Auto dealers and franchise system attacked at FTC forum

Auto dealers and franchise system attacked at FTC forum

NADA described a recent workshop by the Federal Trade Commission on auto distribution in the U.S. and the state laws that regulate it as hostile and imbalanced.

–Many of the FTC speakers, as well as the supposedly neutral academics and economists invited by the Commission to participate, brought preconceived attitudes that were hostile toward the franchise system and counterproductive to the dialogue,” NADA wrote. –The panel quickly revealed an imbalanced agenda that resulted in an exceedingly one-sided discussion.”

NADA President Peter Welch spoke during the last of the dayês four panels, on –Future Trends,” alongside speakers from the AAA, Uber and Securing Americaês Future Energy and professors from Yale and the University of South Carolina. Other panels covered state regulation of dealer networks, warranty reimbursement regulation and direct distribution.

In the –Future Trends” panel, speakers discussed the effect that autonomous vehicles might have on personal ownership of cars. Professor Fiona Scott Morton of Yale University sketched a future where a corporation could buy autonomous cars in bulk directly from a manufacturer. –The local dealer would have less value-added in that world,” Morton said.

NADAês Welch objected. –I think itês actually a pretty big leap to go from autonomy to all of a sudden, people are going to abandon personal ownership of vehiclesÄ.The predominant trend is still going to be, that individuals are going to want to own them and use them, even if these vehicles become 100% autonomous.”

During the panel on state regulation of dealer networks, Professor Henry Schneider of Cornell University said that regulations make it much harder for automakers to restructure dealer networks to match long-run changes in demand, consolidate dealers to achieve economies of scale or limit dealer market power. Later, Professor Morton said, –the laws surrounding auto distribution in the United States are largely frozen and prohibit innovation.”

In the panel on direct distribution, auto analyst Maryann Keller of Maryann Keller & Associates cited evidence showing that intrabrand competition significantly lowers new-car prices. Her remarks rebutted claims that direct sales would benefit consumers. Keller also explained the importance of franchise laws to the preservation of intrabrand competition.

The FTC received more than 450 written comments on the subject of the workshop. NADA President Jeff Carlson said in a statement, –We will continue to work closely with ATAE dealer associations, dealer lawyers, dealer accountants and other third parties to ensure that the record is both balanced and reflective of the reality of the retail auto industry.”