FTC Staff Comment to Governor James R. Thompson Concerning S.B. 1870 to Limit Auto Base Rental Charges, Alter the Allocation of Costs and Risks of Damage or Theft, and Ban Long-Term Leasing on Sundays

12/23/1988 	10:59 	CHRO 	FTC CHICAGO 	**** 	6602231 312 353 4438 	P.02
Suito 1437
55 Ellt MGnloe StrHt
Chiaro. IIIlnoia 80603
Ar•• Code 312 353-8156
FEDERAL TRADE COMMISSION
Chil,;awo Regional Ottlcc
Oecember 	22, 	1988
The 	Honorable James 	R. 	Thompson
Governor 	of 	Illinois
Office 	of 	the 	Governor
Springfield, 	Illinois 	62706
C3~~ISSION AUTHORIZED
Dear 	Governor 	Thompson:
The 	statf 	ot 	the 	Chicago 	Regional 	otfice 	and 	Bureau 	of
Consumer 	Protection 	ot 	the 	Federal 	Trade 	Commission 	is
pleased to 	have 	the 	opportunity 	to 	rsspond 	to 	your 	request
for 	comment 	on 	the 	need 	for 	amendatory 	legislation 	after 	the
additions 	to 	the 	Illinois 	Vehicle 	Code 	contained 	in 	Senate
Bill 	1870 	become 	effective 	on 	January 	1, 	1989. 1 	As 	you 	have
asked, 	we 	are 	providing 	comments 	on 	how Senate 	Bill 	1870
might 	be 	amended 	or 	revised 	in 	the 	next 	legislative 	session
to 	better 	se'rve 	its 	purpose 	of 	improving 	the 	welfare 	of 	the
consumer 	and 	preserving 	the 	competitive 	en~ironment in 	the
car 	rental 	industry. 	In 	addition, 	you 	indicate 	that 	there
may 	be 	a 	need 	tor 	amendatory 	legislation 	to 	supplement 	the
bill's 	disclosure 	requirements. 	We 	would 	be 	pleased 	to 	offer
additional 	assistance 	if 	other 	amendments 	are 	offered.
Senate 	Bill 	1870 	will 	amend 	the 	Illinois 	Vehicle 	Code
in 	three 	principal 	ways. 	First, 	this 	bill 	will 	limit 	the
methods 	automobile 	rental 	companies 	may 	employ 	in 	calculating
base 	rental 	charges 	and 	in 	advertising 	those 	prices. 	Second,
it 	will 	dramatically 	altar 	the 	current 	methods 	of 	allocating
the 	costs, 	and 	risks, 	ot 	damage 	to 	(or 	theft 	of) 	a 	rental
vehicle. 	Finally, 	it 	will 	extend 	the 	current 	Illinois
prohibition 	against 	buying 	or 	selling 	motor 	vehicles 	on
Sundays 	to 	include 	a 	ban 	on 	long-term 	leasing 	of 	motor
vehicles 	on 	Sundays. 	We 	are 	concerned 	that 	parts 	of 	these
provisions 	may 	resul~ in 	increased 	costs 	to 	consumers 	who
lease 	or 	rent 	automobiles 	without 	providing 	significant
1 	Thsse 	comments 	represent 	the 	views 	of 	the 	Chieaqo
Reqional 	Office 	and 	the 	Bureau 	of 	Consumer 	Protection 	ot 	the
Federal 	Trade 	Commission. 	They 	are 	not 	necessarily 	the 	views
at 	the 	Federal 	Trade 	Commission 	or 	any 	individual
Commissionar. 	Questions 	or comments 	concerning 	this 	document
may 	be 	addrassed 	to 	~imothy T. 	Hughes, 	Attorney, 	Chicago
Regional 	Office, 	(312) 	353-4431.

12/23/1988 	11:00 	CHRO 	FTC CHICAGO 	**** 	5502231 312 353 4438 	P.03
The 	Honorable James 	R. 	Thompson
December 	22, 	1988
benefits 	to 	the 	majority 	of 	automobile 	renters 	or 	to 	the
public 	a~ large.
