SAUNDERS\nDOUGLA D. BROADATER\nALN C. STEPHENSON\n\nFRANCIS P. BARON\nRICHAD W. CLA\n\nWILLM P. ROGERS, .JR.\n,JAMES D. COOPER\n\nFACSIMILE: (212) 474- 3700\n\nPETER S. WILSON\n\nJAMES C. VARDEL., m\n\nROBERT H. BAON\n\nB. ROBBINS KIESLING\n\nTELEPHONE: (212) 474- 1000\n\nMICHA S. GOLDMA\nRICHAO\n\n. GREGORY M. SHAW\n\nMA R. SHULMA\n\nKRIS F. HEINZELM\n\nNEW YORK, NY 10019- 7475\n\nPETER T. BABUR\nSADRA C. GOLDSTIN\nPAUL MICHAKI\nTHOMA G. RAFFERT\n\nSTPHEN L GORDON\nDAIEL L MOSLE\n\nSTUART W. GOLD\n.JOHN W.. WHITE\n,JOHN E. BEERBOWER\nEVAN R. CHESR\nPATRICIA GEOGHEGA\nD. COLLIER KIRKHAM\n\nMICHAL L. SCHLER\n\n825 EIGHTH AVENUE\n\nSTPHEN L BURNS\nCITYPOINT\n\nKEVIN ,J. GREHA\nW. CLAYTN ,JOHNSON\nSTEPHEN S. MAEN\n\nONE ROPEMAER\nLONDON EC2Y 9HR\nTELEPHONE: 44-207-453. 1000\n\nC. ALN PARKER\n\nMA S. ROSENBERG\nWILL B. BRANAN\nLES R. STINBERG\n\nFACSI MILE: 44-.a07.860.11 so\n\nTIMOTHY G.\n\nPHIUP A. GELSON\nRORY O. MILLON\nNEIL P. WEREICH\n\nDAVID MERCO\n\nKATHERINE B. FORRES\nKEITH R. HUMMEL\nDAIEL SUFKIN\n,JEFFEY A. SMITH\n\nWRITER\' S DIRECT DIAL NUMBER\n\nRONA CAI\n\nMA I. GREENE\n\nSAIS ,JEBE.IA\n\n..ES C. WOOLERY\nDAVID R. MARIOTT\n\nMICHAL A. PASN\nANDRE ,J. PITT\nMICHA T. REYOLDS\nANTONY L RYAN\nGEORGE E. ZOBITZ\n\nGEORGE A. STPHANAS\n\nROBERT I. TOWNSEND, m\n\nWlLU ... WHEL m\nSCOTT A. BAHAY\n\nSUSA WEER\n\nROGER D. TURNER\n\nELIBET L GRAYER\n,JUUE A. NORTH\n\n.JUUE T. SPELLMAN\n\nPHIUP ,J. BOECKMA ,\n\nSPECIA COUNSEL\n\nSAUEL C. BUTLR\nTHOMA D. BAR\n\nROGER G. BROOKS\n\nWlLU v. FOGO\n\nROWAN D. WILSON\n\n(212) 474- 1564\n\n..OHN T. GAFNEY\n\nFAI,J. SAED\nRICHA ,J. STARK\n\nTHOMA E. DUNN\n\nOF COUNSEL\n\nROBERT ROSENMA\n\nCHRISTNE BESHA\n\nCONFIDENT TRATMNT REQUESTED\n\nApril 27, 2004\n\nCarboplati\nDear Mr. Clark:\n\nOn April 12 , 2004 , pursuant to Section XI , subsection (2) of the Decision\nand Order dated April 14, 2003 and 16 C. R.\n1.2 , Bristol-Myers Squibb Company\n\nBMS") requested that the FTC issue an advisory opinon fiding that an agreement\nwith Teva Phanaceuticals USA, Inc. (" Teva ) did not raise issues under Section 5 of the\nFederal Trade Commssion Act. BMS submits the enclosed documents to aid the FTC\'\nevaluation of ths request:\n\nDistrbution and Supply Agreement Between BMS and Teva and\nattached Schedules (April 26 , 2004) ("Distrbution and Supply\nAgreement"\nSettement Agreement between BMS , Pharachemie RV. , and\nResearch Corporations Technologies, Inc. and attched Exhbit\n(April 26, 2004) (" Settlement Agreement"); and\nStipulation of the Pares to Dismiss Appeal and Proposed Order,\n\nBristol-Myers Squibb Company and Research Corporation\nTechnologies. Inc. v. Pharachemie B. V.. Appeal No. 03- 1077\n(April 27 , 2004).\n\nThe Distrbution and Supply Agreement is the defmitive agreement\ncontemplated by the agreement between BMS and Teva, dated April 8 , 2004 , provided as\n\nCONFIDENTIA\n\n\x0cpar of our intial submission. The Settement Agreement resolves the ANA patent\nlitigation concerng the drg carboplati and U. s. Patent No. 4 657,927. The Stipulation\nof the Pares to Disss Appea and Proposed Order was fied with the Cour of Appeas\nfor the Feder Circuit ealier today.\n\nrespectfy\n\nConfdential treatment of ths letter and the\n57b-2(c)\nrequested\nto 15 U.\n\npurt\n\nA.\n\nenclosed. material\n\nand 16 C.\n\nR.\n\nis\n\n10(a)(2) and\n\n(e).\n\nThan you in advance for your consideration and assistce. If you have\nany questions ,\n\npleae do not hesitate to call me at the number above.\n\nRichard J. Stak\nDonald Clark , Secreta\n\nFederal Trade Commssion\nth Street and\n\nPennylvana Avenue, N.\n\nWashigton, DC 20580\nBY FEDERA EXPRESS\nCopy to:\n\nAne Schenof, Esq.\nBureau of Competition\nFedera Trade Commssion\n\n601 New Jersey Avenue, N.\nWashigton, DC 20580\n\nBY FEDERA EXPRESS\n\nCONFIENTI\n\n\x0cAttachment Number\n\nREDACTED\n\n\x0cSETTMENT AGRNT\n\nTh Setement Agent an Relea ("Setemt Agent" date\neffecve as of Apr 26, 2004, is\n\nand\n\nen in by an amng Reseah Corporation Technologies,\nPlati"), an\n\nInc. ("RCI an Brl-Myer Sqb Company (\' \'BMS\' \') (collectively, "\n\nphahee B.V. ("Pbaheme" or "Defet\'\').\n\nWites\nWHS, Phaachee fied an Abbrvite New Dr Applition\n(" ANA"), ANA No. 76-162, for apval to maet generc powde for injection prots\n\ncontag capla\n927 pate\')\n\nwith a\n\npah IV cecation tht U.\n\nwa invald, unenroble or not\n\nS.\n\nPat No. 4 657 927 (\'\n\nined\n\nWHS, Ref is the assignee of the \' 927 pate and BMS is\nlicen of the \' 927\n\nth exclusive\n\npatet;\n\nWHAS, RCT an BMS fied sut in th Dict of New Jerey, Civi Action\nNo.\n\n01-C-\n\nthe \' 927\n\n37S1\n\n(M,\n\nuner\n\n3S\n\nC.\n\n271(e)(2) agt Phacheme for ingement\n\nof\n\npat;\nWHAS, Phaheme fied a secnd ANA, ANA No. 76-292, seeki\n\npreed soluton prouc conta capIa with a pah\ncecaton tht the \' 927 pate wa invald, unrceale or not inged\nWH, BMS an Ref fied a inement action in th Dict\napprval to maet\n\nse\n\nNew Jery,\n\nCiv Acton No. 02-C- 1270 (M, ba\n\non ANA 76-292;\n\nWHS, a Joint Stiulon an Or coDSlidati the two cas wa enter\n(the conslida ca refer to herin as \' \'te\nby the Dict Cour\non Apri 22, 2002\n\nLitigaon\n\n\x0cWH, Phmeme\n-PJdgent tht th \' 927\n\ndelary\n\npatig ba\n\non th\n\naner an counlaed in th Litigaon for\n\npa was\n\ninvad on\n\ncla of U. S. Patet No. 4 140,\n\n707 ("te \' 707\n\npror\n\nWHS,\n\nhmchemi e fied a motion forpa\n\npr ru th the bar of the th\nthe \' 707 pate\n\nse\n\nof obviousty\n\nthe grun\n\ndouble\n\npatef\') in ligh of\n\nS1 juen se\n\nof35 U. C. fi 121 di\n\nnot\n\naply to prven us of\n\nin an obviousty double patti chaene to th \' 927 pat and\n\npla fied a cross-mtion for\n\nF.dBJeDt on th\n\nsu\n\nWHRES, on Juy 29, 2002, the Dict\nBMS and RCIs motion for\n\nfi 121 issue;\n\nCour\n\nis\n\nsu jud an hold tht\n\nfi 121\n\nwrtt opon\n\nba use of the \' 707\n\npatet as th bais for an obvouses double panti invaldi chaen;\n\nWH, Phae amen its aner to adt mfgement of at leat\n\ncl\n\nif it were vad, an to waive the defen of inuitale cond an\nin ord to\nits right to appea\nal other invaty defen it ha prousy\none\n\nfrm a\n\nof the \' 927 pat,\n\nfi judgent an the\n\nas\n\nDict Cour\n\nesli\n\nente fi\n\njuen on Octobe 28, 2002, in\n\nfavor of P1aintiff\n\nWHRES, on Octbe 28 2002, the Disct Co ente FiD Judent in\nfavor ofBMS an RCI\n\nine at\n\nlea one\n\nth th \' 927 pa wa\n\ncla of th \' 927 pate\n\nmaeti any prdut put\n\nnot invald,\n\nan tht Plwhee\n\nand an injuntion prJn"bitig\n\nPhahee from\n\nto ANAs 76-162 and 76-292 before th expirn of the \' 927\n\npate an any other exclusty grte by the Foo\n\nan Dm Admtion\n\n("FA"\n\nPhaheme fied an ap in the Unite\nWH, on Novem\nfi jndeent ("te\nof Ap for th Fed Cit ftm\n26, 2002,\n\nSta Cowt\n\nwould\n\nth Distrt Cowt\'\n\n\x0cApp ised an opiDon vati tht\nudgen an redig th Ligatin to th Dict Cour for fter\n\nAp") and on Mah 17,\n\npr;is\n\n200, th Cour of\n\nex\n\nWHRE, Phacheme moved on Mah 19, 200, to\nised th mae, th Plati\nmate and, bere th Cour of\n\nAp\n\n200, a petion for rehea\n\nen bae\n\n\'t Peton\n\nfor Reea"\n\nWHS, on Apri 6, 200, the Cour of Ap\n\nmotion to\n\nex\n\nfied on\n\nof the\n\nMa 29,\n\nPhi\n\ndeed\n\nissuce of th mate;\n\nWH, on April 9, 200, th paes submtt a let to the Cour of App\n\ninorm the Cour of App tht they ba reed an agent in prcile to sette\nmatt\n\nWH, on Ap 21 , 200, th Cour of App dened th Petition for\nReh;\nWHAS, Phahee acowledge th BMS is entitled to a perod\npetrc excluivity with respt to parlatie if an when grte by th FDA purua to 21\nC. i\n\n3SSa\n\nWHAS, the\n\nPla an Defe\n\ndesir to avoid\n\nfu\n\nexpen and\n\nma an ises in contvery betwee them aU without an adon by or on\nto any other pa;\n1he par of any pa of any lity of any\nrelve aU\n\nnatu whatsever\n\nNOW,\n\nTHORE, in consden of the prmies\n\nan\n\ncoven cotaed\n\nherin an for oth goo an valuale consdeoD, th rept of which is heeby\n\nacwleded it is herby\nfollows:\n\nag\n\nby an among\n\nth paes to th\n\nSetem\n\nAgt\n\n\x0cI)mnAsa ofLiga\n\neten Ag\n\nCi\n\nsoon as prtile fonowi the execon of\n\nthe paes wi fie in the\n\nm!mRS BD\n\nstultin of\n\nAs\n\nUni Sta Comt of App for th Fed\n\nprse ord, in the form athed as ExI"bit A.\nprmptl any\npaes ag\n\nspif th ea pa sb be\nadona pa ne or apro to effec th\nown cost. The\n\ndi\n\nRelee of an Coven not to Sue plAintiff ,\n\nrelea licees, coven, agts anor oth\n\n(al of the foreoing\n\nIn\n\ngoo and\n\nret of which is hey acknowleded Phaheme, in\n\nsurs assign offce,\n\nto fie\n\nof the\n\nLitin.\n\nconsdeon of mutu\n\nvale\n\nconsidetion, the\n\nadini91tors,\n\nodg its\n\ndirs, emloyee trte, pats, subsidies\n\nan aftes\n\nbe refem to in th pagrh as "Pbahee Relears rele.\nsu andlor\n\nprs\n\nact an forever dihae. and covent not to bri\n\nany action,\n\nag\n\nsuccrs, asgn, Offce, ditors\n\nBMS and RCT,\n\nemloyee atrn,\nin\nof\n\nth parh\n\ninlu thir adrs\n\ntr,\n\nAffli\n\n(al of\n\nth foreing refeIT to\n\nas "BMS an RCT Relea fr an for al debts\n\ndeds, actions, caes\n\npats sudies an\n\nac suts acun covem cOtm, agents tort da\n\ncla defen, offts\n\njudgments ilemsmdR and liilties\n\nth Litigation andlor\n\nor defen of th Litiaton, and/or other\n\nftduent or tortous\n\nact by the\n\npec excluvity wi re\n\nor\n\nunecte ac\n\nwhh are out of th proseon\n\naleg anticomptive, un, wr\n\nre\n\nBMS an RCT\n\nRelea\n\nto PamJa\n\norovided however.\n\nhein is inde to or sha relea th BMS an ReI\n\nan al\n\nwhatsver, of evfS nae and\n\nnatu both at law and in eqty, knwn or UDwn sute\n\nunCC whch have be asse in\n\nan any\n\nto the \' 927\n\ndectie,\n\npa anor an\n\nth noth contaed\n\nRelea from any an\n\nan obligaons\n\n\x0cset fort\n\nin\n\ntI Agent an\n\nP"AfSlQetica\n\nth Distribution\n\nUSA. In. (th "Dis1ribution\n\nRe of an Coven\n\nAgr\n\nbetee BMS an Teva\n\nan Suly Agrt"\n\nnot to Sue\n\nDet.\n\nIn consden\n\nofmu\n\ncoven agen anor other goo and valle codertion, th\nof which is hery acknowleed BMS an Ref, inlud thei retive\n\nreeaes\n\nre\n\nli\n\nan Suply\n\nadrs\nan afte\n\nsusors asgn\n(aU of the\n\noffcer ditors.\n\nemloyee,\n\ntt pa\n\nforeiD bei refer to m th parh\n\nRelears ) relea, act\n\nan foreer dischae, an\n\ncovenat\n\nsusidies\n\nas "BMS and RCT\n\nnot to brig\n\nany acton, sut\n\nag Phabee, inlu it adtors susors asgn,\noffce. ditors emloyee. attrneys, tr, parts suid and afte (all of the\n\nanor pr\n\nforegoing refem to in\n\ndemds. actions\n\nth\n\npa\n\nRelea ftm an for al debts\n\nca of action suts 8Cun1s coven cont\n\ndaes an any an al cla,\nwhaever, of ever na an\nor\n\nas "Phaheme\n\nunte ac\n\nor\n\nagen, tort,\n\ndefe, offet, judents demds an\n\nliilties\n\nna. both at law an in eqty, knwn or unwn sute\nwhch have\n\nbe asse in the Lition,\n\nanor which\n\nar out of th proseuton or defene of th Ligaon, anor whch ar bas on any\ninement or aleged inem of any pate own lice or assgn by or to the BMS\nanor RCT Relears for\n\nanor\n\nD1,\n\nusg, purha offer for sa, sell\n\ndibu any phaca pr\n\nprvided however.\n\ncota\n\nth notl contaed herm is\n\ncapla\nto or sb\n\nin\n\nas it active\n\nimortg\n\ninent,\n\nrelea the\n\nPbaeme Relea frm any an al oblioDS se fort m th Agren an the\nDistribution an Suply\n\nAgrt. BMS\n\nan Ref do not waive any leg chaenge in\n\nthe\n\n\x0ceven th\nOcbe\n\nFDA grts\n\nIS,\n\nei\n\nfi apval of\n\nor both of ANAs 76-162 an 76-292\n\nbefore\n\n20.