[Federal Register Volume 68, Number 231 (Tuesday, December 2, 2003)]
[Notices]
[Pages 67442-67443]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-29922]


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FEDERAL TRADE COMMISSION


Disclosure Requirements and Prohibitions Concerning Franchising 
and Business Opportunity Ventures

AGENCY: Federal Trade Commission.

ACTION: Grant of petition for exemption.

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[[Page 67443]]

SUMMARY: On March 31, 2003, the Commission published a notice in the 
Federal Register soliciting comments on a petition filed by Paccar, 
Inc., in connection with its sale of Kenworth and Peterbilt truck 
dealerships. The Commission now grants the petition and determines that 
the provisions of 16 CFR part 436 shall not apply to the advertising, 
offering, licensing, contracting, sale or other promotion of Paccar 
dealerships.

EFFECTIVE DATE: December 2, 2003.

FOR FURTHER INFORMATION CONTACT: Steven Toporoff, Room 238, Federal 
Trade Commission, Washington, D.C. 20580; (202) 326-3135.

SUPPLEMENTARY INFORMATION:

Before the Federal Trade Commission, Order Granting Exemption

    In the Matter of a Petition for Exemption from the Trade Regulation 
Rule Entitled ``Disclosure Requirements and Prohibitions Concerning 
Franchising and Business Opportunity Ventures'' filed by Paccar, Inc.
    On March 31, 2003, the Commission published a notice in the Federal 
Register soliciting comments on a petition filed by Paccar, Inc. 
(``Paccar'' or ``Petitioner''). Paccar manufactures heavy-duty and 
medium-duty trucks, parts, and accessories, which it distributes 
through a network of 131 dealers operating under the name ``Kenworth'' 
or ``Peterbilt.'' The dealers also offer and perform warranty repair 
and bodywork; sell, rent, or lease used vehicles; and offer financing 
and insurance in connection with truck sales. Most of these dealers 
have been in business for 10 years or more; one-third have been Paccar 
dealers for more than 20 years. The petition sought an exemption, 
pursuant to Section 18(g) of the Federal Trade Commission Act, from 
coverage under the Commission's Trade Regulation Rule entitled 
``Disclosure Requirements and Prohibitions Concerning Franchising and 
Business Opportunity Ventures'' (``Franchise Rule'').
    In accordance with Section 18(g), the Commission conducted an 
exemption proceeding under Section 553 of the Administrative Procedure 
Act, 5 U.S.C. 553, and invited public comment during a 60-day period 
ending May 30, 2003. No comments were received. After reviewing the 
petition, the Commission has concluded that the Petitioner's request 
should be granted.
    The statutory standard for exemption requires the Commission to 
determine whether application of the Trade Regulation Rule to the 
person or class of persons seeking exemption is ``necessary to prevent 
the unfair or deceptive act or practice to which the rule relates.'' If 
not, an exemption is warranted.
    The pre-sale disclosures required by the Franchise Rule are 
designed to prevent deceptive acts or practices. The Rule requires 
franchisors to provide investors with the material information they 
need to make an informed investment decision in circumstances where 
they might otherwise lack the resources, knowledge, or ability to 
obtain the information, and thus protect themselves from the deception.
    The abuses that the disclosure remedy of the Franchise Rule is 
designed to prevent are most likely to occur, as the Statement of Basis 
and Purpose of the Rule notes, in sales where three factors are 
present:

    (1) A potential investor has a relative lack of business 
experience and sophistication;
    (2) The investor has inadequate time to review and comprehend 
the unique and often complex terms of the franchise agreement before 
making a major financial commitment; and
    (3) A significant information imbalance exists in which the 
prospective franchisee is unable to obtain essential and relevant 
facts known to the franchisor about the investment.

    The petition demonstrates that potential Paccar dealers are and 
will continue to be a select group of sophisticated and experienced 
businesspeople; that they make very significant investments; and that 
they have more than adequate time to consider the dealership offer and 
obtain information about it before investing. In particular, we note 
that the purchase of a Paccar dealership costs in excess of $2 million. 
As a practical matter, investments of this size and scope typically 
involve knowledgeable investors, the use of independent business and 
legal advisors, and an extended period of negotiation that generates 
the exchange of information necessary to ensure that investment 
decisions are the product of an informed assessment of potential risks 
and benefits.
    The Commission has reviewed the potential for unfair or deceptive 
acts or practices in connection with the offer of Paccar dealerships 
and found no evidence or likelihood of a significant patter or practice 
of abuse. If any such evidence exists, it has not yet been brought to 
the Commission's attention in this proceeding.
    Thus, both the record in this proceeding, and all prior experience 
to date with other Franchise Rule exemptions, support the conclusion 
that Petitioner's sale of Paccar dealerships accomplishes what the Rule 
was intended to ensure. The conditions most likely to lead to abuses 
are not present in the sale of the dealerships, and the process 
generates sufficient information to ensure that applicants will be able 
to make an informed investment decision. For these reasons, the 
Commission finds that the application of the Franchise Rule to 
Petitioner's sale of Paccar dealerships is not necessary to prevent the 
unfair or deceptive acts or practices to which the Rule relates.
    Accordingly, the Commission has determined that the provisions of 
16 CFR part 436 shall not apply to the advertising, offering, 
licensing, contracting, sale or other promotion of dealerships by 
Paccar, Inc. This opinion is based on the information submitted and 
representations made in Paccar, Inc.'s petition. The grant of the 
petition applies only to the extent that actual company practices 
conform to the practices described in the petition.

    Issued: November 10, 2003.
    It is so ordered.

    By the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 03-29922 Filed 12-1-03; 8:45 am]
BILLING CODE 6750-01-M