The 	Federal 	Trade 	Commission 	is 	charged with 	promoting
competition 	and 	protecting 	consumers 	from 	unfair 	and
deceptive 	commercial 	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 	competitive 	and
consumer welfare 	implications 	of 	pending 	policy 	issues. 	In
enforcing 	the 	Federal 	Trade 	Commi5sion 	Act, 	the 	Commission
staff 	has 	gained 	subatantiai 	experience 	in 	analyzing 	the
impact 	of 	various 	restraints 	on 	competition 	(both 	by 	private
action 	and 	through 	government 	intervention) 	and 	the 	costs 	and
benefits 	to 	consumers 	of 	such 	restraints.
Pursuant 	to 	its 	statutory mandate, 	the 	Commission 	and
its 	staff 	have 	considered 	other 	matters 	involving 	the 	car
rental 	industry 	and 	Sunday 	closing 	laws. 	The 	Commission
recently 	commented 	on 	the 	draft,guidelines 	prepared 	by 	the
National 	Association 	of Attorneys 	General's 	Task 	Force 	on 	Car
Rental 	Industry 	Advertising 	and 	Practices 	(NAAG 	Guidelines).3
The 	advertising, 	pricing, 	and 	allocation 	of 	liability
portions 	of 	sa 	1870 	are 	very 	similar 	to 	portions 	of 	these
NAAG 	guidelines. 	The 	Commission 	staff 	has 	also 	examined 	and
presented 	its 	comments 	on, 	numerous 	Sunday 	closing 	laws. 4
2 	See 	15 	U.S.C. 	§ 	41 	et 	seq.
3 	Letter 	from 	the 	Federal 	Trade 	Commission
(Commissioner 	strenio 	not 	joining) 	to 	Art 	Weiss, 	Deputy
Attorney 	General, 	Kansas 	(November 	4, 	1988). 	A copy 	is
attached. 	The 	NAAG 	draft 	guidelines 	were 	preliminarily
approved 	with 	certain mOditications 	by 	NAAG 	at 	its 	winter
meeting 	on 	December 	7, 	1988.
4 	Earlier 	testimony 	on 	Sunday 	closing 	laws 	for
automobile 	dealers 	was 	provided 	by 	the 	5taff 	of 	the 	Federal
Trade 	Commission 	to 	the 	committee 	on 	Re9istration 	and
Requlation, 	Illinois 	House 	of 	Representatives 	on April 	17,
1985. 	A copy 	ot 	that 	testimony 	is 	attached. 	See 	also 	staff
comments 	to 	the 	Honorable 	Lee 	F. 	Jackson, 	Texas 	House 	of
~epresentatives, Hay 	10, 	1985; 	and 	to 	the 	Honorable 	Lynn
(continued .•• )
2

12/23/1988 	11:00 	CHRO 	FTC CHICAGO 	**** 	6602231 312 353 4438 	P.04
The 	Honorable James 	R. 	Thompson
December 	22, 	1988
Pricing 	and 	Advertising 	Restrictions
SB 	1870 	contains 	new 	restrictions 	on 	the 	ability 	of
automobile 	rental 	agencies 	to 	advertise, 	and 	charge 	tor,
certain 	items. 	Automobile 	rental 	agencies 	are 	specifically
allowed 	to 	charge 	a 	rental 	fee, 	taxes, 	and 	a 	mileage 	charge. 5
The 	bill 	also 	allows 	rental 	agencies 	to 	charge 	separately 	for
other 	items, 	such 	as 	a 	drop-off 	tee 	or 	tor 	fuel 	actually
used, 	but 	only 	if 	"the 	renter 	can 	avoid 	incurring 	the 	charge
by 	choosing 	not 	to 	obtain 	or 	utilize 	the 	optional 	item 	or
service. ,,6 	Rental 	agencies 	may ~ 	separately 	charge 	for
nondeclinable 	items 	such 	as 	Ilrequired 	fuel 	or 	airport
surcharges" 	or 	"for 	transporting 	the 	renter 	to 	the 	location
where 	the 	rented vehicle 	will 	be 	delivered 	to 	the 	renter." 	7
sa 	1870 	does 	not 	prohibit 	automobile 	rental 	agencies
from 	recovering 	their 	costs 	for 	mandatory 	additional
services; 	it 	simply 	torbids 	breaking 	them 	out 	as 	charges 	that
are 	added 	to 	the 	base 	rental 	rate 	in 	computing 	the 	total
rental 	amount. 	In 	other words, 	rental 	agencies 	must 	"bundle"
certain 	services 	into 	their 	base 	rental 	charges. 	The
apparent 	rationale 	is 	to 	make 	it 	easier 	to 	compare 	advertised
prices 	across 	car 	rental 	agencies, 	some 	of which 	impose
mandatory 	additional 	charges 	and 	some 	of 	which 	do 	not. a
4( ••• continued)
Adelman, 	Chairman, 	Wisconsin 	State 	Senate 	Judiciary 	and
Consumer 	Affairs 	Committee, 	June 	19, 	1987.
