United States v. National Automobile Dealers Association; Proposed Final Judgment and Competitive Impact Statement

DEPARTMENT OF JUSTICE

Antitrust Division

United States v. National Automobile Dealers Association;

Proposed Final Judgment and Competitive Impact Statement

Notice is hereby given pursuant to the Antitrust Procedures and

Penalties Act, 15 U.S.C. 16 (b) through (h), that a proposed Final

Judgment, Stipulation, and Competitive Impact Statement have been filed

with the United States District Court for the District of Columbia, in

United States v. National Automobile Dealers Association, Civil Action

No. 95-1804 (HHG). The Complaint alleged that the National Automobile

Dealers Association (``NADA'') engaged in anticompetitive practices

designed to lessen price competition among car dealers. Those practices

included encouraging members to maintain specific inventory levels at

their dealerships, urging members to boycott manufacturers and auto

brokers, and soliciting agreements from members not to advertise prices

based on their own cost of buying the automobile.

On September 20, 1995, the United States and the NADA filed a

Stipulation in which they consented to the entry of a proposed Final

Judgment that, if approved by the court, would enjoin the NADA for ten

years from entering into agreements with dealers to fix or maintain

motor vehicle prices, urging or encouraging dealers to adopt or to

refrain from adopting specific pricing or advertising policies, urging

dealers to boycott or reduce the business they do with manufacturers or

brokers, and terminating any dealer for reasons relating to the

dealer's prices or advertising policies. The proposed Final Judgment

would also require the NADA to set up an antitrust compliance program.

Public comment is invited within the statutory 60-day comment

period. Such comments and responses thereto will be published in the

Federal Register and filed with the Court. Comments should be directed

to Mary Jean Moltenbrey, Chief, Civil Task Force II, Antitrust

Division, Department of Justice, Liberty Place Building, Room 300, 325

Seventh

[[Page 51492]]

Street, NW., Washington, DC 20530 (telephone: 202-616-5935).

Rebecca P. Dick,

Deputy Director, Office of Operations, Antitrust Division.

Complaint

(For Violations of Section 1 of the Sherman Act)

United States of America, Department of Justice, Washington,

D.C. 20530, Plaintiff, v. National Automobile Dealers Association,

8400 Westpark Drive, McLean, Virginia 22102, Defendant. Civil Action

No.: 1:95CV01804; Judge Harold H. Greene.

The United States of America, plaintiff, by its attorneys, acting

under the direction of the Attorney General of the United States,

brings this civil action to prevent and restrain the defendant, the

National Automobile Dealers Association (``NADA''), from engaging in

unlawful anticompetitive conduct intended to reduce price competition

among automobile dealers, and complains and alleges as follows:

Since at least 1989, the NADA has actively engaged in a campaign

designed to lessen price competition in the retail automobile industry.

Through the use of a group boycott, the NADA attempted to pressure

automobile manufacturers to change their policies by eliminating

consumer rebates and significantly reducing discounts given to large

volume automobile buyers, who often resold slightly used cars to

consumers at prices substantially below the price of a new car. In

particular, the NADA recommended that all dealers significantly reduce

their inventories to 15-30 days' supply to coerce manufacturers to

raise the prices the manufacturers charged large volume automobile

buyers and thereby constrain the latter's ability to compete. The NADA

also solicited agreements from its members not to advertise retail

prices based on the invoice price of an automobile, and agreed to tell

its members to refuse to do business with automobile brokers. The

instant action seeks to enjoin the NADA from continuing to engage in

conduct intended to limit price competition in the retail automobile

industry.

I. The Defendant NADA

1. The NADA is a corporation organized and existing under and

pursuant to the laws of the State of Delaware. It maintains offices at

8400 Westpark Drive, McLean, Virginia 22102, and 412 1st Street SE,

Washington, DC 20003.

2. The NADA is a national trade association that represents

franchised new car and truck dealers in the United States. In 1994,

approximately 84% of franchised dealers in the United States were NADA

members. Its members sold approximately $375 billion of cars and other

automobile products and services in 1993.

II. Jurisdiction and Venue

3. This complaint is filed pursuant to Section 4 of the Sherman

Act, 15 U.S.C. 4, in order to prevent and restrain violations by the

NADA of Section 1 of the Sherman Act, 15 U.S.C. 1. This Court has

jurisdiction over this matter pursuant to 28 U.S.C. 1331 and 1337.

4. Venue is properly laid in this District pursuant to Section 12

of the Clayton Act, 15 U.S.C. 22, and under 28 U.S.C. 1391 because the

NADA transacts business and is found within this District.

5. The NADA and its members are engaged in, and their activities

substantially affect interstate commerce.

6. The members of the NADA compete with each other and with other

car and truck dealers to sell cars and other automobile products and

service to consumers. Dealers compete on, among other things, price,

quality of service, and the selection of cars available for purchase at

their dealerships.

III. Concerted Action

A. Agreement Concerning Inventory Levels

7. In recent years, automobile manufacturers have engaged in a

number of sales and marketing practices that have been unpopular with

many automobile dealers. Among these practices are the use of fleet

subsidies and consumer rebates.

8. Fleet subsidies are substantial discounts offered by

manufacturers on the purchase of large quantities of cars by rental car

companies, large corporations, and other high volume buyers.

Manufacturers have sometimes offered fleet subsidies that are larger

than the discounts they offered to franchised dealers.

9. Fleet purchasers, and, in particular, rental car companies,

frequently resell fleet vehicles directly to the public or, in some

instances, to independent (i.e., non-franchised) automobile dealers,

who in turn sell them to the public. Through at least 1991, used fleet

vehicles with relatively low mileage were often sold in the same year

as new cars of the same model year. Thus, sales of some fleet vehicles

competed directly with sales of new vehicles, but fleet vehicles were

often priced at thousands of dollars less than a new car.

