FTC advisory opinion digest

No. 254. Operation of exclusive check~cashing concessions in retail stores.

The Commission rendered an advisory opllllon to the effect that it would not be. illegnl for a company to operate a. proposed c.heekcashing program pursuant to ,yhich it would function as the chec1\:cashing concessionn ire \" it hill sul)sc'l'ihinQ' retail e~:tn b li::-J1111flJL: Under the plan as present(:'d: the company \yould charg(~ checkcashing customers n ten cent fee for all cheeks clnl\\n for sums gl'eatel' than the amount of the purchase' and "ould pay to the subscribing C'tailel's a portion of that fee as eonsidcration for the grant of coneession rights 0 The company ,,'auld assume the C'11tire burdcn of hac1check l'i8ks and C'olJectlon eJiorts. The subsC'rihinp: retailers and their employees ,,'onlc1 net as agents of thl' company by performing the actual check-cashing function follO\yillg proced11l'l's required by the. c.ompany utilizing the CO111p,m~' s in:ronnation system. ::'.1oney used in cashing checks for sums greater than the amount of the purchase ,youlc1 be the retnilers money and the retailers ,yon ld deposit n 11 checks and fees collected by tlJl'lll ill their OI"n banks. Out of the fees so collected and deposited. the subscribers ,yould l'C'Jnit to the company seven cents pel' checl: c,lshed including checks ch'n'Yll in tlw amount of the purchase, although no fee ",ould be chn rg(~d the. cnstOl11n for snch cheeks. The company ould pay the subscriber the full n1ll0unt of all bad checks and would assume the :runction and risks of attempting to collect 011 such cheeks. The subscribing l'rtfli1ers would retain the diffel'l' I1Ce between the, il11l0lmt paid the C01llp,11lY nnc1 the agog-regate, fees collected as their basic collsicIernbon for gl'nnting the concession rights and could 110 maintained byrealize. addition:! 1 consideration from a reSPITe to \

ADVISORY OPISION DIGEST 1339 the company. The company Yi'ould run its own credit check of all applicants for and holders of check-cashing courtesy cards, issue curds inscribed with the retnile.r s name, keep the credit information 11P to date and operate, using moneys and employees of the subscriber find at locatjons w'ithin subscriber s outlets, check-cashing concessions which ,yould be furnished with on-line telephone. reports of information contained in the companis records. The agl'eeme.nts to be ext'l'uted "with the subscribers ,vould give the company the exclnsin' cheek-cashing concession rights "\vithin the stores for a pel'iod of tYlenty-four months, subject. to nn initiall'ight of cancellation by the subscriber at the. end of the first iin~ months. The only cost to the subscriber in exercising this biter privilege oulc1 b(~ the loss of the initial setup charge paid upon installation the concession in the store. After the expiration of the t,yenty-four months period the agreements \youlcl be j'enmyable for one yenr periods at the option of the parties. The CO11lpnn~\~ n1so advised that to its knowledge no one else is presently enga~:'('cl in opfrnting s11eh eheckcashing concessions. The company expressed prillmry concern ,yith hro legal issues created by this proposed plan. The first had to do "\yith whether the company s separate agreements ,yith subscribers, each providing for the collection or a ten cent fee~ ,yould be. deemed a horizontal pricefixing conspiracy. Seconc1 ~ the company inquired as to whether the exclusive aspect of the agreements makes them objectiont( hIe under ~('ctiOll r) oJ tho Federal Trade Commission . ct. 'Vith respect to the first question ~ the opinion advised that in the Commiss10n ~s vie" , based upon the faets presenteel, the only price involved is the compnn:' s o,yn price for the serViCE\ rendered and hence no question of a price fixing ,1greement should m'ise. 'Vith regnrd to the second question, the Commission was of the opinion that the time periods invohcd in these exclusive ngn:ements should not result in unreasonable restraints of trade considcrinr" the' fact that this is a small C0111nanv seekini?o to ("stnblish itself in a nC"" Held or endeavor ",1wr(' thel'(~ nn~ no existing eompetitOl's and 11'11('1'('. a substantial outlay of capital and the' assumption of considerable risk will be. required. I-Ien', the Commission ,yns influenced by the fact that subscribers han; the opportunity to terminate the arrangement at the end of the first fivE' months and again at the expiration of the' t\yC:'nty- rour months pcriod Hnd that renc\yn Is ,yill be for Oll.e year 1wriods only.

The Commission also cautioned t1u~t this opinion was being rendered in the. li~:'~jt-. of the (' ompl'titi\'(~ situntioll "yhjeh HOlY pxists cl1lcl that in that light it. coul(l sel' )10 ob:iectioll to the. Jorm of the. ngrl-'e" lnents and the Pl'oposecl mnnnel' oJ irnplementlllg th(~ pl'ograrn. The Co1!111rissioll co111c1noL or C011l'SP, -forse'!? in an pnl'tienliH'8 t1wimpnct j(

13~ FEDEHAL TRADE CO~nlISs.ro:\' DECISIONS of this program upon future colllpetitiye conditiolls .which might conceinl.bly require a. different view of the exelusive provisions eontn,inec1 therein. (File No. 683 712;3, released 1\13Y 30~ 1968.