[Federal Register Volume 60, Number 190 (Monday, October 2, 1995)]
[Notices]
[Pages 51491-51499]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-24380]



-----------------------------------------------------------------------

DEPARTMENT OF JUSTICE
Antitrust Division


United States v. National Automobile Dealers Association; 
Proposed Final Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16 (b) through (h), that a proposed Final 
Judgment, Stipulation, and Competitive Impact Statement have been filed 
with the United States District Court for the District of Columbia, in 
United States v. National Automobile Dealers Association, Civil Action 
No. 95-1804 (HHG). The Complaint alleged that the National Automobile 
Dealers Association (``NADA'') engaged in anticompetitive practices 
designed to lessen price competition among car dealers. Those practices 
included encouraging members to maintain specific inventory levels at 
their dealerships, urging members to boycott manufacturers and auto 
brokers, and soliciting agreements from members not to advertise prices 
based on their own cost of buying the automobile.
    On September 20, 1995, the United States and the NADA filed a 
Stipulation in which they consented to the entry of a proposed Final 
Judgment that, if approved by the court, would enjoin the NADA for ten 
years from entering into agreements with dealers to fix or maintain 
motor vehicle prices, urging or encouraging dealers to adopt or to 
refrain from adopting specific pricing or advertising policies, urging 
dealers to boycott or reduce the business they do with manufacturers or 
brokers, and terminating any dealer for reasons relating to the 
dealer's prices or advertising policies. The proposed Final Judgment 
would also require the NADA to set up an antitrust compliance program.
    Public comment is invited within the statutory 60-day comment 
period. Such comments and responses thereto will be published in the 
Federal Register and filed with the Court. Comments should be directed 
to Mary Jean Moltenbrey, Chief, Civil Task Force II, Antitrust 
Division, Department of Justice, Liberty Place Building, Room 300, 325 
Seventh 

[[Page 51492]]
Street, NW., Washington, DC 20530 (telephone: 202-616-5935).
Rebecca P. Dick,
Deputy Director, Office of Operations, Antitrust Division.

Complaint

(For Violations of Section 1 of the Sherman Act)
    United States of America, Department of Justice, Washington, 
D.C. 20530, Plaintiff, v. National Automobile Dealers Association, 
8400 Westpark Drive, McLean, Virginia 22102, Defendant. Civil Action 
No.: 1:95CV01804; Judge Harold H. Greene.

    The United States of America, plaintiff, by its attorneys, acting 
under the direction of the Attorney General of the United States, 
brings this civil action to prevent and restrain the defendant, the 
National Automobile Dealers Association (``NADA''), from engaging in 
unlawful anticompetitive conduct intended to reduce price competition 
among automobile dealers, and complains and alleges as follows:
    Since at least 1989, the NADA has actively engaged in a campaign 
designed to lessen price competition in the retail automobile industry. 
Through the use of a group boycott, the NADA attempted to pressure 
automobile manufacturers to change their policies by eliminating 
consumer rebates and significantly reducing discounts given to large 
volume automobile buyers, who often resold slightly used cars to 
consumers at prices substantially below the price of a new car. In 
particular, the NADA recommended that all dealers significantly reduce 
their inventories to 15-30 days' supply to coerce manufacturers to 
raise the prices the manufacturers charged large volume automobile 
buyers and thereby constrain the latter's ability to compete. The NADA 
also solicited agreements from its members not to advertise retail 
prices based on the invoice price of an automobile, and agreed to tell 
its members to refuse to do business with automobile brokers. The 
instant action seeks to enjoin the NADA from continuing to engage in 
conduct intended to limit price competition in the retail automobile 
industry.

I. The Defendant NADA

    1. The NADA is a corporation organized and existing under and 
pursuant to the laws of the State of Delaware. It maintains offices at 
8400 Westpark Drive, McLean, Virginia 22102, and 412 1st Street SE, 
Washington, DC 20003.
    2. The NADA is a national trade association that represents 
franchised new car and truck dealers in the United States. In 1994, 
approximately 84% of franchised dealers in the United States were NADA 
members. Its members sold approximately $375 billion of cars and other 
automobile products and services in 1993.

II. Jurisdiction and Venue

    3. This complaint is filed pursuant to Section 4 of the Sherman 
Act, 15 U.S.C. 4, in order to prevent and restrain violations by the 
NADA of Section 1 of the Sherman Act, 15 U.S.C. 1. This Court has 
jurisdiction over this matter pursuant to 28 U.S.C. 1331 and 1337.
    4. Venue is properly laid in this District pursuant to Section 12 
of the Clayton Act, 15 U.S.C. 22, and under 28 U.S.C. 1391 because the 
NADA transacts business and is found within this District.
    5. The NADA and its members are engaged in, and their activities 
substantially affect interstate commerce.
    6. The members of the NADA compete with each other and with other 
car and truck dealers to sell cars and other automobile products and 
service to consumers. Dealers compete on, among other things, price, 
quality of service, and the selection of cars available for purchase at 
their dealerships.

