Detroit Auto Dealers Association, Inc., et al.; Proposed Consent Agreement With Analysis to Aid Public Comment

FEDERAL TRADE COMMISSION

[Dkt. 9189]

Detroit Auto Dealers Association, Inc., et al.; Proposed Consent

Agreement With Analysis to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting

unfair acts and practices and unfair methods of competition, this

consent agreement, accepted subject to final Commission approval, would

prohibit, among other things, the association of motor vehicle dealers

and a former officer, James Daniel Hayes, from entering into,

continuing or carrying out any agreement to establish, fix or maintain

any hours of operation of any dealer in the Detroit area. In addition,

the consent agreement would require the respondent association to amend

its bylaws to comply with the provisions of the order, and to place

advertisements, in the city's two daily newspapers, stating that

certain area dealers are required by the Commission order to maintain

extended hours (at least 62 hours a week) for a one-year period.

DATES: Comments must be received on or before July 8, 1994.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

Ernest Negata, FTC/H-394, Washington, DC 20580. (202) 326-2714.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 3.25(f) of

the Commission's Rules of Practice (16 CFR 3.25(f)), notice is hereby

given that the following consent agreement containing a consent order

to cease and desist, having been filed with the accepted, subject to

final approval, by the Commission, has been placed on the public record

for a period of sixty (60) days. Public comment is invited. Such

comments or views will be considered by the Commission and will be

available for inspection and copying at its principal office in

accordance with Sec. 4.9(b)(6)(ii) of the Commission's Rules of

Practice (16 CFR 4.9(b)(6)(ii)).

Agreement Containing Consent Order To Cease and Desist

In the Matter of: Detroit Auto Dealers Association, Inc., a

corporation, et al.

The agreement herein, by and between Detroit Auto Dealers

Association, Inc. (``DADA'') and James Daniel Hayes, individually,

hereafter sometimes referred to as respondents, and their attorneys,

and counsel for the Federal Trade Commission, is entered into in

accordance with the Commission's rule governing consent order

procedures. In accordance therewith the parties hereby agree that:

1. Respondent DADA is an incorporated trade association for motor

vehicle dealers with its principal place of business located at 1800 W.

Big Beaver Rd., Troy, MI 48084.

2. Respondent James Daniel Hayes was, at relevant times, an officer

of DADA, and as such formulated, directed and controlled the acts and

practices of DADA. James Daniel Hayes' mailing address is 2845

Palmerston Rd., Troy, MI 48084.

3. Respondents have been served with a copy of the complaint issued

by the Federal Trade Commission charging them and others with violation

of section 5 of the Federal Trade Commission Act, and have filed

answers to said complaint denying said charges.

4. Respondents admit all the jurisdictional facts relating to Count

I set forth in the Commission's complaint in this proceeding.

5. Respondents waive the following with respect to Count I of the

complaint:

(a) Any further procedural steps;

(b) The requirement that the Commission's decision contain a

statement of findings of fact and conclusions of law;

(c) All rights to seek judicial review or otherwise to challenge

or contest the validity of the Order entered pursuant to this

agreement; and

(d) Any claim under the Equal Access to Justice Act.

6. This agreement shall not become part of the public record of the

proceeding unless and until it is accepted by the Commission. If this

agreement is accepted by the Commission it will be placed on the public

record for a period of sixty (60) days and information in respect

thereto publicly released. The Commission thereafter may either

withdraw its acceptance of this agreement and so notify the respondents

in which event it will take such action as it may consider appropriate,

or issue and serve its decision, in disposition of Count I of the

complaint issued by the Commission in this proceeding.

7. This agreement is for settlement purposes only and relates

solely to Count I of the Commission's complaint in this proceeding;

this agreement does not constitute an admission by the respondents that

the law has been violated as alleged in Count I of the complaint issued

by the Commission.

