[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]
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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:-----------------------------------------------------------------
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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