10. Consumer rebates are cash incentives offered by manufacturers

directly to consumers. In recent years, manufacturers have increased

the amount and frequency of consumer rebates that they offer to entice

consumers to purchase new automobiles. In many cases, manufacturers'

cash rebates constitute most, if not all, of a consumer's down payment

for a new car. Consumer rebates thus make new cars more affordable to

those who otherwise would not be able to purchase a new car.

11. Beginning at least as early as 1989 and continuing at least

until 1992, the NADA frequently stated its opposition to the increased

competition generated by fleet subsidies. In particular, it alleged

that fleet subsidies created a class of nearly new vehicles that,

because of their lower prices, unfairly competed with new vehicle

sales. The NADA repeatedly urged manufacturers to stop offering fleet

subsidies that were greater than the discounts offered to franchised

dealers.

12. The NADA also objected to consumer rebates. It believed that

when manufacturers offered rebates to consumers, franchised dealers

were forced to offer their own rebates to consumers who purchased cars

immediately before and after the rebate period. On numerous occasions

between 1989 and 1992, the NADA urged manufacturers to give franchised

dealers, rather than consumers, all of the discounts and incentives

offered by manufacturers to induce the purchase of a new car.

13. In September, 1989, the NADA's president drafted a document

entitled ``An Open Letter to All Dealers'' (``Open Letter''). The Open

Letter discussed financial difficulties facing many dealers and stated

that fleet subsidies contributed to automobile dealers' financial

difficulties. It also discussed the NADA's attempts to convince

manufacturers not to offer rebates and instead give all incentives to

dealers.

14. The Open Letter concluded with several ``recommendations for

survival.'' Among these was the recommendation that all automobile

dealers reduce their inventories to a 15-30 day supply of new vehicles.

The letter then stated that the NADA would ``advise dealers immediately

of any movement by their franchisors which will assist dealers.''

15. The Open Letter was unanimously endorsed by the NADA's

Executive Committee on October 16, 1989, and by its board of directors

on October 17, 1989.

16. On October 23, 1989, the president of the NADA wrote to Oregon

dealers, urging them to look for the Open Letter in the October 30

issue of

[[Page 51493]]

Automotive News, and calling the Open Letter the NADA's ``first

response'' to manufacturers who made little or no compromise with the

NADA.

17. In the October 30, 1989 Automotive News, the automobile

industry's principal trade publication, the Open Letter appeared as a

two page advertisement. It was also published in the NADA's official

publication, Automotive Executive, and sent to numerous representatives

of the media and major automobile manufacturers.

18. At the NADA's 1990 Annual Convention in Las Vegas, Nevada, the

President of the NADA described the Open Letter and its effect upon

manufacturers.

We've tried to negotiate for years--and we tried all this year.

Believe me, believe me, friends, I said to each of the big, big

three, ``Throw a bone to a dog--give me at least one of our four

priority issues I can take to our dealers at convention in Las

Vegas.'' I couldn't come close until after our October 30th ad * * *

but dealers all over this nation started looking at inventory and

adjusting order banks to cut expenses for their very survival. Well,

all of a sudden that got noticed! You bet!

Twenty-five thousand dealerships--doing anything more or less

together--is bound to come to the attention of our suppliers.

[Emphasis added.]

19. The NADA and its officers and directors intended the Open

Letter to constitute a threat to automobile manufacturers that dealers

would collectively reduce their inventories unless manufacturers

adopted policies more favorable to dealers.

B. Agreements Concerning Dealer Advertisements and Sales to Brokers

20. Like manufacturers, some dealers engage in sales and marketing

practices that are unpopular with other dealers. Invoice advertising

and selling cars to brokers are examples of dealer marketing practices

that are unpopular with many dealers and the NADA.

21. ``Invoice advertising'' means advertising sponsored by a

franchised dealer which reveals the dealer's invoice or cost to

purchase a vehicle, or which offers to sell the vehicle to the public

at a price based upon the dealer's invoice or cost to purchase the

vehicle. Officers and directors of the NADA delivered numerous speeches

denouncing invoice advertising because, inter alia, they believed that

it has led to lower retail selling prices for new vehicles.

22. On several occasions between 1989 and 1994, an officer of the

NADA contacted automobile manufacturers to complain about dealers who

had advertised retail prices that were a specific dollar amount over

the dealer's invoice.

23. The NADA officers also communicated directly with the dealers

in question and obtained their agreement not to engage in further

invoice advertising. In the course of these communications, the officer

referred to his position with the NADA in a way that suggested that he

was acting on behalf of the NADA in making the complaints and in

seeking agreement from the dealers.

24. In February 1994, the NADA members, acting through their Board

of Directors, appointed a task force to study the impact of automobile

manufacturers' policies on new vehicles' suggested gross margins. This

report, ultimately entitled ``A SPECIAL REPORT: From the NADA Task

Force on Reduced New Vehicle Margins'' (``Reduced Margins Task Force

Report'') was delivered to, among others, automobile manufacturers'

dealer councils' chairmen and vice chairmen, automobile trade

association executives, numerous NADA members, and representatives from

major automobile manufacturers.

25. In addition to calling on all automobile manufacturers to

increase their suggested gross profit margins, the NADA Reduced Margins

Task Force Report included recommendations for manufacturers and

dealers with respect to automobile brokers. Automobile brokers

generally buy new vehicles from franchised dealers at discounted prices

and resell the vehicles directly to the public in competition with

franchised dealers.

26. The Reduced Margins Task Force Report included the following

recommendation to automobile dealers:

Refuse to do business with brokers or buying services. They

inevitably do harm to new vehicle gross margin potential.

27. The NADA later sent a memorandum and revised pages for the

Reduced Margins Task Force Report that eliminated this recommendation,

but not until the report had been disseminated to over 200 dealer

representatives and other individuals active in the automobile

industry.

