Auto dealers stand to lose some political heft in Texas next spring if lawmakers accept recommendations to reduce the industry’s presence on the board that affects everyone on the road, from setting trucking load rules to the nuances of vehicle registration and sales.
While several agencies are subject to new governance in the upcoming legislative session, changes at the Texas Department of Motor Vehicles proposed by the Sunset Advisory Commission come amid pleas from dealers who insist the current model is fair to both consumers and car salespeople.
The state Sunset Advisory Commission, charged with reviewing state agencies to measure their necessity and effectiveness, recommends in a new report that lawmakers revisit the composition of a number of rule-making agency boards, including the DMV.
Three of the nine current DMV board members have direct ties to the auto dealer industry. The Sunset Commission recommends that one of those members be replaced by a member of the public “to better balance board representation” and that a member of the public be appointed to head the panel, rather than an industry member.
Auto dealers who spoke with The Texas Monitor disagree.
“Having an industry representation on there makes for a more efficient industry,” said Jeff Martin, executive director of the Texas Independent Automobile Dealers Association. He said the nine-member panel is not top heavy with dealers. He also noted that it includes two appointees from the public, as required by state statute.
“The follow-up here is that it’s implied that the industry is passing rules that are not consumer-friendly,” Martin said. “I don’t see any instance of that.”
In a 15-page letter to the Sunset Commission, the Texas Automobile Dealers Association maintains that “the franchised motor vehicle dealers are needed as board members for their historical and hands-on experience and knowledge.”
Association president Bill Wolters did not return a call.
For years, Houston attorney Dana Karni has represented plaintiffs in cases against car dealers. She contends that, over the years, the DMV commission has made it easier for unscrupulous dealerships to survive. There are no tests or requirements to open a used car dealership, Karni notes, while plenty of other occupations require exams proving that the applicants have basic knowledge of the business.
To change the composition of the board “would certainly help the voice of the consumer,” Karni said. “I understand the industry has an interest in the rulemaking … but who is out there to protect the consumer in this industry? I suspect it would take more than adding one or two members who represent the public.”
Members of the DMV board are appointed by the governor. Auto dealers currently serving on the panel include chairman Raymond Palacios Jr., who owns a Cadillac dealership in El Paso. And Abbott appointee Guillermo “Memo” Treviño, one of the three members appointed to represent the public, actually owns a trucking firm. He also serves on the board of BBVA Compass USA, a bank that, among other services, provides auto loans.
The job of regulating motor vehicles was transferred from the Texas Department of Transportation to the DMV in 2009, backed heavily by the auto dealer sector. In doing so, three of the nine board members of the regulatory arm were required to hold an auto dealer’s license.
Tesla lobbyist Karen Steakley in a note to the commission supporting the addition of another consumer voice to board, urged a “review [of] the influence that entrenched factions may have on the Department and any potential and actual conflicts, so that the Department is not used as a tool to create laws and policies for the benefit of very select and biased interests.”
At a hearing in May, the Sunset Commission’s general counsel noted that the DMV board, in addition to needing a stronger consumer voice, also lacks transparency. General Counsel Steve Ogle helps provide direction to the board.
There are “behaviors where the board is not engaging the public,” Ogle told the Sunset Commission’s advisory board in a May meeting. “The [DMV] board is not setting clear policy…They’re struggling with their role.”
Ogle noted that the DMV board “rel[ies] heavily on work groups” which are “less inclusive, less open to the public. It’s a bit of a more cloistered process.”
Ogle cited the Tesla situation as a leading example of dealers’ influence on policy. For years, the electric carmaker has battled, unsuccessfully, for the right to sell its cars directly to Texas consumers through a showroom. That would threaten the current model, under which dealers have to serve as middlemen between manufacturers and buyers.
The commission’s advisory panel is concerned about a 2015 U.S. Supreme Court ruling that the North Carolina State Board of Dental Examiners violated federal antitrust laws by preventing non-dentists from providing teeth whitening services in competition with the state’s licensed dentists.
The DMV is one of a number of Texas agency boards laden with members of the industry that each agency is supposed to regulate. A review of all such boards in light of the Supreme Court ruling is expected to be part of proposed legislation in 2019.
“The concern is that the board will make an anti-competitive decision,” Sunset advisory member state Sen. Kirk Watson (D-Austin) said.
In past years, Texas lawmakers have introduced legislation to amend the dealer-consumer model, but so far the measures have failed.
Attempts to turn Sunset recommendations into law have often proved elusive, and even when legislation is passed it often falls short of the commission’s goals. Failed attempts at sunset legislation forced lawmakers into a special session last year. Former Texas Gov. Ann Richards called the sunset process “a full employment act for lobbyists.”
Steve Miller can be reached at [email protected].