III. Concerted Action

A. Agreement Concerning Inventory Levels
    7. In recent years, automobile manufacturers have engaged in a 
number of sales and marketing practices that have been unpopular with 
many automobile dealers. Among these practices are the use of fleet 
subsidies and consumer rebates.
    8. Fleet subsidies are substantial discounts offered by 
manufacturers on the purchase of large quantities of cars by rental car 
companies, large corporations, and other high volume buyers. 
Manufacturers have sometimes offered fleet subsidies that are larger 
than the discounts they offered to franchised dealers.
    9. Fleet purchasers, and, in particular, rental car companies, 
frequently resell fleet vehicles directly to the public or, in some 
instances, to independent (i.e., non-franchised) automobile dealers, 
who in turn sell them to the public. Through at least 1991, used fleet 
vehicles with relatively low mileage were often sold in the same year 
as new cars of the same model year. Thus, sales of some fleet vehicles 
competed directly with sales of new vehicles, but fleet vehicles were 
often priced at thousands of dollars less than a new car.
    10. Consumer rebates are cash incentives offered by manufacturers 
directly to consumers. In recent years, manufacturers have increased 
the amount and frequency of consumer rebates that they offer to entice 
consumers to purchase new automobiles. In many cases, manufacturers' 
cash rebates constitute most, if not all, of a consumer's down payment 
for a new car. Consumer rebates thus make new cars more affordable to 
those who otherwise would not be able to purchase a new car.
    11. Beginning at least as early as 1989 and continuing at least 
until 1992, the NADA frequently stated its opposition to the increased 
competition generated by fleet subsidies. In particular, it alleged 
that fleet subsidies created a class of nearly new vehicles that, 
because of their lower prices, unfairly competed with new vehicle 
sales. The NADA repeatedly urged manufacturers to stop offering fleet 
subsidies that were greater than the discounts offered to franchised 
dealers.
    12. The NADA also objected to consumer rebates. It believed that 
when manufacturers offered rebates to consumers, franchised dealers 
were forced to offer their own rebates to consumers who purchased cars 
immediately before and after the rebate period. On numerous occasions 
between 1989 and 1992, the NADA urged manufacturers to give franchised 
dealers, rather than consumers, all of the discounts and incentives 
offered by manufacturers to induce the purchase of a new car.
    13. In September, 1989, the NADA's president drafted a document 
entitled ``An Open Letter to All Dealers'' (``Open Letter''). The Open 
Letter discussed financial difficulties facing many dealers and stated 
that fleet subsidies contributed to automobile dealers' financial 
difficulties. It also discussed the NADA's attempts to convince 
manufacturers not to offer rebates and instead give all incentives to 
dealers.
    14. The Open Letter concluded with several ``recommendations for 
survival.'' Among these was the recommendation that all automobile 
dealers reduce their inventories to a 15-30 day supply of new vehicles. 
The letter then stated that the NADA would ``advise dealers immediately 
of any movement by their franchisors which will assist dealers.''
    15. The Open Letter was unanimously endorsed by the NADA's 
Executive Committee on October 16, 1989, and by its board of directors 
on October 17, 1989.
    16. On October 23, 1989, the president of the NADA wrote to Oregon 
dealers, urging them to look for the Open Letter in the October 30 
issue of 

[[Page 51493]]
Automotive News, and calling the Open Letter the NADA's ``first 
response'' to manufacturers who made little or no compromise with the 
NADA.
    17. In the October 30, 1989 Automotive News, the automobile 
industry's principal trade publication, the Open Letter appeared as a 
two page advertisement. It was also published in the NADA's official 
publication, Automotive Executive, and sent to numerous representatives 
of the media and major automobile manufacturers.
    18. At the NADA's 1990 Annual Convention in Las Vegas, Nevada, the 
President of the NADA described the Open Letter and its effect upon 
manufacturers.

    We've tried to negotiate for years--and we tried all this year. 
Believe me, believe me, friends, I said to each of the big, big 
three, ``Throw a bone to a dog--give me at least one of our four 
priority issues I can take to our dealers at convention in Las 
Vegas.'' I couldn't come close until after our October 30th ad * * * 
but dealers all over this nation started looking at inventory and 
adjusting order banks to cut expenses for their very survival. Well, 
all of a sudden that got noticed! You bet!
    Twenty-five thousand dealerships--doing anything more or less 
together--is bound to come to the attention of our suppliers. 
[Emphasis added.]

    19. The NADA and its officers and directors intended the Open 
Letter to constitute a threat to automobile manufacturers that dealers 
would collectively reduce their inventories unless manufacturers 
adopted policies more favorable to dealers.
B. Agreements Concerning Dealer Advertisements and Sales to Brokers
    20. Like manufacturers, some dealers engage in sales and marketing 
practices that are unpopular with other dealers. Invoice advertising 
and selling cars to brokers are examples of dealer marketing practices 
that are unpopular with many dealers and the NADA.
    21. ``Invoice advertising'' means advertising sponsored by a 
franchised dealer which reveals the dealer's invoice or cost to 
purchase a vehicle, or which offers to sell the vehicle to the public 
at a price based upon the dealer's invoice or cost to purchase the 
vehicle. Officers and directors of the NADA delivered numerous speeches 
denouncing invoice advertising because, inter alia, they believed that 
it has led to lower retail selling prices for new vehicles.
    22. On several occasions between 1989 and 1994, an officer of the 
NADA contacted automobile manufacturers to complain about dealers who 
had advertised retail prices that were a specific dollar amount over 
the dealer's invoice.
    23. The NADA officers also communicated directly with the dealers 
in question and obtained their agreement not to engage in further 
invoice advertising. In the course of these communications, the officer 
referred to his position with the NADA in a way that suggested that he 
was acting on behalf of the NADA in making the complaints and in 
seeking agreement from the dealers.
    24. In February 1994, the NADA members, acting through their Board 
of Directors, appointed a task force to study the impact of automobile 
manufacturers' policies on new vehicles' suggested gross margins. This 
report, ultimately entitled ``A SPECIAL REPORT: From the NADA Task 
Force on Reduced New Vehicle Margins'' (``Reduced Margins Task Force 
Report'') was delivered to, among others, automobile manufacturers' 
dealer councils' chairmen and vice chairmen, automobile trade 
association executives, numerous NADA members, and representatives from 
major automobile manufacturers.
    25. In addition to calling on all automobile manufacturers to 
increase their suggested gross profit margins, the NADA Reduced Margins 
Task Force Report included recommendations for manufacturers and 
dealers with respect to automobile brokers. Automobile brokers 
generally buy new vehicles from franchised dealers at discounted prices 
and resell the vehicles directly to the public in competition with 
franchised dealers.
    26. The Reduced Margins Task Force Report included the following 
recommendation to automobile dealers:

    Refuse to do business with brokers or buying services. They 
inevitably do harm to new vehicle gross margin potential.

    27. The NADA later sent a memorandum and revised pages for the 
Reduced Margins Task Force Report that eliminated this recommendation, 
but not until the report had been disseminated to over 200 dealer 
representatives and other individuals active in the automobile 
industry.

