As Tom Knighton covered earlier this week, the Michigan state legislature let its crony capitalist flag fly when it passed a bill affirming Michigan’s protectionist legislation for traditional franchise auto dealers. Yesterday, Republican Michigan Gov. Rick Snyder signed the bill into law.
Under existing law, an auto manufacturer could not a sell new vehicle directly to retail customers other than through “its franchised dealers.” The new legislation signed by Gov. Snyder deletes the word “its.” It thus allows manufacturers to sell through other manufacturers’ dealers, so long as they do sell through someone’s franchised dealer. This legislation is intended to protect Michigan dealers from competition via direct-to-consumer models like that employed by Tesla Motors.
I love capitalism. But I hate crony capitalism.
Tesla wants to bypass traditional auto dealers, who operate via franchises licensed by manufacturers, and instead sell directly to consumers. This would benefit consumers—and manufacturers like Tesla—by eliminating the dealer middlemen.
Michigan does not want its consumers to enjoy those savings.
In this ignominious regard, it joins New Jersey, Maryland, Texas and Arizona. In addition to those, Georgia’s dealers are currently, in the words of Reason’s Brian Doherty, trying “to use the violent force of the state to stop Tesla Motors from innovating and competing against them.”
Auto blog Jalopnik reports that:
The dealer’s case—and GM’s—is that dealers provide a valuable service to consumers and by continuing to employ the traditional dealership model, they’re protecting car owners.
If it were a valuable service, it would not require protectionist legislation. It requires protectionist legislation precisely because it would have trouble competing in a market where consumers were given a choice. Jalopnik further reported GM’s position as follows:
“Competition is always healthy,” GM spokeswoman Heather Rosenker tells Jalopnik. “But it needs to be on a level playing field.”
In other words, GM thinks a level playing field is what is created when one of the world’s largest automobile manufacturers uses the strong arm of government to force other manufacturers to follow its chosen sales model, instead of allowing each to experiment with its own methods and models.
As more than 70 law professors and economists complained when Republican New Jersey Gov. Chris Christie signed similar protectionist legislation:
There is no justification on any rational economic or public policy grounds for such a restraint of commerce. Rather, the upshot of the regulation is to reduce compe- tition in New Jersey’s automobile market for the benefit of its auto dealers and to the detriment of its consumers. It is protectionism for auto dealers, pure and simple.
* * *
[W]e have not heard a single argument for a direct distribution ban that makes any sense. To the contrary, these arguments simply bolster our belief that the regulations in question are motivated by economic protectionism that favors dealers at the expense of consumers and innovative technologies.
If our Republican elected officials actually practiced capitalism—instead of its crony capitalist impersonator—they might fare better at the polls. Without a doubt, consumers would be better off.