U-Haul International, Inc. and its parent company have settled Federal Trade Commission charges that they invited U-Hauls closest competitor, Avis Budget Group, Inc., to collude on prices for truck rentals.
U-Haul and Budget control more than 70 percent of the do-it-yourself one-way truck rental business in the United States. If U-Haul had succeeded in its price-fixing plan, the two companies could have imposed higher prices on truck-rental consumers, according to the FTC.
Its a bedrock principle that you cant conspire with your competitors to fix prices and shouldnt even try. Consumers deserve better. The order announced today will ensure that U-Haul will not try it again, said FTC Chairman Jon Leibowitz when the tentative settlement was reached in June. It was made final today by a 5-0 vote of the commission.
The FTCs complaint alleges that on several occasions between 2006 and 2008, U-Haul tried to increase rates for one-way truck rentals by privately and publicly communicating with Budget, the second-largest truck rental company in the United States. However, the complaint does not allege that U-Haul and Budget actually reached an agreement.
As alleged in the complaint, the problems started after U-Hauls CEO and Chairman Edward J. Shoen discovered in 2006 that competition from Budget was forcing U-Haul to lower prices on its one-way truck rentals. In two companywide memos in 2006, Shoen acknowledged the problem and provided a solution.
For example, Shoen wrote: Budget continues in some markets to undercut us on One-Way rates. Either get below them or go up to a fair rate. Whatever you do, LET BUDGET KNOW. Contact a large Budget Dealer and tell them. Contact their company store and let the manager know.
At the same time, the FTC charges, Shoen told local U-Haul dealers to talk to their counterparts at both Budget and Penske another truck rental competitor and tell them that U-Haul had raised its one-way rates, and that they should now match U-Hauls higher rates.
The complaint alleges that Shoen invited Budget to collude again in 2008 after Budget declined to match U-Hauls price increases this time, during a conference call with industry analysts. During the call, Shoen made statements suggesting that U-Haul would raise its rates, and would maintain the new rates so long as Budget did not respond by price cutting in a way that took market share from U-Haul. He added that Budget need not match the U-Haul prices exactly, but could lag behind by three to five percent.
The settlement order against U-Haul and its parent company AMERCO bars them from colluding or inviting collusion. Specifically, the companies are prohibited from inviting a competitor to divide markets, allocate customers, or fix prices, as well as participating in, maintaining, organizing, implementing, enforcing, offering, or soliciting any other company to engage in such conduct. The order also includes monitoring and compliance provisions to ensure U-Haul and AMERCO comply with its terms. It will expire in 20 years.