Detroit Auto Dealers Ass'n, Inc., In re

• Decision Date: 22 May 1992
• Docket Number: PONTIAC-DATSU,Nos. 89-3388,INC,s. 89-3388
• Citation: 955 F.2d 457
• Parties: 139 L.R.R.M. (BNA) 2401, 60 USLW 2509, 121 Lab.Cas. P 10,020, 1992-1 Trade Cases P 69,696 In re DETROIT AUTO DEALERS ASSOCIATION, INC., et al., BARNETT, et al., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent. to 89-3392.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 457

955 F.2d 457

139 L.R.R.M. (BNA) 2401, 60 USLW 2509,

121 Lab.Cas. P 10,020,

1992-1 Trade Cases P 69,696

In re DETROIT AUTO DEALERS ASSOCIATION, INC., et al.,

BARNETT PONTIAC-DATSUN, INC., et al., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent.

Nos. 89-3388 to 89-3392.

United States Court of Appeals, Sixth Circuit.

Argued March 12, 1990.

Decided Jan. 31, 1992.

Rehearing and Rehearing En Banc

Denied May 22, 1992.

Kathleen McCree Lewis, Dykema & Gossett, Roy R. Hunsinger (briefed), Stringari, Fritz, Kreger, Ahearn, Bennett & Hunsinger, Detroit, Mich., Glenn A. Mitchell (argued and briefed), Stein, Mitchell & Mezines, Washington, D.C., for petitioners in No. 89-3391.

Donald S. Clark, Secretary, David C. Shonka (argued and briefed), Office of the General Counsel, F.T.C., Washington, D.C., for respondent.

Lawrence F. Raniszeski (briefed), Colombo & Colombo, Birmingham, Mich., Kathleen McCree Lewis, Dykema & Gossett, Detroit, Mich., Glenn A. Mitchell (argued and briefed), Stein, Mitchell & Mezines, Washington, D.C., for petitioners in No. 89-3390.

Kathleen McCree Lewis, Dykema & Gossett, Detroit, Mich., James F. Rill, Jeffrey W. King, Christopher J. MacAvoy (briefed), Collier, Shannon & Scott, Glenn A. Mitchell (argued and briefed), Stein, Mitchell & Mezines, Washington, D.C., for petitioners in No. 89-3392.

Kathleen McCree Lewis, Dykema & Gossett, Detroit, Mich., Glenn A. Mitchell (argued and briefed), Basil J. Mezines (briefed), David U. Fierst (briefed), Stein, Mitchell & Mezines, Washington, D.C., for petitioners in No. 89-3388.

Kathleen McCree Lewis, Dykema & Gossett, Detroit, Mich., Glenn A. Mitchell (argued and briefed), Stein, Mitchell & Mezines, Howard E. O'Leary (briefed), Washington, D.C., for petitioners in No. 89-3389.

Before RYAN, Circuit Judge, LIVELY and WELLFORD ^*, Senior Circuit Judges.

WELLFORD, Senior Circuit Judge.

The respondent, Federal Trade Commission (FTC), issued a final order bearing upon trade practices of Detroit area automobile dealers after a lengthy investigation on February 22, 1989. By this challenged order, FTC held invalid and illegal an agreement or agreements to limit hours of operations among the competing automobile dealers involved in this controversy, and their trade associations. Most of the more than ninety dealers, some eighteen trade associations, and seventy-eight individual principal owners or operators of the automobile dealerships have petitioned to set aside the FTC order.

In 1984, the FTC issued an administrative complaint against petitioners and others charging them with arbitrary and anti-competitive action in keeping their automobile showrooms closed all day Saturdays and on three weekday evenings through alleged coercive and unlawful means (an asserted violation of 15 U.S.C. § 45). After hearings on this complaint, the administrative law judge (ALJ) issued an initial decision on July 14, 1987, in which he found that petitioners' agreement to limit showroom hours was engendered by labor disputes with automobile salesmen, and concluded that there was no violation as charged. FTC counsel appealed to the entire Commission, which unanimously reversed the ALJ decision, holding that, at least in part, the agreement constituted an effort by competitors to avoid collective bargaining with salesmen and, ultimately, unionization.

The Commission held that the agreement to limit showroom hours was not the product of arms' length negotiations, was designed to frustrate labor negotiations with the salesmen, and that antitrust laws should be held to apply to this type conduct. In sum, the Commission held that the claimed nonstatutory exemption did not apply and that the agreement brought about a restraint on "an important form of output and a dimension in which new car dealers compete" without an adequate efficiency showing, or other justification.