First Cause of Action

(Agreement To Boycott Manufacturers)
    28. The NADA, through its officers and directors, agreed to 
orchestrate a group boycott of automobile manufacturers to coerce 
manufacturers to decrease the discounts offered to large volume buyers 
and to eliminate consumer rebates. Specifically, the NADA called upon 
its dealer members to reduce their inventories of new cars.
    29. That agreement constituted a combination or conspiracy in 
unreasonable restraint of interstate trade and commerce in violation of 
Section 1 of the Serman Act, 15 U.S.C. 1.
    30. Unless prevented and restrained, the NADA will continue to 
engage in the unlawful conduct as alleged herein.

Second Cause of Action

(Agreement To Fix Inventory Levels)
    31. The NADA, through its officers and directors, agreed to urge 
its dealer members to maintain new vehicle inventory at levels equal to 
15-30 days' supply.
    32. That agreement constituted a combination or conspiracy in 
unreasonable restraint of interstate trade and commerce in violation of 
Section 1 of the Sherman Act, 15 U.S.C. 1.
    33. Unless prevented and restrained, the NADA will continue to 
engage in the unlawful conduct as alleged herein.

Third Cause of Action

(Agreement To Restrict Advertisements)
    34. The NADA, through its officers and directors, solicited and 
obtained agreements from member dealers not to engage in invoice 
advertising.
    35. Those agreements constituted combinations and conspiracies in 
unreasonable restraint of interstate trade and commerce in violation of 
Section 1 of the Sherman Act, 15 U.S.C. 1.
    36. Unless prevented and restrained, the NADA will continue to 
engage in the unlawful conduct as alleged herein.

Fourth Cause of Action

(Agreement To Boycott Automobile Brokers)
    37. The NADA, through its officers and directors, agreed to urge 
its dealer members not to do business with automobile brokers.
    38. That agreement constituted a combination and conspiracy in 
unreasonable restraint of interstate trade and commerce in violation of 
Section 1 of the Sherman Act, 15 U.S.C. 1.
    39. Unless prevented and restrained, the NADA will continue to 
engage in the unlawful conduct as alleged herein.

Prayer for Relief

    Wherefore, plaintiff respectfully prays for relief as follows:
    1. That this Court adjudge and decree that the NADA has entered 
into unlawful contracts, combinations, or conspiracies which 
unreasonably restrain trade in interstate commerce, in violation of 
Section 1 of the Sherman Act, 15 U.S.C. 1;
    2. That the NADA and all persons, firms, and corporations acting on 
their 

[[Page 51494]]
behalf and under their direction or control be permanently enjoined 
from engaging in, carrying out, renewing or attempting to engage in, 
carry out or renew, any contracts, agreements, practices, or 
understandings in violation of Section 1 of the Sherman Act, 15 U.S.C. 
1;
    3. That plaintiff have such other relief that the Court may 
consider necessary, just, or appropriate to restore competitive 
conditions in the markets affected by the NADA's unlawful conduct; and
    4. That plaintiff recover the costs of this action.

    Dated: September 20, 1995.
Anne K. Bingaman,
Assistant Attorney General.
Joel I. Klein,
Deputy Assistant Attorney General.
Rebecca P. Dick,
Deputy Director of Operations.
Mary Jean Moltenbrey,
Chief, Civil Task Force II.
Robert J. Zastrow,
Assistant Chief.
Minaksi Bhatt,
Susan L. Edelheit,
D.C. Bar #250720.
Theodore R. Bolema,

Attorneys, Civil Task Force II, Antitrust Division, U.S. Department of 
Justice, 325 7th Street, NW, Washington, DC 20530.

    For the Defendant the National Automobile Dealers Association:
Frank R. McCarthy,
Executive Vice President, National Automobile Dealers Association, 8400 
Westpark Drive, McLean, VA 22102.
Glenn A. Mitchell,
Counsel for the National Automobile Dealers Association, Stein, 
Mitchell & Mezines, 1100 Connecticut Avenue, NW, Washington, D.C. 
20035.
Arthur L. Herold.
Counsel for the National Automobile Dealers Association, Webster, 
Chamberlain & Bean, 1747 Pennsylvania Avenue, NW, Washington, D.C. 
20006.

Stipulation

    It is stipulated by and between the undersigned parties, by heir 
respective attorneys, that:
    1. The Court has jurisdiction over the subject matter of this 
action and over each of the parties hereto, and venue of this action is 
proper in the District of Columbia;
    2. The parties to this Stipulation consent that a Final Judgment in 
the form attached may be filed and entered by the Court, upon any 
party's or the Court's own motion, at any time after compliance with 
the requirements of the antitrust Procedures and Penalties Act (15 
U.S.C. 16), without further notice to any party or other proceedings, 
provided that plaintiff has not withdrawn its consent, which it may do 
at any time before entry of the proposed Final Judgment by serving 
notice on the defendant and by filing that notice with the Court.
    3. Defendant agrees to be bound by the provisions of the proposed 
Final Judgment pending its approval by the Court. If plaintiff 
withdraws its consent or the proposed Final Judgment is not entered 
pursuant to this Stipulation, this Stipulation shall be of no effect 
whatever and its making shall be without prejudice to any party in this 
or any other proceedings.
    For the Plaintiff the United States of America:
Anne K. Bingaman,
Assistant Attorney General.
Joel I. Klein,
Deputy Assistant Attorney General.
Rebecca P. Dick,
Deputy Director of Operations.
Mary Jean Moltenbrey,
Chief, Civil Task Force II.
Robert J. Zastrow,
Assistant Chief.
Minaksi Bhatt,
Susan L. Edelheit,
DC Bar #250720.
Theodore R. Bolema,

Attorneys, Civil Task Force II, Antitrust Division, U.S. Department of 
Justice 325 7th Street, NW, Washington, DC 20530.

