Open Markets: FTC’s Proposed Rent-to-Own Settlement Is Toothless

WASHINGTON – After uncovering a collusive market allocation scheme among three leading rent-to-own operators, the Federal Trade Commission (FTC) proposes to do nothing except require the companies to comply with the law, which is required of all corporations already. The FTC’s proposed settlement could have brought accountability to the industry, but instead it fails to punish the rent-to-own companies for their illegal collusion, and it could encourage corporations nationwide to collude at the expense of consumers, workers, and suppliers.

The rent-to-own industry targets low-income families who typically lack the savings and conventional credit to buy household goods outright. Firms offer contracts that grant the customer ownership if the required weekly or monthly payments are made for the full term of the contract, typically 12 to 24 months.

The FTC found in its investigation that Aaron’s Inc., Buddy Newco, LLC, and Rent-A-Center, Inc. had agreed not to compete against each other in certain locations. Describing the FTC’s findings, Open Markets wrote:

“Under this collusive arrangement, for example, Aaron’s would close a store competing with a Buddy’s location, transfer its customers to Buddy’s, and agree not to compete against Buddy’s in that area for three years. Buddy’s would return the favor and close a store for the benefit of an Aaron’s location in another area.”

The conduct described is a categorical or per se violation of antitrust law. Instead of treating it as such, the FTC appears to have given the three operators an opportunity to justify their collusion. This raises the question whether the FTC will continue to entertain rationalizations by other colluding corporations.

The FTC also decided not to challenge an interlocking directorate between Aaron’s and Buddy’s. It found that Brian Kahn, the managing partner of the private equity firm owning Buddy’s, previously sat on the board of Aaron’s. Despite this being a clear antitrust violation, the FTC opted not to include this count in its complaint.

On top of its deficient and incomplete analysis and allegations, the FTC’s proposed settlement is toothless. The settlement hinges on a condition that the companies do not violate the law – again – but does not require admissions of fault, misconduct, or notice to the affected workers and consumers. Plain and simple, the proposed settlement threatens to allow collusion between other business rivals for profit at the expense of workers, consumers, and suppliers.

“This settlement is just the latest in a continuous pattern by the FTC of uncovering illegal conduct and then failing to hold the offenders accountable,” said Sandeep Vaheesan, legal director at Open Markets Institute. “Settlements like this one are a signal to businesses that violating antitrust laws comes without real consequences and are an invitation to continue future, profitable violations of antitrust law. Given the rent-to-own industry’s history of predatory behavior, the FTC’s refusal to act here is particularly shameful.”

Read the full comment here.