The Consumer Federation of America and the Consumers Union yesterday called for an end to state laws that prohibit Internet car sales, saying that the restrictions are costing consumers around $US20 billion per year, the Washington Post said.
Citing a CFA study carried out by the Federation’s research director Mark Cooper, the newspaper said that at least nine states have rules that require cars to be sold through dealerships, franchised by the manufacturers.
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According to the study, 24 other state legislatures are considering protection for dealers designed to keep both manufacturers alongside other companies from using the Internet to circumvent dealers.
Jack Gillis, CFA spokesman said that the Consumer Federation “intend(s) to stop the extension of these laws and begin to roll them back.”
“Our goal is to stop the process,” he added.
Quoting David Hyatt, of the National Automobile Dealers Association, the Post said that the CFA study raises questions concerning the level of competition in automobile sales. He said that other studies contradict the conclusions of the CFA about the impact of dealer franchise laws on both competition and prices.
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By GlobalDataMr. Hyatt criticised the CFA study for saying that “more dealerships would be better because they would result in more competition,” and then talking “about direct online sales for manufacturers,” which may be owned by the auto manufacturer.
The newspaper says that very few cars are sold from start to finish over the Internet, including in those states where no restrictions exist. The vast majority of car buyers now use the Internet for research, say the dealers, before visiting the showrooms to feel the metal.
Dealers however have fought auto manufacturers on the issue, over fears that manufacturers may eventually try and sell directly to customers without the need for the dealers.
Recently, manufacturers relaxed their efforts to challenge state dealer laws out of a fear that both dealers and manufacturers may suffer if independent Internet car sellers were to become successful, says the Post.
