Ford Motor Company

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF FORD MOTOR COMPANY CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket 9113. Complaint, July 19, 1918-Decision, Nov. 16, 1983 This consent order dismisses Count I of the complaint charging Ford Motor Co., a Dearborn, Mich. motor vehicle manufacturer, with alleged violations of Section 2(d} of the Clayton Act, and requires the manufacturer, among other things, to cease paying anything of value to daily rental companies or daily rental systems for advertising furnished by such firms or systems, unless advertising payments are made available to competing independent daily rental companies in accord­ ance with terms set forth in the order. Within 90 days from the effective date of the order, and annually thereafter, Ford is required to inform those daily rental companies having no joint advertising agreement with respondent or any other automobile manufacturer, ofadvertising programs available to daily rental compa­ nies that agree to feature Ford products in their advertising and fleets. The order further requires that Ford make a good faith effort to negotiate advertising agree­ ments with such companies. Provisions of the order are to remain in effect for a period of ten years and apply only to agreements relating to daily rental advertis­ ing within the United States.

Appearances For the Commission: Robert W. Rosen and Paul Kane. For the respondent: Richard E. Carlton, New YorkCity and Charles E. Dorkey, III, Washington, D.C., of Sullivan & Cromwell, and Wil­ liam A. Zolbert and John R. Phillips, in-house counsel, Dearborn, Mich.

COMPLAINT The Federal Trade Commission, having reason to believe that re­ spondent, Ford Motor Company [hereinafter referred to as Ford], has violated and is now violating the provisions of Section 2(d) of the Clayton Act, as amended (15 U.S.C.13), and ofSection 5 ofthe Federal Trade Commission Act, as amended (15 U.S.C. 45), and that a proceed­ ing by it in respect thereof is in the public interest, hereby issues its complaint charging as follows:

PARAGRAPH 1. Ford is a corporation organized, existing and doing business under the laws of the State of Delaware, with its principal office and place ofbusiness located at The American Way, Dearborn, Michigan.

1732 Complaint PAR. 2. Ford is the second largest manufacturer of automobiles in the United States. In 1977, Ford sold approximately 3.9 million au­ tomobiles and trucks in the United States. During 1977, Ford's net sales exceeded $37,841,000,000. Ford's net income during 1976 ex­ ceeded $1,672,000,000.

PAR. 3. In the course and conduct ofits business, Ford has been and is now engaged in commerce, as Hcommerce" is defined in the Clayton Act, as amended, and Ford's methods ofcompetition are now and have been in or affecting commerce asucommerce" is defined in the Feder­ al Trade Commission Act, as amended.

The acts and practices herein described in connection with Ford's offers and grants ofadvertising allowances and other expenses [here­ inafter collectively referred to as programs] are and have been in commerce, as Hcommerce" is defined in the Clayton Act, as amended, and are now and have been in or affecting commerce as the term Hcommerce" is defined in the Federal Trade Commission Act, as amended.

PAR. 4. Ford sells its automobiles and trucks [hereinafter referred to as vehicles] to dealers which, in turn, sell the vehicles to rental and leasing companies [hereinafter referred to as Ford customers]. As more particularly described herein, Ford deals directly with Ford customers in administering its programs in connection with the sale of its vehicles.

PAR. 5. In the course and conduct of its business, Ford has paid or contracted for the payment ofsomething ofvalue to or for the benefit ofsome ofits Ford customers, as compensation or in consideration for services or facilities furnished or agreed to be furnished by or through such Ford customers in connection with the distribution of vehicles sold by Ford. Ford has not made or offered to make such payments for services or facilities available on proportionally equal terms to all of its other Ford customers competing with such favored Ford custom­ ers.

For instance, Ford has engaged in programs with certain Ford customers, including but not limited to, Hertz Corporation, whereby payments have been made for advertisements linking vehicles sold by Ford with the vehicles offered for rent or lease by Ford customers to the value and benefit ofsaid customers. Typical, are advertisements placed by Hertz corporation which include phrases such as: ~~Hertz rents Fords and other fine cars." Payments for these programs have been made by Ford to Ford customers, or their agents..Ford has not offered to pay, has not paid, or otherwise made payments available on proportionally equal terms to all ofits Ford customers competing with the favored Ford customers.