5
6
7
Senate 	Bill 	1870 	§ 	1.
~.
~.
8 	One 	effect 	of 	the 	bill 	may 	well 	be 	to 	force 	rental
agencies 	that 	charge 	a 	flat 	fuel 	fee 	to 	incorporate 	that 	fee
in 	the 	base 	rental 	rate 	they 	advertise. 	Car 	rental 	companies
have 	traditionally 	advertised 	a 	base 	fee, 	renting 	automobiles
with 	a 	full 	tank 	of 	gas 	and 	charging 	customers 	tor 	any
gasoline 	needed 	to 	retill 	the 	tank when 	the 	automobile 	is
returned. 	At 	least 	one 	rental 	company, 	however, 	.imply
charqes 	a 	flat 	tee 	tor 	gasoline, 	regardles~ of 	the 	amount
(continued .•. )
3

12/23/1988 	11:01 	CHRO 	FTC CHICAGO 	**** 	6602231 312 353 4438 	P.05
The 	Honorable 	James 	R. 	Thompson
December 	22, 	1988
It 	is, 	of 	course, 	desirable 	that 	consumers 	have
material 	information 	on 	rental 	prices 	before 	they 	sign 	a
rental 	agreement. 	They 	can 	obtain 	that 	information 	from,
among 	other 	sources, 	advertising, 	conversations 	when
reserving 	a 	rental 	vehicle, 	and 	the 	point 	of 	sale 	-- 	the
rental 	counter. 	It 	is 	not 	clear 	why 	additional 	charges 	need
to 	be 	bundled 	into 	the 	base 	rental 	rate 	if 	they 	are
adequately 	disclosed 	to 	consumers 	by 	such means 	prior 	to
purchase. 	Rental 	advertising 	that 	deceptively 	omits
additional 	charges 	can, 	and 	should, 	be 	subject 	to 	legal
action.
It 	is 	possible 	that 	SB 	1870 	may 	make 	it 	more 	difficult
for 	consumers 	to 	obtain useful 	information 	from 	price
advertising. 9 	For 	example, 	some 	charges 	vary 	from 	location-
to 	location. lO 	If 	the 	effect 	of 	the 	bill 	is 	to 	encourage
rental 	agencies 	to 	set 	different 	base 	rental 	rates 	at 	each
location,. national 	or 	regional 	price 	advertising 	(and
therefore 	~rice comparisons 	by 	consumers) 	may 	become 	very
difficult. 	lOne 	alternative 	available 	for 	rental 	companies
8C ••• con tinued)
that 	is 	used. 	Some 	consumers 	may 	prefer 	this 	arrangement
because 	it 	relieves 	them 	of 	the 	need 	to 	refill 	the 	tank 	prior
to 	returning 	the 	automobile 	and 	allows 	them 	to 	determine 	the
total 	cost 	of 	the 	rental 	(including 	fuel 	costs) 	in 	advance.
9 	Short 	radio 	and 	television 	commercials 	advertising
the 	existence 	of 	cheaper 	rates 	can 	serve 	a 	useful 	role 	in
informing 	consumers 	that 	discounts 	are 	available 	and
signalling 	that 	they 	should 	inquire 	further 	for 	details.
This 	form 	or 	advertising 	is, 	however, 	by 	its 	nature 	incapable
of 	providing 	all 	the 	information 	that 	consumers 	might 	need
in making 	an 	ultimate 	decision 	on 	a 	vehicle 	rental.
10 	Some 	airports 	charge 	"access" 	fees 	to 	otf-airport
rental 	agencies 	to 	reimburse 	the 	airport 	for 	the 	use 	of 	its
roads 	and 	other 	services. 	These 	tees, 	which 	are 	not 	within
the 	control 	of 	the 	rental 	agencies, 	are 	generally 	passed 	on
to 	eonsumers.