    For the defendant the National Automobile Dealers Association:
Frank R. McCarthy,
Executive Vice President, National Automobile Dealers Association, 8400 
Westpart Drive, McLean, VA 22102.
Glenn A. Mitchell,
Counsel for the National Automobile Dealers Association, Stein, 
Mitchell & Mezines, 1100 Connecticut Avenue, NW, Washington, DC 20035.
Arthur L. Herold,
Counsel for the National Automobile Dealers Association, Webster, 
Chamberlain & Bean, 1747 Pennsylvania Avenue, NW., Washington, DC 20006

Final Judgment

    Plaintiff, United States of America, filed its complaint on 
September 20, 1995. Plaintiff and defendant, National Automobile 
Dealers Association (``NADA''), by their respective attorneys, have 
consented to the entry of this Final Judgment without trial or 
adjudication of any issue of fact or law. Therefore, before the taking 
of any testimony and without trial or adjudication of any issue of fact 
or law herein, and upon consent of the parties hereto, it is hereby 
Ordered, Adjudged and Decreed as follows:

I. Jurisdiction

    The Court has jurisdiction of the subject matter of this action and 
of the party consenting hereto. The complaint states a claim upon which 
relief may be granted against defendant under Section 1 of the Sherman 
Act (15 U.S.C. Sec. 1).

II. Definitions

    As used in this Final Judgment:
    A. Communication means any exchange, transfer or dissemination of 
information, regardless of the means by which it is accomplished.
    B. Consumer means any person who is an actual or potential 
purchaser of any motor vehicle.
    C. Dealer means a person selling motor vehicles to consumers, 
including each of its divisions, parents, subsidiaries, and affiliates.
    D. Gross margin means the different between an automobile 
manufacturer's suggested retail price for a motor vehicle and a 
dealer's cost to purchase that vehicle from the manufacturer.
    E. Manufacturer means any person which manufactures motor vehicles, 
including each of its divisions, parents, subsidiaries, and affiliates.
    F. NADA means the National Automobile Dealers Association, 
including each of its divisions, parents, subsidiaries, and affiliates, 
and any person acting on behalf of any of them, except that NADA shall 
not include
    1. NADA Charitable Foundation;
    2. Dealers Election Action Committee (DEAC);
    3. National Automobile Dealers Insurance Trust (NADIT);
    4. National Automotive Insurance and Service Agency, Inc. (NAISA);
    5. National Automobile Dealers Association Retirement Trust 
(NADART);
    6. NADA Services Corporation (NADASC);
    7. Salesperson Certification Program;
    8. American Truck Division (ATD).
    G. Organization means any corporation, firm, company, sole 
proprietorship, partnership, joint venture, association, institute, or 
other business, legal, or government entity.
    H. Person means any individual or natural person, corporation, 
firm, company, sole proprietorship, partnership, joint venture, 
association, institute, or other business, legal, or government entity, 
and any employee or agent thereof.
    I. Retail margin means the difference between the price a consumer 
pays to purchase a motor vehicle and a dealer's cost to purchase that 
vehicle from the manufacturer.

[[Page 51495]]


III. Applicability

    A. This Final Judgment applies to defendant and to each of its 
officers, directors, agents, employees, committee or task force 
members, successors, and assigns.
    B. Defendant shall require, as a condition of any merger with or 
acquisition by any other organization, that the organization to which 
defendant is to be merged or by which it is to be acquired agree to be 
bound by the provisions of this Final Judgment.

IV. Prohibited Conduct

    Defendant is hereby enjoined and restrained from:
    A. Directly or indirectly entering into, adhering to, or enforcing 
any agreement with any dealer to fix, stabilize or maintain the prices 
at which motor vehicles may be sold or offered by any person for sale 
in the United States to any consumer;
    B. Urging, encouraging, advocating or suggesting that dealers adopt 
specific prices, specific gross or retail margins, specific pricing 
systems, specific markups, specific discounts, or specific policies 
relating to the advertising of prices, invoices or costs for the sale 
of motor vehicles by dealers in the United States;
    C. Urging, encouraging, advocating or suggesting that dealers 
refrain from adopting specific pricing systems or specific policies 
relating to the advertising of prices, invoices or costs for the sale 
of motor vehicle by dealers in the United States;
    D. Urging, encouraging, advocating or suggesting that dealers (1) 
refuse to do business with particular persons or types of persons, (2) 
reduce the amount of business they do with particular persons or types 
of persons, or (3) do business with particular persons or types of 
persons only on specified terms;
    E. Terminating from membership any dealer for reasons relating to 
that dealer's price or prices, gross or retail margins, pricing 
systems, markups, discounts, or specific policies relating to the 
advertising of prices, invoices or costs for motor vehicles in the 
United States.

V. Limiting Conditions

    A. Nothing in this Final Judgment shall prohibit defendant from:
    1. Continuing to disseminate specific valuation information in the 
N.A.D.A. Official Used Car Guide;
    2. Engaging in collective actions to procure government action when 
such actions are protected under the Noerr-Pennington doctrine, as 
established by Eastern Railroad Presidents Conference v. Noerr Motor 
Freight, Inc., 365 U.S. 127, 81 S.Ct. 523 (1961) and United Mine 
Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585 (1965);
    3. Presenting the views, opinions or concerns of its members on 
topics to manufacturers, dealers, consumers or other interested 
parties, provided that such activities do not violate any provision 
contained in Part IV. above;
    4. Conducting surveys or gathering statistical facts or other facts 
and data relating to dealers, publishing or disseminating such 
information in written materials, studies, reports, seminars or 
programs, or otherwise providing information to manufacturers, dealers, 
consumers or other interested parties in accordance with Maple Flooring 
Mfrs. Ass'n v. United States, 268 U.S. 563 (1925) and its progeny, 
provided that such activities do not violate any provision contained in 
Part IV. above;
    5. Participating in bona fide dispute resolution activities, 
including but not limited to AUTOCAP, involving complaints by specific 
consumers or dealers arising from specific transactions to which such 
consumers or dealers are parties;
    6. Disseminating information about, or encouraging compliance with, 
any laws and government regulations including, but not limited to, tax 
laws, Federal Trade Commission rules and guides, Internal Revenue 
Service cash reporting requirements, and Federal Reserve Board 
regulations.
    B. Nothing in this Final Judgment shall prohibit any individual 
dealer, acting along and not on behalf of or in concert with defendant 
or any of defendant's officers, directors, agents, employees, committee 
or task force members, successors, or assigns, from negotiating any 
terms of the dealer's business relationship with any manufacturer, 
including a manufacturer's policies.