Decision and Order 102 F.T.C. COUNT I Alleging violation of Section 2(d) of the Clayton Act, as amended. PAR. 6. The allegations of Paragraphs One through Five are incor­ porated by reference herein as if fully set forth verbatim. PAR. 7. The acts and practices of respondent, as alleged above, are in violation ofsubsection (d) ofSection 2 ofthe Clayton Act, as amend­ ed (15 U .S.C. 13).

COUNT II Alleging violation of Section 5 of the Federal Trade Commission Act, as amended.

PAR. 8. The allegations of Paragraph One through Five are incor­ porated by reference herein as if fully set forth verbatim. PAR. 9. The aforesaid acts and practices ofrespondent Ford violate the policy ofSection 2(d) ofthe Clayton Act, as amended; are all to the prejudice ofthe public; have the tendency and effect ofpreventing and hindering competition and may tend to create a monopoly in the vehicle rental or leasing businesses; and constitute unfair methods of competition in commerce and unfair acts or practices in or affecting commerce, within the intent and meaning and in violation ofSection 5 of the Federal Trade Commission Act, as amended (15 U.S.C. 45). DECISION AND ORDER The Commission having heretofore issued its complaint charging the respondent named in the caption hereofwith violation ofSection 2(d) of the Clayton Act, as amended, and Section 5 of the Federal Trade Commission Act, as amended, and the respondent having been served with a copy ofthat complaint, together with a notice ofcontem­ plated relief; and The respondent, its attorney, and counsel for the Commission hav­ ing thereafter executed an agreement containing a consent order, an admission by the respondent ofall the jurisdictional facts set forth in the complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondent that the law has been violated as alleged in such com­ plaint, and waivers and other provisions as required by the Commis­ sion's Rules; and The Secretary ofthe Commission having thereafter withdrawn this matter from adjudication in accordance with Section 3.25(c) of its Rules; and The Commission having considered the matter and having there­ upon accepted the executed consent agreement and placed such 1732 Decision and Order agreement on the public record for a period of sixty (60) days, and having duly considered the comments filed thereafter by interested persons pursuant to Section 3.25 ofits Rules, now in further conformi­ ty with the procedure prescribed in Section 3.25(f) of its Rules, the Commission hereby makes the following jurisdictional findings and enters the following order:

1. Respondent Ford Motor Company is a corporation organized, existing and doing business under and by virtue of the laws of the State ofDelaware with its office and principal place ofbusiness locat­ ed at The.American Way, in the City ofDearborn, State ofMichigan. 2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondent, and the proceeding is in the public interest.

ORDER For purposes of this order, the following definitions apply: (a) A daily rental company is an entity, other than one affiliated with a franchised new car dealer of any manufacturer or distributor ofautomobiles, engaged primarily in the business of renting current model-year automobiles to the public on the basis of a flat rate for hourly, daily, weekly or monthly use or on the basis ofacombination of a flat rate and a mileage rate.

(b) A daily rental system is any group of daily rental companies affiliated by ownership, by licensor-licensee, franchisor-franchisee or agency relationship, or similar arrangement, or operating under a common trade name, trademark or logo or through a common or shared reservation system.

(c) An independent daily rental company is a daily rental company that operates during any model year not more than one thousand (1000) automobiles for use in daily rental service and that is not affiliated with a daily rental system. Calculation offleet size shall be made by averaging the number of automobiles in the fleet in daily rental service at quarterly or other regular intervals during the rele­ vant model year.

(d) An independent daily rental system is a daily rental system that operates during any model year not more than one thousand (1000) automobiles in daily rental service. Calculation of fleet size shall be made by averaging the number of automobiles in the fleet in daily rental service at quarterly or other regular intervals during the rele­ vant model year.

(e) Ford products refers to automobiles manufactured, assembled, distributed or sold by Ford Motor Company. (;

( ~ Decision and Order 102 F.T.C. (f) Model year is the period between October 1 and September 30 of the following year, and shall be determined for particular vehicles by reference to the vehicle identification number. I It is ordered, That Count I ofthe Complaint be, and the same hereby is, dismissed.

