AUTO RENTALS: Trying Too Hard?

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Travelers renting cars at most U.S. airports can choose to drive away the Fords of Hertz, the Plymouths of Avis or the Chevies of National Car Rental. Last week the Federal Trade Commission charged that the Big Three of the auto-rental business had combined to make sure that consumers got no other choice. Hertz, Avis and National, said the FTC, have been conspiring since 1968 to freeze competitors out of airport trade, which constitutes 70% of the $700 million-a-year business, and to keep car-rental prices artificially high.

The FTC alleged that Hertz, Avis and National conspired to submit identical bids for concession rights at airports, and persuaded airport managers to set requirements for concessions that disqualified competitors. One rule they are alleged to have promoted requires that "concessionaires have a nationwide reservations network." The FTC also accused the three companies of fixing rental prices and stated that smaller competitors kept out of the airports charged 10% to 40% less.

Booted Out? The commission further charged the rental companies with "entering into anticompetitive arrangements" with automakers—Hertz with Ford, Avis with Chrysler and National with General Motors. According to the complaints, the arrangements provide the rental companies with advertising subsidies from the automakers that average $5 million a year to each, and "have the effect of increasing barriers to entry" to smaller companies, which do not get such large subsidies.

The three rental concerns denied the charges. The FTC chose not to accuse the automakers of any violation, but a spokesman for Ford denied that the advertising agreements were anticompetitive and said the company had similar agreements with some of Hertz's smaller competitors.

A trial of the case before an FTC administrative-law judge may be a year off, and the companies could appeal any unfavorable ruling through the federal courts. If the FTC eventually prevails, the three companies could be forced to pay triple damages to any competitors or consumers who win lawsuits. The FTC might also seek to have one or more of the three big rental companies booted out of some airports and replaced by smaller competitors.