SB 126 is bad and unfair public policy

SB 126 is bad and unfair public policy

Friday, April 12, 2013

By Daniel Gage, Director of Communications and Public Affairs – Alliance of Automobile Manufacturers

Foster's Daily Democrat is entitled to its own opinion, but not to its own facts. Recent editorials regarding a bill — SB 126 — being pushed in the State House by car dealer lobbyists fail to share some key truths.

Automobiles are different from any other consumer product on the market because consumers cannot buy cars and light trucks directly from the manufacturer. New Hampshire law requires the sale of vehicles through a network of independently-owned franchised dealers. On top of that, New Hampshire — like every other state — has a series of statutes that dictate the exact terms of these voluntary business relationships that are willingly entered into by both parties. Few other industries have such state regulation and oversight piled upon state corporate code and federal law that govern typical business operations and their private contracts.

In New Hampshire, dealers are using their special interest influence in Concord to push amendments to these franchise laws that would give them unprecedented powers, powers that could cost consumers more in the end. Automakers support the franchise system of selling the cars and trucks they build, but changes to these unique laws must be balanced. SB 126 simply isn't. 


So what's in SB 126? For starters, provisions that would dictate how dealers are compensated by manufacturers for doing warranty and recall work, allowing for rates to be unilaterally and solely determined by the dealer. Warranty customers are captive customers — dealers incur no advertising or marketing expense in this regard. And by state law, your neighborhood repair professional cannot compete with the local car dealer to do that warranty fix. The lack of competition — coupled with state mandated reimbursement at retail levels — certainly doesn't bode well for consumers.

SB 126 links the reimbursement rates at which manufacturers must reimburse dealers for warranty work to rates that dealers charge the general public. How do we know the average consumer will end up paying more so that manufacturers will have to pay more? Because it has happened in other states that require the same thing. 

Dealers are also asking lawmakers to limit manufacturer input over how a showroom looks, what's in it, what customer conveniences are offered, and how the products we make are displayed, marketed, and eventually sold. Think Apple or the Gap would ever cede that type of control? They don't have to, and they never will. 

Most showroom improvement projects are voluntary and often funded, at least in part, by the manufacturer. If SB 126 passes as written, manufacturers will have little influence in facility improvement projects, even if they pay for them. Sound fair to you?

New Hampshire's dealer lobbyists have argued that SB 126 includes “Buy Local” provisions. The fact is it does not. No aspect of SB 126 indicates that dealers choosing alternative vendors must select — or are even encouraged to select — local vendors. Regardless of the inaccuracy of this convenient slogan, manufacturers are not opposed to the alternative sourcing of vendors, goods, and services. However, the key aspect that dealers fail to share is that they are resisting any input by manufacturers on these decisions concerning the very principles that make a successful franchise business model work — consistency, uniformity, and brand identification. 

Another provision would require a manufacturer to turn over paperwork upon a dealer's demand, regardless of whether that information contains proprietary or confidential information — essentially a Freedom of Information Request (FOIA) for dealers. Where does a law exist that allows one private company to demand private communications from another for its own competitive use? It doesn't, and New Hampshire should not be the first state to test the legality of such a mandate. 

The auto industry is currently experiencing a renaissance after several years of bad economic times. Some automakers' very survival was in question. There may be a handful of dealers who feel they were not treated with the respect they deserved during that difficult period. But those issues were the basis of the New Hampshire Automobile Dealers Association's last significant expansion of the state's franchise statute. Now they need another bite at the same apple?

It is a new day in the auto industry. It is time to move on. Most automakers are making money again, and according to the National Automobile Dealers Association, car dealers made record breaking profits in 2011 and then again in 2012. The franchise model New Hampshire car dealers so desperately want to deconstruct is successful. Just look — it is making them record profits.

Legislation by retribution is not a way for state government to respond to dealer demands. The dealers call SB 126 their “Bill of Rights.” The problem for New Hampshire is that SB 126 may be “right” for dealers, but it is “wrong” for everyone else and will leave consumers holding the “bill”.