[Federal Register Volume 85, Number 38 (Wednesday, February 26, 2020)]
[Notices]
[Pages 11082-11084]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03782]


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FEDERAL TRADE COMMISSION

[File No. 191 0074]


Rent-to-Own Store Swaps; Analysis of Agreement Containing Consent 
Order To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement; request for comment.

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SUMMARY: The consent agreements in this matter settle alleged 
violations of federal law prohibiting unfair methods of competition. 
The attached Analysis of Agreement Containing Consent Order to Aid 
Public Comment describes both the allegations in the complaints and the 
terms of the consent orders--embodied in the consent agreements--that 
would settle these allegations.

DATES: Comments must be received on or before March 27, 2020.

ADDRESSES: Interested parties may file comments online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Please write: ``Rent-to-Own 
Store Swaps; File No. 191 0074'' on your comment, and file your comment 
online at https://www.regulations.gov by following the instructions on 
the web-based form. If you prefer to file your comment on paper, please 
mail your comment to the following address: Federal Trade Commission, 
Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 
(Annex D), Washington, DC 20580, or deliver your comment to the 
following address: Federal Trade Commission, Office of the Secretary, 
Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex 
D), Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Joseph Lipinsky (206-220-4473), 
Federal Trade Commission, 915 Second Avenue, Room 2896, Seattle, WA 
98174.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, 
notice is hereby given that the above-captioned consent agreement 
containing a consent order to cease and desist, having been filed with 
and accepted, subject to final approval, by the Commission, has been 
placed on the public record for a period of thirty (30) days. The 
following Analysis to Aid Public Comment describes the terms of the 
consent agreement and the allegations in the complaint. An electronic 
copy of the full text of the consent agreement package can be obtained 
from the FTC website (for February 20, 2020), at this web address: 
https://www.ftc.gov/news-events/commission-actions.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before March 27, 2020. 
Write ``Rent-to-Own Store Swaps; File No. 191 0074'' on your comment. 
Your comment--including your name and your state--will be placed on the 
public record of this proceeding, including, to the extent practicable, 
on the https://www.regulations.gov website.
    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online through the https://www.regulations.gov website.
    If you prefer to file your comment on paper, write ``Rent-to-Own 
Store Swaps; File No. 191 0074'' on your comment and on the envelope, 
and mail your comment to the following address:

[[Page 11083]]

Federal Trade Commission, Office of the Secretary, 600 Pennsylvania 
Avenue NW, Suite CC-5610 (Annex D), Washington, DC 20580; or deliver 
your comment to the following address: Federal Trade Commission, Office 
of the Secretary, Constitution Center, 400 7th Street SW, 5th Floor, 
Suite 5610 (Annex D), Washington, DC 20024. If possible, submit your 
paper comment to the Commission by courier or overnight service.
    Because your comment will be placed on the publicly accessible 
website at https://www.regulations.gov, you are solely responsible for 
making sure that your comment does not include any sensitive or 
confidential information. In particular, your comment should not 
include any sensitive personal information, such as your or anyone 
else's Social Security number; date of birth; driver's license number 
or other state identification number, or foreign country equivalent; 
passport number; financial account number; or credit or debit card 
number. You are also solely responsible for making sure your comment 
does not include any sensitive health information, such as medical 
records or other individually identifiable health information. In 
addition, your comment should not include any ``trade secret or any 
commercial or financial information which . . . is privileged or 
confidential''--as provided by Section 6(f) of the FTC Act, 15 U.S.C. 
46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2)--including in 
particular competitively sensitive information such as costs, sales 
statistics, inventories, formulas, patterns, devices, manufacturing 
processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular, 
the written request for confidential treatment that accompanies the 
comment must include the factual and legal basis for the request, and 
must identify the specific portions of the comment to be withheld from 
the public record. See FTC Rule 4.9(c). Your comment will be kept 
confidential only if the General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted on the public FTC website--as legally required by FTC Rule 
4.9(b)--we cannot redact or remove your comment from the FTC website, 
unless you submit a confidentiality request that meets the requirements 
for such treatment under FTC Rule 4.9(c), and the General Counsel 
grants that request.
    Visit the FTC website at http://www.ftc.gov to read this Notice and 
the news release describing it. The FTC Act and other laws that the 
Commission administers permit the collection of public comments to 
consider and use in this proceeding, as appropriate. The Commission 
will consider all timely and responsive public comments that it 
receives on or before March 27, 2020. For information on the 
Commission's privacy policy, including routine uses permitted by the 
Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

Analysis of Agreement Containing Consent Order To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Order with Aaron's, 
Inc. (``Aaron's''); an Agreement Containing Consent Order with Buddy's 
Newco, LLC (``Buddy's''); and an Agreement Containing Consent Order 
with Rent-A-Center, Inc. (``RAC'') (``Consent Agreements''). The 
proposed Consent Agreements are intended to remedy anticompetitive 
effects resulting from reciprocal purchase agreements made between 
Aaron's, Buddy's, and RAC, and certain of their competitors in the 
brick-and-mortar rent-to-own (``RTO'') industry.
    Pursuant to the reciprocal purchase agreements, Aaron's, Buddy's, 
and RAC sold consumer rental contracts to nearby competitors contingent 
on Aaron's, Buddy's, or RAC acquiring that competitor's consumer rental 
contracts in another geographic area. These reciprocal purchase 
agreements, called swap agreements (``Swap Agreements'') by the RTO 
industry, also included non-competition agreements whereby Aaron's, 
Buddy's, or RAC and the nearby competitors each agreed to close stores 
associated with the consumer rental contacts being sold and to not open 
new stores within a specified distance for a limited amount of time. 
Not all swap agreements violate the antitrust laws. Swap agreements 
between companies in the same industry that generate significant 
procompetitive benefits for consumers, such as more efficient 
distribution or creation of a new product, may not violate the law. The 
Swap Agreements and ancillary non-competition agreements at issue in 
the present case, however, likely reduced competition between Aaron's, 
Buddy's, RAC, and their competitors in the RTO industry in several 
local markets in the United States, reducing consumer choice and 
depriving consumers of the benefits of price and quality competition.
    Under the Consent Agreements, Aaron's and Buddy's agree that they 
will no longer enter into Swap Agreements and will not take any steps 
to enforce any non-competition agreements associated with the Swap 
Agreements. The proposed Decision and Order (``Order'') in each Consent 
Agreement preserves competition in the RTO industry by prohibiting such 
Swap Agreements and enforcement of ancillary non-competition 
agreements.

