Pub. 56 2015-2016 Issue 4

23 SUMMER 2016  NADA RESPONSE — CONTINUED ON PAGE 24 When considering consumer benef its, the economic contribution of motor vehicle dealers should also not be underestimated or dismissed with theoretical statements about market efficiency. The facts are that light-duty vehicle dealers directly employ nearly 1.1 million indi- viduals with average salaries over $50,000. In total, more than 2.2 million American jobs depend on franchised car dealers in some way. Furthermore, dealers often represent “anchor tenants” in many cities and towns where most other locally owned and operated businesses have left. It is often the case that the local dealership is the last remaining retail outlet providing both local property tax revenue and jobs. Unfortunately, some of the speakers at the Workshop would cast aside these economic contri- butions and claim that the benefits these jobs provide to their local communities are inconsequential when com- pared to certain ethereal and purely theoretical benefits for consumers, of which not a single dollar of value to consumers has yet been concretely illustrated. In a world in which states actively compete for invest- ment and employment and billions of dollars are spent on attracting automotive investment, 21 it is obvious that state legislators and governors have a vested interest in ensuring that their states are competitive and able to retain employment. Few businesses employ so many individuals in such high paying jobs as automotive retail- ing. These realities rebut the theoretical arguments that these individuals will simply find other jobs, and the fact remains that state legislators have a clear and valid social interest in pursuing policies that promote their state as being friendly to employers. Employment in good paying jobs is clearly in the public interest. Why else would states spend billions of dollars attracting employers? Few laws have such clear and resounding economic benefits in the form of jobs, income, and taxes and yet have effectively no tangible cost to the state or to market efficiency. Finally, there is one recurring canard with regard to the im- pact of franchise laws on consumers that must be addressed. One of the greatest misconceptions held by critics of the dealer franchise system is that dealers add costs to the distribution chain. Nothing could be further from the truth. If a manufac- turer owns a dealership, it still must invest millions on which its shareholders will expect a return; hire and compensate personnel; pay for rent, utilities, taxes, facility maintenance, local marketing, etc.; and cover the costs for everything else required to operate the business. What’s more, warranty services, customer relations efforts, and vehicle repair and maintenance capabilities will still have to be provided. If anything, outsourcing these inevitable distribution costs to dealers saves money in the system. Operations by large, remote corporations would likely raise the costs of doing busi- ness over those of local dealers who understand their local markets implicitly and know best how to efficiently control expenses in them. 22 Moreover, dealers provide an immediate outlet for vehicles and parts by paying for them before they even arrive at the dealership. Manufacturers do not have to carry the costs of inventories of vehicles and parts on their books. Thus, far from injecting additional costs, dealers typi- cally represent an overall cost savings. As the foregoing establishes, the state franchise laws operate directly to the benefit of consumers. State legislatures recog- nize this, and that is why they pass these laws. 23 B. e Franchise Laws Seek to Level the Playing Field BetweenManufacturers and Dealers In addition to benefitting consumers, the franchise laws that the state legislatures have enacted level what is otherwise a very imbalanced economic playing field between auto deal- ers and manufacturers. Despite a number of assertions at the Workshop to the contrary, the simple fact is that auto manufacturers retain to this day a massive economic power advantage over their franchised dealers, resulting from both  NADA RESPONSE — CONTINUED FROM PAGE 21 21 For example, two tax incentive plans were offered to Volkswagen in connection with the building of its manufacturing facility in Chattanooga, Tennessee: one in 2008 worth $577 million and another in 2014 worth $165 million. Boucher, Dave. (2015) “Volkswagen Chattanooga Tax Credits May Be Safe” Feb. 19, 2016. http://usat.ly/1RS1WBH. Similarly, in connection with Nissan’s plant in Canton, Mississippi, a total of $1.25 billion in tax incentives was provide: $850 million in tax breaks spread out over a 30-year period and $400 million in cash aid. Gibson, C. R. (2014) “Mississippi Cuts $1.3 Billion From Schools, Gives $1.3 billion to Nissan” Feb. 19, 2016. http://huff.to/20WbmCM. 22 As Ms. Keller explained during panel three, Ford discovered this during its failed experiment with manufacturer-owned stores in the late 1990s. Specifically, she noted that “because of its size and structure, Ford’s approach actually ended up increasing its overall distribution costs.” TR. III; 17. 23 During the Workshop, at least two participants observed that none of the so-called consumer advocacy groups were defending the state franchise laws against the attacks leveled by the Workshop speakers and concluded from this that the laws themselves did not benefit consumers. Apart from the fact that it is far from clear that these “consumer” groups always pursue policy outcomes that actually benefit the largest number of consumers in the long run, this argument ungraciously ignores both the important role of state legislatures in this process and the fact that these laws almost universally regulate the commerce between businesses and not consumers. State legislatures are the only actors who are truly accountable to consumers writ large. If the actions of state legislators dramatically depart from the interests of their constituents, those constituents can vote their legislators out at the next election. In our experience, as both Mr. Jacoby TR. I; 5, and Mr. Appleton, TR. II; 11, explained, these legislators are always focused on the impact on consumers when considering whether to enact these laws. Whether a so-called consumer group supports a particular public policy is not a proxy for whether that policy is good for consumers. Analysis must be had of the content of the policy itself and the underlying legislative intent and, against those measures, the state franchise laws acquit themselves quite well.