Detroit Auto Dealers Association, Inc.; Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. D-9189]

Detroit Auto Dealers Association, Inc.; 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 or deceptive acts or practices and unfair methods of

competition, this consent agreement, accepted subject to final

Commission approval, would require, among other things, the eleven

remaining dealerships in the FTC's case against the Detroit Automobile

Dealers Association (DADA) to be bound by the terms and provisions of

an existing 1995 Commission order, with certain modifications. The

original complaint alleged that DADA and a large number of its member

automobile dealers violated federal antitrust laws when they illegally

conspired to limit competition in the sale of new cars in the Detroit

area by closing dealerships on Saturdays and most week nights.

DATES: Comments must be received on or before May 20, 1997.

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

Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT: William J. Baer, Federal Trade

Commission, H-374, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.

(202) 326-2932.

Mark D. Whitener, Federal Trade Commission, H-374, 6th St. and Pa.

Ave., N.W., Washington, D.C. 20580. (202) 326-2845.

Ernest A. Nagata, Federal Trade Commission, H-394, 6th St. and Pa.

Ave., N.W., Washington, D.C. 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 Section 2.34 of

the Commission's Rules of Practice (16 CFR 2.34), notice is hereby

given that the above-captioned consent agreement containing a consent

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

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

record for a period of sixty (60) days. The following Analysis to Aid

Public Comment describes the terms of the consent agreement, and the

allegations in the accompanying complaint. An electronic copy of the

full text of the consent agreement package can be obtained from the

Commission Actions section of the FTC Home Page (for March 14, 1997),

on the World Wide Web, at ``http://www.ftc.gov/os/actions/htm.'' A

paper copy can be obtained from the FTC Public Reference Room, Room H-

130, Sixth Street and Pennsylvania Avenue, N.W., Washington, D.C.

20580, either in person or by calling (202) 326-3627. 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 Section 4.9(b)(6)(ii) of the Commission's

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

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission (``Commission'') has accepted, subject

to final approval, an agreement to a proposed consent order from eleven

automobile dealerships and nine owners or managers of dealerships in

the Detroit, Michigan Area. The parties to the agreement (hereinafter

collectively referred to as ``the dealers'') are listed at the end of

this document. The proposed order requires the dealers to cease and

desist from entering into or carrying out any agreement among

themselves or with other dealers to fix the hours of operation of

automobile dealerships in the Detroit area.

The proposed consent order will resolve charges against the final

group of respondents named in an administrative compliant issued by the

Commission in December, 1984, in Detroit Auto Dealers Ass'n, Inc., Dkt.

No. 9089. Similar charges against other respondents were resolved

through consent orders issued in 1994 after a federal appellate court

substantially affirmed the Commission's finding that respondents

violated Section 5 of the Federal Trade Commission Act.

The consent order now proposed will modify a previous order that

was entered against the present dealers in 1989 and subsequently

modified in 1995. Upon further review, the Commission has determined

that the previous order should be further modified in light of changes

in the market since the entry of the 1994 consent orders. The 1994

orders required the respondent dealers to maintain extended operating

hours for a one year period to restore competition that was lost as a

result of the dealers' agreement to keep their stores closed on

Saturdays and on several week nights. Recent evidence indicates that

the market has changed in response to the previous orders, making it

unnecessary to continue the same mandatory hours requirement in the

order against the present dealers. The proposed consent order therefore

suspends the remainder of that requirement.

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.

[[Page 13618]]

Background

Count I of the administrative complaint charged that the

respondents 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.\1\

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\1\ Count II of the complaint, charging certain dealers with

agreements to restrain advertising, was settled in 1986.

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The dealers defended their agreement in part on grounds that they

had acted in response to employee demands for shorter hours and,

therefore, that the agreement was exempt from the antitrust laws by

reason of the nonstatutory labor exemption. In February, 1989, the

Commission held that the dealers' agreement restrained competition, and

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. Detroit Auto Dealers Ass'n, Inc. 111 F.T.C. 417 (1989). 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. at 506.

The 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 issue, including whether certain respondents may

be entitled to the nonstatutory labor defense. In re: Detroit Auto

Dealers Ass'n Inc., 955 F.2d 457 (6th Cir.), cert. denied, 113 S. Ct.

461 (1992).

The charges against 148 of the respondents were resolved in April

and July, 1994, through consent orders substantially similar to the

Commission's order of February 22, 1989. Those orders required the

dealer respondents to operate their stores for at least a minimum

number of hours per week for a one year period.\2\

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\2\ See Detroit Automobile Dealers Ass'n Inc., Proposed Consent

Agreement With Analysis to Aid Public Comment, 59 Fed. Reg. 6263

(Feb. 10, 1994); Final Order, 5 Trade Reg. Rep. (CCH) para.23,532

(Apr. 24, 1994), Proposed Consent Agreement With Analysis to Aid

Public Comment, 59 Fed. Reg. 23861 (May 9, 1994); Final Order, 5

Trade Reg. Rep. (CCH) para.23,587 (July 20, 1994).