VI. Notification Provisions

    Defendant is ordered and directed:
    A. To publish the Final Judgment and a written notice, in the form 
attached as Appendix A to this Final Judgment, in Automotive Executive 
within sixty (60) days of the entry of this final Judgment; and
    B. To send a written notice, in the form attached as appendix A to 
this Final Judgment, to each dealer who becomes a member of NADA within 
ten (10) years of entry of this Final Judgment and who was not 
previously given such notice. Such notice shall be sent within thirty 
(30) days after the dealer becomes a member of NADA.

VII. Compliance Program

    Defendant is ordered to establish and maintain an antitrust 
compliance program which shall include designating, within 30 days of 
entry of this Final Judgment, an Antitrust Compliance Officer with 
responsibility for implementing the antitrust compliance program and 
achieving full compliance with this Final Judgment. The Antitrust 
Compliance Officer shall, on a continuing basis, be responsible for the 
following:
    A. Furnishing a copy of this Final Judgment within thirty (30) days 
of entry of the Final Judgment to each of defendant's officers, 
directors, employees, and committee or task force members, except for 
employees whose functions are purely clerical or manual and members of 
committees or task forces that do not address issues related to the 
sale or purchase of automobiles;
    B. Furnishing in a timely manner a copy of this Final Judgment to 
any person who succeeds to a position described in Section VII (A);
    C. Arranging for an annual briefing to each person designated in 
Sections VII (A) or (B) on the meaning and requirements of this Final 
Judgment and the antitrust laws;
    D. Obtaining from each person designated in Sections VII (A) or 
(B), certification that he or she (1) has read and, to the best of his 
or her ability, understands and agrees to abide by the terms of this 
Final Judgment; (2) is not aware of any violation of the Final Judgment 
that has not been reported to the Antitrust Compliance Officer; and (3) 
understands that any person's failure to comply with this Final 
Judgment may result in an enforcement action for civil or criminal 
contempt of court against NADA and/or any person who violates this 
Final Judgment;
    E. Maintaining (1) a record of all certifications received pursuant 
to Section VII (D); (2) a file of all documents related to any alleged 
violation of this Final Judgment; and (3) a record of all non-
privileged communications related to any such violation, which shall 
identify the date and place of the communication, the persons involved, 
the subject matter of the communication, and the results of any related 
investigation;
    F. Reviewing the final draft of each speech and policy statement 
made by any officer, director, employee, or committee or task force 
member in order to ensure its adherence with this decree;
    G. Reviewing the purpose for the formation or creation of each 
committee and task force in order to ensure its adherence with this 
decree;

[[Page 51496]]

    H. Reviewing the content of each letter, memorandum, and report 
written by or on behalf of any director in his or her capacity as an 
NADA director or on NADA stationery in order to ensure its adherence 
with this decree.

VIII. Certification

    A. Within 75 days of the entry of this Final Judgment, defendant 
shall certify to plaintiff whether the defendant has designated an 
Antitrust Compliance Officer and has distributed the Final Judgment in 
accordance with Section VI (A) above.
    B. For ten years after the entry of this Final Judgment, on or 
before its anniversary date, the defendant shall file with the 
plaintiff an annual statement as to the fact and manner of its 
compliance with the provisions of Sections VI and VII.
    C. If defendant's antitrust Compliance Officer learns of any 
violations of any of the terms and conditions contained in this Final 
Judgment, defendant shall immediately take appropriate action to 
terminate or modify the activity so as to comply with this Final 
Judgment.

IX. Plaintiff Access

    A. For the purpose of determining or securing compliance with this 
Final Judgment, and for no other purpose, duly authorized 
representatives of plaintiff shall, upon written request of the 
Attorney General or the Assistant Attorney General in charge of the 
Antitrust Division, and on reasonable notice to the defendant, made to 
its principal office, be permitted, subject to any legally recognized 
privilege:
    1. Access during the defendant's office hours to inspect and copy 
all records and documents in the possession or under the control of 
defendant, which may have counsel present, relating to any matters 
contained in this Final Judgment; and
    2. To interview the defendant's officers, employees and agents, who 
may have counsel present, regarding any such matters. The interviews 
shall be subject to the defendant's reasonable convenience.
    B. Upon the written request of the Attorney General or the 
Assistant Attorney General in charge of the Antitrust Division made to 
defendant at its principal office, defendant shall submit such written 
reports, under oath if requested, with respect to any of the matters 
contained in this Final Judgment as may be requested, subject to any 
legally recognized privilege.
    C. No information or documents obtained by the means provided in 
this Section VIII shall be divulged by any representative of the 
Department of Justice to any person other than a duly authorized 
representative of the Executive Branch of the United States, except in 
the course of legal proceedings to which the United States is a party, 
or for the purpose of securing compliance with this Final Judgment, or 
as otherwise required by law.
    D. If at the information or documents are furnished by defendant to 
plaintiff, defendant represents and identifies in writing the material 
in any such information or documents to which a claim of protection may 
be asserted under Rule 26(c)(7) of the Federal Rules of Civil 
Procedure, and defendant marks each pertinent page of such material, 
``Subject to claim of protection under Rule 26(c)(7) of the Federal 
Rules of Civil Procedure,'' then ten (10) days' notice shall be give by 
plaintiff to defendant prior to divulging such material in any legal 
proceeding (other than a grand jury proceeding), so that defendant 
shall have an opportunity to apply to this Court for protection 
pursuant to Rule 26(c)(7) of the Federal Rules of Civil Procedure.

X. Duration of Final Judgment

    Except as otherwise provided hereinabove, this Final Judgment shall 
remain in effect until ten (10) years from the date of entry.

XI. Construction, Enforcement, Modification and Compliance

    Jurisdiction is retained by the Court for the purpose of enabling 
any of the parties to this Final Judgment to apply to this Court at any 
time for such further orders or directions as may be necessary or 
appropriate for the construction or carrying out of this Final 
Judgment, for the modification of any of its provisions, for its 
enforcement or compliance, and for the punishment of any violation of 
its provisions.

XII. Public Interest

    Entry of this Final Judgment is in the public interest.

