Secret FTC Investigation of Car Dealers Rejecting Truecar Revealed by Ralph Paglia

FEDERAL TRADE COMMISSION, Petitioner,

v.

RALPH PAGLIA, Respondent.

JONATHAN E. NUECHTERLEIN General Counsel

LESLIE RICE MELMAN
Assistant General Counsel for Litigation

IMAD D. ABYAD Attorney

FEDERAL TRADE COMMISSION 600 Pennsylvania Ave., N.W. Washington, DC 20580 Telephone: (202) 326-2375 Facsimile: (202) 326-2477 Email: iabyad@ftc.gov

Attorneys for Petitioner Federal Trade Commission

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEVADA

Case No. Case 2:14-cv-01480-GMN-CWH 

PETITION OF THE FEDERAL TRADE COMMISSION
FOR AN ORDER ENFORCING CIVIL INVESTIGATIVE DEMANDS

The Federal Trade Commission (FTC or Commission), pursuant to Section 20 of the Federal Trade Commission Act (FTC Act), 15 U.S.C. § 57b-1, respectfully petitions this Court for an order requiring Respondent, Ralph Paglia, to comply with two civil investigative demands (CIDs) issued in an FTC investigation. The CIDs seek documentary materials, responses to interrogatories, and oral testimony relevant to an  ongoing investigation into whether certain participants in the retail automotive industry, including dealers and consultants, may have engaged in "unfair methods of competition" in violation of Section 5 of the FTC Act, 15 U.S.C. § 45, by means of their participation in a concerted refusal to deal (a group boycott).

The Commission submits herewith the Declaration of Melissa Westman-Cherry, designated as Petitioner's Exhibit (Pet. Exh.) 1, to verify the allegations herein, and alleges as follows:

Jurisdiction and Venue

 This Court has jurisdiction to enforce the Commission's duly issued CIDs under Sections 20(e) and (h) of the FTC Act, 15 U.S.C. §§ 57b-1(e), (h). This Court also has jurisdiction pursuant to 28 U.S.C. §§ 1331, 1337(a), and 1345.

2. Venue is proper in this judicial district pursuant to Section 20(e) of the FTC Act, 15 U.S.C. § 57b-1(e), because Respondent, Ralph Paglia, is found, resides, or transacts business in this District. Venue is also proper pursuant to 28 U.S.C. § 1391.

The Parties

3. Petitioner, the Federal Trade Commission, is an administrative agency of the United States, organized and existing pursuant to the FTC Act, 15 U.S.C. §§ 41 et seq. Section 5 of the FTC Act, 15 U.S.C. § 45, prohibits "unfair methods of competition in or affecting commerce," and authorizes and directs the Commission to prevent such conduct. Sections 3 and 6(a) of the FTC Act, 15 U.S.C. §§ 43 & 46(a), authorize the Commission to "prosecute any inquiry necessary to its duties in any part of the United States," and to "gather and compile information concerning, and to investigate from time to time the organization, business, conduct, practices and management of, any person, partnership, or corporation" subject to the Commission's jurisdiction. Section 20(c) of the FTC Act, 15 U.S.C. § 57b-1(c), authorizes the Commission to issue CIDs that require the recipients to produce documents, prepare answers to interrogatories, or provide oral testimony under oath, relating to the subject of any Commission investigation.

4. Respondent Ralph Paglia resides or is found in this District, and transacts business in this District and throughout the United States. He is President of Automotive Media Partners LLC, which has its principal place of business in Las Vegas, Nevada. See Pet. Exh. 1 (Westman-Cherry Decl.), ¶5.

The Commission's Investigation and Civil Investigative Demands

5. On January 17, 2014, the Commission issued a Resolution Authorizing Use of Compulsory Process in Non-Public Investigation, File No. 131-0206 (Pet. Exh. 2).  The Compulsory Process Resolution sets forth the nature and scope of the investigation as [t]o determine whether firms in the retail automobile industry, including automobile dealers and industry consultants, may be engaging in, or may have engaged in, conduct violating Section 5 of the Federal Trade Commission Act, 15 U.S.C. §45, as amended, by agreeing to restrain competition, including by agreeing to refuse to deal with TrueCar, Inc.

Pet. Exh. 2, at 1.
6. TrueCar, Inc. is in the business of helping auto dealers market their cars by operating websites that provide extensive information about specific vehicles to prospective car buyers, and that seek to match buyers and sellers. See Pet. Exh. 1 (Westman-Cherry Decl.) ¶2. As part of the investigation, FTC staff is examining whether certain persons or businesses may have organized or participated in a group boycott of, or a concerted refusal to deal with, TrueCar, thereby unlawfully restraining competition. See Pet. Exh. 2 (Compulsory Process Resolution), at 1; Pet. Exh. 1 (Westman-Cherry Decl.) ¶¶2-4. Mr. Paglia provides auto dealers with consulting services, information, and training relating to online marketing. Id. ¶¶5-6. Information related to the subject of the investigation has appeared on websites and web logs (blogs) that Mr. Paglia operates or administers. Id.

7. On May 2, 2014, under the authority of the Compulsory Process Resolution, the Commission issued a CID (Pet. Exh. 3), requiring Mr. Paglia to produce specified documents and to respond to written questions, no later than May 21, 2014. See Pet. Exh. 3, at 1. To date, Mr. Paglia has not produced any documents or information in response to the May 2 CID. See Pet. Exh. 1 (Westman-Cherry Decl.) ¶¶8-10.

8. On June 18, 2014, under the authority of the Compulsory Process Resolution, the Commission issued another CID (Pet. Exh. 4), requiring Mr. Paglia to appear and provide oral testimony under oath at an investigational hearing, which was set for July 10, 2014, in Las Vegas. See Pet. Exh. 4, at 1. Mr. Paglia failed to appear at the investigational hearing at the specified time and place. See Pet. Exh. 1 (Westman- Cherry Decl.) ¶¶11-13.

9. Mr. Paglia's failures to comply with the May 2 CID and June 18 CID have impeded the Commission's ongoing investigation. See Pet. Exh. 1 (Westman-Cherry Decl.) ¶14.

Prayer For Relief

WHEREFORE, the Commission invokes the aid of this Court and prays for:

1. Immediate issuance of an order, substantially in the form attached,

   directing Mr. Paglia to show cause why he should not comply in full with the Commission's CIDs, and setting forth a briefing schedule pursuant to LR 16.1(c)(4); and

2. A prompt determination of this matter and entry of an order:

   1. (i)  Compelling Mr. Paglia to produce the documents and information specified in the May 2 CID within ten (10) days of such order; and

   2. (ii)  Compelling Mr. Paglia to appear and testify under oath, as directed by the June 18 CID, ten (10) days from the date of issuance of such order, or at such later date as the FTC may establish; and

      (iii)  Granting such other and further relief as this Court deems just and proper. 

      
      

Respectfully submitted,