FTC Staff Comment Before the Wisconsin Department of Transportation Concerning Auto Dealers and Auto Sales

Suite 1437
55 East Monroe Street
C~go. Illinois 60603
Area Code 312 353·8156
FEDERAL TRADE COMMISSION
Chicago Regional Office
November 	3, 	1989
V900004
COMMISSION AUTHORIZED
Mr. 	Thomas 	L. 	Gais
Wisconsin 	Department 	of 	Transportation
Dealer 	Section
Room 	806
P.O. 	Box 	7909
Madison, 	WI 	53707-7909
Dear Mr. 	Gais:
The 	staff 	of 	the 	Federal 	Trade 	Commission's 	Chicago 	Regional
Office 	and 	Bureau 	of 	Competition 	are 	pleased 	to 	have 	this
opportunity 	to 	respond 	to 	your 	request 	for 	public 	comments
regarding 	proposed 	changes 	to 	the 	Wisconsin 	Department 	of
Transportation 	(the 	"Department") 	regulations 	concerning
automobile 	dealers 	and 	automobile 	sales. 1 We 	believe 	that 	the
regulations 	would 	likely 	raise 	the 	prices 	that Wisconsin
consumers 	pay 	for 	new 	and 	used 	cars, 	reduce 	competition 	by
limiting 	innovative 	automobile 	marketing methods, 	and 	deprive
consumers 	of 	the 	savings 	that 	they 	could 	realize 	through 	such
marketing 	methods.
INTEREST AND 	EXPERIENCE 	OF THE 	STAFF OF THE 	FEDERAL TRADE
COMMISSION
Our 	interest 	in 	this 	legislation 	stems 	from 	the 	Commission's
mandate 	to 	enforce 	the 	consumer 	protection and 	antitrust 	laws 	of
the 	united 	States. 	The 	Federal 	Trade 	Commission 	is 	charged 	with
promoting 	competition 	and 	protecting consumers 	from 	unfair
methods 	of 	competition 	and 	unfair 	or 	deceptive 	acts 	or
practices. 2 In 	fulfilling 	this 	mandate, 	the 	staff 	of 	the 	Federal
Trade 	Commission 	often 	submits 	comments, 	upon 	request, 	to
federal, 	state, 	and 	local 	governmental 	bodies 	to 	help 	assess 	the
implications 	for 	competition and 	consumers 	of 	pending 	policy
issues. 	In 	enforcing 	the 	Federal 	Trade 	Commission Act, 	the
Commission 	has 	gained 	substantial 	experience 	in 	analyz'ing 	the
These 	comments 	represent 	the 	views 	of 	the 	staff 	of 	the
Federal 	Trade 	Commission's 	Chicago 	Regional 	Office 	and 	Bureau 	of
Competition 	and 	do 	not 	necessarily 	represent 	the 	views 	of 	the
Commission 	or 	any 	individual 	Commissioner.
2 See 	15 	U.S.C. 	§ 	41 	et 	seq.

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Mr. 	Thomas 	L. 	Gais 	-- 	Page 	2
impact 	of 	both 	private 	and 	governmental 	restraints 	on
competition.
