Antitrust Law Daily Big 3 rent-to-own store operators settle FTC charges over ‘swap agreements’
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Friday, February 21, 2020

Big 3 rent-to-own store operators settle FTC charges over ‘swap agreements’

By Jeffrey May, J.D.

Aaron’s, Buddy’s, and Rent-A-Center’s reciprocal purchase and non-compete agreements allegedly harmed competition. Democratic Commissioner Chopra says per se liability should have been applied and "no-money, no-fault proposed orders" are insufficient.

Rent-to-own operators Aaron’s Inc., Buddy’s Newco, LLC, and Rent-A-Center, Inc. have agreed to settle FTC charges that they negotiated and executed reciprocal purchase agreements that amounted to geographic market allocation agreements in the brick-and-mortar rent-to-own (RTO) retail industry, the agency announced. The companies--the three largest players in the RTO market--and their franchisees would be prohibited under the terms of proposed FTC consent orders from soliciting or enforcing reciprocal purchase agreements (In the Matter of Aaron's Inc., In the Matter of Buddy's Newco, LLC, In the Matter of Rent-A-Center, Inc., FTC File No. 191 0074).

According to the FTC, these agreements swapped customer contracts from rent-to-own, or RTO, stores in various local markets, and, as a result, one party would close down stores and exit a local market where the other party continued to maintain a presence. The FTC also took issue with reciprocal non-compete agreements under which competitors allegedly agreed not to compete within a specified territory, typically for a period of three years. The complaints allege that from June 2015 to May 2018, the firms each entered into anticompetitive reciprocal agreements with each other and other competitors.

The proposed FTC consent orders would prohibit the three RTO companies and their franchisees from entering into any reciprocal purchase agreement or inviting others to do so, and from enforcing the non-compete clauses still in effect from the past reciprocal purchase agreements. In addition, the three RTO companies would be required to implement antitrust compliance programs, notify the Commission in the event of certain changes in corporate governance, and grant the Commission access to company facilities as needed to ensure compliance with the order.

Due to prior board-level relationships between Aaron’s and Buddy’s, the settlements with those firms would ban any individual associated with either Buddy’s or Aaron’s from serving on the board of directors of the other company. This conduct was not challenged in the complaint. In a separate statement, FTC Chairman Joseph J. Simons and Commissioner Noah Joshua Phillips expressed their view that they did not believe "adding a count under Section 8 of the Clayton Act, which would typically require the offending parties to end the interlock, adds anything to the settlement," since the board interlock at issue ended four years ago. Rent-A-Center’s settlement does not contain a prohibition on interlocks because, unlike Buddy’s and Aaron’s, there was no evidence that a Rent-A-Center representative previously served on a competitors’ board of directors.

Dissenting statement of Commissioner Chopra. FTC Commissioner Rohit Chopra, in a dissenting statement, took issue with the Commission's decision not to assert that the conduct was per se unlawful. Chopra also contended that the "no-money, no-fault" settlements were insufficient. He questioned the decision not to require notifications to the employees or customers affected by potentially illegal store closures.

Attorneys: Joseph A. Lipinsky for FTC. Norman Armstrong, Jr. (King & Spalding LLP) for Aaron’s Inc. J. Robert Robertson (DLA Piper LLP) for Buddy’s Newco, LLC. Neely Agin (Winston & Strawn LLP) for Rent-A-Center, Inc.

Companies: Aaron’s Inc.; Buddy’s Newco, LLC; Rent-A-Center, Inc.

MainStory: TopStory Antitrust FranchisingDistribution FederalTradeCommissionNews

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