Remaining Dealers in Detroit Auto Dealers Case Agree To Settle

The Federal Trade Commission has issued a proposed order under which the 11 remaining dealerships in the FTC’s case against the Detroit Automobile Dealers Association (DADA) have agreed to be bound by the terms of an existing 1995 Commission order, with certain modifications. The 1995 order resulted from FTC charges 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. Following an administrative trial, the FTC concluded in the 1995 order that the dealers’ agreement harmed consumers by restricting their ability to comparison shop.

Under the settlement announced today, the respondents would be bound by the terms and provisions of the 1995 order. The requirement that the dealerships remain open for a minimum number of hours per week for one year has been shortened to the time during which the respondents complied with that provision pending appeal of this case.

History of the Case

In 1984, the FTC alleged that the automobile dealers violated federal antitrust laws through a conspiracy to limit competition in the sale of new cars in the Detroit area by closing dealerships on Saturdays and most week nights. The FTC complaint detailing the allegations was dismissed by an administrative law judge, but the Commission reversed that decision, and in February 1989, the Commission 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 1989 order also required the dealerships to remain open a minimum number of hours per week, for one year. The respondents appealed the Commission's decision to the U.S. Court of Appeals for the Sixth Circuit. In January 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 majority of the respondents then settled the case. In June 1995, the Commission issued a decision finding that the remaining respondents did not qualify for the nonstatutory labor exemption. The June 1995 order modified in only limited respects the Commission’s 1989 order. The remaining dealers again appealed the case before the Sixth Circuit. Following a 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. In March 1996, the Sixth Circuit issued a stay of the part of the order containing the affirmative hours provision. In May 1996, the court remanded the case to the Commission, directing the FTC to consider whether a modification of the order would be warranted in light of changed conditions in the Detroit area market.

The modified order issued by the Commission shortens the duration of the affirmative hours requirement for the remaining dealers. In addition, the Commission determined that the effective date of the order accepted today will be construed to be the effective date of the June 1995 order, giving the respondents credit for compliance with the order while pending appeal.

The Commission’s June 1995 order went into effect pending appeal of the case, and the respondents have submitted compliance reports certifying that they have been and remain in compliance (except as to the affirmative hours provision, which was stayed by the court of appeals). All other terms and provisions remain in effect. The order prohibits all of the respondents from conspiring in any way to fix hours of operations.

The Commission vote to accept the proposed consent agreement for public comment was 5-0. A summary of the agreement will be published in the Federal Register shortly. The agreement will be subject to public comment for 60 days, after which the Commission will determine whether to issue it as final and binding. Comments should be addressed to the FTC, Office of the Secretary, 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 by the defendants of a law violation. When the Commission issues a consent agreement on a final basis, the agreement carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

Copies of the proposed consent agreement, an analysis of the agreement to assist the public in commenting and other documents associated with this case are available on the Internet at the FTC’s World Wide Web Site at: http://www.ftc.gov or by calling 202-326-3627. FTC documents are also 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 news as it is announced, call the FTC’s NewsPhone recording at 202-326-2710.

(FTC Matter No. D-9189)