Pub. 57 2016-2017 Issue 1

30 dealer level – either intra-brand or inter-brand – you would see tighter margins and so on.” TR. I; 27. Perhaps most important, however, is the fact that we no longer need to rely on a debate of competing economic theories to determine whether intra-brand competition operates to benefit consumers. As Ms. Keller pointed out in her opening remarks on panel three, “there is now substantial empirical evidence to confirm [the value of intra-brand competition].” TR. III; 18. A study of hundreds of thousands of transactions, published in 2015 by the Phoenix Center, shows that intra-brand competi- tion in auto retailing lowers prices for consumers significantly. 64 For example, the PhoenixCenter report found that whenmul- tiple Honda dealers are present in a market, the prices for the popular Honda Accordmodel are $500 lower when compared to markets that have only one Honda dealer. Ms. Keller summarized the significance of this new research as follows: “The PhoenixCenter’s comprehensive analysis of the impact on price in markets with multiple same-brand dealers provide[s] evidence [of what] should be obvious. Competition lowers prices.” TR. III; 19. 65 In light of this new data, it is easy to see why a state legislature would want its constituents to benefit from the costs savings that intra-brand competition delivers. Tesla’s arguments mostly relate to issues that could be re- solved without vertical integration. At the Workshop, Mr. Maron, Tesla’sGeneral Counsel, listed seven reasons whyTesla wishes to sell direct and offered them up as arguments against the state laws that prohibit vertical integration in auto retail- ing. 66 But Mr. Maron’s arguments entirely miss the mark. He simply gave seven reasons why Tesla does not wish to hire as a dealer any of the 16,000+ retailers who currently sell other mo- tor vehicle brands. 67 But none of the laws that constrain vertical  NADA RESPONSE — CONTINUED FROM PAGE 28 Dealers are required to invest substantial sums in service facilities that meet the specifications set by the manufacturers. For example, there are requirements as to the number of square feet dedicated to this purpose, the number of individual service bays, and the size and characteristics of customer reception and waiting areas. In addition, the manufacturers mandate the training required for technicians. 64 A copy of the Phoenix Center report is available at: http://www.phoenix-center.org/pcpp/PCPP48Final.pdf. 65 As Ms. Keller also pointed out TR. III; 18, any individual consumer can test the competitive impact of intra-brand competition with a few clicks on the internet. All one has to do is to log on to one of the many vehicle search engines to see the powerful effects of both inter-brand and intra-brand competition. These sites empower consumers to match, for example, similarly-equipped Camrys, Accords, and Malibus. Once the consumer makes a choice among brands, then the real intense competition begins, compar- ing Camrys to Camrys, Accords to Accords, or Malibus to Malibus. This is facilitated by a wide variety of dealers advertising on the web and in traditional media. Every day, consumers are saving real money on real cars because of real intra-brand competition. See also Scott Morton, Fiona, Florian Zettelmeyer, and Jorge Silva-Risso (2011) “What Matters in a Price Negotiation: Evidence from the US Auto Retailing Industry,” Quantitative Marketing and Economics: 9:365-402. 66 These seven reasons were as follows: 1. Traditional dealers are, in large part, in unacceptable out-of-the-way locations. 2. Traditional dealers carry large inventories while Tesla does not. 3. Traditional dealers need to work on a high volume, fast paced sales model, while Tesla does not. 4. Traditional dealers earn their profit from operations other than new vehicle sales, operations Tesla does not expect to have in any quantity. 5. Traditional dealers rely on manufacturers to fund advertising, while Tesla does not advertise and would not allow or pay for others to advertise for it. 6. Traditional dealers could not make money selling Teslas because Tesla itself would undercut them with lower online pricing. 7. Traditional dealers rely on selling internal combustion engine (ICE) powered vehicles and therefore have a conflict of interest selling electric vehicles (EVs) which Tesla believes need to replace, and not just complement, ICE vehicles. TR. III; 11-12. 67 It is not clear that all of Mr. Maron’s points are correct even as to traditional dealers. For example, in his seventh point, he asserts that dealers who sell ICE vehicles will not be able to effectively sell EVs even at a different store. But dealers are merchants; they sell what the manufacturers build and the consuming public wants. Dealers do not have an a priori view as to superiority of one powertrain over another. In reality, point seven is merely an attempt to conflate arguments over the environmental attributes of Tesla’s products with distribution channel questions. But those two sets of issues are separate, and they should be treated that way.