First Cause of Action

(Agreement To Boycott Manufacturers)

28. The NADA, through its officers and directors, agreed to

orchestrate a group boycott of automobile manufacturers to coerce

manufacturers to decrease the discounts offered to large volume buyers

and to eliminate consumer rebates. Specifically, the NADA called upon

its dealer members to reduce their inventories of new cars.

29. That agreement constituted a combination or conspiracy in

unreasonable restraint of interstate trade and commerce in violation of

Section 1 of the Serman Act, 15 U.S.C. 1.

30. Unless prevented and restrained, the NADA will continue to

engage in the unlawful conduct as alleged herein.

Second Cause of Action

(Agreement To Fix Inventory Levels)

31. The NADA, through its officers and directors, agreed to urge

its dealer members to maintain new vehicle inventory at levels equal to

15-30 days' supply.

32. That agreement constituted a combination or conspiracy in

unreasonable restraint of interstate trade and commerce in violation of

Section 1 of the Sherman Act, 15 U.S.C. 1.

33. Unless prevented and restrained, the NADA will continue to

engage in the unlawful conduct as alleged herein.

Third Cause of Action

(Agreement To Restrict Advertisements)

34. The NADA, through its officers and directors, solicited and

obtained agreements from member dealers not to engage in invoice

advertising.

35. Those agreements constituted combinations and conspiracies in

unreasonable restraint of interstate trade and commerce in violation of

Section 1 of the Sherman Act, 15 U.S.C. 1.

36. Unless prevented and restrained, the NADA will continue to

engage in the unlawful conduct as alleged herein.

Fourth Cause of Action

(Agreement To Boycott Automobile Brokers)

37. The NADA, through its officers and directors, agreed to urge

its dealer members not to do business with automobile brokers.

38. That agreement constituted a combination and conspiracy in

unreasonable restraint of interstate trade and commerce in violation of

Section 1 of the Sherman Act, 15 U.S.C. 1.

39. Unless prevented and restrained, the NADA will continue to

engage in the unlawful conduct as alleged herein.

Prayer for Relief

Wherefore, plaintiff respectfully prays for relief as follows:

1. That this Court adjudge and decree that the NADA has entered

into unlawful contracts, combinations, or conspiracies which

unreasonably restrain trade in interstate commerce, in violation of

Section 1 of the Sherman Act, 15 U.S.C. 1;

2. That the NADA and all persons, firms, and corporations acting on

their

[[Page 51494]]

behalf and under their direction or control be permanently enjoined

from engaging in, carrying out, renewing or attempting to engage in,

carry out or renew, any contracts, agreements, practices, or

understandings in violation of Section 1 of the Sherman Act, 15 U.S.C.

1;

3. That plaintiff have such other relief that the Court may

consider necessary, just, or appropriate to restore competitive

conditions in the markets affected by the NADA's unlawful conduct; and

4. That plaintiff recover the costs of this action.

Dated: September 20, 1995.

Anne K. Bingaman,

Assistant Attorney General.

Joel I. Klein,

Deputy Assistant Attorney General.

Rebecca P. Dick,

Deputy Director of Operations.

Mary Jean Moltenbrey,

Chief, Civil Task Force II.

Robert J. Zastrow,

Assistant Chief.

Minaksi Bhatt,

Susan L. Edelheit,

D.C. Bar #250720.

Theodore R. Bolema,

Attorneys, Civil Task Force II, Antitrust Division, U.S. Department of

Justice, 325 7th Street, NW, Washington, DC 20530.

For the Defendant the National Automobile Dealers Association:

Frank R. McCarthy,

Executive Vice President, National Automobile Dealers Association, 8400

Westpark Drive, McLean, VA 22102.

Glenn A. Mitchell,

Counsel for the National Automobile Dealers Association, Stein,

Mitchell & Mezines, 1100 Connecticut Avenue, NW, Washington, D.C.

20035.

Arthur L. Herold.

Counsel for the National Automobile Dealers Association, Webster,

Chamberlain & Bean, 1747 Pennsylvania Avenue, NW, Washington, D.C.

20006.

Stipulation

It is stipulated by and between the undersigned parties, by heir

respective attorneys, that:

1. The Court has jurisdiction over the subject matter of this

action and over each of the parties hereto, and venue of this action is

proper in the District of Columbia;

2. The parties to this Stipulation consent that a Final Judgment in

the form attached may be filed and entered by the Court, upon any

party's or the Court's own motion, at any time after compliance with

the requirements of the antitrust Procedures and Penalties Act (15

U.S.C. 16), without further notice to any party or other proceedings,

provided that plaintiff has not withdrawn its consent, which it may do

at any time before entry of the proposed Final Judgment by serving

notice on the defendant and by filing that notice with the Court.

3. Defendant agrees to be bound by the provisions of the proposed

Final Judgment pending its approval by the Court. If plaintiff

withdraws its consent or the proposed Final Judgment is not entered

pursuant to this Stipulation, this Stipulation shall be of no effect

whatever and its making shall be without prejudice to any party in this

or any other proceedings.

For the Plaintiff the United States of America:

Anne K. Bingaman,

Assistant Attorney General.

Joel I. Klein,

Deputy Assistant Attorney General.

Rebecca P. Dick,

Deputy Director of Operations.

Mary Jean Moltenbrey,

Chief, Civil Task Force II.

Robert J. Zastrow,

Assistant Chief.

Minaksi Bhatt,

Susan L. Edelheit,

DC Bar #250720.

Theodore R. Bolema,

Attorneys, Civil Task Force II, Antitrust Division, U.S. Department of

Justice 325 7th Street, NW, Washington, DC 20530.

For the defendant the National Automobile Dealers Association:

Frank R. McCarthy,

Executive Vice President, National Automobile Dealers Association, 8400

Westpart Drive, McLean, VA 22102.

Glenn A. Mitchell,

Counsel for the National Automobile Dealers Association, Stein,

Mitchell & Mezines, 1100 Connecticut Avenue, NW, Washington, DC 20035.

