7 ms·

What is the charitable excuse for the law that enforces the use of third-party car dealerships? Something about avoiding monopolies?

janderson215 5y ago
It’s an outdated law (IMO) meant to protect car dealerships from manufacturers opening up dealerships down the road and undercutting them. I think it’s similar to the law preventing movie studios from opening theaters.
- belltaco 5y ago
  That plus heavy lobbying and donations by car dealerships making a lot of money. Electric cars are also bad for their fat profit margins on service for ICE cars.
- PaulDavisThe1st 5y ago
  In what sense is it outdated? What has changed that means that it used to be relevant, and now no longer is?
  - jsight 5y ago
    If I wanted the status quo, I'd argue that dealers have gained enough power to accomplish the same thing without state laws. Look at what happened when US manufacturers tried to decrease the number of dealerships for an example. They fought it out with a barrage of lawsuits and the efforts were only really minimally successful. Its really unlikely that existing brands would be able to change at this point, at least the US brands.
  - trey-jones 5y ago
    Maybe only perspective. In my view, car manufacturers should be competing with other car manufacturers, rather than independently operated dealerships. If a dealership provides a value to consumers then it should survive. If not, then the consumers are better off without them. At the very least, I would like the option to buy directly, since I probably don't use the services provided by the dealership anyway.
  - janderson215 5y ago
    Emphasizing that it is my opinion, I think it’s easier to reach consumers directly. I haven’t researched the history of car dealerships, but I’m guessing (dangerous) that they came into existence because the locals knew the local market better. Now that they exist, they need to be protected to prevent too much unemployment too fast in local job markets. Anecdotal, but I haven’t heard people talking about the wonderful experience they recently had at their car dealership. I think some of that comes from legal protections and getting comfy.
    - rkk3 5y ago
      and selling the exact same product to consumers for widely different amounts.
  - tjalfi 5y ago
    Dealer's Choice[0] explains why these laws were originally passed; Ford and GM forced dealerships to accept new cars during the 1920 depression and the Great Depression. The laws persist because car dealerships are well-connected politically and donate heavily to campaigns; it's just a special interest group protecting their business model. [0] https://www.newyorker.com/magazine/2006/09/04/dealers-choice-2 https://www.newyorker.com/magazine/2006/09/04/dealers-choice...
- reacharavindh 5y ago
  Suddenly Movie studios:theaters::Apple:AppStore comes to mind.
  - mschuster91 5y ago
    The most interesting part re/ movie studios is Disney. I seriously wonder when someone finally brings down the hammer on them... they own the production companies, the studios, the after-market entetainment (Disney World) and so many franchises that they can outright extort cinema owners to licensing terms that are extremely favorable towards Disney. MCU, Star Wars, Avatar... get blocked from showing them as a cinema owner and you can close shop. Especially with how many new films the MCU alone will bring up over the next years.
    - lotsofpulp 5y ago
      >I seriously wonder when someone finally brings down the hammer on them Probably not anytime soon, since in less than a year, they will be able to own the cinemas.
      - mschuster91 5y ago
        At that point however I see antitrust action inevitable (pardon the pun).
- lotsofpulp 5y ago
  https://en.wikipedia.org/wiki/United_States_v._Paramount_Pictures,_Inc https://en.wikipedia.org/wiki/United_States_v._Paramount_Pic.... The "Paramount Decree" is lifted as of Aug 7, 2020 with a 2 year sunset period, so as of Aug 7, 2022, there is no law preventing studios from owning theaters.
throwaway894345 5y ago
I don't know why this is downvoted. I'm similarly confused. I'm guessing it's less about avoiding monopolies and more about making sure more of the money stays in the state, but I'm just speculating.
- djrogers 5y ago
  There's very little (if any) income at a dealership that couldn't be captured by a state with the right tax structure, and that would apply to a manufacturer owned dealership just as much as a private one. It seems like the only person really losing in that scenario would be the dealership owner, which explains why they lobby so heavily to keep those laws in place.
- lotsofpulp 5y ago
  > it's less about avoiding monopolies and more about making sure more of the money stays in the state, but I'm just speculating. If that was the goal, then the state government should have opened their own dealerships and distributed the profits amongst the state's residents. Or better yet, simply operated the dealership at break even.
  - colinmhayes 5y ago
    Americans generally don't like the government running things that aren't natural monopolies.
URSpider94 5y ago
Car manufacturers contracted with car dealers back when the car business was uncertain - they needed a local dealer network to sell and service their cars. Once dealers were established, they lobbied to get laws in place to prevent them from being disintermediated by the manufacturers, who could have easily just put them out of business and replaced them with manufacturer-owned stores. Not a great reason …
RC_ITR 5y ago
I mean this is very Anti-HN zeitgeist, but it's a way to preserve easily accessible middle class jobs and prevent local profit pools from accruing to corporations headquartered elsewhere. From a consumer perspective it reduces welfare (like most worker protections do), but similar to real estate agents, car dealerships are very active in lobbying local governments (in part b/c the amount of jobs they 'create').
- coredog64 5y ago
  Not just jobs, but also sales tax revenue. Cities have their own sales taxes and/or get a cut of the overall take. Better to have that come from a local business to maximize your take.
- mensetmanusman 5y ago
  For every $500k we spend subsidizing dealers (according to economic studies), we waste resources that could be used to grow the middle class.
  - lmm 5y ago
    "Could be" is doing a lot of work in that sentence. Maybe this is actually the most efficient politically doable way to grow the middle class with those dollars.
    - mensetmanusman 5y ago
      That’s an interesting point, but usually rent seeking like this adds a lot of friction to the economy which reduces the velocity of money and makes people on average poorer. The bigger problem is that taxes are so low, and that manual labor jobs (which the rich outsourced to other countries), just don’t exist at scale anymore. The best solution is probably something like taxing productivity gains and then bending the benefit curve towards the workers who have received none of the gains by, eg, paying for their kids health and educational expenses, letting them have free training, giving them stipends to travel, etc. The biggest problem has been that all the productivity gains have gone to the 1% essentially.

