I was very pleased when Chairman Underiner appointed me to serve on this task force. As you know, I am particularly sensitive to the treatment of smaller, rural dealers as it relates to those two areas. I will be viewing the proceedings of this task force from that standpoint.
This task force will challenge General Motors to find a way to offer dealers, especially smaller dealers, some options to comply with reasonable standards at a cost effective price. I will be looking for a way for GM to ask ALL of its dealers to help build their brand but not require the same "elements" of every dealer, regardless of size, market or geography. I am not naive enough to think that will be an easy task.
I analyze these issues in a bit more depth on my blog. I would love to hear your feedback. Please let me know what you think.
Some Manufacturer Stair-Step Programs Are a ‘Cancer in the Industry’
I hope you saw NADA Chairman Bill Underiner’s open letter in Automotive News earlier this month. In it, he takes the manufacturers to task regarding their multi-level pricing schemes and their effect on the retail automobile industry.
NADA has had a long-standing position in support of a level playing field, meaning lawful, equal and fair treatment by a manufacturer for all dealers, both large and small. Unfortunately, history shows that, at times, manufacturers’ incentive pricing programs create short-term incentives that favor the larger, more urban dealerships to the detriment of the smaller, more rural dealerships.
Recent history also shows that the long-term effects of discriminatory programs are to marginalize the smaller dealers and place them at a competitive disadvantage in their marketplace.
These programs also have a tendency to cause confusion among consumers and dealers as to the actual dealer cost of vehicles. This leads to consumer doubt and mistrust that reduces the value of the manufacturer’s brand. It also undercuts the goodwill between consumer and dealer. This is certainly not good business for either the OEM or the dealer.
Dealers of all sizes have recognized the inherent unfairness of a manufacturer’s discriminatory pricing that tilts the playing field in favor of some dealers. For example, Earl Hesterberg, CEO of Group 1 Automotive, emphasized the perniciousness of these stair-step programs as recently as May 21 in Automotive News, where he characterized them as “… a cancer in the industry that isn’t good for dealers or customers.”
The fact is, manufacturers can unfairly create real competitive disadvantages for some dealers and cause real customer confusion and dissatisfaction in the marketplace.
The best way to maintain a level playing field is for factories to focus on what they usually do so well: build quality cars and trucks and avoid disparate treatment of their dealers that can limit their ability to compete. Let all dealers do what they do best: vigorously compete in pricing, service and otherwise for the customer’s business.
NADA to Appeal Court Decision on FTC’s Risk-Based Pricing Rule D.C.
District Court upholds FTC interpretation concerning the scope of the Risk-Based Pricing Rule
The U.S. District Court for the District of Columbia on May 22 granted the Federal Trade Commission’s motion for summary judgment against an action brought by NADA that challenged the agency’s broad interpretation of the scope of the federal Risk-Based Pricing Rule.
The law that the rule implements (section 311 of the FACT Act) applies to persons who, among other requirements, “use” a credit report in particular credit transactions. The FTC issued an interpretation in July 2011 stating that dealers engaged in three-party vehicle financing transactions who do not obtain, receive or review a credit report nevertheless “use” a credit report based on the finance source’s use of a credit report and therefore are responsible for complying with the Risk-Based Pricing Rule’s notice requirement.
Believing this interpretation to be flawed, unnecessary and burdensome to many dealers by requiring them to purchase credit reports for no purpose other than to comply with the Risk Based Pricing Rule, NADA subsequently initiated this challenge.
In its complaint, NADA argued that Congress never intended the word “use” to extend to this subgroup of dealers and that the FTC lacked authority to issue such an interpretation. Although the court found that the statute is capable of supporting NADA’s interpretation, it held that the FTC possessed authority to issue its interpretation and that its interpretation is reasonable.
Regardless of which party prevailed at the district court level, NADA anticipated that the other party would appeal the District Court decision to the D.C. Circuit Court of Appeals. NADA will now direct its outside counsel to commence the appeal.
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