11 	Indeed, 	the NAAG 	car 	rental 	task 	force 	recognized
that 	"[b].cause 	these 	[airport 	access) 	tees 	may 	vary 	from
(continuQd .•. )
4

The 	Honorable 	James 	R. 	Thompson
December 	22, 	1988
is 	t6 	substitute 	"image" 	adv~rtising that 	promotes
recoqnition 	ot the 	company 	name 	but may 	not 	provide 	the 	same
amount 	of 	useful 	comparative 	information 	for 	consumers.
Since 	numerous 	economic 	studies 	have 	demonstrated 	that 	price
advertising 	enhances 	competition 	and 	lowers 	prices,12 	we
sugqest 	caution 	in 	imposing 	an~ requirements 	that 	may
discourage 	price 	advertising. l
LessQr 	Liability
sa 	1870 	also 	makes 	signiticant 	changes 	in 	the
allocation 	of 	the 	risks 	that 	a 	rental 	vehicle 	will 	be 	damaged
or 	stolen. 	58 	1870 	requires 	rental 	agencies 	to 	assume
responsibility 	tor 	losses 	in 	excess 	Qf 	$200 	in 	most
ll( ••• continued)
airport 	to 	airport, 	it 	may 	be 	difficult 	to 	build 	these 	tees
into 	A national 	advertised 	rate. U 	National 	Association 	of
Attorneys 	General, 	Task 	Force 	ot 	Car 	Rental 	Industry
Advertising 	and 	Business 	Practices, 	Preliminary 	Report 	(June
19, 	1988) 	at 	8.
12 	See,~, Cleveland 	Regional 	Office 	and 	Bureau 	of
Economics, 	Federal 	Trade 	Commission, 	Improving 	Consumer
Access 	to 	Legal 	Services: 	The 	Case 	tor 	Removing Restrictions
on 	Truthful 	Advsrtising, 	Federal 	Trade 	Commission 	Staff
Report 	(1984); 	Benham, 	The 	Effects 	of 	Advertising 	on 	the
Price 	of 	Eyeglasses, 	15 J. 	of 	L. 	and 	Econ. 	337 	(1972): 	Cady,
An 	Estimate 	of 	the 	Price 	Effects 	of 	Restrictions 	on 	Drug
Price 	Advertising, 	14 	Econ. 	Inquiry 	493 	(1976): 	Kwoka,
Advertising 	and 	Price 	and 	Quality 	of 	Optometric 	Services, 	74
Am. 	Econ. 	Rev. 	211 	(1984); 	and 	Schroeter 	et 	al., 	Advertising
and 	Competition 	in RQutine 	Legal 	Service Markets: 	An
Empirical 	Investigation, 	36 	The 	J. 	ot 	Indus. 	Econ. 	49 	(1987).
13 	Besides 	potentially 	discouraging 	price 	advertising,
sa 	1870 	may 	lead 	to 	consumers 	renting 	at 	some 	airports
aUbsidizinq 	rentals 	at 	other 	locations. 	For 	example, 	if
rental 	agencies 	are 	forced 	to 	bundle 	airport 	access 	tees 	into
their 	national 	base 	rental 	tee, 	customers 	renting 	automobiles
near 	airports 	that 	have 	no 	such 	tees 	(such 	as 	O'Hare 	and
Midway) 	will, 	in 	etfect, 	SUbsidize 	those 	rantinq 	automobiles
near 	airports 	that 	do.

The 	Honorable James 	R. 	Thompson
December 	22, 	1990
situations. 14 	The 	bill 	thus 	alters 	the 	ability 	of 	rental
agencies 	to 	charge 	separately 	for 	a 	Collision 	Damage 	Waiver
(CDW).15 	We 	are 	concerned 	that 	this 	could 	harm 	consumers 	in
two 	ways: 	by 	limiting their 	ability 	to 	choose 	other means 	of
coverinq 	the 	risk 	that 	a 	rental 	vehicle 	could 	be 	damaged 	or
stolen, 	and 	by producing higher 	overall 	rental 	rates.