janderson215 5y ago

It’s an outdated law (IMO) meant to protect car dealerships from manufacturers opening up dealerships down the road and undercutting them. I think it’s similar to the law preventing movie studios from opening theaters.

belltaco 5y ago
That plus heavy lobbying and donations by car dealerships making a lot of money. Electric cars are also bad for their fat profit margins on service for ICE cars.
PaulDavisThe1st 5y ago
In what sense is it outdated? What has changed that means that it used to be relevant, and now no longer is?
- jsight 5y ago
  If I wanted the status quo, I'd argue that dealers have gained enough power to accomplish the same thing without state laws. Look at what happened when US manufacturers tried to decrease the number of dealerships for an example. They fought it out with a barrage of lawsuits and the efforts were only really minimally successful. Its really unlikely that existing brands would be able to change at this point, at least the US brands.
- trey-jones 5y ago
  Maybe only perspective. In my view, car manufacturers should be competing with other car manufacturers, rather than independently operated dealerships. If a dealership provides a value to consumers then it should survive. If not, then the consumers are better off without them. At the very least, I would like the option to buy directly, since I probably don't use the services provided by the dealership anyway.
- janderson215 5y ago
  Emphasizing that it is my opinion, I think it’s easier to reach consumers directly. I haven’t researched the history of car dealerships, but I’m guessing (dangerous) that they came into existence because the locals knew the local market better. Now that they exist, they need to be protected to prevent too much unemployment too fast in local job markets. Anecdotal, but I haven’t heard people talking about the wonderful experience they recently had at their car dealership. I think some of that comes from legal protections and getting comfy.
  - rkk3 5y ago
    and selling the exact same product to consumers for widely different amounts.
- tjalfi 5y ago
  Dealer's Choice[0] explains why these laws were originally passed; Ford and GM forced dealerships to accept new cars during the 1920 depression and the Great Depression. The laws persist because car dealerships are well-connected politically and donate heavily to campaigns; it's just a special interest group protecting their business model. [0] https://www.newyorker.com/magazine/2006/09/04/dealers-choice-2 https://www.newyorker.com/magazine/2006/09/04/dealers-choice...
reacharavindh 5y ago
Suddenly Movie studios:theaters::Apple:AppStore comes to mind.
- mschuster91 5y ago
  The most interesting part re/ movie studios is Disney. I seriously wonder when someone finally brings down the hammer on them... they own the production companies, the studios, the after-market entetainment (Disney World) and so many franchises that they can outright extort cinema owners to licensing terms that are extremely favorable towards Disney. MCU, Star Wars, Avatar... get blocked from showing them as a cinema owner and you can close shop. Especially with how many new films the MCU alone will bring up over the next years.
  - lotsofpulp 5y ago
    >I seriously wonder when someone finally brings down the hammer on them Probably not anytime soon, since in less than a year, they will be able to own the cinemas.
    - mschuster91 5y ago
      At that point however I see antitrust action inevitable (pardon the pun).
lotsofpulp 5y ago
https://en.wikipedia.org/wiki/United_States_v._Paramount_Pictures,_Inc https://en.wikipedia.org/wiki/United_States_v._Paramount_Pic.... The "Paramount Decree" is lifted as of Aug 7, 2020 with a 2 year sunset period, so as of Aug 7, 2022, there is no law preventing studios from owning theaters.

