On October 1, 2009, a jury awarded an Alaskan Avis licensee $16 million in damages in a breach-of-contract case against Avis Budget Group. The case was filed in 2003 with respect to former Cendant Corporation’s acquisition of Budget Rent A Car.
The case stems from Avis’ acquisition of Agency Rent A Car in 1995. Avis licensees from 10 states, including Robert C. Halcro, owner of Alaska Rent A Car and an Avis licensee for more than 50 years, sued on the grounds that the acquisition violated their exclusive license agreements.
In 1997, a settlement was reached and Halcro was invited to join the “Agency Settlement Agreement.” In essence, the Agency Settlement Agreement held that Avis had the right to buy another car rental company but was not allowed to combine the sales, marketing or operations of the two. The agreement was designed to protect licensees from direct competition that the acquisition would foster.
In 2002, Cendant Corporation, who now owned Avis, acquired the assets of Budget Rent A Car. Licensees were given assurances that the two companies would be run separately in accordance with the Agency agreement, said Andrew Halcro, Robert’s son, who has participated in the family business since 1980. Soon after, however, “We started hearing rumblings about how they [Avis] wanted to revisit some of the Agency settlement terms,” said Halcro.
(Andrew Halcro is also prominent in Alaskan politics. He was a member of the Alaska State House of Representatives from 1999-2003, ran for Governor in 2006 and will seek Alaska’s U.S. House of Representatives seat in 2010.)
Won’t Work in Alaska
Halcro attended a licensee meeting in January 2003. “The [Avis] CEO and the CFO were there, and they told us very clearly that it made sense to combine the sales and marketing and that it didn’t make sense to recreate another car rental company,” Halcro said.
The problem was, from some licensees’ perspectives, that Avis was about to inject life into a major competitor, a company that was in severe financial straits. “The SEC said that if someone didn’t buy Budget, they would have to liquidate,” said Halcro. “They were basically going to go away; they were going to disappear.”