\n\nPhahee Releaors,\nas defied in pah 2, ag th thy sh not intu, enure, surt spnsor or\naga the FDA or any oth entity to obta\npacipat in an leg acn diy or\nCoven Not to Cbem Pedtrc Excluvitv. Th\n\nin\n\nfi apova of eith or bothANA 76-162 an\n\nexclu gr\n\nto BMS by th FDA\n\npurt to 21 U.\n\nNo Admi!Con ofT .iahilit.\n\ncons an adon,\n\nra\n\nconcen\n\n76-292\n\nbefore th\nC.\n\neximon of any\n\n355s.\n\nTh Setement Agent do not cont\n\npar conc the merts of\nor Pettion for Rehea. Th Setemt Agren\n\nor\n\nagen\n\nby any\n\nLition, Ap\nsh not be consed as constug or conta any suh adion,\n\nises\n\nin the\n\nagent.\n\nReoons. Ea of the pares herto\nwam (i) tht it fuy unta\n\nitsTigh to\n\ndis\n\nre,\n\nany and al\n\nconcion\n\nacowledes and\n\nasts of th\n\nAgrt with leg counl of its own chsi; an to th extt, if any,\n(ii) th it ha cafuy re an fuy\nde, it ha avaed\n\nSettement\n\nth any\n\nits of th righ\n\nthe provions of th Settement\n\nAgr (il) 6J it volunta ente\n\nun\n\nal of\n\ninto ths Settemen\n\nAgrent; (iv) tbt it ha th caity to en into ths Setemen Agrment, an (v) tht its\nsignry he ha th aurity to bin it to the obligaons and beefi of th Setement\n\nAgrent.\nNo Pror\n\nRetaon Eah of th paes he rerets acknowledes\n\nwamts th in execti\n\nth Setemt\n\nAgr\n- 6-\n\nit does not rely an ha\n\nnot relied\n\nupn any\n\n\x0cretan\n\nor statecmt not se for\n\noftbs Setem\n\nre\n\nto the sujec\n\nAgen or othe.\n\nEnti\n\nrq\n\nAme ThSeemen Agt\n\nre\n\nthe paes with\n\nher with\n\nto th\n\nma, ba\nth en\n\nsujec ma herf: an al pror negotiOD,\n\nor effect\n\nagt\n\nuners\n\naD agcmts ar incorpra he Th Settem Agent may not be modied,\nchged amened sulemente or\n\nre\n\nexcet puuat to\n\nwrtt inent\n\nsigned by\n\naga whom th enorcnt of the modcation, chae, ament,\n\nthe par\n\nsulementation or reison is soug\n\nRearv Reew. Eah pa, with te (10) days of th executon oftb\nSettemen Agrt, sb comply with th reents of Title XI, Subtitle B of the Acc\nto Afontle\n\nPhaca\n\nPu. L. 108-173) (the "\n\nTrae Common\nBMS wi\n\n(the\n\nAct (th\n\ntion Dm Imvement\n\nMedca\n\nAct", by ti a copy oftb Setement\n\'FCj\n\n"FC\n\nAgent: (a) submion of\n\nOr in Fed\n\nopinon\n\nTmd Common Docket No. C-\n\nOr, (b) suon oftb Setemt Agent in conntin with\n\nre\n\nMyer Sqb\n\nSetemen\n\nAgent to the FrC in coection with th rees for advity\n\nby the Apri 14, 2003 Deison an\n\nnoticaon\n\nCo.,\n\nby the May 14, 2003\n\nOr an Stiulte Injuntion\n\nNo. 1:02-C-OI080 (EGS) (D.\n\nAgren in coon with the noticaon\nOrer an Stipulte Injuon\n(S.D.\n\nof Justice (\' \'DJ\'\'\n\nma the fonowig suons an notice as son as prticale an jn any event no\n\nth Setement\n\n4076 (th\n\nof 2003,\n\nAgrent with the Fed\n\nand the AntIt Divion of the Dearen\n\nlat th te (10) days fonowi the execon of th\n\nre\n\nAct\n\njn\n\nre\n\n), an (c)\nby th\n\nin\n\nsuon\n\nOhio v.\n\nBrl-\n\noftb Settement\n\nNovem 14, 2003 Revi\n\nIn re Busirone Antitr Ligaton No. 01 CV 11401\n\n) (th paes to whom notice is prvide\n\n7-\n\nuner the thes la two\n\noId ar refer\n\n\x0che as\n\nth "Attrn\n\nI\'le\n\nGeer\' \'). Th paes sb us commeria\n\ncoordte su suODS an to\n\nre\n\nprmptly to any\n\nre\n\nefrt to\n\nfor adtion\n\ninrmtion\n\nma by the FTC, the OOJ or th Attmeys Geer If th FI, OOJ or Attmeys Geer\nobject to th Setement Agren th paes sh us al commy rele effort to\nsuch objecon prvide th th sh be no mate ch to the right;\n\nad\n\nobligaon of th paes un\nChce of Law.\n\n10.\n\nconstr in\n\nTh Setement Agren sh be govered by, suject to, and\n\nacrd with the laws of\n\nconfct of law\n11.\n\ncoun\n12.\n\no(\n\nNew York wiout\n\nre\n\nto its\n\niner\n\nl".rmte Th Setem Agt may be exec in one or\nea ofwbi sh be conside an origi intrent, but al of whch togeter\nan th sa\n\nagen\n\nLe Fee an Cost. Ea pa\n\nconnection with th\n13.\n\nth stte of\n\nprles\n\nsha constitu one\n\nth befi\n\nth Settemen Agren-\n\nLitigaon,\n\nBmdinp Effect\n\nsh be\n\nits own leg\n\nfee and costs in\n\nAgrt.\nTh Setement Agrent sb be biD up and in\n\nAp Peton for Rehea an\n\nth paes heto an thei sucm\n\nth Setement\n\nan asgn, regmes of the outcme of\n\nthe review by the Attrnys Gener intite by BMS on Apri 14, 200, and th\n\nadry opinon 1im th FfC ma by BMS on Apr\nand Suply Agren\n\n- 8-\n\n12, 200, with\n\nre\n\nfor an\n\nreect to the Distribution\n\n\x0cIN\nof the\n\nda fi\n\nWIS WHF,\n\nthe paes have\n\nexec th Settemt Agren\n\nabve\n\nDate: Ap-J 200\n\nResh Corpraon\n\nTeclogies, Inc.\n\nBy:\n\nDate Apri -,\n\n200\n\nBril-Myer Squibb\nBy\'\n\nDa Apri-, 200\n\nPhe B.\nBy:\n\nCoy\n\n\x0c..t\n\nF.r\n\nh. CorlltiOl\n\n+sz ,... 002&\n\nInq\n\nTUMDIOfII\n\nWS. t1pahm\nI ofth da fi\n\nabve\n\nDate Ap..\n\n1h\n\nwaum\n\n20\n\nTec1oaes In.\n\nb Co\n\nBy:\n\n, Da Ap\n\ni Da Ap\n\nT-6 P- DOflDtj F-14D\n\nBriol.Mye\n\nSq\n\nPiah\n\nBY.\n\n\x0cIN\nof\n\nti da fi\n\nWIS WHF,\n\nth\n\npa have ex\n\nth\n\nScCJ Agrt\n\nab\n\nDa Ap-- 200\n\nRe Coraon Tecologi\n\nDa Apr JR200\n\nBril-Mye\n\nDa Apr-- 200\n\nPhhee B.\nBy:\n\n--9 -\n\nSqb\n\nComp\n\nInc.\n\n\x0cIN Wls..\n:oldl dI..f\n\nDate:\n\nabve\n\n1-,\n\n.p Ap..\n\n118\n\npa have-e\n\nth8.\n\nwm.\n\nRe "\'\'\'_ \';-.-1"\'\'"n\'\n\nBriJ-M1U sqm\'t\n\nIn\n\nCoy\n\nBy -\n\nNi2b20\n:. I :\n\n.r\n\ni:::\n.I\n\n,L\n\nr "\n.1:-\n\ni i..-:::.\n\n-9-\n\n:t.\n\n\x0cEXIIT A\n\nUND STATES COURT OF APPEALS\nFOR THE FEERA\n\nCICUI\n\nNo. 03- 1077\n\nBRISTOL-MYRS SQUIB COMPAN,\n\nPlaiti-Appellee,\nand\n\nRESEACH CORPORATION TECHNOLOGIES, INC.,\nPlaitiff-Appellee,\n\nPHACHEMI B.V.,\nDefendat-Appellant.\nAppeal from the United States Distct Cour for the Distrct of New Jersey\nin Case No. 01-CV- 375I, Judge Mar L. Cooper\n\nSTIULTION OF THE PARTIS TO DISMISS APPEA\nThe pares, havig seted and\n\nresolved all issues in the case, consent to\n\ndismsal of the appea and the underlyig acton.\nThe pares\n\nagree\n\nDated: Apri -,\n\n2004.\n\nto bear their own costs.\n\n\x0cBy:\n\nDavid T.\n\nPriti\n\nConstie L. Trela, Jr.\n\nLisa A. Schneider\nMarc A. Cavan\nSIDLEY AUSTI BROWN & WOOD LLP\n10 South Deaorn Strt\nChicago, IL 60603\n(312) 853-7000\n(312) 853-7036 (fax)\n\nCounel for Research\n\nCOlporation\n\nTechnologies, Inc.\n\nBy:\n\nRober L. Baechtold\nFitzatrck, Cella, Harer & Scinto\n30 Rockefeller\n\nPlaz\n\nNew York, New York 10112- 3801\n(212) 218-2100\n(212) 218-2200 (fax)\n\nCounel for Britol-Myers Sqwbb Company\n\nBy:\nFrancis C. Lynch\n\nLaure S. Gil\nPALME & DODGE LLP\n50 West State Strt, Suite 1400\n111 Huntigton Avenue\nO. Box 1298\nBoston, MA 02199- 7613\nCounsel for Phaacheme, B.\n\n\x0cNOTE: Puuat to Fed. Cir. R. 47. 6, th order\nis not citale as precedent. It is a public order.\n\nUND STATE COURT OF APPEAS\nFOR TH\n\nFEER CIRCUI\n03- 1077 .\n\nBRISTOL-MYRS SQUIB COMPAN,\n\nPlaiti-Appellee,\nand\nRESEARCH CORPORATION TECHNOLOGIES, INC.\n\nPlati-Appellee,\nPHACHEMI B.V.,\nDefendat-Appellant.\nAppea from the United States Distct Cour for the Distrct of New Jerey\nin Case No. 01- CV- 3751, Judge Ma L. Cooper\n\n(pROPOSED) ORDER\n\nPut\n\nto the Stipulation of the pares dated Apri -, 2004 and by\n\nFederl Rule of Appellate Procedure 42(b),\n\nIt is\n\nORDERD th:\n\n\x0cAppeal dismssed Ths cae is remaded to the\n\nintrctions to\n\ndis the cae.\n\nNo costs.\n\nFor the Cour\n\nDate:\n\nditrct cour with\n\n\x0cUND STATES COURT OF APPEAL\nFOR TH FEDERA CIRCUT\nNo. 03- 1077\n\nBRISTOL-MYRS SQUIB COMPAN\n\nPlaitiff-Appellee\nand\n\nv") :;\nrr" ,\n\nRESEACH CORPORATION TECHNOLOGIES, INC. ))\n\nr- 0 N\n\nPlaintiff-ApJi\n\nU -\n\nm r;\n-I:l\nr- N\n\nrn.\n\nPHACHE B.\nDefendant-Appellant.\n\nAppeal ftom the United States Ditrct Cour for the Distrct of New Jersey\nin Case No. Ol-CV - 3751 , Judge Mar L. Cooper\n\nSTIPULTION OF TH PARTIES TO DISMISS APPEAL\nThe pares, having setted and resolved all issues in the case , consent to\ndismissal of the appeal and the l.derlyig action.\nThe pares agree. to bear\n\nthei own cost.\n\n.I\n\nDated: ApriI27 2004.\n\n\x0c.2\n\nBy:\n\nDavid T.\n\nh:hJ.j\n\nPrti\n\nConstatie L. Trela, Jr.\nLisa A. Schneider\nMarc A. Cavan\nSIDLEY AUSTI BROWN & WOOD LLP\n10 South Dearorn Street\nChicago, UL 60603\n(312) 853-7000\n\n(312) 853-7036 (fax)\n\nCounel for Reseach Corporation\nTechnologies, Inc.\n\nBy:\na."k,\n\nRobert L. Baechtold\n\nFitzatrck, Cella, Harr\n\n& Scinto\n\n30 Rockefeller Plaza\n\nNew York, New York 10112- 3801\n(212) 218-2100\n(212) 218-2200 (fax)\n\nCounsel for Bristol-Myers Squibb Company\n\n;(r\n\nBy:\n\nFrancis C. Lynch\nLaure S. Gill\nPALMER & DODGE LLP\n50 West State Street, Suite 1400\n111 HlDtigton Avenue\nO. Box 1298\n\nBoston, MA 02199-7613\nCounsel for Phachemie , B.\n\n/I#\n\n\x0cNOTE: Pusuant to Fed. Cir R. 47. 6, ths order\nis not citable as precedent. It is a public order.\n\nUND STATES COURT OF APPEALS\nFOR TH FEDERA CICUIT\n03- 1077\n\nBRISTOL-MYERS SQUffB COMPAN\nPlaintiff-Appellee,\nand\nRESEARCH CORPORATION TECHNOLOGIES , INC.\n\nPlaintiff-Appellee\n\nPHACHEMIE B.\nDefendat-Appellant.\nAppeal ftom the United States Distrct Cour for the Distrct of New Jersey\nin Case No. OI-CV- 3751 , Judge Mar L. Cooper\n\n(pROPOSED) ORDER\n\nPuuat to the Stipulation of the pares dated April 27, 2004 and by\nFederal Rule of AppeIIate Procedure 42(b);\n\nIt is ORDERE that:\n\n\x0cAppeal dismssed. Ths case is remaded to the distrct com with\n\nintrctions to dismiss the case.\nNo costs.\nFor the Court\n\nDate:\n\n\x0cUNTE STATES COURT OF APPEALS\nFOR TH FEDERA CIRCUIT\nNo. 03- 1077\n\nBRISTOL-MYRS SQUIB COMPAN,\n\nPlaitiff-Appellee\nand\n\nRESEARCH CORPORATION TECHNOLOGffS , INC.,\n\nPlaitiff-Appellee\n\nPHACHEMl B.\nDefendat-Appellant.\nAppeal from the United States Distrct Cour for the Distrct of New Jersey\nin Case No. 01- CV-3751 , Judge Mar L. Cooper\n\nDECLARTION OF AUTHORI OF ANNE M. MAR\n1, Ane M. Maher, hereby declare as follows:\n\nI am Parer of Fitzatrck, Cella, Harer & Scinto. I submt ths\n\ndeclaration of authority pursuat to Federa Circuit Rule 47.3(d) and 28 U.\n1746.\n\nOn April 14 , 2004 , I was given actual authority to sign the enclosed\nStipulation of the Pares to Dismiss Appeal on behal of Robert L. Baechtold, a\n\n\x0cparer in the law\n\n:f\n\nof Fitzatrck, Cella,\n\nHarer & Scinto, the attorney of\n\nrecord for Bristol-Myers Squibb Company in the above-captioned action.\n\nOn April 14, 2004 was given actual authority to sign the enclosed\nStipulation of the Pares to Dism Appeal on behal of David T. Prti, a\n\nparer of the law\n\nfi\n\nof Sidley,\n\nAusti, Brown & Wood LLP, the attorney of\n\nrecord for Reseach Corporation Technologies, Inc. in the above-captioned action.\nOn Aprl 27 ,\n\n2004, I was given actual to sign the enclosed Stipulation\n\nof the Pares to Dismiss Appeal on behalf of Fracis Lynch, a\n\nparer in the law\n\nfirm ofPaImer & Dodge , LLP, the attorney of record for Pharachemie, B.\nI hereby declare under penalty of perjur\n\ntht the\n\nforegoing is tne\n\ncorrect\n\nDated: April 27, 2004\n\nMAIN 42168v1\n\n)1.\n\nand\n\n\x0ct .\n\nCERTIICATE OF SERVICE\nI hereby cerfy that on ths\n\n16th day of April ,\n\n2004, two copies of the\n\nforegoing STIULATION OF TH PARTIS TO DIS:MS APPEAL and\n(pROPOSED) ORDER were sered upo counel of record as follows:\n\nFrancis C. Lynch\nLaure S. Gill\nPALMER & DODGE LLP\n111 HWltigton Avenue\nBoston, MA 02199-7613\nCounsel for Defendant-Appllant Pharchemie B.\n\nPrti\n\nDavid T.\nSIDLEY AUSTIN BROWN & WOOD LLP\n10 South Dearborn Street\n\nChicago , IL 60603\n\nCounsel for Research Corpration\n\nTechnologies ,\n\nInc.\n\nRobert L. Baechtold\nFitza1rck, Cella, Harer & Scinto\n30 Rockefeller\n\nPlaz\n\nNew York, New York 10112- 3801\n\nCounel for Britol-Myers Squibb Company\nby deliver of said copies , properly addressed with shipping charges prepaid, to a\ncommercial overght deliver serce with inctions to deliver said copies to\nthe addresse the next business day.\n/1.\n\nMa,--\n\nOn behalf of Plaitiffs-Appellees\n\nCHI 2922154vl\n\n\x0c'


