drive, look at the features of the car, [and] physically touch the
car” before purchase.
The first issue is addressed above. The
second example is a manufacturer issue, not a dealer issue, and
the reasons why just in time (also referred to as build-to-order)
manufacturing is inapplicable to the automotive sector have
been thoroughly addressed elsewhere.
And the third alleged
example of a limitation on innovation is simply mistaken.
Dealerships are as flexible and innovative as any retailers in the
way they sell their products and services, and the notion that
dealers do not or will not exercise any option available in the
market reflects a lack of understanding of the business. Dealers
innovate all the time. (If they fail to do so, they become former
dealers.) In addition to every flavor of online and electronic
marketing, dealers display cars at malls, fairs, auto shows, and
other venues. And there is a huge number of vendors – many
of whom are themselves market disruptors – that find dealers
to be among their best customers for cutting edge products and
services. If there is an innovative method of selling that will
increase sales, dealers will undertake it, and any suggestion to
the contrary is unfounded. The bottom line is that there are
no facts asserted that legitimately support the argument that
dealer franchise laws somehow impede amanufacturer’s ability
to “innovate” with respect to the retailing automobiles.
We agree with Commissioner McSweeny who recently stated
that “[t]he age of connected cars has begun, and, I believe, will
only accelerate from here. The answers for what that means
for consumers, for the automotive industry, and for the job
market will be shaped by how regulators, enforcers, legisla-
tors, and most importantly, the innovators approach issues
of safety, security, and privacy.”
For the FTC, that means
focusing on “the important role security and privacy play in
building [consumer] trust.”
The coming years will be very
exciting indeed in the automotive industry; however, no one
knows exactly what the future holds and speculation at this
early stage is likely to be counterproductive. We would urge
the Commission to continue to focus its efforts on those two
critical issues – privacy and security – because unless those are
assured, the full promise of many of these new technologies
will not be met.
V . Conclusion
As we stated at the outset, it is essential that the FTCapproach
issues pertaining to the state franchise laws in a balanced fash-
ion and that it carefully consider the actual effects that removal
of these laws may have on this efficient and consumer-friendly
model. And, for all of the reasons that we have explained, a
balanced and open review of these laws, informed by market
data and not merely hypothetical economic theory, reveals that
the existing system of auto distribution in the U.S., in all of its
variations, works well for all parties, starting with consumers.
In essence, the state legislatures that have considered these
issues have gotten it correct, and their regulatory decisions
should be respected.
Thank you for the opportunity to comment in this matter.
Please contact the undersigned if we can provide you with
additional information that would aid the Commission in its
consideration of these issues.
NADA’s 2014 letter to the FTC providing themwith much of the
information that they were seeking in the 2016 workshop can be
Andrew D. Koblenz
Executive Vice President,
Legal andRegulatory Affairs
CONTINUED FROM PAGE 36
Id. (“So what would those innovations be? Remote updates of software are an obvious one that Ellen pointed out. This is very handy for the consumer. Saves them lots of
time and schedule hassle. And it omits the need for a physical presence in their local area. Efficient manufacturing, just in time manufacturing. So this is the Dell model
as it used to be called. I produced a [sic] demand and not inventory. I make cars that people want. In fact, I make cars that people have already paid a deposit on. So I don’t
even incur the cost for the parts until I have cash in hand. That saves carrying costs for both the manufacturer for parts and the dealer for inventory. Moreover, you’re never
marking down a car, because every car is already bought. So that, the estimates on the savings of that changing a system from producing to inventory to producing to demand
are quite large. So then, you don’t need a local dealer to hold inventory for you. You do need to test drive, look at the features of the car, physically [sic] touch the car perhaps.
There are many interesting ways to organize that. It’s not clear that the franchise model would be the one.”)
See NADA’s 2014 Letter; the comments of Ms. Keller during panel three, TR. III; 17-18; and Maryann Keller and Kenneth Elias,
Consumer Benefits of the Dealer Franchise
2014, a copy of which is available here.
See Keynote Remarks of Commissioner Terrell McSweeny at the Connected Cars USA Conference 2016 at 1.
See id. at 5.