FTC Grants Request for an Exemption from the FTC's Franchise Rule

The Federal Trade Commission has granted the request of Navistar International Transportation Corporation for an exemption from the FTC's Franchise Rule with regard to the company's truck dealership operations.

The Franchise Rule requires the seller of a franchise to provide each prospective franchisee with a basic disclosure document containing detailed information about the nature of its business and the terms of the proposed franchise relationship. The Commission has previously granted exemptions from the rule to eight other motor vehicle manufacturers or importers.

Navistar, based in Chicago, Illinois, manufactures heavy-duty and medium-duty trucks, truck parts, and accessories. Navistar has agreements with a limited number of independent businesses throughout the United States to sell and service Navistar trucks and parts.

In its order granting the exemption, the Commission found that the conditions creating the opportunity for abuses in the sale of franchises are not present in the licensing of Navistar dealers. The Commission found that Navistar dealers are highly sophisticated and experienced business men and women who make significant investments and have more than adequate time to consider the dealership offer and obtain information about it before investing. The Commission also noted that Navistar has a relatively small number of dealers; that Navistar dealers usually have years of experience in truck or other heavy duty equipment sales; and that prospective dealers participate in an extensive application and approval process during which much information is exchanged between the parties. The investment costs of Navistar's dealerships are approximately $1 million.

The abuses that the disclosure remedy of the FTC's Franchise Rule are designed to prevent are most likely to occur when a potential investor lacks business experience; when there is a significant imbalance of information between the franchisor and franchisee; and when there is inadequate time to review franchise agreements and other documents. These factors are not present in Navistar's relationship with its prospective dealers. The Commission has reviewed the potential for unfair or deceptive acts or practices in connection with the licensing of motor vehicle dealership franchises on eight prior occasions since 1980 and found no evidence or likelihood of a significant pattern or practice of abuse by any of the petitioners.

The Commission's vote to grant Navistar's exemption from the Franchise Rule was 4-0.

Copies of the Commission order granting exemption are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC Matter No. R511003)