b'431UNITD STATES OF AMER\n\nFEDERA TRADE COMMSSION\nWASHIGTON, D. C- 20580\n\nMay 12 , 2004\n\nT. Scott Giligan , Esqq.\nStatman Rars Siegel & Eyrch , LLC\n2900 Chemed Center\n\n255 East Fifth Street\nCincinnati , OR 45202\n\nRe: Third Par Merchandise Issue\nDear Scott:\n\nThan you for your letter of March 25 , 2004. I also was pleased with the meetings I had\nwith NFA and the state associations in March , and hope that we wil continue to keep good\nlines of communication open.\n\nYour letter requests an informal staff opinion on an issue related to delivery of caskets\nthat consumers have purchased from third- pary sellers. You note that you have consistently\nadvised funeral homes that they are not required. to sign receipt forms because the homes are not\npar of the casket purchase contract. In addition , you note that the receipt forms frequently\ncontain written representations that the delivered casket is the merchandise that was originally\npurchased , is acceptable , and/or was delivered without damage. You have advised funeral homes\nthat they cannot attest to those conditions or representations because they are not a pary to the\ncontract. You request an informal FTC staff opinion on whether the FTC\' s Funeral Rule (" Rule\nwould prohibit a funeral home from refusing to sign a receipt acknowledging delivery of a casket\na from a third-par casket seller.\n\nThe FTC staf has addressed this issue in the past , in opinions relating to practices that\nmay violate the Rule s prohibition in Section 453. 4(b)(1) against conditioning the furnishing of\nany funeral goods or services to a person aranging a funeral upon the purchase of any other\n\nfuneral good or service. Staff opinions in 1988 and again in 1997 make clear that this prohibition\nincludes situations in which the funeral provider unreasonably burdens the consumer s choice to\npurchase the casket elsewhere. Moreover , a staff opinion , dated March 10 , 1988 , is directly on\npoint. In that opinion , Commission staff stated:\nIn my view , a funeral provider may not unreasonably burden a\nconsumer s choice to purchase an item such as a casket from a\n\nthird par\n\n.\n\n. , I believe that\n\nrefusal of the funeral I1rovider to sirm\n\nfor the merchandise. or acknowled!!e deliverv. al1l1ears\n\n\x0ctantamount to refusal to accel1t deliverv and therefore may be in\nviolaon of the Rule. (emphasis added) (A copy of the opinion is\nenclosed..\n\nThose words reflect the FTC staff\'s opinion in 1988 and they continue to reflect the current\nthinking of the FTC staf charged with enforcing the Funeral Rule. Accordingly, I reaffirm the\nstaf opinion that refusal to sign for merchandise or acknowledge delivery is tantamount to\nrefusing to accept delivery and thus may violate the Funeral Rule s prohibition against tying, in\nSection 453. 4(b)(l).\n\nI hope ths information is helpful to you. Please note that the views expressed in this\nletter ar those of the FTC staff. They have not been reviewed, approved or adopted by the\nCommssion, and they ar not binding on the Commssion or any individual Commssioner.\nHowever, they reflect the opinions of the staff members who are charged with enforcement of the\nFuneral Rule. If you have any questions , please feel free to contact me at (202) 326- 3115 (email\ncdanielson (gftc. gov)\n\nSincerely,\n\nCarole 1. Danelson\n\nSenior Investigator and\nFuneral Rule Coordinator\nDivision of Marketing Practices\n\n\x0cxx\n\nU /I /\n\n- /1\n\n, 3/9\n\nUNITED STATES OF AMERICA\n\nFEDERAL TRAE COMMISSION\nWASHINGTON, D. C. 20580\nBUREAU OF\n\nCONUMER PRTECT\n\nMarch 10, 1988\n\nPittsburgh, Pennsylvania 15236\nDear Mr.\n\nI am writing in response to your request for a staff opinion\nof December 1, 1987, and your follow-up letter of January 22,\nsituation where a person\n1988. Your question is twoarranging a funeral has elected to purchase a casket from a third\nparty casket seller rather than from the funeral director who is\narranging the funeral, (1) can the funeral director require that\nperson or family to be present when the casket is delivered to\nthe funeral home, even if they do not wish to be present: and (2)\ncan the funeral director refuse to sign for the casket when it is\ndelivered to the funeral home.\n\nfold: In a\n\nPlease be advised that the views expressed in this letter\nare those of the FTC staff. They have not been reviewed,\napproved or adopted by the Comm 5sion, and they are not binding\nupon the Commission. However, they reflect the opinions of the\nstaff members charged with enforcement of the Funeral Rule.\nAs you know, under Section 453. 4(b)(1) of the Rule,\nfuneral provider cannot condition the furnishing of any funeral\ngoods or services to a person arranging a funeral upon the\npurchase of any other funeral good or service (except as required\nby law or otherwise permitted by the Rule). Under this section,\nthe funeral provider cannot require the purchase of a casket from\nthe funeral home as a condition of arranging a funeral for the\nindividual or family. The FTC staff has taken the position that\nfuneral providers can assess a casket handling fee to cover any\nadded labor or liability costs incurred because a family chooses\nto provide a casket purchased elsewhere.\n\nIn my view, a funeral provider may not unreasonably burden a\n\nconsumer s choice to purchase an item such as a casket from a\nthird party. I believe that requiring a family to be present for\ndelivery, when that family has expressly asserted they do not\nwish to be present for delivery, is placing an unreasonable\nburden upon the consumer " s choice to purchase the casket\nMoreover, I believe that refusal of the funeral\nprovider to sign for the merchandise, or acknowledge delivery,\n\nelsewhere.\n\nBicentenn of the United States Constitution\n11787- 1987)\n\n\x0cPage 2\n\nappears tantamount to refusal to accept delivery and therefore\nhe Rule.\n\nmay be in violation of\n\nIf, as you allege, there is concerted action among funeral\nproviders in your area to engage in certain practices designed to\ndiscourage or halt third party sales of caskets, such concerted\naction might also constitute a violation of Section 5 of the FTC\nAct, which. prohibi ts" unfair methods of competition in or\n15 U.\nC. Section 45(a) (1).\na1fecting commerce.\nThank\n\nqu for writing to the Commission.\n\nWe appreciate your\n\nbringing these matters to our attention.\n\nSincerely yours,\n\nFuneral Rule Coordinator\n\n\x0c'


b'\x0c\x0c\x0c\x0cCustoms Rulings Online Search System (CROSS) Document Preview\n\nPage 1 of 5\n\nHQ 966062\nMarch 11, 2003\nCLA-2 RR:CR:TE 966062 jsj\nCATEGORY: Classification\nTARIFF NO.: 6001.22.0000\nMr. Herbert J. Lynch Sullivan & Lynch, P.C.\n156 State Street Boston, Massachusetts 02109-2508\nRe: Classification; Laminated Warp Knit Pile Fabric; Subheading 6001.22.0000, HTSUSA; Chapter\n60, Note 1(c); Chapter 59, Note 1; Country of Origin; 19 C.F.R. 102.21 (c)(2).\nDear Mr. Lynch:\nThe purpose of this correspondence is to respond to your request dated March 6, 2002, directed to\nthe National Commodity Specialist Division. The correspondence in issue requested, on the behalf of\nyour client, Velcro USA, Inc., a binding classification and country of origin ruling of the\nmerchandise described as laminated warp knit fabric.\nThis ruling is being issued subsequent to the following: (1) A review of your submission dated\nMarch 6, 2002; (2) A review of the Customs Service laboratory report number: NY 20020351, dated\nMay 28, 2002; and (3) An examination of the base fabric sample and the laminated fabric sample.\nFACTS\nThe article in issue, identified as laminated warp knit fabric, is formed by laminating a sheet of\nplastic to a two bar warp knit fabric. The Customs Service Office of Laboratory and Scientific\nServices, subsequent to examining samples, reported that the lapping movement of the two guide\nbars moving in unison in the same direction produced an unstable construction with inclined loops.\nThe lapping movements of the front bar is expressed as 1/0, 1/2, with the lapping movements of the\nback bar expressed as 1/0, 3/4. The back bar, which pulls the yarn over two rows of stitches before\nforming a knit stitch, is adjusted in the formation of this fabric to provide less tension. The result is\nthe production of a float that projects upward from the surface of the fabric. The projection of the\nlooped float created by the back guide bar is entirely a function of its relative tension and not any\nprocess subsequent to knitting. The fabric has not been brushed.\nThe yarn used in the formation of the Velcro\xc2\xae fabric is 100 % nylon. It weighs approximately 72.2\ngrams per square meters. It will be imported in 101.6 centimeter widths. The fabric, subsequent to\nformation, is laminated with a sheet of polypropylene plastic that is visible to the naked eye. The\nplastic sheeting is imprinted with differing designs, including those of animals, in different colors.\nThe production of the finished Velcro\xc2\xae product, the laminated warp knit fabric, is undertaken in the\nfollowing countries:\nSpain: The nylon warp knit fabric is formed on warp knitting machines in rolls that are sixty inches\nwide.\nGermany: The warp knit fabric, subsequent to export from Spain to Germany, is laminated with\npolypropylene film that had previously been decorated with water-based acrylic motifs appealing to\nchildren.\n\nhttp://rulings.customs.gov/detail.asp?ru=966062&ac=pr\n\n2/25/2004\n\n\x0cCustoms Rulings Online Search System (CROSS) Document Preview\n\nPage 2 of 5\n\nThe Customs Service has not been advised whether the nylon yarn is extruded in Spain or whether\nthe polypropylene film is produced in Germany.\nISSUE\nWhat is the classification, pursuant to the Harmonized Tariff Schedule of the United States\nAnnotated, of the above-described laminated warp knit fabric?\nWhat is the country of origin of the laminated warp knit fabric that is knitted in Spain and laminated\nin Germany ?\nLAW AND ANALYSIS\nClassification\nThe federal agency responsible for initially interpreting and applying the Harmonized Tariff\nSchedule of the United States Annotated (HTSUSA) is the U.S. Customs Service. The Customs\nService, in accordance with its legislative mandate, classifies imported merchandise pursuant to the\nGeneral Rules of Interpretation (GRI) and the Additional U.S. Rules of Interpretation.