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Twenty-two other respondents, including the present dealers,

participated in the remand proceeding. On June 20, 1995, the Commission

issued a decision finding that the dealers did not qualify for the

nonstatutory labor exemption. 5 Trade Reg. Rep (CCH) para.23,853

(1995). The Commission's order of June 20, 1995 modified in limited

respects the Commission's order of February 22, 1989.

The present dealers again appealed the Commission's order to the

United States Court of Appeals for the Sixth Circuit. Following the

denial of the dealers' request for a stay of the order by both the

Commission and the court, the order went into effect pending appeal. On

May 24, 1996, the court once again remanded the case to the Commission.

In re: Detroit Auto Dealers Ass'n Inc., 84 F.3d 787 (6th Cir. 1996),

rehearing denied, ____ F.3d ____ (6th Cir. Aug. 26, 1996). Without

questioning the Commission's finding of liability, the court directed

the Commission to consider whether a modification of the Commission's

order would be warranted in light of changed factual conditions in the

Detroit market. Among other things, the court expressed a belief that

most dealers in the Detroit market were now open on Saturdays, which

would lessen or eliminate any need to order the dealers to be open that

day.

On November 22, 1996, following the court's denial of the

Commission's petition for rehearing, the Commission issued an order

remanding the case to an Administrative Law Judge for further

evidentiary hearings. Shortly thereafter, the parties entered into the

present settlement agreement.

The Proposed Order

The terms of the proposed consent order are substantially similar

to those of the Commission's Order of February 22, 1989, as modified by

Commission's Order of June 20, 1995. The consent order makes three

modest changes to those previous orders, which are incorporated in the

consent order by reference. The principal difference, set forth in Part

I.A of the proposed order, is that the dealers' obligations under Part

III of the previous orders, which required them to maintain a minimum

number of hours of operation for a period of one year, has been reduced

to the time during which the dealers were in compliance with that

provision prior to the Sixth Circuit's issuance of a stay on March 13,

1996--approximately six months. While it does not appear to be the case

that ``most'' dealers in Detroit are now open on Saturdays as the court

stated in its remand decision, it does appear that the Commission's

prosecution of this case, together with the remedial provisions of the

previous consent orders, has resulted in significant corrective changes

in the market. A substantial number of Detroit area dealers are now

open on Saturdays. In recognition of this, the settlement relieves

respondents of any further affirmative hours obligation.

The two other changes relate to the effective date of the consent

order. The Commission's order of June 22, 1995, went into effect

pending appeal, and respondents have filed compliance reports

certifying that they have been and remain in compliance as if the order

remained in effect. To give respondents credit for compliance with the

Commission's previous order to date, the effective date of the consent

order will be construed to be the effective date of the Order of June

22, 1995. However, the terms and duration of all compliance

obligations, other than the Part III affirmative hours provision,

remain the same. Part I.B of the consent order specifies the effective

date for compliance reporting obligations under Part X of the original

order and gives respondents credit for compliance reports filed to

date. Part I.C of the consent order sets forth the same effective date

for all other order provisions.

The relevant order provisions, as modified, are as follows:

Part I of the Commission's order of February 22, 1989, prohibited

the dealers from entering into or continuing any agreement with any

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

maintain or adhere to any

[[Page 13619]]

hours of operation. This provision is not changed by the proposed

consent order.

Part II.A of the Commission's order of February 22, 1989,

prohibited the dealers from exchanging information or communicating

with any other dealer or association concerning hours of operation,

except to the extent necessary (i) to comply with any order of the

Commission, and (ii) after two (2) years from the date the order

becomes final, to incorporate individual dealers' hours of operation in

lawful joint advertisements. Part II.A has two exceptions to the two-

year prohibition against the inclusion of individual dealers' hours of

operation in joint advertising. First, the prohibition would not apply

to individual dealers that are legally operated under common control.

Second, the prohibition would not apply to joint advertising for

special events such as tent sales, mall sales, or annual sales when

hours of operation are extended. These provisions are not changed by

the proposed consent order.

Part II.B of the Commission's order of February 22, 1989,

prohibited the dealers from requesting, recommending, coercing,

influencing, inducing, encouraging or persuading any dealer or dealer

association to maintain, adopt or adhere to any hours of operation.

This provision is not changed by the proposed consent order.

Part III of the Commission's order of February 22, 1989, as

modified by the Commission's Order of June 20, 1995, required the

dealers to maintain for a period of one year, a minimum of sixty-four

hours of operation per week for the sale and lease of motor vehicles,

or alternatively, a minimum of an average of ten and a half hours

during weekdays plus an additional eight hours on Saturdays. Under the

proposed consent order, the term of this requirement is reduced to the

period for which the dealers were in compliance with the requirement

pending appeal of the Commission's order of June 20, 1995. Accordingly,

under the proposed consent order the dealers will have no further

obligations to maintain minimum hours of operation.