During 	recent 	years, 	the 	Commission has 	been 	involved 	in
issues 	relating 	to 	restrictions 	that might 	tend 	to 	limit
alternative 	types 	of 	retailing 	beneficial 	to 	consumers. 	The
Commission has 	addressed 	the 	competitive 	implications 	of 	time 	and
place 	restrictions 	in 	various 	retail 	markets. 	For 	example, 	the
Commission has 	promulgated 	a 	Trade 	Regulation 	Rule 	on 	opthamalic
Services 	to 	eliminate 	restraints 	on 	the 	commercial 	practice 	of
optometry. 3 The 	Commission has 	also 	addressed 	restrictions
occurring 	in 	the 	auto 	industry. 	For 	example, 	the 	Commission
recently 	ruled 	that 	automobile 	dealers 	in 	the 	Detroit 	area
violated 	the 	antitrust 	laws 	by 	agreeing 	to 	limit 	their 	hours 	of
operation. 4 In 	addition, 	the 	Commission 	staff 	has 	conducted 	and
published 	economic 	research 	concerning 	automobile 	marketing. 5
The 	Commission 	staff 	has 	commented 	on Wisconsin 	legislation
that 	would 	have 	amended 	the 	state's 	fair 	dealership 	law 	to 	make
it 	difficult 	for 	a 	grantor 	of 	dealerships 	to 	terminate 	dealers 	in
response 	to 	changes 	in 	demand 	for 	products 	or 	to 	improve
distribution 	systems. 6 The 	Commission 	staff 	also 	recently
commented 	on 	Illinois 	legislation 	that 	would 	have 	strengthened
market 	area 	restrictions 	on 	franchised 	automobile 	dealerships 	and
that would 	have 	extended 	those 	restrictions 	to 	manufacturer-
See Trade 	Regulation 	Rule 	on 	Opthamalic 	Practice, 	54
Fed. 	Reg. 	10285 	(March 	13, 	1989). 	(The 	rule 	bans 	restrictions 	on
the 	practice 	of 	optometry 	such 	as 	limitations 	on 	branch 	offices,
prohibitions 	on 	lay 	associations, 	prohibitions 	on 	commercial
locations 	and 	bans 	on 	trade 	names).
4 Detroit 	Auto 	Dealers 	Ass'n,
(February 	22, 	1989). 	(The 	Commission
by 	area 	dealerships 	limiting hours 	of
competition.)
Inc., 	FTC 	Docket 	9189
decided 	that 	an 	agreement
operation 	limited
5
6
See Robert 	P. 	Rogers, 	The 	Effect 	of 	State 	Entry
Regulation 	on Retail 	Automobile Markets, 	Federal 	Trade
Commission, 	Bureau 	of 	Economics 	Staff Report 	(January 	1986).
(The Report 	concluded 	that 	state 	laws 	restricting 	the 	number 	of
automobile 	dealers 	in 	a 	given 	area 	were 	costly 	to 	consumers.)
Letter 	from 	Jeffrey 	I. 	Zuckerman, 	Director, 	FTC 	Bureau
of 	Competition, 	to 	the 	Honorable William 	P. 	TeWinkle, 	Wisconsin
Senate 	(February 	19, 	1988).

8
9
10
11
Mr. 	Thomas 	L. 	Gais 	-- 	Page 	3
franchised 	auto 	service 	centers.? 	The 	Commission 	staff 	also
commented 	on 	proposed 	Illinois 	legislation 	that 	would 	have
prohibited 	brokers 	from 	selling 	new 	and 	used 	cars 	and 	that 	would
have 	expanded 	Illinois's 	dealer 	licensing 	provisions. 8 We 	have
also 	submitted 	comments 	on 	Illinois 	legislation 	that 	would 	have
prohibited 	car 	dealers 	from 	holding 	sales 	outside 	of 	their 	local
markets,9 	and 	on 	other 	states' 	legislative 	initiatives 	concerning
automobile 	sales. 10
SUMMARY OF 	THE 	PROPOSED 	RULES
The 	proposed 	rules 	affect 	two 	areas 	of 	current 	regulation:
first, 	car 	sales 	held 	away 	from 	a 	dealer's 	licensed 	premises
(known 	variously 	as 	off-premises 	sales, 	off-site 	sales 	or 	tent
sales)ll 	and, 	second, 	car dealer 	licensing. 	The 	off-site 	sales
provisions 	prohibit 	a 	dealer 	from 	participating 	in more 	than
three 	sales 	per year 	at 	sites 	more 	than 	twenty 	miles 	away 	from
? 	Letter 	from 	C. 	steven 	Baker, 	Director, 	Chicago 	Regional
Office 	of 	the 	Federal 	Trade 	Commission, 	to 	the 	Honorable James 	R.
Thompson, 	Governor 	of 	Illinois 	(September 	8, 	1989). 	Governor
Thompson 	amendatorily vetoed 	the 	provisions 	of 	the 	legislation
relating 	to 	car dealerships 	and 	automobile 	service 	centers.
Letter 	from 	C. 	Steven 	Baker, 	Director, 	Chicago 	Regional
Office, 	to 	the 	Honorable Aldo A. 	DeAngelis, 	Illinois 	Senate
(March 	21, 	1989). 	That 	legislation was 	vetoed.