\nGeneral Rule of Interpretation 1 provides, in part, that classification decisions are to be "determined\naccording to the terms of the headings and any relative section or chapter notes." General Rule of\nInterpretation 1. General Rule of Interpretation 1 further states that merchandise which cannot be\nclassified in accordance with the dictates of GRI 1 should be classified pursuant to the other General\nRules of Interpretation, provided the HTSUSA chapter headings or notes do not require otherwise.\nAccording to the Explanatory Notes (EN), the phrase in GRI 1, "provided such headings or notes do\nnot otherwise require," is intended to "make it quite clear that the terms of the headings and any\nrelative Section or Chapter Notes are paramount." General Rules for the Interpretation of the\nHarmonized System, Rule 1, Explanatory Note (V).\nThe Explanatory Notes constitute the official interpretation of the Harmonized System at the\ninternational level. See Joint Explanatory Statement supra note 1, at 549. The Explanatory Notes,\nalthough neither legally binding nor dispositive of classification issues, do provide commentary on\nthe scope of each heading of the HTSUS. The EN\xe2\x80\x99s are generally indicative of the proper\ninterpretation of the headings. See T.D. 89-80, 54 Fed. Reg. 35127-28 (Aug. 23, 1989); Lonza, Inc.\nv. United States, 46 F. 3d 1098, 1109 (Fed. Cir. 1995).\nCommencing classification of the laminated warp knit fabric, in accordance with the dictates of GRI\n1, the Customs Service examined the headings of the HTSUSA. Heading 6001, HTSUSA, provides\nfor the classification of "[p]ile fabrics, including \xe2\x80\x98long pile\xe2\x80\x99 fabrics and terry fabrics, knitted or\ncrocheted." The principle issue to be addressed by Customs in the classification of this fabric is\nwhether the fabric is "pile." The Explanatory Notes and prior Customs Service ruling letters assist in\nresolving this question. Explanatory Note 60.01 provides, in part:\nUnlike the woven fabrics of heading 58.01, the products of this heading are obtained by knitting.\nThe following methods of production are those mainly used:\na circular knitting machine produces a knitted fabric in which, by means of an additional yarn,\nprotruding loops are formed; afterwards the loops are cut to form pile and thus give a velvet-like\nsurface; a special warp knitting machine knits two fabrics face to face with a common pile yarn; the\ntwo fabrics are then separated by cutting to produce two knitted fabrics with a cut pile; textile fibres\nfrom a carded sliver are inserted into the loops of a knitted ground fabric as it is formed ("long pile"\nfabrics); textile yarn to form loops ("imitation terry fabrics") (see General Explanatory Note). Such\nfabrics have rows of chain stitches on the back of the fabric and they differ from the pile facrics of\nheading 58.02, which are characterised by rows of stitches having the appearance of running stitches\nalong the length of the back of the fabric. (Emphasis added).\n\nhttp://rulings.customs.gov/detail.asp?ru=966062&ac=pr\n\n2/25/2004\n\n\x0cCustoms Rulings Online Search System (CROSS) Document Preview\n\nPage 3 of 5\n\nCustoms, relying on EN 60.01, has previously concluded that the processes enumerated in the EN are\nillustrative, rather than exclusive. The EN specifically states that the methods of production listed are\nthose "mainly used" in the formation of "pile" fabric.\nThe determinative factor with regards to whether fabric is considered to be "pile" fabric is whether\nthe process utilized results in the production of a fabric with raised loops, not whether the fabricmaking process is listed in the Explanatory Note. As stated in HQ 951374 (Oct. 30, 1992), "if during\nthe weaving or knitting of a fabric, yarns are caused to project from the surface(s) (i.e., the base\nmaterial) of that fabric creating a \xe2\x80\x98pile\xe2\x80\x99 appearance, that fabric will be considered a pile fabric for the\npurposes of the HTSUSA\xe2\x80\xa6." The Velcro\xc2\xae fabric subject to this classification ruling comports with\nthe requirement that yarns project from the surface of the fabric as the result of the fabric-making\nprocess resulting in the production of a "pile" fabric. See generally HQ 953303 (April 9, 1993); HQ\n953942 (May 7, 1993).\nChapter 60, Note 1(c) provides, with a single exception, that knitted or crocheted fabrics that are\nimpregnated, coated, covered or laminated are classified in Chapter 59, HTSUSA,. The exception set\nforth in Chapter 60, Note 1(c) states that knitted or crocheted pile fabrics that are impregnated,\ncoated, covered or laminated remain classified in heading 6001, HTSUSA. The Velcro\xc2\xae fabric falls\nwithin the exception to Chapter 60, Note 1(c), as it is both a knit pile fabric and laminated. It is,\ntherefore, classified in heading 6001, HTSUSA.\nContinuing the classification of the Velcro\xc2\xae laminated warp knit pile fabric, the fabric is classified in\nsubheading 6001.22.0000, HTSUSA. Subheading 6001.22.0000, HTSUSA, provides for the\nclassification of:\nPile fabrics, including "long pile" fabrics and terry fabrics, knitted or crocheted:\nLooped pile fabrics:\n6001.22.0000 Of man-made fibers.\nCounsel for the importer suggests that the fabric is properly classified in heading 5903, HTSUSA.\nHeading 5903, HTSUSA, provides for the classification of "[t]extile fabrics impregnated, coated,\ncovered or laminated with plastics, other than those of heading 5902." The phrase "textile fabrics" in\nheading 5903, HTSUSA, is defined in Chapter 59, Note 1. Chapter 59, Note 1 states that "[e]xcept\nwhere the context otherwise requires, for the purposes of this chapter the expression "textile fabrics"\napplies only to the woven fabrics of chapters 50 to 55 and headings 5803 and 5806, the braids and\nornamental trimmings in the piece of heading 5808 and the knitted or crocheted fabrics of headings\n6002 to 6006." Since the Velcro\xc2\xae fabric is classified in heading 6001, HTSUSA, it is not a "textile\nfabric" for the purposes of Chapter 59 or heading 5903, HTSUSA.\nCountry of Origin\nThe Uruguay Round Agreements Act, particularly section 334, codified at 19 U.S.C. 3592, as\namended by section 405 of Title IV of the Trade and Development Act of 2000, sets forth rules of\norigin for textile and apparel products. Customs, pursuant to legislative authority, published\nregulations implementing the principles set forth by Congress.\nSection 102.21 of Customs regulations establishes, with specifically delineated exceptions, that\n"the provisions of this section shall control the determination of the country of origin of imported\ntextile and apparel products for purposes of the Customs laws\xe2\x80\xa6." 19 C.F.R. 102.21. Textile and\n\nhttp://rulings.customs.gov/detail.asp?ru=966062&ac=pr\n\n2/25/2004\n\n\x0cCustoms Rulings Online Search System (CROSS) Document Preview\n\nPage 4 of 5\n\napparel products that are encompassed within the scope of section 102.21 are any goods classifiable\nin Chapters 50 through 63 of the HTSUSA, as well as goods classifiable under other specifically\nenunciated subheadings. See 19 C.F.R. 102.21 (b)(5).\nThe Velcro\xc2\xae laminated warp knit pile fabric, as previously determined, is classified in Chapter\n60, HTSUSA. It is, therefore, a textile product subject to the rules of origin in 19 C.F.R. 102.21. See\n19 C.F.R. 102.21 (b)(5).\nThe country of origin of textile and apparel products is determined by the sequential application of\nparagraphs (c)(1) through (c)(5) of section 102.21. Paragraph (c)(1) provides that "[t]he country of\norigin of a textile or apparel product is the single country, territory or insular possession in which the\ngood was wholly obtained or produced." Since the knit fabric was formed in Spain and the\npolypropylene film was laminated to the fabric in Germany, the origin of the finished laminated warp\nknit pile fabric cannot be determined by reference to paragraph (c)(1).\nParagraph (c)(2) of section 102.21 provides that where the country of origin cannot be determined\naccording to paragraph (c)(1), resort should next be to paragraph (c)(2). The country of origin,\naccording to paragraph (c)(2), is "the single country, territory or insular possession in which each\nforeign material incorporated in that good underwent an applicable change in tariff classification,\nand/or met any other requirement, specified for the good in paragraph (e)" of section 102.21.\nParagraph (e)(1), as applicable to the instant determination, establishes a tariff shift rule that\nprovides:\nHTSUS Tariff Shift and/or Other Requirement\n6001-6006 (1) Except for fabric of wool or of fine animal hair, a change from greige fabric of\nheading 6001 through 6006 to finished fabric of heading 6001 through 6006 by both dyeing and\nprinting when accompanied by two or more of the following finishing operations: bleaching,\nshrinking, fulling, napping, decating, permanent stiffening, weighting, permanent embossing, or\nmoireing; or, (2) If the country of origin cannot be determined under (1) above, a change to heading\n6001 through 6006 from any heading outside that group, provided that the change is the result of a\nfabric-making process.\nSince paragraph (1) of the tariff shift requirement for heading 6001, HTSUSA, does not establish the\ncountry of origin of the laminated warp knit pile fabric Customs must examine paragraph (2).\nParagraph (2) of the tariff shift requirement necessitates inquiry into whether the nylon yarn used in\nthe formation of the fabric is classified in a heading other than headings 6001 through 6006,\nHTSUSA, and whether the tariff shift to heading 6001, HTSUSA, resulted from a "fabric-making\nprocess." Although Customs was not advised of the country where the yarn was extruded, since the\nfabric was formed in Spain and subsequently laminated in Germany, it is not necessary to know the\ncountry of extrusion of the yarn.\nThe yarn of which the Velcro\xc2\xae fabric is knitted is entirely nylon. Nylon yarn is classified in Chapter\n54, HTSUSA. Customs Regulations define "fabric-making process" to mean "any manufacturing\noperation that begins with polymers, fibers, filaments (including strips), yarns, twine, cordage, rope\nor fabric strips and results in a textile fabric." 19 C.F.R. 102.21 (b)(2). Customs is cognizant that the\nknit pile fabric in issue is laminated. Subsequent to a thorough examination of 19 C.F.R. 102.21 and\nprior Customs Service ruling letters, it is the decision of this office that the lamination process, with\nregards to fabric classified in heading 6001, HTSUSA, does not impact the origin determination.\nIt is Customs decision that the process of knitting nylon yarn classified in Chapter 54, HTSUSA, into\n\nhttp://rulings.customs.gov/detail.asp?ru=966062&ac=pr\n\n2/25/2004\n\n\x0cCustoms Rulings Online Search System (CROSS) Document Preview\n\nPage 5 of 5\n\na textile fabric of heading 6001, HTSUSA, constitutes a manufacturing operation that results in the\nproduction of a textile fabric. The country of origin of the Velcro\xc2\xae laminated warp knit pile fabric,\nknitted in Spain and laminated in Germany is Spain.\nHOLDING\nThe Velcro\xc2\xae laminated warp knit pile fabric is classified in subheading 6001.22.0000,\nHarmonized Tariff Schedule of the United States Annotated.\nThe General Column 1 Rate of Duty is seventeen and four-tenths (17.4) percent ad valorem.\nThe textile quota category is 224.\nThe country of origin of the laminated warp knit pile fabric, knitted in Spain and laminated in\nGermany is Spain.\nThe designated textile and apparel category may be subdivided into parts. If subdivided, any quota\nand visa requirements applicable to the subject merchandise may be affected. Since part categories\nare the result of international bilateral agreements which are subject to frequent negotiations and\nchanges, to obtain the most current information available, we suggest your client check, close to the\ntime of shipment, the Status Report On Current Import Quotas (Restraint Levels) an internal issuance\nof the U.S. Customs Service which is updated weekly and is available for inspection at the local\nCustoms Service office. The Status Report On Current Import Quotas (Restraint Levels) is also\navailable on the Customs Electronic Bulletin Board (CEBB) which can be found on the U.S.\nCustoms Web site at www.customs.gov.\nDue to the changeable nature of the statistical annotation (the ninth and tenth digits of the\nclassification) and the restraint (quota/visa) categories, your client\nshould contact its local Customs office prior to importation of this merchandise to determine the\ncurrent status of any import restraints or requirements.\nSincerely,\nMyles B. Harmon, Director\n\nCommercial Rulings Division\n\nhttp://rulings.customs.gov/detail.asp?ru=966062&ac=pr\n\n2/25/2004\n\n\x0c\x0c\x0c\x0c'


