Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC staff urges Michigan to abandon direct automobile sales ban, (May 11, 2015)

By Greg Hammond, J.D.

FTC staff from the Office of Policy Planning, Bureau of Competition, and Bureau of Economics have submitted comments to Michigan State Senator Darwin L. Booher (R-Mich), supporting a state bill that would create an exception to current law that prohibits automobile manufacturers from selling new vehicles directly to consumers.

According to the letter, Michigan Senate Bill 268 will likely promote competition and benefit consumers. While there is currently a blanket ban on direct manufacturer sales to consumers, the bill would allow manufacturers of “autocycles,” under certain circumstances, to choose whether to sell directly to consumers, through dealers, or through a combination of the two. An autocycle is an enclosed motorcycle that is equipped with safety belts, rollbar, windshield, wipers, steering wheel, and equipment otherwise required on a motorcycle, and which has no more than three wheels in contact with the roadway at any time.

Specifically, the bill would amend Michigan’s “Regulation of Motor Vehicle Manufacturers, Distributors, Wholesalers, and Dealers,” in part, to add, “The manufacturer of new or used autocycles may engage in the direct retail sale, purchase or exchange of, or deal in or make repairs to, those autocycles. As used in this subsection, ‘repairs’ includes general repairs, warranty work or repairs, or recall work or repairs.”

“The proposed bill carves out a limited exception to current law,” the letter stated. “In FTC staff’s view, any effort to loosen or reduce a blanket prohibition on direct manufacturer sales may prove beneficial. In our view, however, the bill does not go far enough. Rather, the narrow scope of the bill would largely perpetuate the current law’s protectionism for independent franchised dealers, to the detriment of Michigan car buyers.”

Consequently, the FTC urges the Michigan legislature “to consider abandoning the direct sales prohibition in Michigan’s existing law, and instead permit manufacturers and consumers to reengage the normal competitive process that prevails in most other industries,” the letter stated. “Such a change would facilitate the development of new methods of distribution, benefitting the motor vehicle buyers of Michigan.”

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