Arthur L. Herold,

Counsel for the National Automobile Dealers Association, Webster,

Chamberlain & Bean, 1747 Pennsylvania Avenue, NW., Washington, DC 20006

Final Judgment

Plaintiff, United States of America, filed its complaint on

September 20, 1995. Plaintiff and defendant, National Automobile

Dealers Association (``NADA''), by their respective attorneys, have

consented to the entry of this Final Judgment without trial or

adjudication of any issue of fact or law. Therefore, before the taking

of any testimony and without trial or adjudication of any issue of fact

or law herein, and upon consent of the parties hereto, it is hereby

Ordered, Adjudged and Decreed as follows:

I. Jurisdiction

The Court has jurisdiction of the subject matter of this action and

of the party consenting hereto. The complaint states a claim upon which

relief may be granted against defendant under Section 1 of the Sherman

Act (15 U.S.C. Sec. 1).

II. Definitions

As used in this Final Judgment:

A. Communication means any exchange, transfer or dissemination of

information, regardless of the means by which it is accomplished.

B. Consumer means any person who is an actual or potential

purchaser of any motor vehicle.

C. Dealer means a person selling motor vehicles to consumers,

including each of its divisions, parents, subsidiaries, and affiliates.

D. Gross margin means the different between an automobile

manufacturer's suggested retail price for a motor vehicle and a

dealer's cost to purchase that vehicle from the manufacturer.

E. Manufacturer means any person which manufactures motor vehicles,

including each of its divisions, parents, subsidiaries, and affiliates.

F. NADA means the National Automobile Dealers Association,

including each of its divisions, parents, subsidiaries, and affiliates,

and any person acting on behalf of any of them, except that NADA shall

not include

1. NADA Charitable Foundation;

2. Dealers Election Action Committee (DEAC);

3. National Automobile Dealers Insurance Trust (NADIT);

4. National Automotive Insurance and Service Agency, Inc. (NAISA);

5. National Automobile Dealers Association Retirement Trust

(NADART);

6. NADA Services Corporation (NADASC);

7. Salesperson Certification Program;

8. American Truck Division (ATD).

G. Organization means any corporation, firm, company, sole

proprietorship, partnership, joint venture, association, institute, or

other business, legal, or government entity.

H. Person means any individual or natural person, corporation,

firm, company, sole proprietorship, partnership, joint venture,

association, institute, or other business, legal, or government entity,

and any employee or agent thereof.

I. Retail margin means the difference between the price a consumer

pays to purchase a motor vehicle and a dealer's cost to purchase that

vehicle from the manufacturer.

[[Page 51495]]

III. Applicability

A. This Final Judgment applies to defendant and to each of its

officers, directors, agents, employees, committee or task force

members, successors, and assigns.

B. Defendant shall require, as a condition of any merger with or

acquisition by any other organization, that the organization to which

defendant is to be merged or by which it is to be acquired agree to be

bound by the provisions of this Final Judgment.

IV. Prohibited Conduct

Defendant is hereby enjoined and restrained from:

A. Directly or indirectly entering into, adhering to, or enforcing

any agreement with any dealer to fix, stabilize or maintain the prices

at which motor vehicles may be sold or offered by any person for sale

in the United States to any consumer;

B. Urging, encouraging, advocating or suggesting that dealers adopt

specific prices, specific gross or retail margins, specific pricing

systems, specific markups, specific discounts, or specific policies

relating to the advertising of prices, invoices or costs for the sale

of motor vehicles by dealers in the United States;

C. Urging, encouraging, advocating or suggesting that dealers

refrain from adopting specific pricing systems or specific policies

relating to the advertising of prices, invoices or costs for the sale

of motor vehicle by dealers in the United States;

D. Urging, encouraging, advocating or suggesting that dealers (1)

refuse to do business with particular persons or types of persons, (2)

reduce the amount of business they do with particular persons or types

of persons, or (3) do business with particular persons or types of

persons only on specified terms;

E. Terminating from membership any dealer for reasons relating to

that dealer's price or prices, gross or retail margins, pricing

systems, markups, discounts, or specific policies relating to the

advertising of prices, invoices or costs for motor vehicles in the

United States.

V. Limiting Conditions

A. Nothing in this Final Judgment shall prohibit defendant from:

1. Continuing to disseminate specific valuation information in the

N.A.D.A. Official Used Car Guide;

2. Engaging in collective actions to procure government action when

such actions are protected under the Noerr-Pennington doctrine, as

established by Eastern Railroad Presidents Conference v. Noerr Motor

Freight, Inc., 365 U.S. 127, 81 S.Ct. 523 (1961) and United Mine

Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585 (1965);

3. Presenting the views, opinions or concerns of its members on

topics to manufacturers, dealers, consumers or other interested

parties, provided that such activities do not violate any provision

contained in Part IV. above;

4. Conducting surveys or gathering statistical facts or other facts

and data relating to dealers, publishing or disseminating such

information in written materials, studies, reports, seminars or

programs, or otherwise providing information to manufacturers, dealers,

consumers or other interested parties in accordance with Maple Flooring

Mfrs. Ass'n v. United States, 268 U.S. 563 (1925) and its progeny,

provided that such activities do not violate any provision contained in

Part IV. above;

5. Participating in bona fide dispute resolution activities,

including but not limited to AUTOCAP, involving complaints by specific

consumers or dealers arising from specific transactions to which such

consumers or dealers are parties;

6. Disseminating information about, or encouraging compliance with,

any laws and government regulations including, but not limited to, tax

laws, Federal Trade Commission rules and guides, Internal Revenue

Service cash reporting requirements, and Federal Reserve Board

regulations.

B. Nothing in this Final Judgment shall prohibit any individual

dealer, acting along and not on behalf of or in concert with defendant

or any of defendant's officers, directors, agents, employees, committee

or task force members, successors, or assigns, from negotiating any

terms of the dealer's business relationship with any manufacturer,

including a manufacturer's policies.