Dated:-----------------------------------------------------------------

----------------------------------------------------------------------
United States District Judge

Appendix A

    On September 20, 1995, the Antitrust Division of the United 
States Department of Justice filed a civil suit that alleged that 
the National Automobile Dealers Association (``NADA'') had engaged 
in certain practices that violated one section of the antitrust 
laws. NADA denies that its conduct violated the law. However, in 
order to avoid the delay, expense and burden of protracted 
litigation, NADA, without admitting any violation of the law and 
without being subject to any monetary penalties, has agreed to the 
entry of a civil Consent Order to settle this matter. This Consent 
Order applies to NADA and all of its officers, directors, employees, 
agents, and committee and task force members, but not to dealers 
acting on their own.
    Under the Consent Order, NADA may not enter into, adhere to, or 
enforce any agreement with any dealer to fix the prices at which new 
cars are sold or offered. NADA is also prohibited from recommending 
that dealers (1) adopt specific prices or pricing policies, specific 
margins, or specific advertising policies relating to prices or 
costs for automobile sales, (2) refrain from adopting specific 
pricing systems or specific policies relating to the advertising of 
prices or costs for automobile sales, as invoice advertising, and 
(3) refuse to do business or reduce the amount of business they do 
with particular people or types of people. NADA is further 
prohibited from terminating from membership any dealer based upon 
that dealer's prices or specific policies relating to the 
advertising of prices or costs for automobile sales. Failure to 
comply with this Consent Order may result in conviction for criminal 
contempt of court.
    This Consent Order does not prohibit NADA from continuing 
certain activities, including publishing the N.A.D.A. Official Used 
Car Guide, lobbying before legislatures and regulatory agencies, 
offering dispute resolution programs, including the AUTOCAP program, 
educating members on compliance with laws and regulations, and 
presenting dealers' views to manufacturers, consumers or other 
interested parties in ways that do not otherwise violate the Consent 
Order.

Competitive Impact Statement

    The United States of America, pursuant to Section 2 of the 
Antitrust Procedures and Penalties Act (``APPA''), 15 U.S.C. 16(b), 
submits this Competitive Impact Statement regarding the proposed Final 
Judgment submitted for entry in this civil antitrust proceeding.

1. Nature and Purpose of the Proceeding

    On September 20, 1995, the United States filed a civil antitrust 
complaint under Section 4 of the Sherman Act, as amended, 15 U.S.C. 4, 
alleging that the defendant, the National Automobile Dealers 
Association (``NADA''), entered into agreements intended to lessen 
competition in the retail automobile industry in violation of Section 1 
of the Sherman Act, 15 U.S.C. 1. Specifically, the complaint alleges 
that the NADA, through its officers and directors:
    (a) Agreed to orchestrate a group boycott in an attempt to coerce 
automobile manufacturers to decrease the discounts offered to large 
volume buyers and to eliminate consumer rebates;
    (b) Agreed to urge its dealer members to maintain new vehicle 
inventories at levels equal to 15-30 days' supply;

[[Page 51497]]

    (c) Solicited and obtained agreements from member dealers not to 
engage in invoice advertising; and
    (d) Agreed to urge its members not to do business with automobile 
brokers.
    The complaint seeks relief that would prevent the NADA from 
continuing or renewing the alleged practices and agreements, or 
engaging in other practices or agreements that would have a similar 
purpose or effect.
    On September 20, 1995, the United States and the NADA also filed a 
stipulation in which they consented to the entry of a proposed Final 
Judgment that would prohibit the NADA from engaging in certain 
anticompetitive practices, and would require the NADA to implement an 
antitrust compliance program. The proposed Final Judgment provides all 
of the relief that the United States seeks in the Complaint.
    The United States and the NADA have agreed that the Court may enter 
the proposed Final Judgment after compliance with the Antitrust 
Procedures and Penalties Act (``APPA''), 15 U.S.C. 16 (b)-(h), provided 
the United States has not withdrawn its consent. Entry of the proposed 
Final Judgment will terminate the action, except that the Court will 
retain jurisdiction over the matter proceedings to construe, modify, or 
enforce the Final Judgment, or to punish violations of any of its 
provisions.

