Pub. 56 2015-2016 Issue 4

29 SUMMER 2016 simple disagreement between theory and reality.These panel- ists constructed a marvelous theoretical world, one in which all parties in an economic relationship have equal informa- tion, representation, and economic power. This hypothetical world also operates with completely fluid markets in which all individuals and firms act rationally, thinking only of their economic interests and nothing more. Unfortunately, dealers do not operate in such a world. They deal with individuals whose decisions are clouded by per- sonal bias, irrational expectations, or short-term financial and economic objectives that often do not align with an economically-rational long-term outcome. 37 In addition, as noted above, dealers suffer from a large disparity not only in economic power but also in information. Add into this mix high barriers to exit and it soon becomes very clear that it is these inherent disparities in the real interactions between dealers and manufacturers, and not theoretical constructs, that should inform state legislatures regarding the need for and appropriateness of dealer franchise laws. Setting aside theory and focusing on reality, we can examine in more detail the primary economic arguments proffered at the Workshop for eliminating state franchise laws: that the vertical integration of auto retailing will lead to costs savings; that RMA laws result in dealers having market power in retail distribution; that the current distribution system denies consumers the benefits of e-commerce and manufacturers the benefits of a build-to-order system; and, finally, that RMA laws also increase prices. NADA substantively addressed all of these issues when we wrote to the FTC staff regarding its position on direct sales legislation in 2014. See NADA’s letter to Andrew I. Gavil, et al., dated July 17, 2014 (“NADA’s 2014 Letter”). 38 None of the points in support of the franchise laws raised by NADA’s 2014 Letter were addressed by any of the Workshop panelists. The unanswered points include the questions we raised regarding the academic studies used by many in opposition to the franchise laws, nearly all of which suffer from serious econometric or factual issues. More importantly, not a single piece of new econometric 37 For example, just in 2015, a regional executive at one of the auto manufacturers demanded that dealers answer independent surveys from NADA with only positive ratings, thereby impairing the quality and candidness of the dealers’ operational feedback that they were otherwise able to give. Many of the affected dealers had no real ability to resist this pressure because they were single point stores tied only to that manufacturer. While there was no clear motive for the employee’s behavior, it appeared that this was being done so managers would receive positive short-term performance reviews. To be sure, this issue was positively resolved; however, problems like this are not rare, and it is one more example why franchise laws are needed. 38 For the FTC’s convenience, a copy of NADA’s 2014 Letter is attached hereto as Attachment A. (see upcoming issue of Dealers’ Choice or visit https://images.magnetmail.net/ images/clients/NADA/attach/AutoRetailDistributionWorkshopComments_03042016.pdf )  NADA RESPONSE — CONTINUED ON PAGE 30 When you have the capabilities, execution is precise. J.A.M. has the capabilities to do it all— from design of a high-performance shop layout based on your needs to providing you sales, service and installation of every piece of equipment. • Facility Design • Alignment Systems • Air Compressors • Air Delivery Systems • Battery Chargers • Brake Lathes & Accessories • Floor Jacks • Freon Recyclers • Fuel Management Systems • Hose Reels • Lifts – InGround, Surface, HD • Lubrication Delivery Equipment • Lube Center Accessories • Parts Shelving / Racks • Parts Washers • Shop Furniture • Tanks – Oil/Gasoline/Diesel • Tank Monitoring Systems • Tire Changing Equipment • Waste Oil Systems • Wheel Balancers 800-288-3848 JAMDistributing.com/equipment Precision Execution