Letter 	from 	John M. 	Peterson, 	Director, 	Chicago
Regional 	Office 	Trade 	Commission, 	to 	the 	Honorable Woods 	Bowman,
Illinois 	House 	of 	Representatives 	(April 	24, 	1987). 	That
legislation was 	vetoed.
See 	Letter 	from Mark 	Kindt, 	Director, 	Cleveland
Regional 	Office, 	to 	the 	Honorable 	Dick 	Posthumus, 	Michigan 	Senate
(September 	29, 	1988); 	letter 	from 	Paul 	Davis, 	Director, 	Atlanta
Regional 	Office, 	to 	the 	Honorable 	Gwen Margolis, 	Florida 	Senate
(March 	29, 	1988); 	letter 	from 	the 	Paul 	Davis, 	Director, 	Atlanta
Regional 	Office, 	to 	the 	Honorable 	Oavid 	C. 	Waldrop, 	Jr., 	South
Carolina 	House 	of 	Representatives 	(March 	21, 	1988); 	letter 	from
Marcy Tiffany, 	Director, 	Los 	Angeles 	Regional 	Office, 	to 	the
Honorable 	Richard 	Katz, 	California 	State Assembly 	(January 	29,
1988); 	letter 	from Jim Moseley, 	Director, 	Dallas 	Regional 	Office,
to 	the 	Honorable William 	P. 	Clements, 	Jr., 	Governor 	of 	Texas
(June 	1, 	1987).
Proposed 	Rule 	amending Wis. 	Admin. 	Code 	§ 	Trans 	138.08
and 	creating wis. 	Admin. 	Code 	§§ 	Trans 	138.02 	and 	138.09.

12
Mr. 	Thomas 	L. 	Gais 	-- 	Page 	4
the 	dealer's 	licensed 	premises 12 and 	prohibit 	a 	dealer 	from
offering more 	than 	five 	vehicles 	at 	any 	such 	sale. 13
Under 	current 	law, 	all 	sellers 	of 	new 	or used 	cars 	in
Wisconsin, 	including 	car 	rental 	fleet 	dealers 	such 	as 	Hertz 	or
Avis, 	must 	be 	licensed. 	The 	dealer 	licensing 	provisions 	of 	the
proposed 	rules 	would 	broadly define 	the 	types 	of 	car 	sales
activities 	for 	which 	a 	license 	is 	required. 14 Despite 	the 	fact
that 	those who 	actually 	sell 	the 	cars 	and 	transfer 	title 	at 	off-
site 	sales 	are 	licensed 	dealers, 	the 	proposed 	rules 	would 	require
that 	other 	businesses 	offering 	additional 	services 	connected 	with
car 	sales, 	such 	as 	credit 	unions 	that 	sponsor 	sales 	and 	buying
clubs 	that 	arrange 	car purchase 	terms 	for 	their members, 	also
obtain 	automobile 	dealer 	licenses. 15
Proposed 	Rule, 	section 	6, 	creating wis. 	Admin. 	Code 	§
Trans 	138.08 	(2) 	(a) i 	Section 	7 	amending Wis. 	Admin. 	Code 	§ 	Trans
138.08 	(3) 	to 	become 	Wis. 	Admin. 	Code 	§ 	Trans 	138.08 	(2) 	(e).
Recreational 	vehicle 	("RV") 	sales 	are 	treated 	similarly 	under 	the
proposed 	rules 	although 	dealers 	are 	allowed 	to 	participate 	in 	six
off-site RV 	sales 	per year. 	section 	8 	creating 	Wis. 	Admin. 	Code
§ 	Trans 	138.08 	(3) 	(c). 	We 	are 	unaware 	of 	the 	reason 	for
treating 	automobile 	and RV 	sales 	differently.
