A move by the Federal Trade Commission to tackle the current car dealership system could lead to fewer dealers and much higher prices, five influential conservative groups said in a letter to the agency.
Led by Americans for Tax Reform, the five accused the FTC of targeting the system potentially for break up despite evidence that the competitive system saves car buyers nearly $500.
The letter from ATR President Grover Norquist, Phil Kerpen of American Commitment, Andrew Langer of Institute for Liberty, George Landrith of Frontiers of Freedom and Jeffery L. Mazzella of Center for Individual Freedom, slapped an FTC hearing set for Tuesday that appeared to push the position of Tesla maker Elon Musk who wants to sell directly to consumers.
Under that scheme, the groups warned, dealerships of the same companies like Ford or Toyota that directly compete would dry up, leaving just one direct seller in an area. And that would jump prices since consumers wouldn’t be able to play dealers off each other.
Only one car maker is testifying at the hearing, a representative from Tesla, an Obama ally.
“While the FTC’s mission is to ‘prevent business practices that are anticompetitive or deceptive or unfair to consumers,’ both economic theory and empirical evidence show with little doubt that the retail automotive market is extraordinarily competitive. Thousands of franchised automobile dealers compete on pricing, financing and servicing, and empirical research shows that this competition drives down prices for consumers. In short, the FTC appears to be trying to find a problem in a market where no evidence of a problem exists,” said their letter to the FTC. The full letter is below.
At issue are laws on dealerships and the practice inter-brand competition, or General Motors dealers competing with nearby GM dealers. The group provided a report that showed inter-brand competition saves consumers money, but an analyst writing in the Hill newspaper said that FTC staff thinks otherwise.
Wrote analyst George S. Ford in the Hill:
The FTC’s staff says their position that intra-brand price competition among competition dealers does not lower car prices is “not merely a theoretical possibility,” but that it is based on strong statistical evidence. But what evidence do FTC staff members offer to support this peculiar position? They cite a study published 16 years ago analyzing state limitations on gasoline refiners’ ability to operate their own gas stations.
What do gasoline refineries have to do with car prices? With all due respect to the FTC’s staff, when a simple Google search of “intra-brand auto competition” would have led to more relevant (and recent) empirical evidence, such intellectual laziness does not inspire confidence that the FTC can be trusted to hold a neutral workshop.
Paul Bedard, the Washington Examiner’s “Washington Secrets” columnist, can be contacted at [email protected].
