Santa Clara County Auto Dealers Association Settles Charges Over Alleged Advertising Boycott

After the San Jose Mercury News ran an article in May 1994 telling consumers how to analyze new car factory invoices so that they could be better negotiators when buying cars, local car dealers retaliated by conspiring to cancel their advertising in the paper, according to the Federal Trade Commission. That's illegal, the FTC charged. The car dealers could have made individual decisions to pull their advertising, but an agreement to do so restrains competition among dealers and chills the publication of important consumer information, making it more difficult for consumers to compare dealer prices and services.

The Santa Clara County Motor Car Dealers Association, which allegedly orchestrated the boycott, has agreed to settle the FTC charges under an order that would prohibit it from engaging in any effort to boycott a media outlet, and require the Association to educate its members about the Commission's action.

"By ensuring consumer access to advertising, this antitrust case is as important to consumers as the cases we bring to ensure that advertising is true and not deceptive," said FTC Chairman Robert Pitofsky. "Advertising is a key source of price and other information and when competitors band together to restrict it, consumers lose. That's especially true here, where the boycott was orchestrated in retaliation to a news story that also contained important consumer information. The settlement is designed to ensure that the car dealers involved in the boycott will comply with the law prohibiting agreements to restrict advertising in the future and to send the message that the FTC will take law-enforcement action against such agreements."

The Association, based in Campbell, California, has approximately 47 members, constituting about 50 percent of the new automobile and truck dealers in Santa Clara County, according to the FTC complaint detailing the charges in this case. The complaint alleges that Association members agreed to cancel the ads each had scheduled for the paper after the May 1994 article ran, and thereafter withheld their advertising from the paper. Daily circulation for the San Jose Mercury News exceeds 600,000, according to industry sources.

The proposed consent agreement to settle the FTC charges, announced today for public comment, would prohibit the Association from carrying out, participating in, inducing or assisting any boycott or concerted refusal to deal with any newspaper, periodical, television or radio station. The settlement would not prohibit the Association from engaging in joint advertising programs, so long as they are not a part of any such boycott or concerted refusal to deal.

In addition, the settlement would require the association to amend its by-laws to incorporate the above prohibition, and to distribute the amended by-laws and the final Commission order to each of its members. Finally, the settlement contains various reporting provisions that would assist the FTC in monitoring the Association's compliance.

The FTC's San Francisco Regional Office investigated this matter.

The Commission vote to announce the proposed consent agreement for public comment was 5-0. It 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 complaint, proposed consent agreement, and an analysis of the agreement to assist the public in commenting are available from the FTC's Public Reference Branch, Room 130, same address as above; 202-326-2222; TTY for the hearing impaired 1-866-653-4261.

(FTC File No. 941 0107)