Ceridian Corporation; Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 981 0030]

Ceridian Corporation; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged

violations of federal law prohibiting unfair or deceptive acts or

practices or unfair methods of competition. The attached Analysis to

Aid Public Comment describes both the allegations in the draft

complaint that accompanies the consent agreement and the terms of the

consent order--embodied in the consent agreement--that would settle

these allegations.

DATES: Comments must be received on or before December 13, 1999.

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

Room 159, 600 Pennsylvania Ave., NW, Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Michael Moiseyev, FTC/S-2308, 600

Pennsylvania Ave., NW, Washington, DC 20580. (202) 326-2682.

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 complaint. An electronic copy of the full text of

the consent agreement package can be obtained from the FTC Home Page

(for September 29, 1999), on the World Wide Web, at ``http://

www.ftc.gov/os/actions97.htm.'' A paper copy can be obtained from the

FTC Public Reference Room, Room H-

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130, 600 Pennsylvania Avenue, NW, Washington, DC 20580, either in

person or by calling (202) 326-3627.

Public comment is invited. Comments should be directed to: FTC/

Office of the Secretary, Room 159, 600 Pennsylvania, Ave., NW,

Washington, DC 20580. Two paper copies of each comment should be filed,

and should be accompanied, if possible, by a 3\1/2\ inch diskette

containing an electronic copy of the comment. 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 (26 CFR

4.9(b)(6)(ii)).

Analysis of Proposed Consent Order To Aid Public Comment

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

to public comment, an agreement containing a proposed Consent Order

from Ceridian Corporation (``Ceridian''), which is designed to remedy

the anticompetitive effects resulting from Ceridian's acquisitions of

NTS Corporation and Trendar Corporation. Under the terms of the

agreement, Ceridian will grant licenses to providers of truck stop fuel

desk automation systems to process transactions originated by

Ceridian's fleet cards, and will grant licenses to fleet card issuers

to have their cards processed through Ceridian's Trendar fuel desk

automation system.

The proposed Consent Order has been placed on the public record for

sixty (60) days for reception of comments by interested persons.

Comments received during this period will become part of the public

record. After sixty (60) days, the Commission will again review the

proposed Consent Order and the comments received, and will decide

whether it should withdraw from the proposed Consent Order or make

final the proposed Order.

Pursuant to an asset exchange agreement executed in January, 1998,

Ceridian, through its wholly owned subsidiary Comdata Network, Inc.

(``Comdata''), acquired substantially all of the assets of NTS. In

March, 1995, Comdata Holdings Corporation, a subsidiary of Ceridian,

acquired Trendar Corporation. Because the price of Trendar was below

$15 million, it was not reportable under the Hart-Scott-Rodino

Antitrust Improvements Act. The proposed Complaint alleges that these

two acquisitions violated Section 7 of the Clayton Act, as amended, 15

U.S.C. 18, and Section 5 of the Federal Trade Commission Act, as

amended, 15 U.S.C. 45, in the market for the provision of fleet card

services to over-the-road trucking companies and the market for truck

stop fuel desk automation systems.

Fleet Card Services for Over-the-Road Trucking Companies

The services provided by fleet card issuers are of critical

importance to over-the-road trucking companies. Fleet cards physically

resemble traditional credit cards in that they are plastic laminated

cards with embossed numbers on the front and a magnetic stripe on the

back. Fleet cards are similar to traditional credit cards in that they

provide a means by which cardholders can make purchases at retail

locations that accept the card. Fleet cards issued on behalf of

trucking companies provide additional services that go beyond the

capabilities of traditional credit cards, allowing trucking companies

to control the type, volume and frequency of their drivers' purchases,

and capture important information relating to the transactions, such as

drivers' odometer readings and vehicle identification numbers. Because

of the specialized features of these fleet cards, traditional credit

cards and other types of fleet cards are not acceptable substitutes.

Comdata is the largest provider of fleet card services to over-the-road

trucking companies in the United States. At the time Ceridian acquired

NTS, NTS and Comdata were substantial, actual competitors in that

market.