II It is further ordered, That respondent, Ford Motor Company, a corporation, its officers, directors, agent~, representatives, employees, successors and assigns, directly or indirectly, ·through any corporate or other device in connection with the furnishing ofadvertising by or through daily rental companies or daily rental systems in or affecting commerce, as ucommerce" is defined in the Federal Trade Commis­ sion Act, shall forthwith:

Cease and desist from paying or contracting to pay anything of value to or for the benefit of any daily rental company or any daily rental system as compensation or consideration for any advertising furnished by or through such daily rental company or daily rental system, unless the payment, compensation or consideration is made available by Ford on terms as provided in Paragraph III hereof to all independent daily rental companies and independent daily rental systems competing with such d~ily rental company or daily rental system.

III It is further ordered, That Ford shall be in full compliance with Paragraph II of this order if it offers or causes to be offered to all independent daily rental companies and independent daily rental systems an advertising program for the joint promotion of Ford products and the services ofthe independent daily rental company or the independent daily rental system, which contains the following provisions:

A. Ford shall reimburse any independent daily rental company or independent daily rental system agreeing to feature current model year Ford products in its advertising and fleet fifty (50) percent (un­ less that percentage is modified in accordance with the provisions of Paragraph III.G. of this order) of the cost of a yellow pages display advertisement featuring Ford products up to one quarter page (double 1732 Decision and Order half column) in size, under the classification ttAutomobile Renting and Leasing," to appear in the hometown telephone directory or direc­ tories where the main rental offices of the ·independent daily rental company or independent daily rental system are located. B. Any independent daily rental company or independent daily rental system accepting the offer described in Paragraph III.A. ofthis order shall be offered the option of participating in additional adver­ tising featuring Ford products and the services of the independent daily rental company or independent daily rental system, for which Ford will reimbu:r:se the independent daily rental company or the independent daily rental system fifty (50) percent (unless that per­ centage is modified in accordance with the provisions of Paragraph III.G. ofthis order) ofthe cost ofadvertising featuring Ford products. The criteria for determining what advertisements and what advertis­ ing costs are reimbursable for independent daily rental companies and independent daily rental systems participating in joint advertis­ ing programs with Ford shall be the same as for all other daily rental companies and daily rental systems participating in joint advertising programs with Ford.

C. To be eligible for the advertising program set forth in Paragraphs III.A. or III.B. of this order an independent daily rental company or . independent daily rental system must agree to feature Ford products in its fleet and to purchase at least twenty (20) Ford products ofthe model year during which the advertising featuring Ford products appears.

D. Ford may require that the independent daily rental company or independent daily rental system substantiate its purchases of Ford products and itsfleet size. Ford may also require substantiation, simi­ lar to the substantiation required ofother daily rental companies and daily rental systems, from. the independent daily rental company or independent daily rental system of its expenditures for advertising featuring Ford products, through the submission of bills, invoices, copies of advertisements or other reasonable documentation and other procedures for verification of such expenditures. E. Ford may provide for termination or nonrenewal ofjoint adver­ tising programs for cause. Such cause may include, for example, false or deceptive advertising or claims for payments, advertising which, or in media which, reflect negatively on Ford, its products or its goodwill or failure to maintain reasonable standards of automobile mainte­ nance, safety or cleanliness. Without limitation affords other rights under this order, Ford may decline to enter into a joint advertising program where it reasonably appears such affiliation would negative­ ly reflect on Ford, its products or its goodwill. Any decision by Ford to decline to enter into, decline to renew, or terminate a joint advertis­ Decision and Order 102 F.T.C. ing program under the provisions ofthis subparagraph shall be made on the basis of standards which are consistent for all daily rental companies and daily rental systems. Where Ford exercises its right hereunder to decline to enter into, to terminate or not to renew a joint advertising program on the basis that such an affiliation would nega­ tively reflect on Ford, its products or its goodwill, it shall maintain a written record ofthe specific basis for such exercise and the relevant dates relating thereto. Such records shall be retained for two years following exercise of such right or until expiration of this order, whichever is sooner, and shall be made available to the Commission upon request following reasonable notice.

