Pub. 57 2016-2017 Issue 1

18 The following is the balance of the letter authored by NADA Executive Vice-President, Andrew D. Koblenz and Chief Economist, Steven Szakaly in response to the Federal Trade Commission following the agency’s decidedly biased workshop on state dealer franchise laws conducted January 19, 2016 at their Washington headquarters. III. The Value and Importance of the Specific Laws About Which the FTC Has Inquired The foregoing points about the value and importance of the state franchise laws apply with particular force to the three sets of laws specifically discussed at the Workshop – laws relating to (1) dealer terminations and additions, (2) warranty reim- bursement, and (3) direct sales. As we demonstrate below, the concerns of some of the presenters about these particular laws were unfounded.These laws represent prudent and appropriate policy decisions of the state legislatures that adopted them. A. Dealer Terminations and Additions The underlying public policy rationale for the state regulation of dealer networks by each of the 50 states is as viable to today as when these laws were first enacted. More than 100 years ago, the auto manufacturers established a dealer network comprised of independent entrepreneurs to outsource the costs associated with the distribution, sales, and servicing of their products. Since its inception, the franchise systemhas provided an efficient and cost-effective method for selling and servicing vehicles. However, also since the inception of the franchised system, a severe economic imbalance between themanufacturer and the dealer has existed and, as explained in detail above, that imbalance still exists today. It is that imbalance and the advantage of it that many manufacturers have taken (and con- tinue to take) that has led state legislatures to enact the types of laws that were discussed during panel one of theWorkshop. Prior to the enactment of the statutory provisions relating to dealer networks, existing dealers faced several types of pressure from the manufacturers, including the threat of a unilateral NADA Response to the Federal Trade Commission (Part Two)