Pub. 56 2015-2016 Issue 4

18 to speak had views that, regardless of their nature, were grounded in an accurate understanding of the marketplace under discussion. Any attempt to determine whether the laws at issue are necessary and/or prudent needs to be so based. It should not be founded on anecdotal reports, conjecture, or theoretical arguments that do not manifest themselves in the market. But, again, a number of the people given the microphone during the Workshop did not meet this test. A few examples follow: • Professor Lafontaine stated that state relevant market area (RMA) laws “create exclusive territories around the dealerships.” TR. I; 5. But Messrs. Jacoby and Roesner explained that this was an inaccurate characterization of the laws. TR. I; 15; 18-19. They clarified that far from granting dealers exclusive rights, these laws merely provide governmental oversight, oversight which applies only to business-to-business transactions between manufactur- ers and dealers. 7 Furthermore, this government oversight inevitably involves consideration of the public interest. These differences should be significant in any discussion of the prudence of these laws. 8 • Similarly, Professor Scott Morton stated that “[a] single franchise dealer that owns the car has market power in its local area, and it will set a stiff retail market,” TR. IV; 24, and Professor Schneider spoke of dealers “having some market or monopoly power in their local area” as a result of franchise regulation, TR. I; 22. Again, these comments reveal a fundamental misunderstanding of the new vehicle market. Consumers are not only free to shop nationally on the internet, they also might receive active solicitations from competing dealers even while closing a sale inside a dealership. No law grants market exclusivity to dealers for any vehicle, and no law prevents any con- sumer from shopping at any dealer at any point in time. As noted above, RMA laws exist as a means to regulate commerce and business-to-business transactions between a manufacturer and a dealer. They are completely invisible to consumers, who are free to shop at any dealership no matter where they live or work. • Professor Sappington stated that “teams” of dealers are able to negotiate with manufacturers over contract terms and that, as a result, state legislative involvement is unneces- sary. 9 This ignores the reality that the exercise of collective economic power by dealers against a manufacturer does not occur because it would constitute a federal antitrust violation. Dealers cannot (and do not) cooperate in this manner, let alone form negotiation “teams.” 10 • Ms. Keller, in her comments during panel three, explained a number of ways in which the writings of Professors Lafontaine and Scott Morton and some of the sources they cite fail to appreciate the market realities of auto manufacturing and retailing. TR. III; 17. For all of the foregoing reasons, NADA remains quite con- cerned about the process that has apparently been employed in organizing and putting on the Workshop to date. It is our hope that, going forward, the FTC will work to ensure that greater balance is incorporated into the record and that such balance will be reflected in the Commission’s deliberations based on that record. And NADA stands ready to assist the FTC in developing such a balanced record and product.  NADA RESPONSE — CONTINUED FROM PAGE 17 7 More particularly, the RMA laws (1) specify a set geographic area surrounding a dealership and (2) provide that dealer the opportunity to argue that a proposed manufacturer action – such as the establishment or relocation of a competing dealership of the same brand – taking place within that geographic area does not meet certain substantive criteria. Thus, the statutes do not allow dealers to protest the proposed action for any reason whatsoever; they merely give the dealer the right to argue that the proposed action does not satisfy the specific evaluative standards established by the legislature. In this connection, it is also important to note that auto manufacturers do not provide their franchisees with exclusive market territories via their franchise agreements. Quite to the contrary, those franchise agreements typically specify that the dealer’s primary area of responsibil- ity is non-exclusive. 8 Professor Lafontaine also professed confusion over the number of dealerships that exist in the country, stating that NADA’s data differed from that of the Census Bureau. (The NADA data is drawn from primary sources and is accurate.) Although the dealer count is not the most important data point involved, one would hope that someone who has focused on auto retailing as much as Professor Lafontaine would resolve this factual question about the market as part of her work. 9 In particular, Professor Sappington stated that “in my view, it is not apparent that we really need government intervention here to force these manufacturer and dealer teams to agree upon warranty terms that will serve consumers.” TR. II; 9-10. 10 This is not to say that a manufacturer and its dealers do not together compete against manufacturers and dealers representing other brands; of course, they do. But when it comes to establishing the terms of the relationship between amanufacturer and its in-brand dealers, there is littlemeaningful negotiation that can lawfully occur outside of the legislative process.