Consumer Groups Say Dealer Associations Prevent Free and Direct Auto Buying On Web

The Washington Post reported that two leading consumer groups, the Consumer Federation of America and Consumers Union, yesterday called for an end to state laws prohibiting Internet car sales, claiming the restrictions cost consumers an estimated $20 billion a year.

A CFA study found that at least nine states have rules requiring cars to be sold through dealerships that are franchised by the manufacturers. Two dozen other state legislatures are considering dealer-protection measures designed to keep manufacturers and other companies from using the Internet to circumvent dealers, according to the study.

Robert Krughoff, president of Washington Consumer Checkbook, said that in Texas his organization is even prohibited by state law from selling price reports to clients interested in purchasing a car.

"We intend to stop the extension of these laws and begin to roll them back," said CFA spokesman Jack Gillis. "Our goal is to stop the process."

They went on to quote David Hyatt of the National Automobile Dealers Association who said that the CFA study raises serious questions about the level of competition in auto sales, but that other studies contradict the CFA conclusions about the impact of dealer franchise laws on prices and competition.

Hyatt criticized the CFA study for suggesting that "more dealerships would be better because they would result in more competition," and then talking "about direct online sales for manufacturers," which could be owned by the automaker.

Although today just a few cars are sold over the Internet, dealers estimate the vast majority of car buyers now use the Internet for research before coming to the showrooms to kick the tires.

The Post explains that dealers have ferociously fought auto manufacturers on the issue, over fears that manufacturers would eventually try to sell directly to customers, cutting out dealers, who could suffer if independent Internet car vendors were to thrive.