(a) •
13 section 	6 	creating wis. 	Admin. 	Code 	§ 	Trans 	138.08 	(2)
14
15
section 	5 	creating wis. 	Admin. 	Code 	§§ 	Trans 	138.02 	(1)
through 	(4), 	(6) 	through 	(8), 	and 	(10) 	through 	(18)
(definitions). 	These 	definitions 	are 	then 	applied 	in 	the
proposed 	rule 	requiring 	that 	motor vehicle 	dealers 	be 	licensed.
section 	6 	creating Wis. 	Admin. 	Code 	§ 	Trans 	138.025.
See 	section 	5 	creating Wis. 	Admin. 	Code 	§§ 	Trans 	138.02
(1) 	through 	(4), 	(6) 	through 	(8), 	and 	(10) 	through 	(18)
(definitions) 	(especially 	proposed Wis. 	Admin. 	Code 	§§ 	Trans
138.02 	(8), 	(13), 	and 	(14». 	These 	definitions 	are 	applied 	in
section 	6 	creating Wis. 	Admin. 	Code 	§ 	Trans 	138.025 	(motor
vehicle 	dealer 	license 	requirements 	and 	exceptions). 	For
example, 	licenses would 	probably be 	required 	for 	credit 	unions,
buying 	clubs, 	and 	other 	providers 	of 	car 	sale 	services 	because,
under 	proposed Wis. 	Admin. 	Code 	§ 	Trans 	138.025 	(1), 	a 	license 	is
required 	to 	provide 	"services 	intended 	to 	aid 	the 	sale 	of motor
vehicles," 	as 	defined 	in 	proposed Wis. 	Admin. 	Code 	§ 	Trans 	138.02
(14). 	Other proposed 	definitions when 	applied 	to 	the 	proposed
provisions 	that 	specify who must 	obtain dealer 	licenses 	would
likewise 	require 	that 	these 	entities 	be 	licensed 	as 	car 	dealers.
The 	licensing 	exceptions 	in 	proposed Wis. 	Admin. 	Code 	§ 	Trans
138.025 	would 	probably 	not 	change 	this 	result.

16
17
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Mr. 	Thomas 	L. 	Gais 	-- 	Page 	5
AUTOMOBILE 	MARKETING METHODS
various 	techniques 	can 	be 	used 	to 	assist 	consumers 	in
finding 	licensed 	automobile 	dealers 	willing 	to 	sell 	at 	discounts.
One 	source 	is 	credit 	unions 	that 	sponsor 	automobile 	sales
conducted 	through 	licensed 	dealers. 16 The 	credit 	unions
encourage 	these 	sales 	to 	obtain 	opportunities 	to 	provide
automobile 	financing. 	Since 	cars 	are 	sold 	in volume, 	the 	credit
unions 	can 	obtain 	substantial 	savings 	for 	their members. 17
Finally, 	credit 	union 	sponsored 	fleet 	sales 	may 	in 	some 	cases
stimulate business 	for 	existing 	dealerships.18
Car 	rental 	companies, 	such 	as 	Hertz 	and Avis, 	are 	a 	primary
source 	of 	automobiles 	for 	sales 	conducted 	on 	credit union
premises. 	The 	fleet 	dealers 	are 	seeking 	a 	means 	of 	selling 	their
used 	rental 	cars. 	Low 	overhead 	sales 	offered 	in 	conjunction with
credit 	unions 	enable 	fleet 	dealers 	to 	turn 	over 	their 	inventories
efficiently.
Innovative marketing 	techniques 	may 	in 	some 	cases 	provide
cost 	savings 	and 	services 	for 	consumers. 	For 	example, 	consumers
who 	purchase 	used 	cars 	at 	fleet 	sales may 	be 	able 	to 	obtain
benefits 	that may 	not 	be 	available 	to 	other used 	car 	purchasers.
Cars 	purchased 	at 	fleet 	sales 	generally 	carry 	a 	12-month 	or
A credit 	union 	representative 	familiar 	with 	these 	kinds
of 	sales 	indicated 	that 	an 	individual 	credit union 	generally
sponsors 	no 	more 	than 	one 	sale 	per year.
