Pub. 56 2015-2016 Issue 4

19 SUMMER 2016  NADA RESPONSE — CONTINUED ON PAGE 20 Substantive Analysis As noted, despite our concerns about process, NADA is providing a thorough analysis of the subject matter of the Workshop to assist in establishing a common and better un- derstanding of the realities of the auto retailing marketplace and to help ensure that the record in this matter is fact-based and accurate. I. e Proper Role of the FTC in the Context of Federalism As a preliminary matter, in connection with any discussion of the questions that the FTC has asked, we believe that it is important to be mindful of the limited role that the FTC has here. Ours is a federal system of government, and one of the important aspects of that system is that the states retain the authority to determine what level of regulation is appropriate for a given market within their borders. 11 The approach our system establishes is a prudent one. In such a large and di- verse country, many things vary from state to state: the needs, wants, and habits of consumers; political philosophies; the nature of the markets and the market participants themselves; prevalent market behaviors; and the list goes on and on. On many matters, one size does not fit all. Auto retailing is a good example. There are significant varia- tions among the states on a host of issues addressed by the state franchise laws. Take the controversial subject of vertical integration and direct manufacturer sales for example. To read many media accounts, one would conclude that vertical integration in the distribution of automobiles is prohibited in every state. Nothing could be further from the truth; the laws vary tremendously. 12 But this is a good thing. Some states have determined that vertical integration is fine for their constituent consumers and their local markets while others have concluded the opposite. 13 The fundamental point is that these are decisions that are the duly elected state legislatures’ to make. Those legislatures are closer and more politically accountable to the people of their states than is the FTC. That is why the state legislatures are Go to CARDEALERSHIPFURNITURE.COM to see solutions for nearly all automotive brands. The Wells Group is partnered with HON and is recognized as a Platinum furniture source for automotive furniture solutions. Products made in America. Go to CARDEALERSHIPFURNITURE.COM to see solutions for nearly all automotive brands. The Wells Group is partnered with HON and is recognized as a Platinum furniture source for automotive furniture solutions. Products made in America. 11 The federal government is one of limited powers – those expressly given to it by the Constitution – with the rest being reserved to the states and ultimately to the people. 12 Indeed, Tesla’s General Counsel himself acknowledged, “it’s a very, very small minority of states that restrict [Tesla’s] ability to sell directly.” TR. III; 13. And there are states – including the largest, California – that allow even manufacturers who already have franchised dealers to sell direct, as long as their outlets do not unfairly compete with the independent dealers they have previously authorized within their relevant market areas. 13 We will explain below why a state legislature could prudently come to this con- clusion.