Part IV of the Commission's order of February 22, 1989, required

the dealers, beginning thirty days after the order became final and for

a minimum of four weeks thereafter, to place at least four weekly

advertisements in Detroit newspapers explaining that the dealers were

required by Commission order to offer extended shopping hours for one

year. The dealers fulfilled their obligations under this provision

pending appeal of the Commission's June 20, 1995 order. Accordingly,

the proposed consent order imposes no further obligations under this

provision.

Part V of the Commission's order of February 22, 1989, required the

dealers, while Part III of the order was in effect, to disclose their

hours of operation in all advertising, with limited exceptions. Since

the proposed consent order limits the dealers' obligations under Part

III to their compliance to date, the dealers will have no further

obligations under Part V.

Parts VI, VII and VIII of the Commission's order of February 22,

1989, applied only to the association respondents. Accordingly, the

dealers will have no obligations under these provisions.

Part IX of the Commission's order of February 22, 1989, required

the dealers to give a copy of the order to each employee and, for a

period of five years, to give a copy to each new employee involved in

motor vehicle sales or leasing. This provision is not changed by the

proposed consent order.

Part X of the Commission's order of February 22, 1989, required the

dealers to file annual compliance reports for a period of five years.

The proposed consent order would give the dealers credit for compliance

reports filed since the effective date of the Commission's order of

June 20, 1995.

Part XI of the Commission's order of February 22, 1989, required

the dealers, for a period of five years, to inform the Commission of

any change in corporate status that may affect compliance obligations

under the order, or, with respect to individual respondents, of any

change in employment. This provision is not changed by the proposed

consent 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.

Parties to the Consent Agreement

Dealer Respondents

Crestwood Dodge, Inc., 32850 Ford Road, Garder City, MI 48135

Bob Borst Lincoln-Mercury, Inc., a/k/a Bob Borst Lincoln-Mercury Sales

Inc., 1950 W. Maple Road, Troy, MI 48084

Bob Dusseau, Inc., a/k/a Bob Dusseau Lincoln-Mercury, 31625 Grant River

Avenue, Farmington, MI 48024

Bob Maxey Lincoln-Mercury Sales, Inc., 16901 Mack Avenue, Detroit, MI

48224

Crest Lincoln-Mercury Sales, Inc., 36200 Van Dyke Avenue, Sterling

Heights, MI 48077

Stewart Chevrolet, Inc., 23755 Allen Road, Woodhaven, MI 48183

Woody Pontiac Sales, Inc., 12140 Joseph Campau, Hamtramck, MI 48212

Jack Demmer Ford, Inc., a/k/a/ Jack Demmer Ford, 37300 Michigan Avenue,

Wayne, MI 48184

Al Long Ford, Inc., 13711 E. Eight Mile Road, Warren, MI 48089

Ed Schmid Ford, Inc., 21600 Woodward Avenue, Ferndale, MI 48220

Ray Whitfield Ford, a/k/a/ Ray Whitfield Ford, Inc., 10725 S. Telegraph

Road, Taylor, MI 48180

Individual Respondents

Robert C. Borst, c/o Bob Borst Lincoln-Mercury, Inc., 1950 W. Maple

Road, Troy, MI 48084

Robert Dusseau, a/k/a/ Robert F. Dusseau, c/o Bob Dusseau Lincoln-

Mercury, 31625 Grant River Avenue, Farmington, MI 48024

Robert Maxey, c/o Bob Maxey Lincoln-Mercury Sales Inc., 16901 Mack

Avenue, Detroit, MI 48224

William Ritchie, a/k/a/ William R. Ritchie, c/o Crest Lincoln-Mercury

Sales, Inc., 36200 Van Dyke Avenue, Sterling Heights, MI 48077

Gordon L. Stewart, a/k/a/ Gordon Stewart, c/o Steward Chevrolet, Inc.,

23755 Allen Road, Woodhaven, MI 48183

Woodrow W. Woody, c/o Woody Pontiac Sales, Inc., 12140 Joseph Campau,

Hamtramck, MI 48212

John E. Demmer, a/k/a/ Jack E. Demmer, c/o Jack Demmer Ford, Inc.,

37300 Michigan Avenue, Wayne, MI 48184

Edward F. Schmid, a/k/a/ Edward Schmid, c/o Ed Schmid Ford, Inc., 21600

Woodward Avenue, Ferndale, MI 48220

Raymond J. Whitfield, a/k/a/ Raymond Whitfield, c/o Ray Whitfield Ford,

10725 S. Telegraph Road, Taylor, MI 48180

Donald S. Clark,

Secretary.

[FR Doc. 97-7261 Filed 3-20-97; 8:45 am]

BILLING CODE 6750-01-M