For 	example, 	in 	1986, 	credit 	unions 	surveyed 	by 	the
Illinois 	Credit Union 	League 	estimated 	that 	consumers 	paid 	an
average 	of 	$1,118 	less 	for 	a 	used 	car at 	a 	credit 	union 	sponsored
fleet 	sale 	than 	those 	consumers 	would 	have 	paid 	to 	a
"conventional" 	used 	car 	dealer. 	The Michigan 	Credit Union 	League
asserts 	an 	estimated 	average 	savings 	of 	$900 	per vehicle. 	Hertz
Corporation 	asserts 	an 	estimated 	savings 	of 	approximately 	$1,000
per 	car 	in 	1987.
According 	to 	the Wisconsin 	Credit Union 	League, 	credit
unions 	may 	offer 	special 	financing 	terms 	and 	rates 	for 	a 	fleet
sale. 	Credit Unions 	may 	pre-approve members 	for 	the 	financing
terms 	and 	typically 	keep 	theset~rms open 	for 	thirty days 	after 	a
fleet 	sale. 	Consumers 	are 	given 	the 	option 	to 	purchase 	a 	car
that 	was 	not 	available 	at 	the 	fleet 	sale 	from 	a 	dealership 	under
the 	sale's 	financing 	terms. 	One 	credit union 	noted 	that, 	at 	a
recent 	sale, 	approximately 	92 	members 	were 	pre-approved 	for 	the
fleet 	sale. 	Approximately 	42 	of 	these members 	purchased 	a 	car 	at
the 	fleet 	sale. 	Of 	the 	remaining 	50 	members, 	15 	exercised 	the
option 	and 	purchased 	a 	car 	from 	a 	dealer.

19
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Mr. 	Thomas 	L. 	Gais 	-- 	Page 	6
12,000 	mile 	power-train warranty.19 	other used 	cars 	may 	carry
shorter 	term warranties 	or 	none 	at 	all. 	Some 	fleet 	dealers 	have
national 	service 	networks 	through which 	consumers 	can have 	the
purchased 	cars 	repaired.~ 	In 	addition, 	some 	fleet 	dea1ers
contract with 	local 	dealerships 	and 	automotive 	repair 	firms 	to
perform 	service 	under 	these 	warranties.
Another 	innovative marketing 	technique, 	automobile 	buying
clubs 	and 	referral 	services, 	provide 	consumers with 	additional
opportunities 	to 	obtain 	substantial 	savings when 	purchasing 	cars.
These 	services 	generally 	charge 	an 	annual 	membership 	fee 	and
arrange 	new 	car purchases 	for 	members 	at guaranteed 	prices 	with
participating dealers. 	An 	August 	1988 	survey 	of 	six automobile
buying 	services 	by 	Changing 	Times magazine 	concluded 	that
customers 	purchasing 	cars 	through 	these 	services 	would 	have
realized 	substantial 	savings 	on 	each 	purchase, 	no 	matter which
service was 	picked. 21
OFF-SITE 	SALES 	RESTRICTIONS
The 	rules 	that 	the 	Department 	proposes 	to 	impose 	upon 	off-
site 	automobile 	sales 	are 	likely 	to 	reduce 	the 	number 	of 	such
sales 	and 	the 	number 	of 	vehicles 	available 	through 	such 	sales.
If 	that 	occurs, 	consumers 	will 	be 	unable 	to 	realize 	the 	savings
that 	otherwise might 	have 	been 	available 	without 	the 	proposed
restrictions.
The 	Department's 	analysis 	of 	the proposed 	rule 	recognizes
that 	off-premises 	sales 	have 	caused 	"no 	special, 	recurrent
Fleet 	dealers, 	like 	car 	dealerships, 	have 	an 	interest
in maintaining good 	consumer 	relations 	in 	the 	communities 	in
which 	they 	hold 	sales. 	Fleet 	dealers 	have 	an 	ongoing 	need 	to
turn 	over 	their used 	rental 	car 	inventory 	and 	thus 	have 	an
incentive 	to 	provide 	favorable 	services 	to 	consumers 	in 	order 	to
insure 	a 	supply 	of 	customers. 	We 	understand 	that 	Hertz
Corporation, 	for 	example, 	provides 	a 	30-day warranty 	on
mechanical 	problems 	in 	addition 	to 	the 	typical 	12 	month 	or 	12,000
mile 	power-train warranty.