VI. Notification Provisions

Defendant is ordered and directed:

A. To publish the Final Judgment and a written notice, in the form

attached as Appendix A to this Final Judgment, in Automotive Executive

within sixty (60) days of the entry of this final Judgment; and

B. To send a written notice, in the form attached as appendix A to

this Final Judgment, to each dealer who becomes a member of NADA within

ten (10) years of entry of this Final Judgment and who was not

previously given such notice. Such notice shall be sent within thirty

(30) days after the dealer becomes a member of NADA.

VII. Compliance Program

Defendant is ordered to establish and maintain an antitrust

compliance program which shall include designating, within 30 days of

entry of this Final Judgment, an Antitrust Compliance Officer with

responsibility for implementing the antitrust compliance program and

achieving full compliance with this Final Judgment. The Antitrust

Compliance Officer shall, on a continuing basis, be responsible for the

following:

A. Furnishing a copy of this Final Judgment within thirty (30) days

of entry of the Final Judgment to each of defendant's officers,

directors, employees, and committee or task force members, except for

employees whose functions are purely clerical or manual and members of

committees or task forces that do not address issues related to the

sale or purchase of automobiles;

B. Furnishing in a timely manner a copy of this Final Judgment to

any person who succeeds to a position described in Section VII (A);

C. Arranging for an annual briefing to each person designated in

Sections VII (A) or (B) on the meaning and requirements of this Final

Judgment and the antitrust laws;

D. Obtaining from each person designated in Sections VII (A) or

(B), certification that he or she (1) has read and, to the best of his

or her ability, understands and agrees to abide by the terms of this

Final Judgment; (2) is not aware of any violation of the Final Judgment

that has not been reported to the Antitrust Compliance Officer; and (3)

understands that any person's failure to comply with this Final

Judgment may result in an enforcement action for civil or criminal

contempt of court against NADA and/or any person who violates this

Final Judgment;

E. Maintaining (1) a record of all certifications received pursuant

to Section VII (D); (2) a file of all documents related to any alleged

violation of this Final Judgment; and (3) a record of all non-

privileged communications related to any such violation, which shall

identify the date and place of the communication, the persons involved,

the subject matter of the communication, and the results of any related

investigation;

F. Reviewing the final draft of each speech and policy statement

made by any officer, director, employee, or committee or task force

member in order to ensure its adherence with this decree;

G. Reviewing the purpose for the formation or creation of each

committee and task force in order to ensure its adherence with this

decree;

[[Page 51496]]

H. Reviewing the content of each letter, memorandum, and report

written by or on behalf of any director in his or her capacity as an

NADA director or on NADA stationery in order to ensure its adherence

with this decree.

VIII. Certification

A. Within 75 days of the entry of this Final Judgment, defendant

shall certify to plaintiff whether the defendant has designated an

Antitrust Compliance Officer and has distributed the Final Judgment in

accordance with Section VI (A) above.

B. For ten years after the entry of this Final Judgment, on or

before its anniversary date, the defendant shall file with the

plaintiff an annual statement as to the fact and manner of its

compliance with the provisions of Sections VI and VII.

C. If defendant's antitrust Compliance Officer learns of any

violations of any of the terms and conditions contained in this Final

Judgment, defendant shall immediately take appropriate action to

terminate or modify the activity so as to comply with this Final

Judgment.

IX. Plaintiff Access

A. For the purpose of determining or securing compliance with this

Final Judgment, and for no other purpose, duly authorized

representatives of plaintiff shall, upon written request of the

Attorney General or the Assistant Attorney General in charge of the

Antitrust Division, and on reasonable notice to the defendant, made to

its principal office, be permitted, subject to any legally recognized

privilege:

1. Access during the defendant's office hours to inspect and copy

all records and documents in the possession or under the control of

defendant, which may have counsel present, relating to any matters

contained in this Final Judgment; and

2. To interview the defendant's officers, employees and agents, who

may have counsel present, regarding any such matters. The interviews

shall be subject to the defendant's reasonable convenience.

B. Upon the written request of the Attorney General or the

Assistant Attorney General in charge of the Antitrust Division made to

defendant at its principal office, defendant shall submit such written

reports, under oath if requested, with respect to any of the matters

contained in this Final Judgment as may be requested, subject to any

legally recognized privilege.

C. No information or documents obtained by the means provided in

this Section VIII shall be divulged by any representative of the

Department of Justice to any person other than a duly authorized

representative of the Executive Branch of the United States, except in

the course of legal proceedings to which the United States is a party,

or for the purpose of securing compliance with this Final Judgment, or

as otherwise required by law.

D. If at the information or documents are furnished by defendant to

plaintiff, defendant represents and identifies in writing the material

in any such information or documents to which a claim of protection may

be asserted under Rule 26(c)(7) of the Federal Rules of Civil

Procedure, and defendant marks each pertinent page of such material,

``Subject to claim of protection under Rule 26(c)(7) of the Federal

Rules of Civil Procedure,'' then ten (10) days' notice shall be give by

plaintiff to defendant prior to divulging such material in any legal

proceeding (other than a grand jury proceeding), so that defendant

shall have an opportunity to apply to this Court for protection

pursuant to Rule 26(c)(7) of the Federal Rules of Civil Procedure.

X. Duration of Final Judgment

Except as otherwise provided hereinabove, this Final Judgment shall

remain in effect until ten (10) years from the date of entry.

XI. Construction, Enforcement, Modification and Compliance

Jurisdiction is retained by the Court for the purpose of enabling

any of the parties to this Final Judgment to apply to this Court at any

time for such further orders or directions as may be necessary or

appropriate for the construction or carrying out of this Final

Judgment, for the modification of any of its provisions, for its

enforcement or compliance, and for the punishment of any violation of

its provisions.

XII. Public Interest

Entry of this Final Judgment is in the public interest.