b"UNITED STATES OF AMERICA\n\nFEDERAL TRADE COMMISSION\nWASHINGTON, D.C. 20580\n\nBureau of Competition\nAlden F. Abbott\nAssistant Director for Policy and Evaluation\nDirect Dial\n(202) 326-2881\n\nJanuary 29, 2004\n\nMr. Jerald A. Jacobs\nShaw Pittman LLP\n2300 N. Street, NW\nWashington, DC 20037-1128\nDear Mr. Jacobs:\nThis letter responds to your request on behalf of the Electronic Retailing Association\n(\xe2\x80\x9cERA\xe2\x80\x9d) for a Bureau of Competition staff (\xe2\x80\x9cBC staff\xe2\x80\x9d) opinion letter regarding a proposed\nprogram to review and, if appropriate, recommend discontinuation of DRTV (\xe2\x80\x9cdirect response\ntelevision\xe2\x80\x9d) shows (e.g., infomercials) and advertising in other media that contain claims that\nappear on their face to be unreasonable or incapable of substantiation.1 You have asked whether,\nbased on the facts submitted, BC staff would recommend that the Commission bring an\nenforcement action challenging implementation of the program. On the basis of information that\nyou provided in your letter of December 23, 2003, BC staff have no present intention to\nrecommend a challenge to ERA\xe2\x80\x99s implementation of the DRTV review program as proposed.\nThis conclusion is entirely dependent on the accuracy of our understanding of pertinent facts\nconcerning the review program. Our understanding of those facts, in turn, is entirely dependent\non the information that you provided. Our present enforcement intentions might be different\nshould the DRTV review program not be as described in your letter and other materials.\nERA\xe2\x80\x99s Proposed Program\nWe understand that ERA is the nation\xe2\x80\x99s principal trade association representing the\nelectronic retailing/DRTV industry. ERA\xe2\x80\x99s membership includes DRTV producers, media\nbuyers, product owners, consultants, and other industry firms.\n\n1\n\nLetter of December 23, 2003 from Jerald A. Jacobs to Alden Francis Abbott, Assistant\nDirector for Policy and Evaluation, Bureau of Competition.\n\n\x0cMr. Jerald A. Jacobs \xe2\x80\x93 Page 2\nWe further understand that ERA proposes to establish a separate unit under the umbrella\nof the National Advertising Review Council (\xe2\x80\x9cNARC\xe2\x80\x9d) to perform the review function.2 We\nalso understand that the new unit will be funded by ERA, and operate under the rules and\nprocedures set forth in ERA\xe2\x80\x99s proposal, but would otherwise be under NARC supervision and\nindependent of ERA. The new unit will initially be staffed by one attorney, experienced in\nadvertising law and ad substantiation, who will be selected by and work under the supervision of\nNARC, although ERA may participate in the interviewing process and provide guidance on\nselection standards and process.\nWe understand that the review program is intended to identify and effectuate\ndiscontinuance of advertising that contains claims that appear to be untrue and lack any form of\ncredible substantiation. The single mission of the review program is to curtail false or deceptive\nDRTV advertising for the benefit of consumers.\nWe further understand that reviews may be initiated by the new unit on its own initiative\nor in response to referrals by any ERA member, consumer, or consumer advocacy group.\nDecisions on whether to review a referral will be based on the number of consumers affected, the\ntype of advertising claims involved \xe2\x80\x93 ERA proposes that the reviewing unit focus on advertising\ncampaigns that involve \xe2\x80\x9chigh impact\xe2\x80\x9d on consumers, such as when health or safety issues are\ninvolved \xe2\x80\x93 and how egregious the advertising claims appear to be.\nWe understand that the reviewing unit will notify the marketer whose advertising\ncampaign is under review, and may request product samples and additional information and/or\ndocumentation from the marketer as needed. The review will be limited to the primary or core\nefficacy or performance claims. The marketer will be required to provide the requested materials\nwithin 15 calendar days, and, within those 15 days, may request a meeting with the reviewer,\nwhich meeting shall be held within 15 calendar days of the request. The reviewing unit will\nmake a decision and notify the marketer within 15 calendar days after receipt of the final\nsubmission from the marketer or within 15 calendar days of the meeting.\nReview Standards\nWe understand that the review will consist of:\n\xe2\x80\xa2\n\n2\n\nDetermination/identification of claims;\n\nWe understand that NARC is a strategic alliance of the advertising industry and the\nCouncil of Better Business Bureaus (\xe2\x80\x9cCBBB\xe2\x80\x9d), formed in 1971 by the Association of National\nAdvertisers, Inc., the American Association of Advertising Agencies, Inc., the American\nAdvertising Federation, Inc., and the CBBB to foster truth and accuracy in national advertising\nthrough voluntary self-regulation.\n\n\x0cMr. Jerald A. Jacobs \xe2\x80\x93 Page 3\n\xe2\x80\xa2\n\nDetermination whether substantiation for claims appears reasonable on its face,\ne.g.,\ni)\n\nDoes the substantiation address the claims being made?\n\nii)\n\nIf applicable, does the substantiation meet general standards of competent\nand reliable scientific evidence?\n\nWe understand that the review is intended to be limited, with the goal of identifying\n\xe2\x80\x9coutliers\xe2\x80\x9d \xe2\x80\x93 egregious primary or core advertising claims that on their face appear unreasonable\nor incapable of substantiation. The reviewing unit will recommend whether the primary or core\nclaims that were reviewed should be continued. The reviewing unit is not expected to (but may)\nmake recommendations regarding how claims should be modified or qualified. The proposed\nprogram does not include provisions for appeal of the reviewing unit\xe2\x80\x99s decisions.\nEnforcement\nWe understand that failure to comply with the reviewing unit\xe2\x80\x99s recommendation to\ndiscontinue a claim will result in a referral to the FTC or other appropriate agency and expulsion\nfrom membership in ERA. Failure to comply with a request for information or other materials\nalso may result in referral to the FTC or other agency. Decisions of the reviewing unit will be\nmade public through publication in NARC reports. Review decisions and referrals to the FTC or\nanother agency will also be announced in NARC press releases. Conclusions of the reviewing\nunit will be qualified \xe2\x80\x93 e.g., \xe2\x80\x9cbased on preliminary evaluation, it appears that certain advertising\nclaims may not be adequately substantiated.\xe2\x80\x9d\nFinally, we understand that ERA contemplates that publication of the reviewing unit\xe2\x80\x99s\ndecisions and actions will benefit ERA members and suppliers such as fulfillment companies,\ntelemarketing companies, and media services by providing information that will assist them in\nmaking independent decisions regarding whether to provide goods or services to a noncompliant company.\nAnalysis of the ERA Proposed DRTV Review Program\nWe begin with the observation that the antitrust laws do not forbid legitimate selfregulation that benefits consumers. As the Commission has stated, \xe2\x80\x9c[s]uch self-regulatory\nactivity serves legitimate purposes, and in most cases can be expected to benefit, rather than to\ninjure, competition and consumer welfare.\xe2\x80\x9d American Academy of Ophthalmology, 101 F.T.C\n1018 (1983) (advisory opinion); see also American Medical Association, 117 F.T.C. 1091 (1994)\n(advisory opinion); American Medical Association, 94 F.T.C. 701, 1029 (1979), aff'd as\nmodified, 638 F.2d 443 (2d Cir. 1980), aff'd by an equally divided Court, 455 U.S. 676 (1982)\n(\xe2\x80\x9cAMA\xe2\x80\x9d). On the other hand, conduct that unreasonably restricts competition is inconsistent\nwith the antitrust laws.\n\n\x0cMr. Jerald A. Jacobs \xe2\x80\x93 Page 4\nWe also note at the outset that ERA\xe2\x80\x99s DRTV review program is in many respects similar\nto a standard-setting and standard-compliance program, and that precedents dealing with these\nkinds of programs are therefore helpful in the analysis of the ERA\xe2\x80\x99s proposed program.3\nSpecifically, under the review process, recommendations regarding whether ERA members\nshould continue or discontinue an advertiser\xe2\x80\x99s commercial will depend on whether the\ncommercial satisfies a standard of reasonableness (capacity to be substantiated) with respect to\nthe claims made in the commercial. The reasonableness standard, in turn, is solely determined\nby ERA through NARC. ERA, through NARC, is thus, in this respect, both a standard-setting\nbody and an evaluator of compliance with the adopted standard.\nAs a general principle, industry adoption of private standards and voluntary compliance\nwith those standards often, if not typically, promote competition by enhancing price and quality\nrivalry and by increasing consumer confidence in product quality and thereby increase demand,\nand facilitate entry of new sellers. It is inherent in a standards system, however, that some\nproducts may fail to satisfy the standards, and therefore may tend to be excluded from the\nmarketplace. This effect is not inherently anticompetitive, but an unreasonable restraint on\ncompetition may arise under some circumstances. For this reason, the actions of standard-setting\nbodies are subject to scrutiny under the antitrust laws.4 See, e.g., Allied Tube & Conduit Corp. v.\nIndian Head, Inc., 486 U.S. 492, 500 (1988); American Soc\xe2\x80\x99y of Mechanical Eng\xe2\x80\x99rs, Inc. v.\nHydrolevel Corp., 456 U.S. 556, 572-73 (1982).