U-Haul International, Inc. and AMERCO; Analysis of Agreement Containing Consent Order to Aid Public Comment, 35033-35035 [2010-14870]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 75, Number 118 (Monday, June 21, 2010)]
[Notices]
[Pages 35033-35035]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-14870]


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FEDERAL TRADE COMMISSION

[File No. 081 0157]


U-Haul International, Inc. and AMERCO; Analysis of Agreement 
Containing Consent Order to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint and the terms of the consent order -- embodied in the consent 
agreement -- that would settle these allegations.

DATES: Comments must be received on or before July 9, 2010.

ADDRESSES: Interested parties are invited to submit written comments 
electronically or in paper form. Comments should refer to``U-Haul 
AMERCO, File No. 081 0157'' to facilitate the organization of comments. 
Please note that your comment -- including your name and your state -- 
will be placed on the public record of this proceeding, including on 
the publicly accessible FTC website, at (https://www.ftc.gov/os/publiccomments.shtm).
    Because comments will be made public, they should not include any 
sensitive personal information, such as an individual'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. Comments also 
should not include any sensitive health information, such as medical 
records or other individually identifiable health information. In 
addition, comments should not include any ``[t]rade secret or any 
commercial or financial information which is obtained from any person 
and which is privileged or confidential. . . .,'' as provided in 
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and Commission Rule 
4.10(a)(2), 16 CFR 4.10(a)(2). 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), 16 CFR 4.9(c).\1\
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    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See FTC Rule 4.9(c), 16 CFR 
4.9(c).
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    Because paper mail addressed to the FTC is subject to delay due to 
heightened security screening, please consider submitting your comments 
in electronic form. Comments filed in electronic form should be 
submitted by using the following weblink: (https//
public.commentworks.com/ftc/U-HaulAmerco) and following the 
instructions on the web-based form. To ensure that the Commission 
considers an electronic comment, you must file it on the web-based form 
at the weblink: (https//public.commentworks.com/ftc/U-HaulAmerco). If 
this Notice appears at (https://www.regulations.gov/search/index.jsp), 
you may also file an electronic comment through that website. The 
Commission will consider all comments that regulations.gov forwards to 
it. You may also visit the FTC website at (https://www.ftc.gov/) to read 
the Notice and the news release describing it.
    A comment filed in paper form should include the ``U-Haul AMERCO, 
File No. 081 0157'' reference both in the text and on the envelope, and 
should be mailed or delivered to the following address: Federal Trade 
Commission, Office of the Secretary, Room H-135 (Annex D), 600 
Pennsylvania Avenue, NW, Washington, DC 20580. The FTC is requesting 
that any comment filed in paper form be sent by courier or overnight 
service, if possible, because U.S. postal mail in the Washington area 
and at the Commission is subject to delay due to heightened security 
precautions.
    The Federal Trade Commission Act (``FTC Act'') and other laws 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, 
whether filed in paper or electronic form. Comments received will be 
available to the public on the FTC website, to the extent practicable, 
at (https://www.ftc.gov/os/publiccomments.shtm). As a matter of 
discretion, the Commission makes every effort to remove home contact 
information for individuals from the public comments it receives before 
placing those comments on the FTC website. More information, including 
routine uses permitted by the Privacy Act, may be found in the FTC's 
privacy policy, at (https://www.ftc.gov/ftc/privacy.shtm).

FOR FURTHER INFORMATION CONTACT: Dana Abrahamsen (202-326-2906), Bureau 
of Competition, 600 Pennsylvania Avenue, NW, Washington, D.C. 20580.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 the 
Commission Rules of Practice, 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 Home Page 
(for June 9, 2010), on the World Wide Web, at (https://www.ftc.gov/os/actions.shtm). A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, Washington, 
D.C. 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

[[Page 35034]]