8. This agreement contemplates that, if it is accepted by the

Commission, and if such acceptance is not subsequently withdrawn by the

Commission pursuant to the provisions of Sec. 3.25(f) of the

Commission's Rules, the Commission may without further notice to the

respondents (1) issue its decision containing the following Order to

cease and desist in disposition of Count I of the complaint issued by

the Commission in this proceeding, and (2) make information public in

respect thereto. When so entered, the Order to cease and desist shall

have the same force and effect and may be altered, modified or set

aside in the same manner and within the same time provided by statute

for other orders. The Order shall become final upon service. Delivery

by the U.S. Postal Service of the decision containing the agreed-to

Order to respondents' addresses as stated in this agreement shall

constitute service. Respondents waive any right they might have to any

other manner of service. The complaint may be used in construing the

terms of the Order, and no agreement, understanding, representation, or

interpretation not contained in the Order or in the agreement may be

used to vary or to contradict the terms of the Order.

9. Respondents have read the complaint and the Order contemplated

hereby. They understand that once the Order has been issued, they may

be required to file one or more compliance reports showing they have

fully complied with the Order. Respondents further understand that they

may be liable for civil penalties in the amount provided by law for

each violation of the Order after it becomes final.

It is ordered, that for the purposes of this order, the following

definitions shall apply:

1. Person means any natural person, corporation, partnership,

association, joint venture, trust, or other organization or entity, but

not governmental entities.

2. Dealer means any person who receives on consignment or purchases

motor vehicles for sale or lease to the public, and any director,

officer, employee, representative or agent of any such person.

3. Dealer association means any trade, civic, service, or social

association whose membership is composed primarily of dealers.

4. Detroit area means the Detroit, Michigan metropolitan area,

comprising Macomb County, Wayne County and Oakland County in the State

of Michigan.

5. Hours of operation means the times during which a dealer is open

for business to sell or lease motor vehicles.

6. Weekday hours means the hours of 9 a.m. to 6 p.m. Monday through

Friday.

7. Non-weekday hours means hours other than 9 a.m. to 6 p.m. Monday

through Friday.

8. Respondent means any dealership, individual, or association

respondent.

I

It is further ordered, that DADA and James Daniel Hayes shall cease

and desist from, directly or indirectly or through any corporate or

other device, entering into, continuing, or carrying out any agreement,

contract, combination, or conspiracy, in or affecting commerce (as

``commerce'' is defined in the Federal Trade Commission Act), with any

other respondent or other dealer or dealer association in the Detroit

area to establish, fix, maintain, adopt, or adhere to any hours of

operation.

II

It is further ordered, that DADA and James Daniel Hayes shall cease

and desist from, directly or indirectly or through any corporate or

other device, performing any of the following acts or practices or

encouraging, inducing, or requiring any person to perform any of the

following acts or practices, or entering into, continuing, or carrying

out any agreement, contract, combination, or conspiracy with any other

person in the Detroit area to do or perform any of the following acts

or practices:

A. Exchanging information or communicating with any other

respondent or other dealer or dealer association in the Detroit area

concerning hours of operation, except to the extent necessary (i) to

comply with any order of the Federal Trade Commission, (ii) after two

(2) years from the date this order becomes final, to incorporate

individual dealers' hours of operation in lawful joint advertisements,

and (iii) in connection with special sales events or promotions

sponsored or coordinated by DADA, including but not limited to the

North American International Auto Show; or

B. Requesting, recommending, coercing, influencing, inducing,

encouraging, or persuading, or attempting to request, recommend,

coerce, influence, induce, encourage, or persuade, any other respondent

or other dealer or dealer association in the Detroit area to maintain,

adopt or adhere to any hours of operation.

III

It is further ordered, that respondent DADA shall:

A. Beginning thirty (30) days after this order becomes final, and

for a period of not less than four (4) weeks thereafter, place and

cause to be disseminated each week at least four (4) advertisements,

including one in the Thursday editions of the Detroit News and the

Detroit Free Press, one in the Saturday edition of the combined Detroit

News and Free Press, and one in any other edition of the Detroit News,

the Detroit Free Press, or the combined Detroit News and Free Press.