II. Description of Practices Giving Rise to the Alleged Violation of 
the Antitrust Laws

    The NADA is a national trade association, headquartered in McLean, 
Virginia, that represents approximately 84% of the franchised new car 
and truck dealers in the United States. Franchised dealers purchase new 
cars and trucks from manufacturers pursuant to franchise agreements, 
and in turn sell those cars and trucks and provide related services to 
consumers. The members of the NADA compete with each other and with 
other car and truck dealers to sell motor vehicles and other auto 
products and services to consumers. Dealers compete by offering 
different prices, quality of service, and selection of cars. NADA's 
members had retail sales of products and services of approximately $375 
billion in 1993.
1. Agreement Concerning Inventory Levels
    In recent years, automobile manufacturers have used certain sales 
and marketing practices designed to stimulate car sales, including 
fleet subsidies and consumer rebates. Fleet subsidies are discounts 
offered to purchasers of large quantities of cars, such as rental car 
companies and large corporations. These discounts can be larger than 
the discounts offered to franchised dealers. Fleet purchasers often 
resell fleet vehicles directly to the public or to non-franchised 
automobile dealers, who in turn sell them to the public. Prior to 1991, 
many fleet vehicles were sold in the same year as new cars of the same 
model year. Fleet vehicles, therefore, directly competed with new 
vehicle sales, but fleet cars were sometimes offered at prices 
thousands of dollars less than similar new cars. During the late 1980's 
and early 1990's, the NADA objected to manufacturers' practices of 
offering substantial fleet discounts. The NADA claimed that fleet 
subsidies created a class of vehicles that, because of their lower 
prices and mileage, unfairly increased competition with new vehicle 
sales.
    The NADA also objected to manufacturers' use of consumer rebates to 
stimulate sales. Consumer rebates are cash incentives offered by 
manufacturers directly to consumers. In recent years, manufacturers 
have increased the amount and frequency of consumer rebates that they 
offered to entice consumers to purchase new automobiles. During the 
time period covered by the Complaint, many analysts estimated that 
consumer rebates saved consumers as much as $1,000 per car. Many 
franchised dealers believe that when manufacturers offer rebates to 
consumers, franchised dealers are forced to offer their own rebates to 
consumers who purchase cars immediately before or after the rebate 
period. During the late 1980's and early 1990's, the NADA repeatedly 
urged manufacturers to give franchised dealers, rather than consumers, 
all discounts and incentives designed to stimulate sales.
    In September, 1989, the NADA's president drafted a document 
entitled ``An Open Letter to All Dealers'' (``Open Letter''). The Open 
Letter claimed that manufacturers' use of fleet subsidies had 
contributed to automobile dealers' financial difficulties. It also 
discussed the NADA's attempts to convince consumer manufacturers not to 
offer rebates to consumes, and instead to give all incentives to 
dealers. The Open Letter concluded with a recommendation that all 
automobile dealers reduce their inventories to a 15-30 day supply of 
new vehicles. The letter then stated that the NADA would ``advise 
dealers immediately of any movement by their franchisers which will 
assist dealers.''
    Dealers customarily have substantially more than 15-30 days' supply 
of new cars in inventory at any given time. Sixty to ninety days' 
supply is more typical. A dealer that unilaterally reduced its 
inventory by a substantial amount would risk losing sales to other 
dealers that maintain greater selection of cars. If dealers 
collectively reduced inventories, however, they could lower their 
inventory costs without losing sales to competing dealers. Such an 
action would adversely affect manufacturers, which would see a dramatic 
reduction in orders.
    On October 23, 1989, the NADA president wrote a letter to Oregon 
dealers in which he called the Open Letter the NADA's ``first 
response'' to manufacturers who made little or no compromise with the 
NADA. The Open Letter was unanimously endorsed by the NADA's Executive 
Committee and board of directors and published in the October 30, 1989 
issue of Automotive News as a two page advertisement. It was also 
published in the NADA's official publication, Automotive Executive, and 
sent to numerous representatives of the media and major automobile 
manufacturers.
    At the NADA's 1990 Annual Convention, the NADA president claimed 
that the had been unable to obtain any concessions from manufacturers 
until after the Open Letter was published and dealers responded by 
cutting their new car orders. He further observed that: ``Twenty-five 
thousand dealerships--doing anything more or less together--is bound to 
come to the attention of our suppliers.''
    The Complaint alleges that the Open Letter reflected an agreement 
by the NADA to reduce and maintain inventory levels equal to 15-30 
day's supply unless and until automobile manufacturers adopted policies 
more favorable to dealers. An agreement by a trade association to 
recommend that all dealers maintain a particular inventory level is a 
per se violation of section 1 of the Sherman Act. An agreement by a 
trade association to boycott a supplier by encouraging its members to 
withhold or reduce orders is also a per se violation of the Sherman 
Act.
2. Agreement Concerning Advertising
    Invoice advertising is advertising that reveals the dealer's 
invoice or cost to purchase a vehicle, or offers to sell the vehicle to 
the public at price based upon the dealer's invoice or cost to purchase 
the vehicle. The Complaint alleges that the NADA has frequently 
expressed its opposition to invoice advertising, at least in part 
because it believes that such advertising leads to 

[[Page 51498]]
lower retail selling prices for new vehicles.
    On several occasions between 1989 and 1994, an officer of the NADA 
contacted automobile manufacturers to complain about dealers who had 
engaged in invoice advertising. The NADA officer also complained 
directly to the dealers in question about the advertisements. He used 
NADA letterhead and referred to his position with the NADA in a manner 
that suggested that the was acting on behalf of NADA in communicating 
his complaints and seeking agreement from the dealers. In some 
instances, the NADA officer obtained the dealers' agreement not to 
engage in further invoice advertising. Such an agreement by a trade 
association or its members not to engage in certain types of 
advertising is a per se violation of the antitrust laws.
3. Agreement To Boycott Brokers
    Automobile brokers generally buy new vehicles from franchised 
dealers at discounted prices and resell the vehicles directly to the 
public in competition with franchised dealers. On numerous occasions, 
the NADA has expressed its dissatisfaction with competition by brokers. 
In 1994 a task force appointed by the NADA's Board of Directors issued 
a report urging dealers to boycott automobile brokers. The report 
recommended that dealers ``Refuse to do business with brokers or buying 
services. They inevitably do harm to new vehicle gross margin 
potential.'' Although the NADA eventually revised the report to 
eliminate that recommendation, the original version of the report was 
first disseminated to over 200 dealer representatives and other 
individuals active in the automobile industry. An agreement by a trade 
association or its members not to do business with other competitors or 
customers for purposes of restricting price competition is a per se 
violation of the Sherman Act.