F. Ford shall, within ninety (90) days after service of a final order and annually thereafter commence reasonable action, in good faith,. to inform all independent daily rental companies and independent daily rental systems of the availability of the advertising program contemplated by this order.

G. In the event Ford or any ofits divisions agrees to reimburse more or less than fifty (50) percent of tl).e type of advertising expenditures described in Paragraphs III.A. and III.B. above for any daily rental company or any daily rental system, then Ford or, in the case of a particular division ofFord, that division shall offer to reimburse to all independent daily rental companies and independent daily rental systems the highest percentage ofreimbursement offered to any daily rental company or daily rental system by Ford or that particular division of Ford.

IV It is further ordered, That:

A. Ford shall within ninety (90) days after service of a final order and annually thereafter advise all daily rental systems and daily rental companies not affiliated with a daily rental system, which do not have a joint advertising agreement with Ford and which are not independent daily rental companies or independent daily rental sys­ tems, ofthe existence ofadvertising programs for daily rental compa­ nies and daily rental systems agreeing to feature Ford products in their advertising and fleets.

B. Ford shall in good faith seek to negotiate an agreement with: (1) any daily rental company or daily rental system that is advised pursu­ ant to Paragraph IV A. hereof of the existence of Ford advertising programs and that does not have a joint advertising agreement with any other manufacturer or distributor of automobiles; and (2) any daily rental system, or any daily rental company that is not affiliated 1732 Decision and Order with a daily rental system, other than an independent daily rental system or independent daily rental company, that already has a joint advertising agree:ment with Ford which is due to expire on or before the last day ofthat model year. Failure to reach agreement after good faith efforts to do so shall not constitute a violation of this Order. v It is further ordered, That nothing herein contained shall prevent Ford from carrying out the provisions of any advertising agreement with any daily rental company or daily rental system that shall have been entered into prior to January 1, 1982. VI It is further ordered, That the provisions ofthis order shall remain in effect for a period often (10) years after service ofa final order, and shall apply only to agreements relating to daily rental advertising within the United States.

VII It is further ordered, That nothing herein shall preclude Ford from offering or participating in an advertising program on terms intended in good faith to meet a bona fide offer received by a daily rental company or daily rental system from another manufacturer or dis­ tributor of automobiles, provided that Ford shall have the burden of proving that it was acting in good faith to meet such~ bona fide offer, and the provisions ofparagraphs II, III and IV ofthis order shall not apply to such offer or program.

VIII It is further ordered, That in the event the proceeding against Gen­ eral Motors Corporation, respondent in Docket No. 9114, results in a final adjudicated order in accordance with Section 5(g)-(k) ofthe Fed­ eral Trade Commission Act, 15 U.S.C. 45, or in a consent order, pre­ scribing less restrictive standards or less demanding obligations than any corresponding provision of this order, then Ford shall be bound only by the less restrictive standards and less demanding obligationf! set forth in such order. In the event the aforesaid proceeding against1 General Motors Corporation is dismissed, then Ford shall no longe1 be bound by the provisions ofthis order. In the event the Commissior issues a final Trade Regulation Rule prescribing less restrictive stan Decision and Order 102 F.T.C. dards or less demanding obligations on any manufacturer, assembler or distributor ofautomobiles than any corresponding provision ofthis order, then Ford shallonly be bound by the standards set forth in such Rule.

IX It is further ordered, That respondent shall within one hundred and twenty (120) days after service ofa final order, file with the Commis­ sion a report, in writing, setting forth in detail the manner and form in which it has complied with this order and shall file such other reports as may, from time to time, be required to assure compliance with the terms and conditions of this order. X It is further ordered, That respondent notify the Commission at least thirty (30) days prior to any proposed change in the corporate respondent such as dissolution, assignment or sale resulting in the emergency of a successor corporation, the creation or dissolution of subsidiaries or any other change in the corporation which may affect compliance obligations arising out of the order. ( \( \l 1741 Complaint