First, 	making 	rental 	agencies 	liable 	in 	the 	event 	that
automobiles 	are 	damaged 	or 	stolen will 	eliminate 	the 	ability
ot 	consumers 	to 	choose 	alternative 	means 	ot 	dealing 	with 	this
risk. 	Renters 	currently 	have 	several 	options. 	They 	can
purchase 	optional 	cow 	trom 	the 	rental 	company, 	which
typically 	relieves 	the 	renter 	of 	liability 	for 	damage 	to 	or
loss 	of 	the 	rental 	vehicle 	in 	case 	of 	accident 	or 	theft. 	Or
they 	can 	decline 	to 	purchase 	CDW 	and 	instead: 	1) 	assume 	the
riSk 	of 	personal 	liability 	for 	damage 	to 	rental 	vehicles,16
2) 	rely 	on 	their 	personal 	automobile 	insurance 	policies 	for
coverage,l7 	or 	3) 	rely on 	the 	coverage 	from 	other
providers. IS 	One 	or more 	of 	these 	option~ could 	be 	less
expensive 	than 	the 	increased 	prices 	all 	customers 	may 	have 	to
pay 	to 	cover 	the 	accident 	and 	thett 	losses 	SB 	1870 	shifts 	to
the 	rental 	companies. 	Some 	renters 	with 	good 	driving 	records
can 	currently 	reduce 	their 	costs 	by 	arranging 	third-party
14 	SB 	1870, 	§ 	1. 	Renters 	remain 	liable 	under 	sa 	1870
it 	damage 	is 	caused 	intentionally, 	results 	from 	willful 	or
wanton 	misconduct 	or 	trom 	intoxication 	or 	drug 	use, 	occurs
while 	engaging 	in 	a 	speed 	contest, 	or 	involves 	similar
misconduct 	or 	criminal 	activity. 	~.
lS 	CDW might 	still 	be 	sold 	to 	cover 	the 	risk 	of 	damage
that 	is 	less 	than 	$200.
16 	The 	U.S. 	Government, 	for 	example, 	is 	self 	insured.
17 	According 	to 	J. 	Robert 	Hunter, 	president 	ot 	the
National 	Insurance 	Consumer 	Organization, 	approximately 	60
percent 	ot 	all 	drivers 	possess 	automobile 	insurance 	policies
that 	provide 	coverage 	should 	the 	insured 	driver 	experience 	an
accident 	in 	a 	rental 	vehicle. 	Car 	rentals: 	How 	to 	avoid
being 	takWD 	for 	a 	ride, 	Money, 	April 	1988, 	at 	201.
18 	For 	example, 	.everal 	credit 	card 	companies 	offer
complete 	coverage 	for 	damages 	incurred 	while 	driving 	a 	rental
car 	that 	is 	paid 	tor 	with 	their 	card. 	~.
6

The Honorable James 	R. 	Thompson
December 	22, 	1988
insurance 	rather 	than 	purchasing 	a 	cow. 	Drivers 	who 	cannot,
or choose 	not 	to, 	arrange 	for 	third-party 	insuranoe 	can
atill 	reduce 	the 	risk 	of 	driving 	a 	rented 	vehicle 	by 	purchas-
inq 	a 	COW. 19
Second, 	shifting this 	liability 	to 	rental 	agencies 	may
lead 	to 	higher 	basic 	rates. 	When 	SB 	1870 	goes 	into 	effect 	on
January 	1, 	1989, 	rental 	car 	companies 	may 	have 	to 	increase
the 	rental 	rate 	to 	compensate 	for 	their 	expanded 	liability
for 	accidents 	and 	thetts. 	Thus, 	it may 	be 	more 	accurate 	to
characterize 	the 	effect 	of 	this 	legislation 	not 	as
eliminating 	COW but 	as 	mandating 	the 	sale 	of 	COW 	indirectly.
Many 	consumers who would 	have 	declined 	purohasing 	CDW would
be 	injured 	because 	they 	would 	be 	required, 	in 	essence, 	to 	pay
~or coverage 	twioe: 	tirst 	tor 	the 	coverage 	provided 	by 	their
own 	insurance, 	which 	reflects 	their 	own 	dri~ing 	records, 	and
also 	for 	rental 	car 	company-provided 	insurance, 	which 	pools
good 	and 	bad 	drivers. 20
19 	In 	addition, 	making 	rental 	agencies 	liable 	tor
accident 	and 	theft 	losses 	could 	result 	in 	relatively 	safe
drivers 	subsidizing 	relatively 	unsafe 	ones. 	(This 	is 	so
because 	insurance 	companies 	are 	able 	to 	charge 	different
premiums 	tor 	drivers 	with 	different 	driving 	records.
