Pub. 15 2016-2017 Issue 2

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S I S S U E N O . 3 , 2 0 1 6 8 new jersey auto retailer NADA Director’s MESSAGE | BY MARCY H. MAGUIRE State Franchise Laws Lower Prices and Benefit Consumers An economic report, released in July by the Phoenix Center for Advanced Legal and Economic Public Policy Studies, makes one overriding conclusion: state auto franchise laws lower retail prices of new cars, which benefits consumers. The study, "State Automobile Franchise Laws: Public or Private Interests?" found that franchise laws do not limit competition or lead to higher prices. Quite the opposite, the study found that "there is intense com- petition leading to very low margins on new car sales." This, in turn, demonstrably lowers prices for consumers and alters the way they buy cars and service in a very positive way. And how does the dealer network compare to manufacturers? The study found that when dealers sell an automobile-service bundle, "franchised auto dealers have a better incentive with respect to consumer desires than car manufacturers." Thus, it makes sense that state legislatures choose a market design that best fits their con- stituents. For more than 100 years, car buyers have been relying on a system that delivers the most efficient and cost-effective way of buying a car—through franchised dealers. Automakers contract with dealers who incur billions of dollars in expenses for equipment and facilities; deliver in-person customer service that consumers cannot get through a computer screen; and reduce consumer costs through a competitive model that lowers retail prices and makes purchasing possible through dealer-assisted financing. This latest report is also consistent with what respected auto analyst Maryann Keller reported at a Federal Trade Com- mission (FTC) panel earlier this year. She cited empirical evidence showing that intra-brand competition among dealers sig- nificantly lowers new-car prices. A direct- sales model would not benefit consumers in the same way. Moreover, the franchise network also promotes public safety and instills confidence in the consumer that there is someone there to help service the vehicle when needed. State governments require dealers to invest in facilities so that help is available to car owners throughout the life of the vehicle, and not just at the point of sale. As regulators such as the FTC continue to probe the benefits of the franchise system, NADA, and dealers na- tionwide, urge them to remember that the franchise laws in place not only promote competition in the free market but public safety for all. That is a win-win for consum- ers and dealers alike. Coun t down t o NADA’ s 100th Anniversary NADA celebrates it’s 100th anniversary in 2017, and the NADA Convention in New Orleans (January 26-29, 2017) will kick-off the celebration. There is no better place than New Orleans to celebrate a legacy of serving the public for the past 100 years. NADA expects more than 24,000 people— including over 3,000 guests from other countries—to attend our birthday bash. Once you arrive in New Orleans, be ready to enjoy some of the best food and music in