throwaway894345 5y ago

I don't know why this is downvoted. I'm similarly confused. I'm guessing it's less about avoiding monopolies and more about making sure more of the money stays in the state, but I'm just speculating.

djrogers 5y ago
There's very little (if any) income at a dealership that couldn't be captured by a state with the right tax structure, and that would apply to a manufacturer owned dealership just as much as a private one. It seems like the only person really losing in that scenario would be the dealership owner, which explains why they lobby so heavily to keep those laws in place.
lotsofpulp 5y ago
> it's less about avoiding monopolies and more about making sure more of the money stays in the state, but I'm just speculating. If that was the goal, then the state government should have opened their own dealerships and distributed the profits amongst the state's residents. Or better yet, simply operated the dealership at break even.
- colinmhayes 5y ago
  Americans generally don't like the government running things that aren't natural monopolies.

URSpider94 5y ago

Car manufacturers contracted with car dealers back when the car business was uncertain - they needed a local dealer network to sell and service their cars. Once dealers were established, they lobbied to get laws in place to prevent them from being disintermediated by the manufacturers, who could have easily just put them out of business and replaced them with manufacturer-owned stores. Not a great reason …

RC_ITR 5y ago

I mean this is very Anti-HN zeitgeist, but it's a way to preserve easily accessible middle class jobs and prevent local profit pools from accruing to corporations headquartered elsewhere. From a consumer perspective it reduces welfare (like most worker protections do), but similar to real estate agents, car dealerships are very active in lobbying local governments (in part b/c the amount of jobs they 'create').

coredog64 5y ago
Not just jobs, but also sales tax revenue. Cities have their own sales taxes and/or get a cut of the overall take. Better to have that come from a local business to maximize your take.
mensetmanusman 5y ago
For every $500k we spend subsidizing dealers (according to economic studies), we waste resources that could be used to grow the middle class.
- lmm 5y ago
  "Could be" is doing a lot of work in that sentence. Maybe this is actually the most efficient politically doable way to grow the middle class with those dollars.
  - mensetmanusman 5y ago
    That’s an interesting point, but usually rent seeking like this adds a lot of friction to the economy which reduces the velocity of money and makes people on average poorer. The bigger problem is that taxes are so low, and that manual labor jobs (which the rich outsourced to other countries), just don’t exist at scale anymore. The best solution is probably something like taxing productivity gains and then bending the benefit curve towards the workers who have received none of the gains by, eg, paying for their kids health and educational expenses, letting them have free training, giving them stipends to travel, etc. The biggest problem has been that all the productivity gains have gone to the 1% essentially.