II. The Parties

A. Aaron's, Inc.

    Aaron's is headquartered in Atlanta, Georgia. As of December 2018, 
Aaron's, the second largest operator of RTO stores, has 1,689 stores, 
comprised of 1,312 company-operated stores and 377 independently owned 
franchised stores operating in 47 states. Aaron's estimates its 2018 
fiscal year revenues were roughly $3.8 billion with over $196 million 
in net earnings.

B. Buddy's Newco, LLC

    Buddy's, doing business as Buddy's Home Furnishings, is a limited 
liability company headquartered in Orlando, Florida. Buddy's operates 
approximately 300 franchised and corporate stores throughout the 
Continental United States.

C. Rent-A-Center, Inc.

    Rent-A-Center, Inc. is a corporation headquartered in Plano, Texas. 
RAC has approximately 2,800 company-owned stores and 225 RAC franchised 
stores throughout the United States.

III. The Complaints

A. Background

    In the RTO business, consumers do not buy merchandise outright, but 
rather take possession after entering into rental contracts with an RTO 
company. The contracts are shortterm contracts (typically one week or 
one month) that renew when the consumer makes the lease payment. The 
rental contracts are at-will; consumers may terminate the contracts and 
return the merchandise without penalty. The rental contracts create a 
recurring revenue stream for the RTO company. If an RTO store closes, 
the RTO company will either transfer the store's rental contracts to 
another of its own stores, or sell them to a nearby competitor.
    A large percentage of RTO customers travel to the RTO store 
associated with their rental contract to make their weekly or monthly 
payments. If an RTO company seeks to close a store and

[[Page 11084]]

transfer the store's contracts to another, more distant store, the 
consumer may terminate the rental contract rather than traveling to the 
more distant store. The greater the distance between the receiving 
store and the closing store, the greater the likelihood that the 
consumer will terminate the contract. Therefore, if an RTO company does 
not have another store near the closing store, it may opt to sell its 
rental contracts to a competitor that has an RTO store in close 
proximity to the closing store.

B. The Challenged Conduct

    Between 2015 and 2018, Aaron's, Buddy's, and RAC entered into 
several Swap Agreements with one another and with other RTO operators. 
These agreements typically covered stores in multiple different 
markets. Each Swap Agreement consists of two related transactions. In 
one transaction, a competitor closes one or more RTO stores and sells 
the closing stores' consumer rental contracts to Aaron's, Buddy's, or 
RAC, which have RTO stores near the competitor's soon-to-close stores. 
In the other transaction, the facts are reversed: Aaron's, Buddy's, or 
RAC closes one or more of its RTO stores and sells the soon-to-close 
stores' consumer rental contracts to the competitor which has RTO 
stores nearby. The sales of the rental contracts by Aaron's, Buddy's, 
or RAC is explicitly contingent on the purchase of the competitor's 
rental contracts. Parties to the Swap Agreement also sign non-compete 
agreements, usually for a three-year period, for the areas in the 
immediate vicinity of the closed stores.

C. Effects of the Challenged Conduct

    The evidence indicates that at least some of the Swap Agreements 
entered into by Buddy's, Aaron's, and RAC, had the purpose and effect 
of facilitating each party's ability to induce its competitor to exit a 
market. Such agreements are a form of restraint that reduces 
competition and creates a clear threat of consumer harm. Consumers in 
the affected geographic areas lost any benefits of competition 
resulting from the closing of RTO stores and had fewer options for 
rental merchandise. Moreover, the evidence indicates that Aaron's, 
Buddy's, and RAC closed stores that might not have been closed but for 
the Swap Agreements. As a result, the FTC has issued its Complaints and 
entered into the Consent Agreements, which remedy the harm to 
competition.

IV. The Agreement Containing Consent Order

    The proposed Orders fully address Aaron's, Buddy's, and RAC's past 
actions and contain important fencing in and notification provisions. 
The Orders prohibit Aaron's, Buddy's, and RAC from entering into any 
future Swap Agreements and from enforcing any non-compete clauses that 
are still in effect from past Swap Agreements. The Orders also prohibit 
any Aaron's or Buddy's representatives from serving on the Board of 
Directors of any of their competitors, or any competitor's 
representatives from serving on the Aaron's or Buddy's Board. RAC's 
Order does not contain this prohibition because, unlike Buddy's and 
Aaron's, there is no evidence that a RAC representative has previously 
served on a competitor's Board of Directors. The Orders require Aaron's 
and Buddy's to establish antitrust compliance programs, while RAC must 
establish a compliance program related to its Order. Finally, all the 
Orders impose reporting requirements, and the Orders will terminate in 
20 years.
    The Commission does not intend this analysis to constitute an 
official interpretation of the proposed Orders or to modify their terms 
in any way.

    By direction of the Commission.
April J. Tabor,
Acting Secretary.
[FR Doc. 2020-03782 Filed 2-25-20; 8:45 am]
BILLING CODE 6750-01-P