\nCompetitive concerns can arise, for example, when competitors abuse or distort the use\nof standards for the purpose of restricting competition, thus imposing harm on the market and\nconsumers while not providing the procompetitive benefits that can flow from compliance with\nindustry standards.5 In addition, the adoption of an industry standard may, in effect, be an\n3\n\nThere is one significant difference between the ERA\xe2\x80\x99s proposed program and\nstandardization programs. An industry group might voluntarily adopt standard specifications to\nensure that its members offer particularly high quality products or products that appeal to\nspecific consumer preferences (like a preference for \xe2\x80\x9corganic\xe2\x80\x9d food). Many consumers may\nprefer non-standard offerings (perhaps at lower prices), however, and it is therefore necessary to\nconsider whether the standardization program will foreclose competition from non-compliant\nsellers and thus reduce output and consumer welfare. Because the ERA\xe2\x80\x99s program does not\nestablish product standards but seeks only to exclude egregiously false claims, it is not necessary\nto be concerned about an adverse effect on competitive opportunities for products that are\ndeceptively promoted.\n4\n\nThe actions of groups or associations such as ERA comprised of entities with horizontal\nbusiness relationships (i.e., competitors) are deemed, under the antitrust laws, to be concerted\naction.\n5\n\nE.g., Allied Tube, 486 U.S. at 501; Accrediting Commission on Career Schools\nand Colleges of Technology, 119 F.T.C. 977 (1995) (advisory opinion; Commission declined to\napprove a proposed accreditation standard that would define acceptable tuition levels, reasoning\n\n\x0cMr. Jerald A. Jacobs \xe2\x80\x93 Page 5\nagreement not to sell non-compliant products.6 Competitive concerns may arise when the\nstandard is not reasonably necessary to attain procompetitive objectives.7\nERA\xe2\x80\x99s adoption of the proposed review program would be an agreement among\ncompetitors to restrict a certain kind of DRTV advertising, i.e., advertising that does not meet\nERA/NARC substantiation standards. As such, it raises two potential antitrust concerns. First,\nthe program could be characterized simply as a non-competition agreement, i.e., an agreement\namong ERA members, by means of enforcement of a standard, not to compete for the business of\nparticular advertisers. Second, the expulsion from ERA of a member that refuses to comply with\nthe review program requirements could be characterized as a group boycott.\nBC staff would analyze both of these issues under the \xe2\x80\x9crule of reason\xe2\x80\x9d test rather than the\nper se test.8 Under a rule of reason test, BC staff weighs the potential for competitive harm\narising from an agreement among competitors against any procompetitive or efficiency benefits\nproduced by the agreement. If BC staff concludes that the procompetive benefits more than\noffset the likely competitive harm, BC staff will not pursue an enforcement action. Given the\nfacts as we understand them in this instance, it is unlikely that BC staff would conclude that\npotential anticompetitive effects arising from the implementation of ERA\xe2\x80\x99s DRTV review\nprogram would outweigh procompetitive benefits. We find therefore that ERA\xe2\x80\x99s DRTV review\nprogram does not merit a staff recommendation to the Commission for enforcement action at this\ntime. We reach this conclusion for a number of reasons.\nFirst, truthful, non-deceptive advertising promotes competition by providing consumers\nwith important information about product prices, quality, and availability, among other factors\nthat consumers consider in their purchasing decisions. See, e.g., Virginia State Board of\nPharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 765 (1976). Agreements\non standards among competitors that restrict truthful, nondeceptive advertising, therefore, have\nthe potential to restrict competition and harm consumers. See, e.g., American Medical\nAssociation, 94 F.T.C. at 1005. Such agreements harm consumers by raising the cost of finding\nthe combination of price, service, and quality that best fits their needs and by reducing the\nincentive for firms to compete (by preventing them from informing consumers of their prices,\nservices, or quality). Id. By contrast, false or deceptive advertising does not produce the same\nbenefits for consumers as truthful advertising, and, therefore, agreements among competitors on\n\nthat this would in effect be an agreement among members of the accrediting body to charge no\nmore than the standard would permit).\n6\n\nId.\n\n7\n\nE.g., American Soc\xe2\x80\x99y of Sanitary Eng\xe2\x80\x99rs, 106 F.T.C. 324 (1985) (consent order).\n\n8\n\nSpecifically, BC staff\xe2\x80\x99s analysis would follow the framework set out in the Federal\nTrade Commission/Department of Justice Guidelines for Collaborations Among Competitors,\navailable at http://www.ftc.gov/os/2000/04/ftcdojguidelines.pdf.\n\n\x0cMr. Jerald A. Jacobs \xe2\x80\x93 Page 6\nstandards that are aimed at restricting deceptive advertising present less antitrust concern;\nindeed, restricting deceptive advertising may help avoid anticompetitive effects. Calif. Dental\nAssn. v. FTC, 526 U.S. 756, 773 n.9 (1999) (\xe2\x80\x9cThat false or misleading advertising has an\nanticompetitive effect, as that term is customarily used, has been long established.\xe2\x80\x9d) ERA\xe2\x80\x99s\nreview program appears to fall into this second class of restrictions.\nSecond, both the agreement to adopt a standard and the standard itself are not product or\nadvertiser-specific. Because ERA represents a wide spectrum of marketers that use DRTV\nadvertising, the agreement would relate to a class of advertising rather than specific products.\nThat fact would attenuate any adverse consumer impact.\nThird, ERA\xe2\x80\x99s proposed program appears to have a significant pro-consumer rationale by\nrestricting advertising that is deemed to be facially unreasonable or incapable of substantiation.\nAccording to ERA, the overriding purpose of the proposed program is to curtail false or\ndeceptive DRTV advertising, rather than to restrict competition. The restriction of such\nadvertising likely would increase consumer confidence in DRTV and make the overall market\nmore efficient. See Calif. Dental Assn. v. FTC, 526 U.S. at 771-772 (restrictions designed for the\npurpose of avoiding false or deceptive advertising might plausibly have a net procompetitive\neffect).\nFourth, the review program will be administered under the umbrella of NARC and not\ndirectly by ERA. Although, because of ERA funding and participation in staff interviewing, the\nreviewing unit cannot be characterized as fully independent of ERA, there is nonetheless some\ndegree of separation between the reviewing unit and ERA respecting the actual screening and\ndecision-making process. This separation tends to lessen the possibility that the program could\nbe manipulated by horizontal competitors for the purpose of restraining competition for their\nproducts.9 Furthermore, NARC will control the rules and procedures used by the reviewing unit\nafter formation.\nFifth, while the expulsion of a member for non-compliance with program requirements\ncould be characterized as a horizontal boycott, there will not be an effect on competition in the\nmarketing of the expelled member\xe2\x80\x99s product unless two or more members actually compete in\nthe marketing of that product or reasonable substitutes. Further, even if there is extant\ncompetition with respect to the marketing of that particular product, expulsion of a noncompliant member may not be unreasonably exclusionary. In general, expulsion from a trade\ngroup characteristically is not likely to result in predominantly anticompetitive effects. See\nNorthwest Wholesale Stationers, Inc. v. Pacific Stationery & Printing Co., 472 U.S. 284, 286\n(1985). According to ERA, membership does not have significant competitive ramifications.\nAlthough loss of membership results in the loss of ERA\xe2\x80\x99s trade association services, those\nservices are not essential to competition or competitors.\n\n9\n\nEvidence to the contrary would cause serious antitrust concerns.\n\n\x0cMr. Jerald A. Jacobs \xe2\x80\x93 Page 7\nFinally, we understand that ERA plans to encourage members not to deal with marketers\nthat refuse to comply with the reviewing unit\xe2\x80\x99s procedures and decisions. BC staff would not\nrecommend enforcement action by virtue of ERA simply encouraging members not to deal with\nnon-compliant marketers, so long as the actions of the members remain voluntary. By contrast, a\nrequirement that members refrain from dealing with such marketers could be viewed as a boycott\nor an agreement not to compete for that marketer\xe2\x80\x99s business, and therefore may be subjected to\nheightened BC staff scrutiny.\n\nConclusion\nFor all the reasons stated above, we believe that, on balance, the likely benefits of ERA\xe2\x80\x99s\nproposed review program more than offset the potential for competitive harm. On this basis, BC\nstaff have no present intention to recommend a challenge to ERA\xe2\x80\x99s proposed DRTV review\nprogram.\nThis letter sets out the views of the staff of the Bureau of Competition, as authorized by\nRule 1.1(b) of the Commission's Rules of Practice, 16 C.F.R. \xc2\xa7 1.1(b). Under Commission Rule\n1.3(c), 16 C.F.R. \xc2\xa7 1.3(c), the Commission is not bound by this staff opinion and reserves the\nright to rescind it at a later time. In addition, this Office retains the right to reconsider the\nquestions involved and, with notice to the requesting party, to rescind or revoke the opinion if\nimplementation of the proposed program results in substantial anticompetiutive effects, if the\nprogram is used for improper purposes, if facts change significantly, or if it would be in the\npublic interest to do so.\nSincerely yours,\n\nAlden F. Abbott\nAssistant Director\nfor Policy & Evaluation\n\n\x0c"