Each advertisement shall: (1) List all dealership respondents which

within ten (10) days prior to the placement of the advertisement are

subject to a final Commission order to maintain minimum weekly hours of

operation, (2) list all non-respondent dealerships in the Detroit area

that are owned or operated by an individual respondent who within ten

(10) days prior to the placement of the advertisement is subject to a

final Commission order to maintain minimum weekly hours of operation,

and (3) disclose that all such orders have a minimum hours requirement

of 62 hours per week, or 58 hours per week where applicable. For the

purpose of complying with Part III.A.(2), above, DADA shall use its

best efforts to identify all non-respondent dealerships in the Detroit

area that are owned or operated by an individual respondent. The

advertisements shall be devoted exclusively to the content set forth in

paragraph B. hereto. The advertisements shall be clear and prominent

containing a banner headline in 24 point or larger bold type so that it

can be readily noticed, with the principal portion of the text in 12

point or larger type, and the list of respondent and non-respondent

dealerships in 9 point or larger type. The advertisement shall be a

minimum of one-eighth (\1/8\) of a page and shall be placed in the same

location at which advertisements for the sale of new automobiles

ordinarily appear; and

B. The advertisements referred to in paragraph A. of this section

shall state as follows:

Auto Dealers Open For Extended Hours

Prior to [date of Order] most Detroit area automobile dealers

have not been open for business on Saturday or on Tuesday,

Wednesday, or Friday evening. As a result of a consent order of the

Federal Trade Commission, the following Detroit area automobile

dealers must offer expanded shopping hours of a minimum of 62 hours

per week for one year and are free to choose their own hours

thereafter.

[list dealerships]*

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*Dealers noted with an asterisk must offer a minimum of 62

shopping hours per week during Daylight Savings Time and a minimum

of 58 hours at other times.

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IV

It is further ordered, that DADA shall, for a period of five (5)

years from the date this order becomes final, cause to be made minutes

of all business meetings of its membership, its board of directors, and

its committees. Such minutes shall: (i) Identify all persons attending

such meeting, (ii) include a certification, signed by the presiding

officer and the secretary under penalty of perjury, that states whether

hours of operation were discussed at the meeting, and (iii) summarize

what was discussed at the meeting. If hours of operation were discussed

at any business meeting subject to this order, then the minutes of such

meeting shall identify the participants in the discussion of hours of

operation and state in detail the substance of the discussion(s). DADA

shall retain such minutes (including, but not limited to, the required

certifications) for a period of five (5) years from the date the

minutes were created. Such minutes shall be provided to the Commission

upon request.

V

It is further ordered, that DADA shall:

A. Within sixty (60) days from the date this order becomes final,

amend its bylaws, rules and regulations to eliminate any provision

inconsistent with any provisions of this order;

B. Within sixty (60) days from the date this order becomes final,

amend its bylaws, rules and regulations to incorporate:

(1) A provision that prohibits its members from discussing at any

formal or informal membership, board of directors, or committee meeting

the hours of operation of any dealer, except to the extent necessary to

comply with any order of the Federal Trade Commission; and

(2) A provision that requires expulsion from membership of any

member who violates such prohibition;

(C) Within ten (10) days after the amendment of any bylaws, rules

or regulations pursuant to this order, furnish a copy of such amended

bylaws, rules or regulations to all members, and within ten (10) days

of any new member joining DADA, furnish to such new member a copy of

the bylaws, rules and regulations of DADA; and

D. Within sixty (60) days after receiving information from any

source concerning a potential violation of any bylaw, rule, or

regulation required by part V.B. of this order, investigate the

potential violation, record the findings of the investigation, and

expel for a period of one (1) year any member who is found to have

violated any of the bylaws, rules or regulations required by part V.B.

of this order.

VI

It is further ordered, that DADA shall, for a period of five (5)

years from the date this order becomes final, provide to the Commission

the name and address of any member expelled pursuant to the

requirements of part V.D. of this order within ten (10) days after such

expulsion.

VII

It is further ordered, that within ten (10) days after the date

this order becomes final DADA shall provide a copy of the order to each

of its officers, directors, members and employees. For a period of five

(5) years from the date this order becomes final, DADA shall provide a

copy to each new member and new employee, within ten (10) days after

the date the employee is hired or the new member joins DADA.