Dated:-----------------------------------------------------------------

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United States District Judge

Appendix A

On September 20, 1995, the Antitrust Division of the United

States Department of Justice filed a civil suit that alleged that

the National Automobile Dealers Association (``NADA'') had engaged

in certain practices that violated one section of the antitrust

laws. NADA denies that its conduct violated the law. However, in

order to avoid the delay, expense and burden of protracted

litigation, NADA, without admitting any violation of the law and

without being subject to any monetary penalties, has agreed to the

entry of a civil Consent Order to settle this matter. This Consent

Order applies to NADA and all of its officers, directors, employees,

agents, and committee and task force members, but not to dealers

acting on their own.

Under the Consent Order, NADA may not enter into, adhere to, or

enforce any agreement with any dealer to fix the prices at which new

cars are sold or offered. NADA is also prohibited from recommending

that dealers (1) adopt specific prices or pricing policies, specific

margins, or specific advertising policies relating to prices or

costs for automobile sales, (2) refrain from adopting specific

pricing systems or specific policies relating to the advertising of

prices or costs for automobile sales, as invoice advertising, and

(3) refuse to do business or reduce the amount of business they do

with particular people or types of people. NADA is further

prohibited from terminating from membership any dealer based upon

that dealer's prices or specific policies relating to the

advertising of prices or costs for automobile sales. Failure to

comply with this Consent Order may result in conviction for criminal

contempt of court.

This Consent Order does not prohibit NADA from continuing

certain activities, including publishing the N.A.D.A. Official Used

Car Guide, lobbying before legislatures and regulatory agencies,

offering dispute resolution programs, including the AUTOCAP program,

educating members on compliance with laws and regulations, and

presenting dealers' views to manufacturers, consumers or other

interested parties in ways that do not otherwise violate the Consent

Order.

Competitive Impact Statement

The United States of America, pursuant to Section 2 of the

Antitrust Procedures and Penalties Act (``APPA''), 15 U.S.C. 16(b),

submits this Competitive Impact Statement regarding the proposed Final

Judgment submitted for entry in this civil antitrust proceeding.

1. Nature and Purpose of the Proceeding

On September 20, 1995, the United States filed a civil antitrust

complaint under Section 4 of the Sherman Act, as amended, 15 U.S.C. 4,

alleging that the defendant, the National Automobile Dealers

Association (``NADA''), entered into agreements intended to lessen

competition in the retail automobile industry in violation of Section 1

of the Sherman Act, 15 U.S.C. 1. Specifically, the complaint alleges

that the NADA, through its officers and directors:

(a) Agreed to orchestrate a group boycott in an attempt to coerce

automobile manufacturers to decrease the discounts offered to large

volume buyers and to eliminate consumer rebates;

(b) Agreed to urge its dealer members to maintain new vehicle

inventories at levels equal to 15-30 days' supply;

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(c) Solicited and obtained agreements from member dealers not to

engage in invoice advertising; and

(d) Agreed to urge its members not to do business with automobile

brokers.

The complaint seeks relief that would prevent the NADA from

continuing or renewing the alleged practices and agreements, or

engaging in other practices or agreements that would have a similar

purpose or effect.

On September 20, 1995, the United States and the NADA also filed a

stipulation in which they consented to the entry of a proposed Final

Judgment that would prohibit the NADA from engaging in certain

anticompetitive practices, and would require the NADA to implement an

antitrust compliance program. The proposed Final Judgment provides all

of the relief that the United States seeks in the Complaint.

The United States and the NADA have agreed that the Court may enter

the proposed Final Judgment after compliance with the Antitrust

Procedures and Penalties Act (``APPA''), 15 U.S.C. 16 (b)-(h), provided

the United States has not withdrawn its consent. Entry of the proposed

Final Judgment will terminate the action, except that the Court will

retain jurisdiction over the matter proceedings to construe, modify, or

enforce the Final Judgment, or to punish violations of any of its

provisions.

II. Description of Practices Giving Rise to the Alleged Violation of

the Antitrust Laws

The NADA is a national trade association, headquartered in McLean,

Virginia, that represents approximately 84% of the franchised new car

and truck dealers in the United States. Franchised dealers purchase new

cars and trucks from manufacturers pursuant to franchise agreements,

and in turn sell those cars and trucks and provide related services to

consumers. The members of the NADA compete with each other and with

other car and truck dealers to sell motor vehicles and other auto

products and services to consumers. Dealers compete by offering

different prices, quality of service, and selection of cars. NADA's

members had retail sales of products and services of approximately $375

billion in 1993.

1. Agreement Concerning Inventory Levels

In recent years, automobile manufacturers have used certain sales

and marketing practices designed to stimulate car sales, including

fleet subsidies and consumer rebates. Fleet subsidies are discounts

offered to purchasers of large quantities of cars, such as rental car

companies and large corporations. These discounts can be larger than

the discounts offered to franchised dealers. Fleet purchasers often

resell fleet vehicles directly to the public or to non-franchised

automobile dealers, who in turn sell them to the public. Prior to 1991,

many fleet vehicles were sold in the same year as new cars of the same

model year. Fleet vehicles, therefore, directly competed with new

vehicle sales, but fleet cars were sometimes offered at prices

thousands of dollars less than similar new cars. During the late 1980's

and early 1990's, the NADA objected to manufacturers' practices of

offering substantial fleet discounts. The NADA claimed that fleet

subsidies created a class of vehicles that, because of their lower

prices and mileage, unfairly increased competition with new vehicle

sales.

