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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)