Fuel Purchase Desk Automation Systems

Fuel purchase desk automation systems are the means by which most

truck stops process fleet card transactions. Fuel purchase desk

automation systems used by truck stops can process multiple card

issuers' fleet cards with a single device, thereby minimizing the

physical space truck stops must allocate to point of sale (``POS'')

equipment and the training required for fuel purchase desk attendants.

Such systems report transactions data and other information to the

fleet card issuer, process the approval or rejections of requested

transactions, and interface with fueling pumps. Comdata's fuel purchase

desk automation system, Trendar, is the dominant means by which truck

stops process fleet card transactions.

Fleet cards and fuel purchase desk automation systems are

complementary products, and both products exhibit strong network

effects. Demand for a fleet card rises with the number of truck stops

that accept the card, which in turn depends on the number of fuel

purchase desk automation systems that accept the card. Similarly,

demand for a fuel purchase desk automation system rises with the number

of fleet cards that can use the system. Effective entry into either

market alleged in the complaint would be difficult, time consuming and

unlikely to be successful without access to a substantial portion of

the other market.

Effects of the Acquisitions

The acquisitions of NTS and Trendar resulted in Comdata's having a

dominant position in both the fleet card services market and the fuel

purchase desk automation systems market. In addition, the acquisitions

raised barriers to entry in both markets, because effective entry into

either market now requires Comdata's acquiescence. In the absence of

the two acquisitions, Comdata would have had strong incentives to

ensure that its fleet card was accepted on as many fuel purchase desk

automation systems as possible, and Trendar would have maximized its

value by accepting as many fleet cards as possible, and Trendar would

have maximized its value by accepting as many fleet cards as possible.

With the acquisitions, however, these incentives became skewed: Comdata

now must consider the impact on its Trendar system of allowing a

competing fuel purchase desk automation system to process its card, and

the impact on its fleet card business of allowing a rival fleet card to

be processed on the Trendar system.

The market for the provision of fleet card services for over-the-

road trucking companies is highly concentrated. Comdata controls the

majority of that market and, with its acquisition of NTS, is more than

five times larger than its nearest competitor. At the time of its

acquisition, NTS was Comdata's closest competitor in the market for

fleet card services for over-the-road trucking companies. The market

for fuel purchase desk automation systems is also highly concentrated.

At the time of its acquisition by Comdata, Trendar was the leading

supplier of truck stop fuel purchase desk automation systems in the

United States. Trendar remains the nation's leading supplier of truck

stop fuel purchase desk automation systems.

Ceridian's acquisitions of NTS and Trendar have given Comdata the

power to control new entry into, and expansion by incumbent providers

in, both the market for the provision of fleet card services to over-

the-road trucking companies and the market for truck stop fuel purchase

desk automation systems. By acquiring Trendar, Comdata gained control

of the predominant means by

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which fleet cards are processed by truck stops. Comdata therefore has

the ability to preclude or delay new entry into the fleet card market,

and to discipline or disadvantage new entrants or incumbent providers

of fleet cards who seek to compete effectively with Comdata, by denying

them access to Trendar's POS system or by granting access only on

discriminatory terms. The investigation revealed evidence that Comdata

has delayed or denied some fleet card competitors access to Trendar and

Comdata has increased the fees to other firms for Trendar access.

Similarly, by acquiring NTS, Comdata enhanced its control over the

means by which over-the-road trucking companies purchase fuel.

In addition, both acquisitions increased the difficulty of entry

into the fuel purchase desk automated system market. Comdata can defend

Trendar's dominant position in that market by denying new entrants

access to the fleet card protocols needed to process Comdata and NTS

cards, or by granting access only on discriminatory terms. The

investigation revealed evidence that Comdata has sought to impede

entry. Given Comdata's dominance in the fleet card market, truck stop

operators are unlikely to accept a POS system that cannot process

Comdata's fleet cards. Because of the complementary nature of the fleet

card and fuel purchase desk automation systems products, a new entrant

that is unable to secure access to Comdata's products would have to

enter both markets simultaneously. Such entry would be time consuming

and costly, and is much less likely to be successful.