III. Explanation of the Proposed Final Judgment

    The parties have stipulated that the Court may enter the proposed 
Final Judgment at any time after compliance with the APPA. The proposed 
Final Judgment states that it shall not constitute an admission by 
either party with respect to any issue of fact or law. Section III of 
the proposed Final Judgment provides that it shall apply to the NADA 
and each of its officers, directors, agents, employees, committee and 
task force members, and successors, and any organization that acquires 
or merges with the NADA.
    Section IV of the Proposed Final Judgment contains five categories 
of prohibited conduct. Section IV(A) contains a general prohibition 
against any agreements by the NADA with dealers to fix, stabilize or 
maintain prices at which motor vehicles may be sold or offered in the 
United States to any consumer. Sections IV (B)-(E) address the specific 
activities of the NADA and its officers and directors that were the 
source of the antitrust violations.
    Section IV(B) of the Proposed Final Judgment prohibits the NADA 
from urging, encouraging, advocating, or suggesting that dealers adopt 
specific margins, specific discounts, or specific policies relating to 
the advertising of prices or dealer costs of motor vehicles. Similarly, 
Section IV(C) prohibits the NADA from discouraging dealers from 
adopting specific pricing systems or specific policies relating to the 
advertising of prices or dealer costs of motor vehicles. Sections IV 
(B) and (C) prohibit the NADA from urging or encouraging members to 
make uniform or collective decisions with respect to key areas in which 
they compete, such as prices or advertisements.
    Section IV(D) prohibits the NADA from urging dealers to refuse to 
do business with particular types of persons, to reduce their business 
with particular types of persons, or to do business with particular 
persons only on specified terms. This provision is intended to prohibit 
the NADA from using the threat of a group boycott to attempt to 
pressure manufacturers into changing policies. It will also bar the 
NADA from urging dealers to reduce or eliminate the amount of business 
they do with particular types of buyers, such as brokers. Finally, 
Section IV(E) prohibits the NADA from terminating the membership of any 
dealer for reasons relating to that dealer's pricing or advertising of 
prices or dealer costs.
    Section V of the Proposed Final Judgment contains certain limiting 
provisions that clarify the scope of the prohibitions in Section IV. 
Section V identifies specific NADA activities that are unlikely to 
restrict competition and are not prohibited by the decree. 
Specifically, Section V(A) provides that the NADA may (1) continue to 
disseminate specific valuation information in the N.A.D.A. Official 
Used Car Guide; (2) engage in collective action to procure government 
action, such as lobbying activities, when those actions are immune from 
antitrust challenge under the Noerr-Pennington doctrine; (3) present 
the views, opinions, or concerns of its members on topics to 
manufacturers, dealers, consumers, or other interested parties, 
provided that such activities do not violate any provision contained in 
Part IV; (4) conduct surveys, and gather and disseminate information, 
in accordance with Maple Flooring Mfrs. Ass'n v. United States, 268 
U.S. 563 (1925) and its progeny; (5) participate in bona fide dispute 
resolution activities involving the parties to specific transactions; 
and (6) disseminate information about laws and government regulations 
that affect dealers, and encourage dealers to comply with those laws. 
Section V(B) clarifies that nothing in the proposed Final Judgment 
limits individual dealers' rights to act independently.
    Section VI of the Proposed Final Judgment requires the NADA to 
publish a notice describing the Final Judgment in Automotive Executive, 
the NADA's automobile industry trade publication, within 60 days after 
this proposed Final Judgment is entered, and to send a copy of the 
notice to each dealer who becomes a member of the NADA during the ten-
year life of this Final Judgment.
    Secitons VII and VIII require the NADA to set up an antitrust 
compliance program to ensure that the NADA's members are aware of and 
comply with the limitations in the proposed Final Judgment and 
antitrust laws. They require the NADA to designate an antitrust 
compliance officer and to furnish a copy of the Final Judgment, 
together with a written explanation of its terms, to each of its 
officers, directors, non-clerical employees, and members of committees 
and task forces that address issues related to the purchase and sale of 
automobiles. The NADA is also required to review the final draft of 
each speech and policy statement by each officer, director, employee, 
and committee and task force member, as well as the content of each 
letter, memorandum and report written by or on behalf of each director 
in his capacity as NADA director, in order to ensure adherence to the 
Final Judgment.
    Section IX of the Proposed Final Judgment provides that, upon 
request of the Department of Justice, the NADA shall submit written 
reports, under oath, with respect to any of the matters contained in 
the Final Judgment. Additionally, the Department of Justice is 
permitted to inspect and copy all books and records, and to interview 
officers, directors, employees and agents of the NADA.
    The Government believes that the proposed Final Judgment is fully 
adequate to prevent the continuation or recurrence of the violations of 
Section 1 of the Sherman Act alleged in the Complaint, and that 
disposition of this 

[[Page 51499]]
proceeding without further litigation is appropriate and in the public 
interest.

IV. Remedies Available to Potential Private Litigants

    Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any 
person who has been injured as a result of conduct prohibited by the 
antitrust laws may bring suit in federal court to recover three times 
the damages the person has suffered, as well as costs and reasonable 
attorneys fees. Entry of the proposed Final Judgment will neither 
impair nor assist the bringing of any private antitrust damage action. 
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. 
16(a), the Final Judgment has no prima facie effect in any subsequent 
private lawsuit that may be brought against the defendant.

V. Procedures Available for Modification of the Proposed Final Judgment

    The United States and the defendant have stipulated that the 
proposed Final Judgment may be entered by the Court after compliance 
with the provisions of the APPA, provided that the United States has 
not withdrawn its consent.
    The APPA provides a period of at least 60 days preceding the 
effective date of the proposed Final Judgment within which any person 
may submit to the United States written comments regarding the proposed 
Final Judgment. Any person who wants to comment should do so within 60 
days of the date of publication of this Competitive Impact Statement in 
the Federal Register. The United States will evaluate the comments, 
determine whether it should withdraw its consent, and respond to the 
comments. The comments and the response of the United States will be 
filed with the Court and published in the Federal Register.
    Written comments should be submitted to: Mary Jean Moltenbrey, 
Chief, Civil Task Force II, U.S. Department of Justice, Antitrust 
Division, 315 7th Street, NW., Room 300, Washington, DC. 20530.
    Under Section X of the proposed Final Judgment, the Court will 
retain jurisdiction over this matter for the purpose of enabling either 
of the parties to apply to the Court for such further orders or 
directions as may be necessary for the construction, implementation, 
modification, or enforcement of the Final Judgment, or for the 
punishment of any violations of the Final Judgment.

VI. Alternatives to the Proposed Final Judgment

    The only alternative to the proposed Final Judgment considered by 
the Government was a full trial on the merits and on relief. Such 
litigation would involve substantial cost to the United States and is 
not warranted, because the proposed Final Judgment provides appropriate 
relief against the violations alleged in the Complaint.

VII. Determinative Materials and Documents

    No particular materials or documents were determinative in 
formulating the proposed Final Judgment. Consequently, the Government 
has not attached any such materials or documents to the proposed Final 
Judgment.

    Dated: September 20, 1995.

        Respectfully submitted,
Mary Jean Moltenbrey,
Chief.
Robert J. Zastrow,
Assistant Chief.
Minaksi Bhatt,

Susan L. Edelheit,
D.C. Bar #250720.
Theodore R. Bolema,

Attorneys, Civil Task Force II Antitrust Division, U.S. Department of 
Justice, 325 7th Street, NW., Room 300, Washington, DC. 20530.

[FR Doc. 95-24380 Filed 9-29-95; 8:45 am]
BILLING CODE 4410-01-M