Detroit Automobile Dealers Association

The Federal Trade Commission has ruled that certain member dealers of the Detroit Automobile Dealers Association (DADA) are not exempt from antitrust laws under the nonstatutory labor exemption. After hearing this matter on remand from the United States Court of Appeals for the Sixth Circuit, the Commission opinion announced today upholds an earlier Commission order that, for one year, will require the respondents involved in the proceeding to open their showrooms for a minimum number of hours per week.

History of the Case

In 1984, the FTC alleged that automobile dealers violated federal antitrust laws by illegally conspiring to limit competition in the sale of new cars in the Detroit area by closing dealerships on Saturdays and most weeknights. The FTC complaint detailing the allegations was dismissed by an administrative law judge, but the Commission reversed that decision, and in February 1989, issued an order that DADA, other associations of automobile dealers in the Detroit area, and many dealerships and individuals cease and desist from agreeing to fix their hours of operation.

The respondents appealed the Commission's decision. On January 31, 1992, the Sixth Circuit Court of Appeals affirmed the decision in part, but remanded the matter to the Commission "for the limited purpose" of reconsidering whether the nonstatutory labor exemption applies to "the distinct minority of petitioner dealers who entered into collective bargaining agreements...."

  The court ruled that the FTC failed to consider adequately the administrative law judge's findings that certain dealerships entered into collective bargaining agreements with their employees and told the Commission that a petitioner "may well be able to claim" the exemption if direct negotiations and collective bargaining brought about additional or different limits on showroom hours. The court directed the Commission individually to examine facts relating to each remaining dealer.

After the Court of Appeal's decision, sixty-one individuals, sixty-eight dealerships, and fifteen dealer associations signed a consent agreement settling the charges, which was given final approval in May 1994. The DADA and a former association official settled similar terms in July 1994. Twelve dealerships and ten individuals participated in the remand proceeding, offering a number of supplemental affidavits and proposed supplemental findings. On remand, the Commission examined each respondent dealership individually.

The Commission Decision as to the Respondents

In response to a complaint alleging that the dealers had unlawfully agreed to fix showroom hours of operation, the dealers asserted that they were exempt from antitrust restrictions by reason of the nonstatutory labor exemption. The issue on remand was whether any or all of the individual dealers could establish that their conduct was protected under the nonstatutory labor exemption.

In an opinion by Commissioner Mary L. Azcuenaga, the Commission reviewed evidence relating to the nonstatutory labor exemption and found that the exemption did not shield the agreement among dealers to restrict hours of operation.

The Commission observed: "Overall, the evidence shows that the automobile dealers in Detroit were unwilling to bargain with their employees over hours of operation." "Instead, they reserved hours of operation for resolution with their competitors." "Although the respondents produced some evidence of violent incidents and threats of violence, the nonstatutory labor exemption requires a showing of bargaining with employees or a union representing employees, not an agreement with competitors to limit hours because of violence or perceptions of violence."

"In summary, we find that the respondents who participated in the remand proceeding did not restrict their hours of operation as a result of bona fide, arm's-length bargaining with employees or a union and are not exempt under the nonstatutory labor exemption," the Commission concluded.

Modifying the Order

In addition to considering the nonstatutory labor exemption claim, the Court of Appeals directed the Commission to consider whether the 30-day time period in Part VII.D of the order was sufficiently long. Part VII.D requires the DADA to investigate, within 30 days, any information concerning a potential violation of the order, and to expel for one year, any member found to have violated any of the rules, bylaws, or regulations required by Part VII.B of the order. The Commission modified Part VII.D of the order by changing the 30-day requirement to 60 days.

The Commission also modified Part III of its February 1989 order and will permit the dealers to maintain a minimum of 64 hours per week of operation, or maintain a minimum average of ten and one-half hours per day of operation, plus an additional eight hours on Saturdays.

The Commission vote to issue the Opinion and Modified Final Order was 3-0, with Chairman Robert Pitofsky and Commissioner Christine A. Varney not participating.

Copies of the Commission's Opinion and Modified Final Order, as well as other news releases associated with this case 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 for the hearing impaired 1-866-653-4261. To find out the latest FTC news as it is announced, call the FTC's NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web Site at: http://www.ftc.gov