VIII

It is further ordered, that DADA and James Daniel Hayes shall,

within ninety (90) days after this order becomes final and annually

thereafter for a period of five (5) years, file with the Commission a

verified written report setting forth in detail the manner and form in

which they have complied with this order. The requirements of parts

VIII and IX shall not apply to James Daniel Hayes; provided, however,

that James Daniel Hayes shall, within ninety (90) days after this order

becomes final, file with the Commission a verified written report

stating that he is no longer employed by DADA or any other dealer

association in the Detroit area and does not own or operate a

dealership in the Detroit area; provided, further, that if

circumstances change whereby James Daniel Hayes shall become employed

by DADA or any other dealer association in the Detroit area, or shall

own or operate a dealership in the Detroit area, then he shall notify

the Commission at the earliest practicable date of such a change and

shall begin complying with the requirements of parts VIII and IX of

this order.

IX

It is further ordered, that for a period of five (5) years from the

date this order becomes final, DADA shall notify the Commission at

least thirty (30) days prior to any proposed change in corporate status

(such as dissolution, assignment, or sale) that results in the

emergence of a successor corporation, the creation or dissolution of

subsidiaries, or any other change in DADA which may affect compliance

obligations arising out of the order. James Daniel Hayes shall, for

five (5) years from the date the order becomes final, promptly notify

the Commission of the discontinuance of his present business or

employment and of any new affiliation or employment with any dealer or

dealer association. Such notice shall include his new business address

and a statement of the nature of the business or employment in which he

is newly engaged, as well as a description of his duties and

responsibilities in connection with the new business or employment.

DADA of 1800 W. Big Beaver Rd., Troy, Michigan 48084 and James

Daniel Hayes of 2845 Palmerston Rd., Troy, MI 48084 hereby agree to the

terms and conditions of the Consent Agreement containing an order to

cease and desist from engaging in the acts and practices identified in

Count I of the complaint in In the Matter of Detroit Auto Dealers

Association, Inc. a corporation, et al., Docket No. 9189.

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission has accepted, subject to final

approval, an agreement to a proposed consent order from Detroit

Automobile Dealers Association, Inc. (``DADA'') and James Daniel Hayes,

a former officer of the association.

The proposed consent order has been placed on the public record for

60 days for reception of comments by interested parties. Comments

received during this period will become part of the public record.

After 60 days, the Commission will again review the agreement and the

comments received and will decide whether it should withdraw from the

agreement or make final the agreement's proposed order.

On December 20, 1984, the Commission issued an administrative

complaint alleging that DADA, James Daniel Hayes and certain automobile

dealers and dealer associations agreed among themselves and with others

to limit competition in the sale of new motor vehicles in the Detroit,

Michigan area in violation of section 5 of the Federal Trade Commission

Act, by adopting and adhering to a schedule limiting hours of operation

for the sale or lease of motor vehicles in the Detroit area. The

alleged agreement limited weekday evening hours to Mondays and

Thursdays and eliminated Saturday hours altogether, except for

occasional special sales.

On July 14, 1987, the Administrative Law Judge (``ALJ'') issued an

Initial Decision dismissing the complaint. The ALJ found that the

dealers and the other respondents had acted in response to employee

demands for shorter hours and, therefore, that the dealers' agreement

was exempt from the antitrust laws by reason of the nonstatutory labor

exemption.

Counsel supporting the complaint appealed the Initial Decision to

the Commission. On February 22, 1989, the Commission issued a decision

reversing the ALJ. The Commission held that the dealers were not

entitled to the nonstatutory labor exemption because their uniform

hours restrictions were not the result of any collective bargaining

activity with employees; on the contrary, the dealers had agreed among

themselves in order to avoid collective bargaining. The Commission's

Final Order, among other provisions, prohibited the dealers from

conspiring in any way to fix hours of operation. As a corrective

measure the Final Order also required the dealers to remain open a

minimum of 64 hours a week for one year. The Commission found that ``a

cease and desist order alone would be inadequate to remedy the

respondents' violations of section 5.'' Because of the history of

violent enforcement of the hours restrictions, the Commission found

that ``[d]ealers individually will decide to remain closed for fear of

reprisals if they try to extend hours. Only if many dealers are open at

the same time, making enforcement of the restriction difficult or

impossible, will the fear of being singled out for enforcement be

overcome.'' Detroit Auto Dealers Ass'n, Inc., 111 F.T.C. 417, 506

(1989). The Commission's Final Order also required DADA to print

newspaper advertisements informing the Detroit-area public that dealers

were now required to maintain expanded hours for a one year period

pursuant to the Commission's order.