Rental 	agencies 	would 	not 	be 	able 	to 	adapt 	their 	charges 	to
reflect 	these 	difterent 	risk 	levels.) 	It 	is 	unclear 	that
such 	a 	SUbsidy would 	be 	in 	the 	public 	interest. 	Moreover,
such 	subsidization 	is 	discouraged 	by 	the 	current 	system,
which 	allows 	consumers 	to 	choose 	COW 	protection 	or 	to 	decline
such 	protection 	if 	they 	are 	(or 	believe 	themselves 	to 	be)
relatively 	good 	risks.
20 	Moreover, 	it 	is 	possible 	that 	in 	response 	to 	this
change 	some 	consumers 	would 	become 	less 	careful 	with 	rental
vehicles. 	If 	this 	were 	to 	happen, 	rental 	companies 	would
experience 	higher 	repair 	costs 	and 	an 	increase 	in 	the
proportion 	of 	vehicles 	under 	repair 	at 	any 	given 	time.
Increased 	costs 	are 	likely 	to 	be 	passed 	through 	to 	consumers
as 	higher 	rates. 	Fer 	a 	theoretical 	treatment 	of 	this 	issue,
see 	Brown, 	Toward 	an 	Economic 	Theory 	of 	Liability, 	2 	J. 	of
Legal 	Stud. 	323 	(1973); 	Diamond, 	Single 	Activity Accidents, 	3
J. 	ot 	Legal 	stud. 	107 	(1974); 	and 	Shavell, 	strict 	Liability
va. 	Negligence, 	9 J. 	of 	Legal 	Stud. 	1 	(1980).
7

12/23/1988 	11:04 	CHRO 	FTC CHICAGO 	**** 	6602231 312 353 4438 	P.09
The 	Honorable James 	R. 	Thompson
December 	22, 	1999
Our 	analysis 	of 	the 	COW 	issue 	comes 	to 	a 	different
conclusion 	than 	that 	reached 	in 	the 	NAAG Task 	Force 	Report. 2l
The 	task 	force 	attributes 	problems 	with 	the 	marketing 	of 	COW
to 	renters' 	iqnorance 	of 	the 	product's 	features. 	The 	task
force 	then 	concludes 	that 	the 	informational 	gap 	is 	such 	that
optional 	COW 	should 	simply 	be 	banned. 	Our view, 	however, 	is
that 	when 	consumers 	lack 	the 	information 	needed 	to 	make 	an
informed 	choice, 	the 	preferable 	approach 	is 	to 	provide 	them
with 	the 	ne.ded 	information, 	not 	to 	eliminate 	the 	choice
altoqether. 22 	We 	hope 	that 	the 	legislature 	will 	reexaliline 	sa
1870 	and 	explore 	methods 	of 	facilitating 	the 	communication 	of
accurate 	information 	concerning 	optional 	COW, 	rather 	than
banninq 	the 	COW option 	altogether.
Sunday 	Closing
Illinois 	law 	currently 	prohibits 	automobile 	dealers
from 	operating 	any 	established 	place 	of 	business 	for 	the
purpose 	of 	selling 	motor vehicles 	on 	sundays.23 	SB 	1870 	will
extend 	that 	prohibition 	to 	preclude 	the 	leasing 	of
automobiles 	on 	Sundays 	if 	the 	lease 	period 	is 	greater 	than
onQ 	YQar.
In 	the 	spring 	of 	1985 	the 	staff 	of 	the 	Federal 	Trade
commission's 	Chicago 	Regional 	Office 	testified 	in 	favor 	of
repealing 	the 	Illinois 	Sunday 	closing 	law 	for 	automobile
dealers. 	As 	the 	attached 	testimony 	indicates, 	studies 	have
shown 	that 	Sunday 	closing 	makes 	it 	more 	difficult 	for
consumers 	to 	shop 	and 	compare, 	and 	thus 	may 	lead 	to 	increased
automobile 	prices 	tor 	consumers. 24 	We 	believe 	that
21 	Guideline 	3.1 	of 	the 	Report 	recommends 	adoption 	of
leqislation 	to 	eliminate 	the 	sale 	of 	COW 	and 	to 	prohibit
charging 	a 	customer 	tor damage 	or 	theft 	of 	a 	vehicle.
22 	~ Virginia 	state 	Board 	of 	Pharmacy 	v. 	Virginia
Citizens 	Consumer. Council, 	425 	u.S. 	748, 	770 	(1975).
