[Federal Register Volume 62, Number 55 (Friday, March 21, 1997)]
[Notices]
[Pages 13617-13619]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-7261]


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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