DADA, James Daniel Hayes, the respondent dealers and other

respondents appealed the Commission's decision to the United States

Court of Appeals for the Sixth Circuit. On January 31, 1992, the Court

of Appeals affirmed the Commission's decision in substantial part and

remanded the case to the Commission for the ``limited purpose'' of

reconsidering certain issues.

On January 24, 1994, the Commission accepted, and on February 10,

1994, published for public comment, an Agreement Containing a Consent

Order to Cease and Desist in order to resolve the allegations in the

administrative complaint as to 146 respondents, consisting of

dealerships, owners or managers of dealerships and dealer associations.

Detroit Automobile Dealers Ass'n, Inc., Proposed Consent Agreement With

Analysis to Aid Public Comment, 59 F. R. 6263 (Feb. 10, 1994). DADA and

James Daniel Hayes were not parties to that agreement.

DADA and James Daniel Hayes subsequently entered into a separate

Agreement Containing a Consent Order to Cease and Desist to resolve the

allegations in the administrative complaint against them. Under part I

of the proposed order, DADA and James Daniel Hayes would be prohibited

from entering into, continuing or carrying out any agreement to

establish, fix or maintain any hours of operation.

Part II.A of the proposed order would prohibit DADA and James

Daniel Hayes from exchanging information or communicating with any

dealer or association concerning hours of operation, except to the

extent necessary: (i) To comply with any order of the Commission, (ii)

after two (2) years from the date the order becomes final, to

incorporate individual dealers' hours of operation in lawful joint

advertisements, and (iii) in connection with special sales events or

promotions sponsored or coordinated by DADA, such as the North American

International Auto Show.

Part II.B of the proposed order would prohibit DADA and James

Daniel Hayes from requesting, recommending, coercing, influencing,

inducing, encouraging or persuading any dealer or dealer association to

maintain, adopt or adhere to any hours of operation.

Under part III of the proposed order, DADA would be required to

place four weekly advertisements, specified in part III.B of the order,

in the Detroit News and Detroit Free Press for a four-week period,

stating that certain dealers are required by Commission order to

maintain extended hours for a one-year period, and listing the dealers

subject to such a requirement. The advertisements must be printed in a

``clear and prominent manner'' using a banner headline in 24 point or

larger bold type and twelve point or larger type for the principal

portion of the text so that it can be readily noticed.

Under part IV of the proposed consent order, DADA would be required

to maintain detailed certified minutes of any meeting at which hours of

operation are discussed.

Part V of the proposed order would require DADA to amend its

bylaws, rules and regulations to:

(i) Eliminate any provision inconsistent with any provision of the

order;

(ii) Incorporate a provision that prohibits its members from

discussing hours of operation at any meeting; and

(iii) Expel from membership any member who violates such

prohibition.

DADA would also be required to furnish a copy of the amended

bylaws, rules and regulations to every member and new member, and

within 60 days after receiving information concerning a potential

violation of any bylaw, rule or regulation required by the order,

conduct an investigation and expel for one year any person who is found

to have committed a violation. Under part VI of the proposed order,

DADA would be required to provide to the Commission the name and

address of each member expelled pursuant to paragraph V.

The remainder of the proposed order contains provisions regarding

compliance, record-keeping and distribution of the order to various

persons. Part VII would require DADA to give a copy of the order to

each employee and member, and to each new employee and member, as the

case may be. Part VIII would require DADA and James Daniel Hayes to

file annual compliance records for a period of five years. The

reporting requirement for James Daniel Hayes would be waived, provided

that he submits an initial verified report stating that he is no longer

employed by DADA or any other dealer association and does not own or

operate a dealership in the Detroit area. The reporting requirement

would be re-activated if he again becomes employed by DADA or another

dealer association or comes into ownership or operation of a dealership

in the Detroit area. Part IX of the proposed order would require DADA

and James Daniel Hayes to report any change of status that may affect

their obligations under the order.

The purpose of this analysis is to facilitate public comment on the

proposed order, and it is not intended to constitute an official

interpretation of the agreement and the proposed order or to modify in

any way their terms.

Donald S. Clark,

Secretary.

[FR Doc. 94-11107 Filed 5-6-94; 8:45 am]

BILLING CODE 6750-01-M