A national 	network 	is 	especially valuable 	to 	a 	consumer
who 	needs 	service work while 	travelling 	far 	from 	the 	place 	of
purchase.
Taking 	the 	Hassle 	out 	of 	car-Buying, 	Changing Times,
August 	1988, 	at 	37.

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Mr. 	Thomas 	L. 	Gais 	-- 	Page 	7
consum~r problems."~ 	Nevertheless, 	the 	Department 	is 	concerned
that 	stricter 	off-premises 	sales 	restrictions 	may 	be 	necessary 	to
prevent 	large, 	urban 	dealers 	from 	absorbing markets 	outside 	their
permanent premises 	and 	hypothesizes 	that 	closing 	such 	markets 	to
these 	dealers 	could 	encourage 	the 	establishment 	of 	permanent
dealerships 	in 	smaller communities 	not 	currently 	served 	by
permanent 	car 	dealerships.23
The 	contemplated 	restrictions 	would 	eliminate 	car 	sales
events 	in markets 	not 	served 	by 	permanent 	dealerships, 	depriving
consumers 	in 	these 	markets 	of 	the 	opportunity 	to 	participate 	in
such 	sales 	events 	locally. 	Off-site 	sales 	on 	credit 	union
property 	or 	at 	other temporary 	locations 	may 	be 	held 	for 	several
reasons. 	A fleet 	dealer 	such 	as 	a 	car 	rental 	company may 	need 	to
hold 	such 	sales 	to 	turn 	over 	inventory. 	A traditional 	dealer may
wish 	to 	hold 	an 	off-premises 	sale 	to 	reduce 	inventory 	of
overstocked 	cars. 	An 	off-premises 	sale may 	also 	be 	desirable 	if
customers 	are 	supplied 	to 	the 	seller 	-- 	such 	as 	credit 	union
members 	at 	a 	credit 	union-sponsored 	sale. 	Off-premises 	sales
provide 	a 	low-overhead mechanism 	for 	bringing 	sellers 	and
customers 	together 	and 	the 	reduced 	overhead 	costs 	can 	result 	in
savings 	for 	consumers. 	The 	advantages 	of 	selling 	cars 	in markets
without 	permanent 	dealers may 	not 	be 	substantial 	enough 	to
justify the 	costs 	associated 	with 	establishing and 	maintaining 	a
permanent 	dealership 	in 	those 	markets. 	In 	addition, 	some
communities 	are 	probably 	simply 	too 	small 	to 	support 	permanent
dealerships, 	and 	temporary 	off-site 	sales 	may 	provide 	local
consumers 	with 	a 	rare 	opportunity 	to 	purchase a 	less 	expensive
automobile. 	Under 	the 	proposed 	rules, 	low overhead 	fleet 	sales
would 	have 	to 	be 	held 	in 	areas 	served by 	permanent 	dealers.
Consumers 	living 	in markets 	not 	served by permanent 	dealers 	would
have 	to 	travel 	to 	outside 	markets 	to 	take 	advantage 	of 	the 	sales.
The 	proposed 	restrictions 	on 	off-premises 	sales 	may 	also
reduce 	competition 	in 	some 	locales. 	Off-premises 	sales 	conducted
by 	dealers 	from 	other markets 	may 	in 	some 	small 	communities
provide 	the 	only 	effective 	competition to 	local 	dealers. 	Under
the 	proposed 	rules, 	the 	local 	dealers 	would 	be 	insulated 	from
this 	form 	of 	competition. 	As 	a 	result, 	Wisconsin 	consumers 	in
these 	communities 	may 	face 	higher prices 	for 	new and 	used 	cars.
Notice 	of 	Hearing 	and 	Proposed Rule, 	Analysis 	Prepared
by 	the 	Wisconsin 	Department 	of 	Transportation 	("Analysis"), 	at 	2.