Analysis of Agreement Containing Consent Order to Aid Public Comment

    The Federal Trade Commission has accepted, subject to final 
approval, an agreement containing a proposed consent order with U-Haul 
International, Inc. and its parent company AMERCO (collectively 
referred to as ``U-Haul'' or ``Respondents''). The agreement settles 
charges that U-Haul violated Section 5 of the Federal Trade Commission 
Act, 15 U.S.C. Sec.  45, by inviting its closest competitor in the 
consumer truck rental industry to join with U-Haul in a collusive 
scheme to raise rates. The proposed consent order has been placed on 
the public record for 30 days to receive comments from interested 
persons. Comments received during this period will become part of the 
public record. After 30 days, the Commission will review the agreement 
and the comments received, and will decide whether it should withdraw 
from the agreement or make the proposed order final.
    The purpose of this analysis is to facilitate comment on the 
proposed order. The analysis does not constitute an official 
interpretation of the agreement and proposed order, and does not modify 
their terms in any way. Further, the proposed consent order has been 
entered into for settlement purposes only, and does not constitute an 
admission by Respondents that it violated the law or that the facts 
alleged in the complaint (other than jurisdictional facts) are true.

I. The Complaint

    The allegations of the complaint are summarized below:
    U-Haul is the largest consumer truck rental company in the United 
States. Edward J. Shoen is the Chairman, President and Director of 
AMERCO, and the Chief Executive Officer and Chairman of U-Haul 
International, Inc. U-Haul's primary competitors in the truck rental 
industry are Avis Budget Group, Inc. (``Budget'') and Penske Truck 
Leasing Co., L.P. (``Penske'').
A. Private Communications
    For several years leading up to 2006, Mr. Shoen was aware that 
price competition from Budget was forcing U-Haul to lower its rates for 
one-way truck rentals. In 2006, Mr. Shoen developed a strategy in an 
attempt to eliminate this competition and thereby secure higher rates. 
Mr. Shoen instructed U-Haul regional managers to raise rates for truck 
rentals, and then contact Budget to inform Budget of U-Haul's 
conditional rate increase and encourage Budget to follow, or U-Haul's 
rates would be reduced to the original level.
    At about the same time, Mr. Shoen also instructed local U-Haul 
dealers to communicate with their counterparts at Budget and Penske, 
with the purpose of re-enforcing the message that U-Haul had raised its 
rates, and competitors' rates should be raised to match the increased 
U-Haul rates.
    In late 2006 and thereafter, U-Haul representatives contacted 
Budget and invited price collusion as instructed by Mr. Shoen. The 
complaint includes specific allegations regarding the
    U-Haul operation in Tampa, Florida.
    U-Haul's regional manager for the Tampa area is Robert Magyar. In 
October 2006, Mr. Magyar received from Mr. Shoen the instructions 
described above. In response to Mr. Shoen's directive, Mr. Magyar 
increased U-Haul's rates for one-way truck rentals commencing in the 
Tampa area. Next, Mr. Magyar telephoned Budget and communicated to 
Budget representatives that U-Haul had raised its rates in Tampa, and 
that the new rates could be viewed on the U-Haul web-site.
    One year later, in October 2007, Mr. Magyar again contacted several 
local Budget locations. Mr. Magyar communicated to Budget that U-Haul 
had increased its one-way truck rental rates, and that Budget should 
increase its rates as well. In an e-mail message addressed to U-Haul's 
most senior executives, Mr. Magyar related the conversations, as 
follows:

 I have also called 3 major Budget locations in Tampa and told them who 
I am, I spoke about the .40 per mile rates to SE Florida and told them 
I was killing them on rentals to that area and I am setting new rates 
to the area to increase revenue per rental. I encouraged them to 
monitor my rates and to move their rates up. And they did.
B. Public Communications
    In late 2007, Mr. Shoen decided that U-Haul should attempt to lead 
an increase in rates for one-way truck rentals across the United 
States. Mr. Shoen understood that this rate increase could be sustained 
only if Budget followed. On November 19, 2007, Mr. Shoen instructed U-
Haul regional managers to raise prices. His expectation was that Budget 
would follow this rate increase.
    However, Budget did not immediately match U-Haul's higher rates. U-
Haul instructed its regional managers to maintain the new, higher rates 
for a while longer, in case Budget should take note and decide to 
follow.
    U-Haul held an earnings conference call on February 7, 2008. Mr. 
Shoen was aware that Budget representatives would monitor the call. Mr. 
Shoen opened the earnings conference call with a short statement, 
noting U-Haul's efforts ``to show price leadership.''\2\ When asked for 
additional information on industry pricing, Mr. Shoen made the 
following points:
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    \2\ A complete transcript of the earnings conference call is 
annexed to the complaint as Exhibit A.
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    1.U-Haul is acting as the industry price leader. The company has 
recently raised its rates, and competitors should do the same.
    2.To date, Budget has not matched U-Haul's higher rates. This is 
unfortunate for the entire industry.
    3. U-Haul will wait a while longer for Budget to respond 
appropriately, otherwise it will drop its rates.
    4. In order to keep U-Haul from dropping its rates, Budget does not 
have to match U-Haul's rates precisely. U-Haul will tolerate a small 
price differential, but only a small price differential. Specifically, 
a 3 to 5 percent price difference is acceptable.
    5. For U-Haul, market share is more important than price. U-Haul 
will not permit Budget to gain market share at U-Haul's expense.
    With regard to both the private and public communications, U-Haul 
acted with the specific intent to facilitate collusion and increase the 
prices it could charge for truck rentals.

