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A bill in the Minnesota legislature that would regulate automobile brokers -- those who arrange the sale or lease of new cars and trucks to consumers for a fee -- could encourage these brokering services to the extent it would clarify the legal status of operating such a business paid for by dealers. On the other hand, if the bill were applied to discourage or prohibit brokering services paid for directly by consumers, the result would be unfortunate. These cautionary notes were sounded by staff members of the Federal Trade Commission in comments on the bill, in response to a request to the agency from Minnesota State Senator Leonard R. Price. The FTC suggested instead that the legislature consider permitting all kinds of broker services to compete effectively, which "could benefit Minnesota consumers by saving them money and inconvenience."

The bill at issue, S.F. No. 1065, would require those who offer brokering services for new vehicle sales or leases, and who are paid for those services by auto dealers, to obtain licenses from the state. The bill also would regulate how these brokers conduct business. In its introductory remarks, the FTC staff letter states that new car brokers can help consumers by saving them money, time, and effort spent on haggling over the price, and notes the Commission's concern about restrictions imposed on retailing methods that benefit consumers.

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The FTC staff said that, although the bill does not appear to prohibit brokering services paid for by consumers, "[c]reating distinctions based on source of income may impair the ability of some providers of brokering services to compete." According to the staff letter, the bill may limit how consumer-paid brokering services could advertise and operate, and this "could increase the costs of providing those services and thus might ultimately increase costs to consumers." Yet the reasons for defining the scope of the bill based on pay source is unclear, the staff said, suggesting that, if the concern were undisclosed ties between dealers and brokers, a disclosure requirement could alleviate that concern.

These comments represent the views of the FTC's Chicago Regional Office and its Bureau of Competition, and not neces- sarily those of the Commission or any individual Commissioner.

Copies of the letter are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.

(FTC Matter No. V950007)