Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: FTC Chairwoman Ramirez addresses auto distribution workshop, (Jan 20, 2016)

By Michael Menzhuber, J.D., LL.M.

FTC Chairwoman Edith Ramirez, in her opening remarks at the FTC’s auto distribution workshop in Washington, D.C., noted that the automobile marketplace may be on the precipice of dramatic change. The aim of the workshop is to focus on how state-based laws and regulations affect consumers, competition, and innovation in the automobile marketplace, according to Ramirez’s prepared remarks.

Ramirez began by briefly describing the origins of the current system of automobile distribution. She explained how the basic system of independent franchised auto dealers that operates today was already established by the early 1930s. As this system evolved, however, Ramirez noted that dealers grew concerned about abusive and coercive practices by manufacturers, given the few alternative manufacturers dealers could turn to as alternatives.

“Today, the FTC is the primary federal enforcement agency for most dealers,” Ramirez said, noting that the Commission’s enforcement efforts include both competition and consumer protection issues. In particular, Ramirez noted the Commission’s 2015 nationwide effort taken together with 32 law enforcement partners to crack down on deception and fraud in the automotive sales, financing, and leasing industries.

Ramirez explained that the complex system of regulation governing automobile distribution would be explored by the workshop panelists in discussions on: (1) how state laws currently regulate the relationship between manufacturers and their franchised dealers; (2) laws prohibiting direct manufacturer sales to consumers; and (3) how technological changes affecting the auto industry may impact state auto distribution rules.

According to Ramirez, the questions about the impact of regulation on competition and innovation will continue. She concluded by suggesting that continued consideration should be given as to whether the state laws, under discussion at the workshop, are necessary to protect dealers against abuses by manufacturers or if they serve some other purpose.

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