II. Analysis

    The term ``invitation to collude'' describes an improper 
communication from a firm to an actual or potential competitor that the 
firm is ready and willing to coordinate on price or output. Such 
invitations to collude increase the risk of anticompetitive harm to 
consumers, and as such, can violate Section 5 of the FTC Act.\3\
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    \3\ In the Matter of Valassis Communications, Inc., 141 F.T.C. 
------ (C-4160) (2006); In the Matter of MacDermid, Inc., 129 F.T.C. 
------ (C-3911) (2000); In the Matter of Stone Container Corp., 125 
F.T.C. 853 (1998); In the Matter of Precision Moulding Co., 122 
F.T.C. 104 (1996); In the Matter of YKK (USA) Inc., 116 F.T.C. 628 
(1993); In the Matter of A.E. Clevite, Inc., 116 F.T.C. 389 (1993); 
In the Matter of Quality Trailer Products Corp., 115 F.T.C. 944 
(1992). In addition, invitations to collude may be violations of 
Section 2 of the Sherman Act as acts of attempted monopolization 
(United States v. American Airlines, 743 F.2d 1114 (5th Cir. 1984), 
cert. dismissed, 474 U.S. 1001 (1985)); as well as violations under 
the federal wire and mail fraud statutes, (United States v. Ames 
Sintering Co., 927 F.2d 232 (6th Cir. 1990)).
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    If the invitation is accepted and the two firms reach an agreement, 
the Commission will allege collusion and refer the matter to the 
Department of Justice for a criminal investigation. In

[[Page 35035]]

this case, the complaint does not allege that U-Haul and Budget reached 
an agreement, despite Mr. Magyar's report to his bosses that he 
privately encouraged Budget to raise its rates ``and they did.'' See 
Complaint Paragraph 19.
    Even if no agreement was reached it does not necessarily mean that 
no competitive harm was done.\4\ An unaccepted invitation to collude 
may facilitate coordinated interaction by disclosing the solicitor's 
intentions and preferences. For example, in this case Budget learned 
from Mr. Magyar that if Budget raised its rates U-Haul would not 
undercut Budget. Thus, the improper communication from U-Haul could 
have encouraged Budget to raise rates. Similarly, the public statements 
made by the CEO of U-Haul could have encouraged competitors to raise 
rates.
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    \4\ The Commission has previously explained that there are 
several legal and economic reasons to punish firms that invite 
collusion even when acceptance cannot be proven. First, it may be 
difficult to determine whether a particular solicitation has or has 
not been accepted. Second, the conduct may be harmful and serves no 
legitimate business purpose. Third, even an unaccepted solicitation 
may facilitate coordinated interaction by disclosing the intentions 
or preferences of the party issuing the invitation. In the Matter of 
Valassis Communications, Inc., Analysis of Agreement Containing 
Consent Order To Aid Public Comment, 71 Fed. Reg. 13976, 13978-79 
(Mar. 20, 2006). See generally P. Areeda & H. Hovenkamp, VI 
Antitrust Law ]1419 (2003).
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    Although this case involves particularly egregious conduct, it is 
possible that less egregious conduct may result in Section 5 liability. 
It is not essential that the Commission find repeated misconduct 
attributable to senior executives, or define a market, or show market 
power, or establish substantial competitive harm, or even find that the 
terms of the desired agreement have been communicated with precision.