The Proposed Consent Order

While litigation with a goal of forcing the divestiture of NTS and

Trendar was an alternative considered by the Commission, the proposed

Consent Order effectively remedies the competitive effects of the two

acquisitions without the delay and expenditure of resources that would

be incurred with litigation. The proposed Consent Order requires

Ceridian to grant fleet card issuers access to Comdata's Trendar fuel

purchase desk automation system, and to grant fuel purchase desk

automation systems suppliers the right to process Comdata's fleet

cards. While access to the Trendar network and the NTS card could also

have been accomplished through divestiture, the Commission concluded

that divestiture was not necessary to resolve the competitive concerns

raised by the two transactions, in part because numerous firms have

indicated that they intend to take advantage of the terms of the

proposed Consent Order to enter or expand their presence in the two

markets.

In order to remedy the concerns in the fleet card services market,

the Consent Order requires Comdata, for a period of three years, to

grant a ten-year license to effect transactions on the Trendar system

to any company providing, or seeking to provide, fleet card services.

The order requires Comdata to refer any requests for such a license to

a third-party developer approved by the Commission, that will perform

all programming or other services necessary to enable the licensee to

process transactions on the Trendar system. Once such programming

services are completed by the third-party developer, Comdata is

required to promptly disseminate the software to all truck stops on the

Trendar network. Comdata is further required to provide licensees with

equal access to any upgrades or modifications to the Trendar system,

and is prohibited from basing any transaction fees charged to truck

stops for processing the Comdata card, as well as access to the Comdata

card, on whether such truck stops accept any other firm's fleet cards.

In order to remedy concerns in the fuel purchase desk automation

systems market, the Consent Order requires Comdata, for a period of

three years, to grant a ten-year license to all incumbent suppliers of

fuel purchase desk automation systems, and to the first three new

system providers that request a license. The license awarded to new

system providers shall be transferable, ensuring that if a better

positioned entrant emerges in the future, it will be able to acquire a

license.

In order to qualify for a license, new system providers must meet

certain established criteria. Under the Consent Order, Comdata is

required to promptly provide all licensees with all information or

assistance necessary to enable the licensee to effect Comdata card

transactions in a manner comparable to the way in which those

transactions are processed on the Trendar system. The Order permits

Comdata to certify that a licensee's system is capable of processing

Comdata card transactions using criteria set forth in the Consent

Order, and, if Comdata denies such certification, it must provide a

compete enumeration for the reasons for such denial. The Order further

requires Comdata to grant licensees complete and equal access to all

Comdata card functions, upgrades and new developments. Finally, the

Order provides that Comdata may not discriminate against any supplier

of fuel purchase desk automation systems by charging transaction fees

to truck stops that are based on which fuel purchase desk automation

system the truck stop uses.

The Consent Order contains additional provisions that are designed

to prevent the flow of confidential information obtained from Comdata's

competitors between Comdata's fleet card and fuel purchase desk

automation system businesses. Under the Order, Comdata is prohibited

from providing any non-public information obtained from fuel purchase

desk automation system providers to its Trendar business. Likewise, the

Order prohibits Comdata from providing any non-public information

obtained from fleet card issuers to its Comdata card business.

In order to ensure Comdata's compliance with the terms of the

Order, the Commission is allowed to appoint a trustee to monitor any

disputes, claims or controversies arising under the Order. The order

specifically permits the monitor-trustee to prepare a report for the

Commission relating to any failure by Comdata to certify either a fuel

purchase desk automation system or a new fleet card and any failure by

the third-party developer to provide programming and certification

services to fleet card issuers in a timely manner. The trustee is also

permitted, where appropriate, to report to the Commission regarding

Ceridian's compliance with 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 proposed Order or to modify their

terms in any way.

By direction of the Commission.

Benjamin I. Berman,

Acting Secretary.

[FR Doc. 99-26845 Filed 10-13-99; 8:45 am]

BILLING CODE 6750-01-M