UNITED STATES OF AMERICABEFORE FEDERAL TRADE COMMISSION

)In the Matter of))I

NSTITUTE OF

TORE

LANNERS

,)File No. 021-0144)a corporation.))

PUBLIC COMMENTS OFCITIZENS FOR VOLUNTARY TRADE

Pursuant to th

e Federal Trade Commission’s April 17, 2003, publication of a proposedconsent order in the above-captioned matter, Citizens for Voluntary Trade(CVT)

respectfullysubmits the following public comments.

Material Facts

On Thursday, April 17, 2003, the Federal Trade Commission (FTC) announced aproposed consent order (proposed order) with the Institute of Store Planners (ISP), a New York-

based association composed of approximately 860 members. ISP’s members include various professionals who design and construct retail store interiors. ISP maintains a voluntary ethicscode which is the subject of the FTC’s complaint and proposed order.The complaint alleges three provisions of the ISP ethics code violate Section 5 of theFTC Act, which generally prohibit “unfair methods of competition.” The challenged provisions,according to the complaint, are as follows:

Citizens for Voluntary Trade is an unincorporated nonprofit association organized under District of Columbia law.

21)

“a member shall not render professional services without compensation.”2)“a member shall not knowingly compete with another member on the basis of professional charges, or use donations as a device for obtaining professionaladvantage.”3)“a member shall not offer his services in a competition except as provided by suchcompetition codes as the Institute may establish.”The FTC claims these statements, taken alone and without context, injured the legalrights of consumers by “discouraging and restricting price competition,” thus deprivingconsumers of “the benefit of free and open competition among store planners.”The proposed order addressesthe FTC’s concerns by forcing ISP to amend its ethics codeand other governing documents to reflect FTC viewpoints. Specifically, the order prohibits ISPfrom “[r]egulating, restricting, impeding, declaring unethical or unprofessional, interfering withor advising against price competition by its members, including, but not limited to, the provisionof free or discounted services or restricting members from offering their services in acompetition unless they conform to rules or regulations established by ISP.”

Comments

The FTC presents no actual evidence that consumers were harmed by ISP’s ethics code.Instead, the Commission relies on a false interpretation of the ethics code’s intent andapplication, and from there proceeds to make a number of speculative, unprovable, andultimately arbitrary conclusions. In the process, the FTC violates the First Amendment byimposing a government-enforced prior restraint on ISP’s present and future speech. The precedent set by this consent order, as well as other recently adopted FTC consent orders against private associations, will have a chilling effect on the First Amendment rights of all Americans.For these reasons, entry of the proposed consent order should be rejected.

1.Consumer harm.

The FTC alleges the mere

existence

of certain provisions of ISP’s ethics code constitutesa legal harm to consumers. The Commission’s complaint states ISP engaged in “unfair competition” under the FTC Act by “discouraging and restricting price competition among store planners,” and by denying consumers “the benefit of free and open competition among store planners.” Both of these statements are false. ISP never restricted legitimate competition amongits members, and consumers suffered no demonstrable injury.Since the FTC refuses to provide any context for ISP’s ethics code (or even a completecopy of the code itself), the public is left with little useful information to assess theCommission’s claims of anticompetitive behavior. Nevertheless, CVT’s independentinvestigation into ISP’s affairs turned up some useful information. CVT has determined thatISP’s ethics code was never intended, or applied, as an agreement to restrict competition in anymanner. Rather, ISP adopted its current ethics code in the 1960’s as a means to advise memberson how to avoid potentially illegal activities. The code is purely advisory in nature, and hasnever been enforced with respect to the provisions now challenged by the FTC. Any suggestion by the Commission to the contrary is simply untrue.What ISP has

advised

their members against is entering sham “competitions” that aredesigned to exploit individual store planners. It is a well-known practice in the retail industrythat store builders will often solicit proposals from numerous store planners.These planners will prepare detailed plansandsubmit them to the builder for a nominal reimbursement, whereuponthe builderwill award the job to only one planner. Itis also then a common practice for thewinning planner to incorporate—or steal, depending on your vantage—elements of the losing planner’s designs. In this regard, “competition” serves only to rob the unsuccessful planner of