Industry comes up short on co-op ad revision - Federal Trade Commission's antitrust guidelines governing co-operative advertising programs - column

Industry comes up short on co-op ad revision

The nation's drug chains came out on the short end of a key revision of the Federal Trade Commission's antitrust guidelines governing co-operative advertising programs.

Independent druggists fared a little better, but even NARD won't be completely satisfied with the FTC's changes.

At the heart of the concerns: the commission's 20-year-old "Fred Meyer" guides for retail advertising and promotional allowances. Those guides were issued in the wake of FTC findings that some manufacturers and their chain store customers were using co-op ad allowances in violation of the Robinson-Patman anti-price discrimination act.

Among other things, the FTC guides required sponsors of co-op advertising plans to make these promotional allowances available on a "proportionately equal basis" to all competing retail customers.

Under this standard smaller customers (for example, independent druggists) unable to afford newspaper advertising would have to be offered alternative promotional allowances (handbills or bag stuffers subsidized by the manufacturer).

At the same time, the guides prohibited manufacturers from refusing to pay for co-op advertisements containing below-list retail prices--a provision designed to prevent suppliers from using promotional rebates to police illegal resale price maintenance conspiracies.

Two years ago FTC antitrusters proposed a series of sweeping changes in those R-P guides--changes that would draw fire from chains and independents alike.

NACDS raised sharp objections to the FTC's plan to scrap the guide provisions barring co-op ad program sponsors from discriminating against discount price ads.

Along with other industry groups, the chain drug store association warned the FTC that such a change would promote RPM conspiracies in the drug store marketplace.

Separate changes proposed by FTC antitrusters came under fire by independent pharmacies. The most controversial of these would alter the "proportional equality" standard and allow manufacturers to pay different allowances to different retailers based on the value of the retailer's advertising medium to the manufacturer.

For example, if the manufacturer considered newspaper advertising twice as effective as handbill ads, the supplier could pay 50 percent of the cost of Retailer A's newspaper ad but only 25 percent of the cost of Retailer B's handbill.

This proposal came under attack across the nation. After studying those comments for more than a year, FTC officials finally handed down their decision. The verdict:

* A setback for NACDS as the agency ignored chain protests and moved to allow suppliers to cut off reimbursement for discount price ads.

* A victory of sorts for independents as FTC backed away from plans to permit manufacturers to decide co-op ad reimbursement based on the perceived value of the ad medium.

Independent druggists have no reason to celebrate the FTC's final co-op ad guides, however. The commission flatly ignored a number of key NARD recommendations. Indeed, despite NARD's objections the commission voted to:

* Eliminate product returns for credit as an example of the promotional services which must be offered to retailers on a non-discriminatory basis.

* Scuttle an anti-discrimination safeguard requiring co-op ad sponsors to conduct "spot checks" every 90 days to determine whether all retail customers are aware of the promotional allowances available.

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