23 See 	Analysis, 	at 	3.

Mr. 	Thomas 	L. 	Gais 	-- 	Page 	8
PROPOSED 	DEALER 	LICENSING RULES
We 	are 	concerned 	that 	the 	licensing 	rules 	proposed by 	the
Department may 	be 	overly broad 	and 	consequently may 	limit 	or
eliminate 	the 	assistance 	that 	credit 	unions, 	buying 	clubs 	and
other 	services 	provide 	consumers, 	in 	cooperation with 	dealers
that 	already 	hold 	licenses. 	By 	statute, 	the 	state 	of 	Wisconsin
requires 	that 	car dealers 	be 	licensed 24 and 	imposes 	various
obligations 	on 	those 	licensed dealers. 	For 	example, 	a 	licensed
car dealer must 	have 	a 	permanent 	car display 	and 	repair
facility.25 	By 	extending the 	licensing 	requirements, 	the
Department's 	proposed 	rule 	is 	likely 	to 	impose 	these 	obligations
on 	credit 	unions 	and 	buying 	clubs. 	Since 	credit 	unions 	and
buying 	clubs 	are 	not 	dealers 	in 	the 	usual 	sense 	(they 	only
facilitate 	transactions 	between 	licensed 	car dealers 	and
consumers), 	it would 	be 	difficult 	or 	impossible 	for 	them 	to
obtain 	licenses. 	The 	costs 	of 	establishing 	and 	maintaining
permanent 	display 	and 	repair 	facilities, 	necessary 	to 	obtain
licenses 	under 	the 	proposed 	rule, 	may 	be 	so 	high 	that 	credit
unions 	and 	buying 	services 	could 	no 	longer 	offer 	the 	car 	sales
services 	that 	they 	now 	provide 	under 	current 	regulation.
The 	Department's 	proposed 	rule 	is 	intended 	to 	clarify 	and
codify 	the 	Department's 	case-by-case 	decisions 	on whether
specific 	businesses 	require 	dealer 	licenses~ under 	the 	statutory
definitions 	of 	"motor vehicle 	dealer."v 	The 	proposed 	licensing
24
25
26
Wis. 	stat. 	§ 	218.01 	(2).
Wis. 	stat. 	§ 	218.01 	(3) 	(bf).
See Analysis, 	at 	2.
27 Wis. 	stat. 	§§ 	218.01 	(1) 	(n) 	(definition 	of 	"motor
vehicle 	dealer") 	and 	218.01 	(1) 	(0) 	(exceptions 	to 	definition 	of
"motor vehicle 	dealer").
These 	provisions 	are 	specifically as 	follows:
§ 	218.01 	(1) 	(n): 	"Motor vehicle 	dealer" 	means 	any 	person,
firm 	or 	corporation, 	not 	excluded by 	par. 	(0) 	who:
1. 	For 	commission, 	money 	or 	other 	thing 	of value, 	sells,
exchanges, 	buys, 	rents 	with 	the 	option 	of 	purchase, 	offers 	or
attempts 	to 	negotiate 	a 	sale 	or 	exchange 	of 	an 	interest 	in motor
vehicles; 	or,
2. 	Is 	engaged wholly 	or 	in 	part 	in 	the 	business 	of 	selling
motor vehicles, 	including motorcycles, 	whether 	or not 	such motor
vehicles 	are 	owned 	by 	such 	person, 	firm 	or corporation.
(continued ... )

I
Mr. 	Thomas 	L. 	Gais 	-- 	Page 	9
rules 	are 	expansive 	and 	quite 	detailed. 	The 	proposed 	rules 	fall
into 	two 	general 	categories: 	(1) 	a 	broad 	definition 	of 	the
statutory 	term 	"negotiating," 	designed 	to 	encompass 	as 	dealers
those 	persons, 	sometimes 	called 	"brokers," 	who 	negotiate 	car
sales 	for 	third 	parties;28 	and 	(2) 	a 	broad 	enumeration 	of 	the
types 	of 	activities 	that 	constitute 	"engag[ing] 	wholly 	or 	in 	part
in 	the 	business 	of 	selling" 	cars, 	designed 	to 	require 	licenses 	of
car 	sale 	sponsors, 	of 	intermediaries 	between 	sellers 	and 	buyers
of 	cars, 	and 	of 	those who 	profit 	directly 	from 	car 	sales.~ 	The
rule would 	thus 	require 	licensing 	of many 	providers 	of 	car 	sales
services 	who 	are 	not 	currently 	required 	to 	hold 	licenses, 	even
though 	these 	providers 	may 	not 	negotiate 	the 	terms 	of 	the 	sale 	or
transfer 	ownership 	in 	cars.
