FTC orders auto dealers to end newspaper advertising boycott

FTC orders auto dealers to end newspaper advertising boycott

10/09/95

CALIFORNIA–The Federal Trade Commission in early August announced that a group of Santa Clara County automobile dealers signed a FTC-drafted agreement prohibiting advertising boycotts of print and broadcast media.

The agreement came after the FTC investigated a car dealers organization for allegedly conspiring to withdraw advertising in the San Jose Mercury News last year.

FTC spokeswoman Bonnie Jansen would not say how the commission became involved in the incident, but an article published in the newspaper said that the FTC began an investigation after one of its employees learned of the alleged boycott through media coverage.

The incident began after the Mercury News published an article in 1994 instructing consumers how to analyze factory invoices on cars to bargain with dealers.

A few days after the article appeared, members of the Santa Clara County Motor Car Dealers Association met with the newspaper’s publisher and complained to him about the article, according to a 1995 report in the newspaper. The later article also said that the association members met in a hotel after meeting with the publisher.

The FTC investigation revealed that the dealers together decided to cancel and withhold advertising from the newspaper in June 1994. The paper lost more than $1 million from the advertising boycott, according to an estimate appearing in the 1995 article.

Under terms of the agreement, the association is prohibited from carrying out or encouraging or assisting in any boycott or concerted refusal to deal with any newspaper, periodical, television and radio stations.

“Advertising is a key source of price and other information and when competitors band together to restrict it, consumers lose,” said FTC Chairman Robert Pitofsky in an FTC statement. “That’s especially true here, where the boycott was orchestrated in retaliation to a news story that also contained important consumer information.”

While the agreement does not state that the association violated the law, it does mandate that the group take steps to prevent a boycott, including providing a copy of the agreement to new members for the next five years. The association also must include the agreement in its bylaws for twenty years.

The agreement was signed by the dealer association president in late April. The FTC will accept comment on the agreement for 60 days after it appears in the Federal Register. After the public comments have been evaluated, the agreement will be finalized and will become legally binding, according to the statement issued by the FTC. Spokeswoman Jansen said the FTC was working under no deadline to finalize the agreement. (In the matter of Santa Clara County Motor Car dealers Association)