23 	Ill. 	Rev. 	stat. 	Ch. 	95 	1/2, 	§ 	5-106 	(1987). 	This
aection 	of 	the 	statute 	contain 	exceptions 	tor 	aome 	items,
auch 	as 	sales 	of 	mobile 	homes 	and 	motorcycles.
24 	~,~, 	Carlson 	and 	Gieseke, 	Price 	Search 	In 	a
Product 	Market, 	J. 	ot 	Cons. 	Research, 	March 	1983, 	pp. 	357-
(continued ... )
s

The 	Honorablo 	James 	R. 	Thompson
December 	22, 	1988
prohibiting 	long-term 	leasing 	of 	automobiles 	on 	Sundays
presents 	similar problems.
Consumers 	typically consider 	a 	range 	of 	factors 	in
deciding 	the 	type 	ot 	automobile 	they 	want 	to 	lease 	or
purchase 	and 	where 	they 	want 	to 	obtain 	it. 	These 	include
safety, 	reliability, 	handling, 	size, 	and 	price, 	aa 	well 	as
terms 	and 	conditions 	of 	the 	lease 	or 	purchase. 	Although
advertising 	provides 	information 	that 	aids 	consumers 	in
making 	informed 	decisions, 	consumers 	may 	also 	tind 	it 	usetul
to 	engage 	in 	on 	site 	inspections 	of 	different 	automobiles.
Sunday 	closing 	laws 	are 	likely 	to 	inhibit 	the 	ability 	of
consumers 	to 	exercise 	this 	option.
Extending 	the 	Sunday 	closing 	law 	to 	long-term 	leasing
raises 	another 	concern 	in 	addition 	to 	those 	identified
above. 	It 	is 	our 	understanding 	that 	some 	short-term 	rental
agencies 	also 	lease 	automobiles 	tor 	longer 	periods. 	To 	the
extent 	that 	both 	services 	are 	offered 	in 	one 	location,
precluding 	long-term 	leasing 	while 	the 	location 	is 	open 	for
short-term 	rental 	purposes 	may 	prevent 	the 	firm 	from
realizing 	economies 	in 	operation 	and 	passing 	the 	attendant
cost 	savings 	on 	to 	consumers.
Conclusion
In 	sum, 	it 	is 	not 	clear 	that 	sa 	1870 	will 	provide 	net
benefits 	to 	consumers. 	We 	suggest 	additional 	consideration
of 	the 	potential 	adverse 	effects 	of 	the 	requirement 	in 	sa
1870 	that 	some 	charges 	be 	bundled 	into 	base 	automobile 	rental
tees. 	We 	also 	hope 	you 	will 	take 	into 	account 	the 	prospect
that 	the 	changes 	in 	liability 	for 	damaged 	or 	stolen 	rental
vehicles 	would 	mean, 	on 	balance, 	higher 	rental 	prices 	for
consumers. 	In 	addition, 	it 	may 	be 	desirable 	to 	review 	the
effects 	of 	the 	Sunday 	closing 	law 	now 	applicable 	to 	the 	sale
of 	automobiles 	and 	consider 	its 	repeal.
We 	hope 	that 	these 	comments 	will 	help 	you 	in 	your
determination 	of 	Whether SB 	1870 	is 	likely 	to 	achieve 	the
24( ••• continued)
S~; 	Morrison 	and 	Newman, 	Hours 	ot 	Operation 	Restrictions 	and
Competition Among 	Retail 	Firms, 	Econ. 	Inq., 	Vol. 	XXI,
January 	1983; 	stigler, 	The 	Economics 	ot 	Intormation, 	J. 	of
Pol. 	Econ., 	June 	1961, 	pp. 	213-15.
9

• 	<
The Honorable James 	R. 	Thompson
December 	22, 	1999
goal 	ot 	protecting 	consumers 	and 	whether, 	or 	how, 	the
Illinois 	Motor Vehicle 	Code 	could 	be 	amended 	or 	revised 	in
the 	next 	legislative 	session 	to 	serve 	the 	welfare 	of
consumers 	and 	foster 	a 	competitive 	environment 	in 	the 	car
rental 	and 	leasing 	industries. 	The 	Commission 	staff 	will 	be
pleased 	to 	offer 	any 	assistance 	that 	it 	can 	to 	your 	office
during 	the 	next 	legislative 	session.
We 	appreciate 	the 	opportunity 	to 	comment.
C~~GLc. 	Steven 	Baker 	'
Director
CHICAGO 	REGIONAL 	OFFICE
10