The NADA also objected to manufacturers' use of consumer rebates to

stimulate sales. Consumer rebates are cash incentives offered by

manufacturers directly to consumers. In recent years, manufacturers

have increased the amount and frequency of consumer rebates that they

offered to entice consumers to purchase new automobiles. During the

time period covered by the Complaint, many analysts estimated that

consumer rebates saved consumers as much as $1,000 per car. Many

franchised dealers believe that when manufacturers offer rebates to

consumers, franchised dealers are forced to offer their own rebates to

consumers who purchase cars immediately before or after the rebate

period. During the late 1980's and early 1990's, the NADA repeatedly

urged manufacturers to give franchised dealers, rather than consumers,

all discounts and incentives designed to stimulate sales.

In September, 1989, the NADA's president drafted a document

entitled ``An Open Letter to All Dealers'' (``Open Letter''). The Open

Letter claimed that manufacturers' use of fleet subsidies had

contributed to automobile dealers' financial difficulties. It also

discussed the NADA's attempts to convince consumer manufacturers not to

offer rebates to consumes, and instead to give all incentives to

dealers. The Open Letter concluded with a recommendation that all

automobile dealers reduce their inventories to a 15-30 day supply of

new vehicles. The letter then stated that the NADA would ``advise

dealers immediately of any movement by their franchisers which will

assist dealers.''

Dealers customarily have substantially more than 15-30 days' supply

of new cars in inventory at any given time. Sixty to ninety days'

supply is more typical. A dealer that unilaterally reduced its

inventory by a substantial amount would risk losing sales to other

dealers that maintain greater selection of cars. If dealers

collectively reduced inventories, however, they could lower their

inventory costs without losing sales to competing dealers. Such an

action would adversely affect manufacturers, which would see a dramatic

reduction in orders.

On October 23, 1989, the NADA president wrote a letter to Oregon

dealers in which he called the Open Letter the NADA's ``first

response'' to manufacturers who made little or no compromise with the

NADA. The Open Letter was unanimously endorsed by the NADA's Executive

Committee and board of directors and published in the October 30, 1989

issue of Automotive News as a two page advertisement. It was also

published in the NADA's official publication, Automotive Executive, and

sent to numerous representatives of the media and major automobile

manufacturers.

At the NADA's 1990 Annual Convention, the NADA president claimed

that the had been unable to obtain any concessions from manufacturers

until after the Open Letter was published and dealers responded by

cutting their new car orders. He further observed that: ``Twenty-five

thousand dealerships--doing anything more or less together--is bound to

come to the attention of our suppliers.''

The Complaint alleges that the Open Letter reflected an agreement

by the NADA to reduce and maintain inventory levels equal to 15-30

day's supply unless and until automobile manufacturers adopted policies

more favorable to dealers. An agreement by a trade association to

recommend that all dealers maintain a particular inventory level is a

per se violation of section 1 of the Sherman Act. An agreement by a

trade association to boycott a supplier by encouraging its members to

withhold or reduce orders is also a per se violation of the Sherman

Act.

2. Agreement Concerning Advertising

Invoice advertising is advertising that reveals the dealer's

invoice or cost to purchase a vehicle, or offers to sell the vehicle to

the public at price based upon the dealer's invoice or cost to purchase

the vehicle. The Complaint alleges that the NADA has frequently

expressed its opposition to invoice advertising, at least in part

because it believes that such advertising leads to

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lower retail selling prices for new vehicles.

On several occasions between 1989 and 1994, an officer of the NADA

contacted automobile manufacturers to complain about dealers who had

engaged in invoice advertising. The NADA officer also complained

directly to the dealers in question about the advertisements. He used

NADA letterhead and referred to his position with the NADA in a manner

that suggested that the was acting on behalf of NADA in communicating

his complaints and seeking agreement from the dealers. In some

instances, the NADA officer obtained the dealers' agreement not to

engage in further invoice advertising. Such an agreement by a trade

association or its members not to engage in certain types of

advertising is a per se violation of the antitrust laws.

3. Agreement To Boycott Brokers

Automobile brokers generally buy new vehicles from franchised

dealers at discounted prices and resell the vehicles directly to the

public in competition with franchised dealers. On numerous occasions,

the NADA has expressed its dissatisfaction with competition by brokers.

In 1994 a task force appointed by the NADA's Board of Directors issued

a report urging dealers to boycott automobile brokers. The report

recommended that dealers ``Refuse to do business with brokers or buying

services. They inevitably do harm to new vehicle gross margin

potential.'' Although the NADA eventually revised the report to

eliminate that recommendation, the original version of the report was

first disseminated to over 200 dealer representatives and other

individuals active in the automobile industry. An agreement by a trade

association or its members not to do business with other competitors or

customers for purposes of restricting price competition is a per se

violation of the Sherman Act.

III. Explanation of the Proposed Final Judgment

The parties have stipulated that the Court may enter the proposed

Final Judgment at any time after compliance with the APPA. The proposed

Final Judgment states that it shall not constitute an admission by

either party with respect to any issue of fact or law. Section III of

the proposed Final Judgment provides that it shall apply to the NADA

and each of its officers, directors, agents, employees, committee and

task force members, and successors, and any organization that acquires

or merges with the NADA.

Section IV of the Proposed Final Judgment contains five categories

of prohibited conduct. Section IV(A) contains a general prohibition

against any agreements by the NADA with dealers to fix, stabilize or

maintain prices at which motor vehicles may be sold or offered in the

United States to any consumer. Sections IV (B)-(E) address the specific

activities of the NADA and its officers and directors that were the

source of the antitrust violations.

Section IV(B) of the Proposed Final Judgment prohibits the NADA

from urging, encouraging, advocating, or suggesting that dealers adopt

specific margins, specific discounts, or specific policies relating to

the advertising of prices or dealer costs of motor vehicles. Similarly,

Section IV(C) prohibits the NADA from discouraging dealers from

adopting specific pricing systems or specific policies relating to the

advertising of prices or dealer costs of motor vehicles. Sections IV

(B) and (C) prohibit the NADA from urging or encouraging members to

make uniform or collective decisions with respect to key areas in which

they compete, such as prices or advertisements.