Petitioners defended unsuccessfully against the administrative charges by contending that there was no adverse effect on new car prices in the Detroit area, and that, under all the circumstances, the agreement was reasonable and legitimate. The order, which is now the subject of appeal, barred dealers from continuing to operate under the agreement's limited showroom hours, and it prohibited petitioners from inducing others to abide by the agreement in this respect. The order required dealers to stay open at least 64 hours per week for one year and to advertise these extended open hours of operation. Petitioner associations are required to keep transcripts of all business meetings for five years and (1) to amend any bylaws inconsistent with the order; (2) to prohibit discussions of hours of operation; and (3) to expel members who violate the proscription about hours of operation. Finally, the FTC order mandated certain reporting in order to monitor compliance, and the furnishing of copies of the order to employees. Petitions for review of individual dealers and associations concerned were timely filed and have been consolidated. They meet the requirements of Minority Employees v. Tennessee, 901 F.2d 1327 (6th Cir.), cert. denied sub nom., Davis v. Tennessee Dept. of Employment Sec., --- U.S. ----, 111 S.Ct. 210, 112 L.Ed.2d 170 (1990), in all respects. ¹

It is undisputed that the business of each petitioner is in retail sales of new automobiles in the Detroit metropolitan area, and that the agreement in dispute among petitioners is not directly mandated by any multi-employer collective bargaining agreement. In 1959, when a labor organization began efforts to unionize salesmen, most of the petitioners and other dealerships selling new cars in Detroit were open every weekday night and on Saturdays as well. Two competing unions were involved in unionization attempts by 1960. Each demanded multiemployer bargaining, uniform work weeks, shorter hours, higher commissions, and other benefits. As a consequence, by agreement among themselves, petitioners, and others, began to reduce hours that showrooms were open. ² The FTC complained that the series of agreements resulting in shorter hours were not with unions nor with salesmen, but were arranged among petitioners to forestall growing and bitter disputes concerning hours of operation. Petitioners emphasize that the agreements were the result of demands by salespersons, or their purported representatives, to reduce the long working hours without reducing their income.

There is little dispute about the fact that at dealer association meetings union demands were discussed and the associations and members determined to resist unionization vigorously. The unions lost most of their 1959 efforts to unionize after two night closings were effectuated. By 1973, petitioners concede that they were closed at night except Mondays and Thursdays, and also closed all day Saturdays. The ALJ was persuaded by petitioners that the reduction of hours was "the result of a labor dispute--the give and take of a struggle between labor and management." (Emphasis added). The ALJ also held that "[s]ome closings were in fact collectively bargained," and that "[s]ales employees negotiated a prohibition on reopening." He also decided that "sales employees and their unions reinforced their demands for uniform shorter hours by intimidation and violence on many occasions and over many years," and that "[s]ome dealers agreed orally and informally with sales employees and their unions to meet the demands for uniform shorter hours." All this, he concluded, was "part of the collective bargaining process." At the same time, it seems clear that DADA was engaged in concerted and consistent efforts to "persuade" those uncooperative dealers who were not complying with the shorter hours arrangement to do so. Not only did the ALJ find the labor exemption to apply, he also concluded that the constricted hours of operation did not bring about any substantial injury to competition nor to consumers in the form of higher prices for new cars.

During the 1970s, the Teamsters Union made further organizational efforts, including picketing and institution of strikes, on behalf of dealer sales personnel using Saturday closings as a basis for recruitment. The union was unable to attain this general goal, however, through collective bargaining with dealers, their association, or their representatives, but the Teamsters Union did attain agreements not to extend existing hours of operations. Both the dealers and their sales personnel were concerned about competitors staying open longer hours and thereby drawing business away from "cooperating" dealers. There was some evidence that dealers thought the Saturday closings brought about less customer shopping for lower prices and thus increased dealer profit margins. There was evidence of violence and intimidation by salespersons and others, including union sympathizers, to bring about shorter hours. Petitioners uniformly and consistently resisted multi-employer bargaining to thwart the union's efforts in this regard. The Commission concedes that a "decision not to form a multi-employer bargaining unit is not fatal to respondents' nonstatutory labor exemption defenses."

FTC points out that Detroit is the only area in the country which has new car dealers closed on Saturdays. Petitioners claim the closings came about to accomplish labor peace and in response to union and salespersons' constant pressure. Dealers who did open, or attempt to open, on Saturdays have been subject to picketing, threats, violence, and damage to their property, and some of this picketing has been on the part of sales personnel.

This case presents an issue of first impression and of great difficulty and has been vigorously pressed by both parties. Petitioners' position is set forth succinctly in their brief at 9:

The Federal Trade Commission erred as a matter of law and of fact in ruling that the uniform reduction of business hours by automobile dealers was not exempt from the antitrust laws...