FTC Grants Rolls-Royce and Paccar, Inc. Exemption from Franchise Rule

For Release

The Federal Trade Commission has granted the request of Rolls-Royce Corporation for an exemption from the FTC’s Franchise Rule with regard to the company’s authorized maintenance centers for turboprop, turbofan, and industrial gas turbine engines. The FTC has also granted the request of Paccar, Inc. for an exemption from the Franchise Rule with regard to its truck dealerships.

The Franchise Rule requires the seller of a franchise to provide each prospective franchisee with a basic disclosure document containing detailed information about the nature of its business and the terms of the proposed franchise relationship. The Commission has previously granted exemptions from the Rule to 9 other motor vehicle manufacturers or importers.

Rolls-Royce

Rolls-Royce, a wholly-owned subsidiary of Rolls-Royce plc, manufactures turboprop, turbofan, and industrial gas turbine engines for sale in the defense and civilian aerospace and industrial markets. Rolls-Royce also provides aftermarket support for some of its model engines through a combination of company-owned and independent third-party authorized maintenance centers (AMCs). The AMCs perform repair, overhaul, and maintenance services for customers under the Rolls-Royce trademark.

In its order granting the exemption, the FTC found that the conditions most likely to lead to abuses are not present in the sale of the maintenance centers, and the process generates sufficient information to ensure that applicants will be able to make an informed investment decision. The Commission found that Rolls-Royce potential maintenance center franchisees are highly sophisticated and experienced businessmen and women who will make significant investments and have more than adequate time to consider the dealership offer and obtain information about it before investing.

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 Rolls-Royce’s relationship with its maintenance centers. The Commission has reviewed the potential for unfair or deceptive acts or practices in connection with the offer of Rolls-Royce maintenance centers and found no evidence or likelihood of a significant pattern or practice of abuse.

The Commission’s vote to grant Rolls-Royce’s exemption from the Franchise Rule was 5-0.

Paccar, Inc.

Paccar, Inc. manufactures heavy-duty and medium-duty trucks, parts, and accessories that it distributes through a network of 131 dealers operating under the names “Kenworth” and “Peterbilt.” The dealers also offer and perform warranty repair and bodywork; sell, rent, or lease used cars; and offer financing and insurance in connection with truck sales. Most of its dealers have been in the business for 10 or more years, and one third have been Paccar dealers for more than 20 years.

In its order granting the exemption, the FTC found that the conditions most likely to lead to abuses are not present in the sale of dealerships, and the process generates sufficient information to ensure that applicants will be able to make an informed investment decision. The Commission found that Paccar dealers are highly sophisticated and experienced businessmen and women who will make significant investments and have more than adequate time to consider the dealership offer and obtain information about it before investing.

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 Paccar’s dealerships. The Commission has reviewed the potential for unfair or deceptive acts or practices in connection with the offer of Paccar dealerships and found no evidence or likelihood of a significant pattern or practice of abuse.

The Commission’s vote to grant Paccar’s exemption from the Franchise Rule was 5-0.

Copies of the Commission orders granting Rolls-Royce’s and Paccar’s exemption from the Franchise Rule are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.

MEDIA CONTACT:

Brenda Mack
Office of Public Affairs
202-326-2182

STAFF CONTACT:

Steve Toporoff
Bureau of Consumer Protection
202-326-3135

(FTC Matter No. R511003)

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