b"UNITED STATES OF AMERICA\n\nFEDERAL TRADE COMMISSION\nWASHINGTON, D.C. 20580\n\nBureau of Competition\nAlden F. Abbott\nAssistant Director\nDirect Dial\n(202) 326 2881\n\nDiane L. Weinberg, Esquire\nMeeks & Sheppard\n330 Madison Avenue, 39th Floor\nNew York, NY 10017\nRe:\n\nAmerican Down & Feather Section\nHome Fashion Products Association\nRequest for Staff Opinion Letter\nFTC File No. P002501\n\nDear Ms. Weinberg:\nThis letter responds to your request on behalf of the American Down & Feather Section\nof the Home Fashion Products Association (AD&FS) for a staff opinion letter regarding a\nproposed Labeling Compliance Program. You have asked whether, based on the facts submitted,\nthe Commission Staff would recommend that the Commission bring an enforcement action\nchallenging implementation of the AD&FS proposal. On the basis of information you provided\nin your letters of May 1, 2003, June 9, 2003, and June 24, 2003, Commission staff have no\npresent intention to recommend a challenge to AD&FS\xe2\x80\x99s implementation of the Compliance\nProgram as proposed.\nAD&FS and the Proposed Labeling Compliance Program\nWe understand that AD&FS is a voluntary association of dealers, buyers, sellers and\nprocessors of raw feathers and down in home fashion products. As of June 9, 2003, AD&FS had\n21 members, of which 18 were manufacturers of finished products containing down and feather,\ntwo were importers of finished products, and one was a supplier of processed down and\nfeathers.1\n\n1\n\nCommission.\n\nLetter of June 9, 2003, to the Office of Policy and Evaluation, Federal Trade\n\n\x0cAD&FS proposes to implement a Labeling Compliance Program with two stated\nobjectives: (1) \xe2\x80\x9cto assure that all members [of AD&FS] and non-members are in compliance\nwith Industry Standards adopted by the ADA . . . and reaffirmed by a majority vote of the\nAD&FS,\xe2\x80\x9d and (2) \xe2\x80\x9cto further assure that all representations and claims made on the product, on\nthe packing, and in advertising are truthful and in accordance with Industry Standards and the\nLaw.\xe2\x80\x9d2 To that end, AD&FS proposes to implement a Labeling Compliance Program, which\ninvolves the physical testing of products, upon receipt of a complaint from a member, to ensure\nthat those products meet Industry Standards. AD&FS proposes to impose various sanctions for\nnon-compliance with Industry Standards. You have explained that the process for considering\ncomplaints regarding representations, claims, and advertising, to ensure compliance with\nIndustry Standards and State and Federal law, also will involve physical testing of the product as\nset forth in the Labeling Compliance Program.3\nAny member of AD&FS may bring a complaint to the AD&FS Standards and Testing\nCommittee, asserting that another company\xe2\x80\x99s product does not comply with Industry Standards,\nor that another company\xe2\x80\x99s representations, claims, and advertising do not comply with Industry\nStandards or with state law or federal law. The Program will apply only to various home\nfurnishing products in their finished state; it will not apply to intermediate products or inputs into\nfinished goods.4 Complaints may be brought against non-members as well as members of\nAD&FS. AD&FS estimates that no more than six non-member entities, primarily importers,\nwould be subject to the AD&FS complaint process.5 Upon receipt of a complaint, the\nCommittee will initiate a process of testing or evaluation, and, if the accused company is found\nnot in compliance, the AD&FS may undertake sanctions against the company. Our\nunderstanding of the details of the proposed Compliance Program is set forth below.\nComplaints Regarding Non-Compliance with Industry Standards\nThe Industry Standards specify the requirements for product attributes in seven\ncategories: (A) Down Cluster content (with different standards depending on whether the\nproduct bears a \xe2\x80\x9cDown\xe2\x80\x9d label, a \xe2\x80\x9cDown & Feather\xe2\x80\x9d label, or a \xe2\x80\x9cFeather & Down\xe2\x80\x9d label); (B)\nGoose Specie content; (C) Filling Power; (D) Oxygen #; (E) Turbidity; (F) Thread Count; and\n(G) Filling Weight.\nCompliance with the Industry Standard is evaluated under a \xe2\x80\x9cWeighted Point System\xe2\x80\x9d\n\n2\n\nProposed Labeling Compliance Program, Home Fashion Products Association,\nAmerican Down & Feather Section, dated April 30, 2003, at \xc2\xb6 1. We understand the ADA to be\nthe American Down Association, the predecessor to AD&FS.\n3\n\nLetter of June 24, 2003, to the Office of Policy and Evaluation, Federal Trade\n\nCommission.\n4\n\nLetter of June 24, 2003, to the Office of Policy and Evaluation, Federal Trade\n\nCommission.\n5\n\nCommission.\n\nLetter of June 9, 2003, to the Office of Policy and Evaluation, Federal Trade\n\n\x0cthat rates a product in each category of performance covered by the standard. A product that\nmeets the standard for a given category is deemed to \xe2\x80\x9cpass\xe2\x80\x9d that standard. A non-complying\nproduct is assigned a specified number of \xe2\x80\x9cpoints\xe2\x80\x9d depending on the degree of failure. Four\nsamples of the product are tested in each category, and the final score for each category is\ncalculated by averaging the four tests. A product that receives 1-7 total points is deemed to pass;\n8 or more total points, or 5 or more points in any one category, results in a failure. The\ntolerances applied in this system are said to be consistent with Industry Standards. All sampling,\nclassification, and testing of the filling material is required to satisfy the International Down and\nFeather Bureau (\xe2\x80\x9cIDFB\xe2\x80\x9d) Standards and be performed by one of three certified IDFB testing\nlabs.\nIf the initial round of testing of four samples results in a failure, the Program Manager\nwill purchase a second round of four samples of the same or similar product and repeat the\ntesting.6 If the second round of testing results in a failure, the company that failed the testing\nwill have an opportunity to appeal the findings and request additional testing at its expense.7\nUnder the appeal process, the Program Manager will purchase four more samples of the\nsame or similar product for a third round of testing. Third round samples will be tested in all\nthree certified labs. The results of the second and third round of testing will be averaged\ntogether to determine pass or fail. The same procedures for sampling and testing, and the same\nappeal rights, apply to members and non-members.\nAn AD&FS member found not in compliance with Industry Standards is subject to one\nyear of probation, whereby the company is de-listed from the membership roster and is required\nto pay for additional rounds of sampling and testing. If the company passes the additional\nrounds of testing, it is taken off probation and all membership rights are reinstated. If the\ncompany fails the additional rounds of testing, refuses to participate and fund the additional\nrounds of testing, or does not pay its dues and its share of AD&FS expenses during the probation\nperiod, it will be expelled from membership. Ongoing violations may be reported to appropriate\ngovernmental agencies.\nA non-member that is found not in compliance with Industry Standards will be notified in\nwriting that failure to comply will result in notification to the appropriate governmental\nauthorities.\nComplaints Regarding Representations, Claims, or Advertising\nThe proposed Labeling Compliance Program states that \xe2\x80\x9c[i]f the complaint being\n\n6\n\nThe Program Manager is a third party retained by AD&FS to administer the\n\nProgram.\n7\n\nThe cost of the first round of samples and testing is the responsibility of the\nparty bringing the complaint. The AD&FS will initially pay for the second round of samples and\ntesting; in the event of a pass the complaining company will be billed for the samples and\ntesting, and in the event of a failure the accused company will be billed for the samples and\ntesting.\n\n\x0csubmitted is regarding representations, claims, or advertising, the AD&FS will consider each on\na case by case basis and determine the appropriate action;\xe2\x80\x9d the proposal does not describe the\nprocess for evaluating such complaints, the standards to be applied, or the actions that may be\ntaken if claims are determined not to be correct. Based on your letter of June 24, 2003, it now\nappears, and we will assume for purposes of the analysis set forth in this letter, that the\nevaluation of complaints regarding representations, claims, and advertising will involve no more\nthan a testing of products to determine whether the representations, claims, or advertising at\nissue are consistent with actual product attributes. We will also assume that the actions that may\nbe taken by AD&FS, in the event claims are not substantiated, will be limited to the sanctions\nthat may be imposed in the event a product is found not to comply with Industry Standards.8\nAnalysis of the Proposed Compliance Program\nWe begin with the observation that the antitrust laws do not forbid legitimate selfregulation that benefits consumers. As the Commission has stated, \xe2\x80\x9c[s]uch self-regulatory\nactivity serves legitimate purposes, and in most cases can be expected to benefit, rather than to\ninjure, competition and consumer welfare.\xe2\x80\x9d American Academy of Ophthalmology, 101 F.T.C.\n1018 (1983) (advisory opinion); see also American Medical Association, 117 F.T.C. 1091 (1994)\n(advisory opinion); American Medical Association, 94 F.T.C. 701, 1029 (1979), aff'd as\nmodified, 638 F.2d 443 (2d Cir. 1980), aff'd by an equally divided Court, 455 U.S. 676 (1982)\n(\xe2\x80\x9cAMA\xe2\x80\x9d). On the other hand, conduct that unreasonably restricts competition is inconsistent\nwith the antitrust laws.\nWe also note that voluntary private standards generally have the potential to promote\ncompetition by providing useful information to consumers and making it easier for them to\nselect among providers of a product or service. By providing information about quality and\nperformance of products or services, voluntary private standards may facilitate quality\ncompetition and price/quality comparisons, increase consumer confidence in product quality and\nthereby increase demand, and facilitate entry of new sellers.\nIt is inherent in a standards system, however, that some products may fail to satisfy the\nstandards, and therefore may tend to be excluded from the marketplace.9 The effect is not\ninherently anticompetitive, but an unreasonable restraint on competition may arise under some\ncircumstances. The actions of standard-setting bodies, therefore, are subject to scrutiny under\nthe antitrust laws.10 See, e.g., Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492,\n500 (1988); American Soc\xe2\x80\x99y of Mechanical Eng\xe2\x80\x99rs, Inc. v. Hydrolevel Corp., 456 U.S. 556, 57273 (1982).\n\n8\n\nShould either of these assumptions be incorrect, our analysis of the proposed\nprogram may require modification insofar as it relates to the program for handling complaints\nregarding representations, claims, and advertising.\n9\n\nProducts that do not meet the standard may be disfavored, and, even under a\nvoluntary standards program, non-compliant products may be disadvantaged in the market.\n10\n\nThe actions of standards groups controlled by entities with horizontal business\nrelationships (i.e., competitors) are deemed concerted action.\n\n\x0cCompetitive concerns can arise, for example, when competitors abuse or distort the\nstandard-setting process for the purpose of restricting competition, thus imposing harm on the\nmarket and consumers while not providing the procompetitive benefits that can flow from\nstandard-setting programs.11 In addition, the adoption of a standard may, in effect, be an\nagreement not to sell non-compliant products.12 Competitive concerns may arise when the\nstandard is not reasonably necessary to attain procompetitive objectives.13\nAlthough the actions of the AD&FS in adopting the Industry Standards are not the focus\nof this letter, efforts to enforce standards also can raise antitrust concerns.14 The proposal to test\nproducts for compliance with Industry Standards, and to impose sanctions for non-compliance,\nwill be evaluated from two perspectives. First, do the procedures themselves present any risk of\nunreasonably restraining competition? For example, procedures that can be applied arbitrarily or\nin a discriminatory manner may, in some circumstances, be used to unreasonably raise rivals\xe2\x80\x99\ncosts to such an extent as to substantially lessen competition. Second, are the proposed sanctions\nlikely to result in a substantial lessening of competition?