FOR RELEASE: JANUARY 27, 1993
FTC TARGETS ALLEGED CONSPIRACY AGAINST COMPETITION
FOR KANSAS CITY SCHOOL DISTRICT BUS SERVICE CONTRACT:
Three companies agree to settle FTC charges
Three school bus transportation companies have agreed to
settle separate Federal Trade Commission and State of Missouri
charges in connection with a "joint venture" called Kansas City
School Transportation, and the venture's bid on a three-year
contract to provide bus service for children in the Kansas City
Missouri School District. According to the FTC, the joint venture
was set up to keep the firms from having to compete with one
another, and to allow them to allocate among themselves the areas
of the district each would serve. The FTC alleged that the school
district had "little choice" but to accept the joint bid -- these
firms (or their predecessors) had provided bus service in the past
and few other bids were received.
Named in the FTC complaint detailing the alleged conspiracy
to restrain competition are:
-- B & J School Bus Service, Inc., of Kansas City;
-- Ryder Student Transportation Services, Inc., of Miami,
Florida; and
-- Mayflower Contract Services, Inc., of Overland Park,
Kansas.
- more -
K.C. School District--01/27/93)
The proposed FTC settlement agreement, announced today for
public comment, would prohibit each company from entering into
similar agreements with any other school bus transportation
company restraining competition for school bus service in the
Kansas City area. The settlement agreement also would prohibit
the companies, for three years, from communicating to past,
present or likely future providers of bus service to the Kansas
City school district their plans to bid, or not to bid, for those
services. The office of the Missouri Attorney General will file a
similar settlement in the Circuit Court of Cole County, Missouri,
today.
According to the FTC complaint, four companies provided most
of the school bus transportation to the Kansas City school dis-
trict for many years prior to the 1984/1985 school year -- B & J;
R. W. Harmon & Sons, Inc. (purchased by a predecessor of Mayflower
in 1984); Pace School Bus Service (purchased by a predecessor of
Mayflower in 1985); and KAL Leasing, Inc. (purchased in 1986 by a
predecessor of Ryder). For the 1984/1985 school year, the com-
plaint states, the district decided to adopt a competitive bidding
process with the expectation that, by increasing competition, it
would get lower rates.
The FTC alleged that, in response to this request for bids,
Harmon, Pace, KAL and B & J "agreed not to compete with each other
with respect to whether, and on what terms, they would submit bids
to [the school district] for providing school bus transportation
services." Instead, the FTC charged, the four companies agreed to
form Kansas City School Transportation and submit a joint bid, and
then to allocate among themselves the portions of the district to
which each would provide service. "The four companies would,
thereby, be able to continue generally to serve schools located in
areas of the [district] that they had served in the past," the FTC
said.
Although the companies called Kansas City School Transporta-
tion a "joint venture," they did not integrate their operations in
any substantial manner, or make any substantial capital contribu-
tions to the venture, the FTC charged.
The proposed consent agreement to settle these charges would
prohibit each respondent -- B & J, Ryder and Mayflower -- as well
as their successors, from soliciting or attempting to enter into,
organize, or implement any agreement or understanding with another
respondent or school bus transportation provider in the three-
county Kansas City area, if the agreement or understanding is:
-- to submit jointly-determined bids, or to refrain from
bidding, for school bus transportation services in the area;
K.C. School District--01/27/93)
-- with respect to price or other terms and conditions
relating to such services for the area; or
-- to allocate or divide jobs, markets, customers, contracts,
or territories for such services in the area.
Further, the proposed consent agreement contains a provision
that would expire in three years, and would prohibit each respon-
dent from communicating with certain entities about its intent to
bid, or not to bid, to provide school bus transportation services
for the Kansas City Missouri School District. The entities with
whom such communication would be prohibited during that three-year
period include:
-- any other respondent;
-- any entity that has provided school bus transportation
services in the Kansas City area at any time since 1982;
-- any entity currently providing such services;
-- any entity known to have been requested to provide such
services; or
-- any entity that has publicly announced its intention to
provide such services.
The settlement would not prohibit otherwise legal joint
ventures. Also, if requested in writing by a potential purchaser
of school bus transportation services, the agreement would not bar
the respondents from making a joint bid or engaging in other joint
undertakings.
The FTC's Chicago Regional Office worked with the Missouri
Attorney General's office on the investigation in this case.
The Commission vote to accept the proposed FTC consent agree-
ment for public comment was 5-0, although Commissioner Mary L.
Azcuenaga issued a statement in which she dissented in part.
According to the statement, the order does not prohibit price
fixing, bid rigging, or market allocation outside the three-county
Kansas City area even though two respondents are national
companies. Thus, Azcuenaga said, if either engaged in another
illegal conspiracy outside the Kansas City area, the FTC could not
seek civil penalties for violation of the current order.
"The conduct alleged in the complaint is plainly unlawful,"
she said, adding that the joint venture "can aptly be charac-
terized as a sham or cover for an illegal conspiracy." Further,
Azcuenaga said, "[w]hen the Commission finds bid rigging, market
K.C. School District--01/27/93)
allocation or price fixing, it should take strong action to
prohibit the participants from repeating the violation."
In conclusion, Azcuenaga said, "[t]his Order, limited to
three counties in Missouri, hardly amounts to a slap on the
wrist."
The agreement will be published in the Federal Register
shortly and will be subject to public comment for 60 days, after
which the Commission will decide whether to make it final.
Comments should be addressed to the Office of the Secretary, FTC,
6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.
NOTE: A consent agreement is for settlement purposes only and
does not constitute an admission of a law violation. When the
Commission issues a consent order on a final basis, it carries the
force of law with respect to future actions. Each violation of
such an order may result in a civil penalty of $10,000.
Copies of the FTC complaint and proposed consent agreement,
as well as the settlement reached by the State of Missouri with
the respondents, are available from the FTC's Public Reference
Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W.,
Washington, D.C. 20580; 202-326-2222; TTY 1-866-653-4261.
# # #
MEDIA CONTACT: Bonnie Jansen, Office of Public Affairs
202-326-2161
STAFF CONTACT: Thomas J. Russell or Catherine R. Fuller
Chicago Regional Office
55 East Monroe Street, Suite 1437
Chicago, Illinois 60603
312-353-8156
(FTC File No. 901 0172)
(KCSchool)