In 	addition 	to 	requiring 	licenses 	for 	credit 	unions 	that
sponsor 	car 	sales, 	for 	buying 	clubs 	that 	arrange 	discount 	prices
for 	their members, 	and 	for 	other 	providers 	of 	car 	sale 	services,
the 	proposed 	licensing 	rules 	would 	impose many 	obligations 	on
these 	organizations 	that 	do 	not 	relate 	to 	or 	arise 	from 	the
services 	they 	provide. 	Thus, 	credit 	unions, 	which 	provide
financing, 	and 	buying 	clubs, 	which 	pool 	car buyers, 	would 	be
burdened with 	unnecessary 	and 	costly 	responsibilities 	such 	as
acquiring 	and maintaining 	permanent 	showrooms 	and 	garages. 	We
believe 	that 	requiring 	these 	service 	providers 	to 	comply 	with
these 	obligations may 	not 	benefit 	consumers 	because 	such 	a
requirement 	is 	likely 	to 	prevent 	credit unions, 	buying 	clubs 	and
other businesses 	from 	providing valuable 	car 	sale 	services 	to
consumers.
27 ( ..• continued)
§ 	218.01 	(1) 	(0): 	The 	term 	"motor vehicle 	dealer" 	does 	not
include:
1. 	Receivers, 	trustees, 	administrators, 	executors,
guardians 	or 	other persons 	appointed by 	or 	acting 	under 	the
judgment 	or 	order 	of 	any 	court; 	or
2 .. Public 	officers 	while 	performing 	their 	official 	duties;
or
3. 	Employes 	of 	persons, 	corporations 	or associations
enumerated 	in 	subds. 	1 	and 	2, 	when 	engaged 	in 	the 	specific
performance 	of 	their 	duties 	as 	such 	employes.
4. 	Sales 	finance 	companies 	or 	other 	loan 	agencies 	who 	sell
or 	offer 	for 	sale motor vehicles 	repossessed 	or 	foreclosed 	by
them under 	terms 	of 	an 	instalment 	contract, 	or motor vehicles
taken 	in 	trade 	on 	such 	repossessions.
28
~
Analysis, 	at 	2.
Analysis, 	at 	3.

/	r
Mr. 	Thomas 	L. 	Gais 	-- 	Page 	10
We 	recognize 	that 	the 	Department 	is 	bound by 	the 	state's
statutory 	scheme 	and 	by 	the 	definitions 	provided 	by 	the
legislature.~ 	We 	merely 	suggest 	that 	any 	licensing 	rules 	be
narrowly 	drawn 	to 	apply 	only 	to 	those 	businesses 	that 	actually
operate 	as 	car 	sellers 	and 	to 	ensure 	that 	providers 	of 	related
services, 	who 	do 	not 	actually 	sell 	cars, 	may 	continue 	to 	offer
their valuable 	services 	to 	Wisconsin 	consumers.
CONCLUSION
Both 	the 	proposed 	licensing 	rules 	and 	the 	proposed 	off-site
sales 	restrictions 	would 	likely 	eliminate 	credit 	union-sponsored
fleet 	sales 	and 	other 	automobile 	marketing methods 	that 	may
benefit Wisconsin 	consumers. 	The 	proposed 	rules 	would 	restrict
the 	ability 	of 	licensed 	car 	dealers 	to 	conduct 	automobile 	sales
through 	credit 	unions 	or buying 	clubs 	and 	to 	employ 	other
innovative marketing 	techniques 	that may 	result 	in 	substantial
savings 	to 	consumers. 	These 	rules 	may 	limit 	competition 	among
automobile 	dealers 	and 	increase 	the 	prices 	that 	Wisconsin
consumers 	pay 	for 	automobiles.
We 	appreciate 	this 	opportunity 	to 	comment.
~4c. 	steven 	Baker
Director
chicago 	Regional 	Office
~ See 	supra 	note 	26, 	wis. 	stat. 	§§ 	218.01 	(1)
218.01 	(1) 	(0).
(n) 	and