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Topic: Freightliner
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| Agency: Federal Trade Commission
Date: 23 December 1996 |
The Franchise Rule requires the seller of a franchise to provide each prospective franchisee with detailed information about the nature of its business and terms of the proposed franchise relationship. Since 1980, the Commission has granted exemptions from the Rule to several other automobile companies and their subsidiaries.
Freightliner, a Portland, Oregon-based corporation, is a wholly-owned subsidiary of the Daimler-Benz group and a sister corporation of Mercedes-Benz of North America. Freightliner manufacturers heavy-duty and medium-duty trucks, truck parts, and military tractors, and enters into distributorship agreements with businesses throughout the United States to sell and service Freightliner's trucks and parts.
In its order granting the exemption, the Commission found that the conditions creating the opportunity for abuses in the sale of franchises are not present in the licensing of Freightliner dealers. The Commission found that Freightliner dealers are highly sophisticated and experienced business men and women who make significant investments, and have more than adequate time to consider the dealership offer and obtain information about it before investing. The Commission also noted that Freightliner has a relatively small number of dealers; that Freightliner dealers usually have years of experience in truck or other heavy duty equipment sales; and that prospective dealers participate in an extensive application and approval process during which time information is exchanged between the parties. The investment costs for Freightliner dealerships are approximately $4 million.
The abuses that the disclosure remedy of the FTC's Franchise Rule are designed to prevent are most likely to occur when a potential investor lacks business experience; when there is a significant imbalance of information between the franchisor and franchisee; and when there is inadequate time to review franchise agreements and other documents. These factors are not present in Freightliner's relationship with its prospective dealers. The Commission has reviewed the potential for unfair or deceptive acts or practices in connection with the licensing of motor vehicle dealership franchises on six prior occasions since 1980, and found no evidence or likelihood of a significant pattern or practice of abuse by any of the petitioners.
The Commission's vote to grant Freightliner's exemption from the Franchise Rule was 5-0.
Copies of the Commission order granting exemption and of the petition itself are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest FTC news as it is announced, call the FTC's NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web Site at: http://www.ftc.gov
(FTC Matter No. R511003)