\nProduct Testing\nBased on the information provided, the procedures for testing products for compliance\nwith Industry Standards do not appear likely to present a risk to competition. The procedures\nappear to be reasonably formulated to achieve the stated objective. The Industry Standards\nthemselves appear to be clearly defined, and the procedures for testing products for compliance\nwith the standards appear reasonably likely to ensure objectivity in their application. The\ncompliance program requires that sampling and testing satisfy independent third-party standards,\nand be performed by an independent third party lab. Further, the fact that a complaining party\nmust bear the costs for the first round of samples and testing, and also for the second round if the\n\n11\n\nE.g., Allied Tube, 486 U.S. at 496 (manufacturers \xe2\x80\x9cpacked\xe2\x80\x9d meeting at which\nstandard was to be voted upon, in order to prevent approval of a competing product); Hydrolevel,\n456 U.S. at 560-64 (manufacturer manipulated the process to obtain an unjustified interpretation\nof a safety code, declaring a competitor\xe2\x80\x99s product unsafe); Dell Computer Corp., 121 F.T.C. 616\n(1996) (consent order) (failure of a participant in a standard setting process to disclose its patent\nposition, contrary to the rules of the organization; after its technology was adopted in the\nstandard, the company sought to enforce the patent).\n12\n\nE.g., Allied Tube, 486 U.S. at 501; Accrediting Commission on Career Schools\nand Colleges of Technology, 119 F.T.C. 977 (1995) (advisory opinion; Commission declined to\napprove a proposed accreditation standard that would define acceptable tuition levels, reasoning\nthat this would in effect be an agreement among members of the accrediting body to charge no\nmore than the standard would permit).\n13\n\n14\n\nE.g., American Soc\xe2\x80\x99y of Sanitary Eng\xe2\x80\x99rs, 106 F.T.C. 324 (1985) (consent order).\n\nWe express no opinion on the substantive reasonableness of the standards. Based\non the information presently before us, however, we have no reason to believe that the standards\nthemselves are unreasonably restrictive. This informs our analysis of the proposed Labeling\nCompliance Program.\n\n\x0ctesting results in a pass, may lessen the likelihood that complaints will be brought without\nreasonable cause.15 In addition, the same procedures are applicable to the products of both\nmembers and non-members. These factors tend to ensure impartiality in the application of the\ncompliance program.\nThe proposed program also incorporates an appeals process that provides for objective\nretesting of products found not to be in compliance, using additional samples and additional\ntesting labs. Although the antitrust laws do not require standards groups to apply any particular\ndue process procedures, and the presence of such mechanisms is not determinative of the\nantitrust analysis, adequate procedural safeguards lessen the possibility of exclusionary conduct\nin the guise of self regulation. See Allied Tube & Conduit Corp. v. Indian Head Inc., 486\nU.S.492 (1988); Silver v. New York Stock Exchange, 373 U.S. 341, 36-67 (1963).\nFinally, given the number of firms that manufacture or import down and feathercontaining products, it does not appear likely that a competitive disadvantage visited upon any\nsingle firm would adversely affect competition in the industry as a whole.16\nFor the forgoing reasons, the procedures themselves do not appear likely to present a risk\nto competition.\nEvaluation of Complaints Regarding Representations, Claims, or Advertising\nTo the extent that the evaluation of complaints regarding representations, claims, or\nadvertising is limited to the testing of products to determine whether they are in compliance with\nIndustry Standards, as stated in your letter of June 24, 2003, this aspect of the proposed Labeling\nCompliance Program does not require separate analysis \xe2\x80\x93 our observations regarding testing\nprocedures (above) and sanctions (see below) are applicable in this context. We will note,\nhowever, that agreements among competitors to restrict truthful, nondeceptive advertising have\nthe potential to restrict competition and harm consumers. See, e.g., American Medical\nAssociation, 94 F.T.C. at 1005. Such agreements may harm consumers by raising the cost of\nfinding the combination of price, service, and quality that best fits their needs and by reducing\nthe incentive for firms to compete (by preventing them from informing consumers of their prices,\n\n15\n\nHowever, the fact that a complainant may be required to bear some costs is not a\nguarantee that the complaint will not be motivated by anticompetitive objectives. Under some\ncircumstances, a complainant may be willing to incur those costs if it can reduce the level of\ncompetition in the market by disadvantaging competitors, as by raising their costs\ndisproportionately. In the present instance, however, although we lack specific information on\nthe costs that may be imposed upon the complainant and the accused company, it does not\nappear likely that testing costs would be of such magnitude as to affect the competitive balance.\n16\n\nAlthough we lack sufficient information to determine the relevant antitrust\nmarket, we note that the group of firms that manufactures or imports down and feathercontaining products is relatively unconcentrated. AD&FS members constitute a sizeable\npercentage of that group, but the effects of the testing process on any given firm, standing alone,\ndo not appear likely to affect competition adversely, so long as competition among other firms is\nnot constrained.\n\n\x0cservices, or quality). Id.\nSeveral factors suggest that AD&FS\xe2\x80\x99s proposed compliance program regarding\nrepresentations, claims, and advertising is unlikely to harm competition. First, this aspect of the\nprogram is limited to the physical testing of products against Industry Standards. Second, the\ntesting procedures appear to be objective and narrowly tailored to achieve the stated purposes.\nThird, the proposed program may make consumers more likely to purchase from AD&FS\nmembers without concern that they are purchasing substandard merchandise. For these reasons,\nthe restrictions, far from harming competition, may well promote it.\nSanctions for Non-Compliance with Industry Standards\nYou have asked that this staff opinion letter specifically address three questions:\n\xe2\x80\xa2\n\nWhether AD&FS may report a non-compliant party to state and federal\nauthorities;\n\n\xe2\x80\xa2\n\nWhether AD&FS may list a non-compliant company on a website or in another\npublic forum; and\n\n\xe2\x80\xa2\n\nWhether AD&FS may place members that are non-compliant on probation or\nexpel them.\n\nThe proposed sanctions do not appear, on their face, to be unreasonably exclusionary.\nFirst, the reporting of a non-compliant company to state and federal authorities appears unlikely,\nin itself, to result in a substantial lessening of competition. Although such action may cause the\nallegedly non-compliant company to incur some costs, such as legal fees, we have no reason to\nbelieve, based on current information, that the rival\xe2\x80\x99s costs would increase by such an amount as\nto substantially impair its ability to compete and adversely affect competition in the market.\nFurther, the reporting of a company that is reasonably believed to be non-compliant may\nultimately have a salutary effect on the market by increasing consumer confidence in products\nfound in the market.\nSecond, the listing of a non-compliant company on a website or in another public forum\nappears unlikely, in itself, to result in a substantial lessening of competition. The public\nidentification of a company that is reasonably believed to be non-compliant may ultimately have\na salutary effect on the market by increasing consumer confidence in products found in the\nmarket. Thus, unless the underlying disciplinary action itself violates the antitrust laws,\npublication of a disciplinary action or the fact of non-compliance is not likely to violate the\nantitrust laws.17\nThird, expulsion from AD&FS of a member found to be non-compliant, or placing such a\nmember on probation, does not appear, on the basis of the information provided, to be\nunreasonably exclusionary. In general, expulsion from a trade group characteristically is not\n\n17\n\nSee American Medical Association, 117 F.T.C. at 1105.\n\n\x0clikely to result in predominantly anticompetitive effects.18 As stated by the Supreme Court,\n\xe2\x80\x9c[u]nless the organization has market power or exclusive access to an element essential to\neffective competition, the conclusion that expulsion is virtually always likely to have an\nanticompetitive effect is not warranted.\xe2\x80\x9d19\nBased on the information before us, probation or expulsion of a member from AD&FS\nlikely would not result in denial of \xe2\x80\x9caccess to an element essential to effective competition.\xe2\x80\x9d\nYou have stated that the primary benefit of AD&FS that would be lost if a member is placed on\nprobation or expelled because of violating Industry Standards would be the inability to\nparticipate in the association\xe2\x80\x99s decision-making.20 Such participation does not appear to rise to\nthe level of an \xe2\x80\x9celement essential to effective competition.\xe2\x80\x9d In addition, although the members\nof AD&FS represent a sizeable percentage of the manufacturers and importers of products\ncontaining down and feathers, the information presently before us does not suggest that\ncompetition in the industry would be significantly affected by the expulsion of one member.21\nConclusion\nFor the reasons discussed above, Commission staff have no present intention to\nrecommend a challenge to AD&FS\xe2\x80\x99s proposed conduct. This letter sets out the views of the staff\nof the Bureau of Competition, as authorized by Rule 1.1(b) of the Commission's Rules of\nPractice, 16 C.F.R. \xc2\xa7 1.1(b). Under Commission Rule 1.3(c), 16 C.F.R. \xc2\xa7 1.3(c), the\nCommission is not bound by this staff opinion and reserves the right to rescind it at a later time.\nIn addition, this office retains the right to reconsider the questions involved and, with notice to\nthe requesting party, to rescind or revoke the opinion if implementation of the proposed program\nresults in substantial anticompetitive effects, if the program is used for improper purposes, if\nfacts change significantly, or if it would be in the public interest to do so.\n\nSincerely yours,\n\nAlden F. Abbott\nAssistant Director\nfor Policy & Evaluation\n\n18\n\nSee Northwest Wholesale Stationers, Inc. v. Pacific Stationery & Printing Co.,\n472 U.S. 284, 286 (1985).\n19\n\nId.\n\n20\n\nLetter of June 9, 2003, to the Office of Policy and Evaluation, Federal Trade\n\nCommission.\n21\n\nIn contrast, for example, expulsion could raise serious questions if it were\nintended to reinforce a price or output restraint.\n\n\x0c"