III. The Proposed Consent Order

    U-Haul has signed a consent agreement containing the proposed 
consent order. The proposed consent order consists of seven sections 
that work together to enjoin U-Haul from inviting collusion and from 
entering into or implementing a collusive scheme.
    Section II, Paragraph A of the proposed consent order enjoins U-
Haul from inviting a competitor to divide markets, to allocate 
customers, or to fix prices. Section II, Paragraph C prohibits U-Haul 
from entering into, participating in, maintaining, organizing, 
implementing, enforcing, inviting, offering or soliciting an agreement 
with any competitor to divide markets, to allocate customers, or to fix 
prices. Section II, Paragraph B bars U-Haul from discussing rates with 
its competitors, with a proviso permitting legitimate market research.
    The proviso in Section II, Paragraph D prevents the proposed order 
from interfering with U-Haul's efforts to negotiate prices with 
prospective customers, and it would permit U-Haul to provide investors 
with considerable information about company strategy. This proviso also 
permits U-Haul to communicate publicly any information required by the 
federal securities laws.
    Sections III, IV, V, and VI of the proposed order include several 
terms that are common to many Commission orders, facilitating the 
Commission's efforts to monitor respondents' compliance with the order. 
Section IV, Paragraph A requires a periodic submission to the 
Commission of unredacted copies of certain internal U-Haul documents. 
This provision is necessary because U-Haul impeded the Federal Trade 
Commission's investigation of this matter. Specifically, U-Haul 
submitted to the Commission, in response to a subpoena duces tecum, 
documents authored by Mr. Shoen, from which were redacted many of the 
sentences quoted in the complaint. In the Commission's view, there was 
no justification for the redaction. The proposed order should deter 
repetition of this conduct.
    Finally, Section VII provides that the proposed order will expire 
in 20 years.
    By direction of the Commission.

Donald S. Clark,
Secretary.

Statement of Chairman Leibowitz, Commissioner Kovacic, and Commissioner 
Rosch

    The Commission today has entered into a consent agreement with U-
Haul and its parent company, AMERCO, resolving the Commission's 
allegation that they attempted to collude on truck rental prices. The 
parties have settled an invitation-to-collude case and not a Sherman 
Antitrust Act Section 1 conspiracy case. Put differently, the complaint 
in this case alleges an unfair method of competition in violation of 
Section 5 of the FTC Act that does not also constitute an antitrust 
violation.
    Invitations to collude are the quintessential example of the kind 
of conduct that should be - and has been - challenged as a violation of 
Section 5 of the Federal Trade Commission Act,\5\ which may limit 
follow-on private treble damage litigation from Commission action while 
still stopping inappropriate conduct. In contrast to conspiracy claims 
that would violate Section 1, invitations to collude do not require 
proof of an agreement; nor do they require proof of an anticompetitive 
effect. The Commission has not alleged that Respondents entered into an 
agreement with Budget or any other competitors in violation of Section 
1. Today's Commission action is instead based on evidence that 
Respondents unilaterally attempted to enter into such an agreement. The 
Commission therefore has reason to believe that Respondents engaged in 
conduct that is within Section 5's reach.
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    \5\ In re Valassis Commc'ns, Inc., F.T.C. File No. 051-008, 2006 
FTC LEXIS 25 (April 19, 2006) (Complaint); In re MacDermid, Inc., 
F.T.C. File No. 991-0167, 1999 FTC LEXIS 191 (Feb. 4, 2000) 
(Complaint, Decision and Order); In re Stone Container Corp., 125 
F.T.C. 853 (1998) (June 3, 1998) (Complaint, Decision and Order); In 
re Precision Moulding Co., 122 F.T.C. 104 (Sept. 3, 1996) 
(Complaint, Decision and Order); In re YKK (USA) Inc., 116 F.T.C. 
628 (July 1, 1993) (Complaint); In re A.E. Clevite, Inc., 116 F.T.C. 
389 (June 8, 1993) (Complaint); In re Quality Trailer Products 
Corp., 115 F.T.C. 944 (Nov. 5, 1992) (Complaint).
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[FR Doc. 2010-14870 Filed 6-18-10: 8:45 am]
BILLING CODE 6750-01-S