Dot Coms Should Not Count Dealer Sales As Revenue, Says AIADA In the dot com world, words like "sales" and "revenue" don't always mean what they used to, and that could have negative implications for dealers if regulators don't fix the problem soon, says AIADA. At issue are permissible regulations that allow some Internet companies to count as revenue the full price of products they sell to customers online, rather than just the fee they receive for brokering the sale. For example: Priceline.com reported "revenue" of $482.4 million last year, when actual gross profits were only $59.4 million, since it counts the full transaction price of hotel rooms, plane tickets, etc. as sales. They claim that their sales should include the entire scope of the transaction because they assume the "full risk of ownership" as the "merchant of record" and are therefore entitled to count the entire cost rather than just the finder's fee. Of concern to dealers is if Internet auto brokers or lead generators, like Priceline, are allowed to count the full price of on-line vehicle transactions as revenue, rather than just the referral fees they receive. "These so called gimmicks may be used by Internet companies to unfairly capitalize on market opportunities and place dealers at risk," AIADA President Walter Huizenga explains. "Inaccurate reporting of motor vehicle sales and inflated revenue numbers also harm customers and those who invest in these Websites." In January, AIADA pledged to "strongly oppose the implementation of any sales or service system which directly or indirectly removes the franchised dealer from the process." To protect dealers and the extensive investments they have made in brick and mortar operations, AIADA is taking the revenue accounting issue up with federal regulators. The association has sent a letter to the Emerging Issues Task Force of the Federal Accounting Standards Board, which is developing guidelines to apply generally accepted accounting principles to Internet companies. AIADA urged the Task Force to ensure motor vehicle sales revenues are accounted for properly, by ensuring that Internet companies are barred from counting revenue from motor vehicle transactions as part of their sales figures. To read the full text of the letter, see www.aiada.org/fasb.htm.

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Last year, Korean auto makers exported 1.5 million vehicles worldwide, while only 2,400 vehicles were imported into Korea. "There is no question that Korea's auto industry is exploiting the benefits of a sealed sanctuary market at home while taking advantage of open markets abroad," the two groups said in a joint statement.

Until recently, Korea was struggling to overcome an economic crisis. Now that the country appears to be recovering, U.S. automakers are demanding improvements in the low numbers of import vehicles sold there. Market access issues have caused trade frictions in the past and are what led to the 1995 U.S.-Japan auto trade crisis. AIADA continues to meet with Korean automakers and trade groups while monitoring the situation.