Automotive News - February 4, 2008 - (Page 34) 34 • FEBRUARY 4, 2008 The online dealer INSIGHT Legal barriers fall, but online auto sales still tricky Harry Stoffer hstoffer@crain.com S tan Liebowitz, an expert on electronic commerce, says he would never buy a new car or truck entirely online. He first would want to see the vehicle, feel it and drive it. At the same time, the University of Texas economics professor contends that government should not block consumers who want to buy entirely online and never set foot in a dealership. He objects to state franchise laws that he says prevent experimentation with more efficient electronic sales. Dealers and their advocates say such complaints, while common, are misdirected. They say franchise laws do not bar online sales. Instead, they say, the laws keep unqualified, unauthorized people and companies from trying to sell vehicles directly to consumers — online or in person. Increasingly, franchised dealers, under the law, are as free to complete sales online as they are in their own showrooms, says Wisconsin dealer Russ Darrow, of the Russ Darrow Group. His dealership group, which sells 13 brands in 18 stores, has an aggressive online marketing program. But dealers still need to be cautious about online transactions for legal Dealer Russ Darrow: “We always try to encourage the customer to come in.” and other reasons, Darrow and others say. “We always try to encourage the customer to come in” during the purchase, Darrow told Automotive News. One legal concern: A sale completed at a customer’s home triggers the Federal Trade Commission’s three- day cooling-off rule, says Jim Moors, director of franchising and state law for the National Automobile Dealers Association. Under the rule, a buyer has three days to cancel a sale and get a full refund. Caution flags Dealers now can treat online vehicle sales more like in-store sales, but there still are reasons to be especially cautious, experts say. The legal dangers of online sales include Triggering cooling-off periods for customers Violating unfamiliar licensing, advertising and business practice rules in other states Failing to verify buyers’ personal and financial information merce director at the Napleton Automotive Group in suburban Chicago, which operates 57 franchises in four states. Some dealers think they need to be more careful about verifying the identities and financial histories of out-of-state buyers, Hamid and others say. “You have to authenticate everything,” Hamid says. Legal snarls Moors cites another concern: A dealer who sells to online customers across state lines may inadvertently violate unfamiliar, fine-print provisions in other states’ laws or rules on licensing, advertising or other business practices. “We like to stay away from out-ofstate sales,” says Rafi Hamid, e-com- Market at work Worries about cross-border online sales are waning, says Roy Dockum, executive director of the Oklahoma Motor Vehicle Commission and president of the National Association of Motor Vehicle Boards and Commissions. Members of the national group administer most of the laws and rules that govern dealer behavior. The group considered proposing model legislation that would make state requirements for online sales more uniform. The idea was that fewer violations, especially inadvertent ones, would occur. But Dockum says that plan “has dropped off the agenda and out of the radar of the association.” Dockum says most dealers have learned how to use the Internet positively. And there has been a shakeout of buying services and brokers that seek to help online customers find vehicles and begin the buying process, he adds. It was “survival of the fittest” in the market, Dockum says. Good vendors are the ones left standing, he adds. Still, critics insist that government, mainly through franchise laws, is impeding a more competitive online marketplace for motor vehicles. The argument is heard across the political spectrum — from the liberal-leaning Consumer Federation of America to the libertarian Cato Institute. The NADA’s Moors says the debate should be over. Dealers — who argue that franchise laws protect consumers as well as auto retailers that have made big investments in physical facilities — have won in every state. Liebowitz, the Texas professor, says he understands the arguments. But he still thinks that others besides dealers — even automakers — should be allowed to use the Internet to try new ways to sell and deliver vehicles. That ought to be the case, he says, even if most customers, like him, still would choose to inspect real vehicles on real lots and take test drives. “I suspect that that’s what would prevail,” Liebowitz says, “but we don’t get to see an alternative model that effectively competes because of the laws.” c Donna Harris contributed to this report http://www.usemafs.com http://www.usemafs.com
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.