Section IV(D) prohibits the NADA from urging dealers to refuse to

do business with particular types of persons, to reduce their business

with particular types of persons, or to do business with particular

persons only on specified terms. This provision is intended to prohibit

the NADA from using the threat of a group boycott to attempt to

pressure manufacturers into changing policies. It will also bar the

NADA from urging dealers to reduce or eliminate the amount of business

they do with particular types of buyers, such as brokers. Finally,

Section IV(E) prohibits the NADA from terminating the membership of any

dealer for reasons relating to that dealer's pricing or advertising of

prices or dealer costs.

Section V of the Proposed Final Judgment contains certain limiting

provisions that clarify the scope of the prohibitions in Section IV.

Section V identifies specific NADA activities that are unlikely to

restrict competition and are not prohibited by the decree.

Specifically, Section V(A) provides that the NADA may (1) continue to

disseminate specific valuation information in the N.A.D.A. Official

Used Car Guide; (2) engage in collective action to procure government

action, such as lobbying activities, when those actions are immune from

antitrust challenge under the Noerr-Pennington doctrine; (3) present

the views, opinions, or concerns of its members on topics to

manufacturers, dealers, consumers, or other interested parties,

provided that such activities do not violate any provision contained in

Part IV; (4) conduct surveys, and gather and disseminate information,

in accordance with Maple Flooring Mfrs. Ass'n v. United States, 268

U.S. 563 (1925) and its progeny; (5) participate in bona fide dispute

resolution activities involving the parties to specific transactions;

and (6) disseminate information about laws and government regulations

that affect dealers, and encourage dealers to comply with those laws.

Section V(B) clarifies that nothing in the proposed Final Judgment

limits individual dealers' rights to act independently.

Section VI of the Proposed Final Judgment requires the NADA to

publish a notice describing the Final Judgment in Automotive Executive,

the NADA's automobile industry trade publication, within 60 days after

this proposed Final Judgment is entered, and to send a copy of the

notice to each dealer who becomes a member of the NADA during the ten-

year life of this Final Judgment.

Secitons VII and VIII require the NADA to set up an antitrust

compliance program to ensure that the NADA's members are aware of and

comply with the limitations in the proposed Final Judgment and

antitrust laws. They require the NADA to designate an antitrust

compliance officer and to furnish a copy of the Final Judgment,

together with a written explanation of its terms, to each of its

officers, directors, non-clerical employees, and members of committees

and task forces that address issues related to the purchase and sale of

automobiles. The NADA is also required to review the final draft of

each speech and policy statement by each officer, director, employee,

and committee and task force member, as well as the content of each

letter, memorandum and report written by or on behalf of each director

in his capacity as NADA director, in order to ensure adherence to the

Final Judgment.

Section IX of the Proposed Final Judgment provides that, upon

request of the Department of Justice, the NADA shall submit written

reports, under oath, with respect to any of the matters contained in

the Final Judgment. Additionally, the Department of Justice is

permitted to inspect and copy all books and records, and to interview

officers, directors, employees and agents of the NADA.

The Government believes that the proposed Final Judgment is fully

adequate to prevent the continuation or recurrence of the violations of

Section 1 of the Sherman Act alleged in the Complaint, and that

disposition of this

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proceeding without further litigation is appropriate and in the public

interest.

IV. Remedies Available to Potential Private Litigants

Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any

person who has been injured as a result of conduct prohibited by the

antitrust laws may bring suit in federal court to recover three times

the damages the person has suffered, as well as costs and reasonable

attorneys fees. Entry of the proposed Final Judgment will neither

impair nor assist the bringing of any private antitrust damage action.

Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C.

16(a), the Final Judgment has no prima facie effect in any subsequent

private lawsuit that may be brought against the defendant.

V. Procedures Available for Modification of the Proposed Final Judgment

The United States and the defendant have stipulated that the

proposed Final Judgment may be entered by the Court after compliance

with the provisions of the APPA, provided that the United States has

not withdrawn its consent.

The APPA provides a period of at least 60 days preceding the

effective date of the proposed Final Judgment within which any person

may submit to the United States written comments regarding the proposed

Final Judgment. Any person who wants to comment should do so within 60

days of the date of publication of this Competitive Impact Statement in

the Federal Register. The United States will evaluate the comments,

determine whether it should withdraw its consent, and respond to the

comments. The comments and the response of the United States will be

filed with the Court and published in the Federal Register.

Written comments should be submitted to: Mary Jean Moltenbrey,

Chief, Civil Task Force II, U.S. Department of Justice, Antitrust

Division, 315 7th Street, NW., Room 300, Washington, DC. 20530.

Under Section X of the proposed Final Judgment, the Court will

retain jurisdiction over this matter for the purpose of enabling either

of the parties to apply to the Court for such further orders or

directions as may be necessary for the construction, implementation,

modification, or enforcement of the Final Judgment, or for the

punishment of any violations of the Final Judgment.

VI. Alternatives to the Proposed Final Judgment

The only alternative to the proposed Final Judgment considered by

the Government was a full trial on the merits and on relief. Such

litigation would involve substantial cost to the United States and is

not warranted, because the proposed Final Judgment provides appropriate

relief against the violations alleged in the Complaint.

VII. Determinative Materials and Documents

No particular materials or documents were determinative in

formulating the proposed Final Judgment. Consequently, the Government

has not attached any such materials or documents to the proposed Final

Judgment.

Dated: September 20, 1995.

Respectfully submitted,

Mary Jean Moltenbrey,

Chief.

Robert J. Zastrow,

Assistant Chief.

Minaksi Bhatt,

Susan L. Edelheit,

D.C. Bar #250720.

Theodore R. Bolema,

Attorneys, Civil Task Force II Antitrust Division, U.S. Department of

Justice, 325 7th Street, NW., Room 300, Washington, DC. 20530.

[FR Doc. 95-24380 Filed 9-29-95; 8:45 am]

BILLING CODE 4410-01-M