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If dealers actually add a value they don’t need a law to protect them from direct sales. And if they don’t it’s just a lawful money extortion. Why such laws do

If dealers actually add a value they don’t need a law to protect them from direct sales. And if they don’t it’s just a lawful money extortion. Why such laws do exist?

CPLX 3y ago
Your comment contains the unstated premise that market forces always produce efficient outcomes. That premise is false. If you want to assess the value of car dealers you’ll have to use evidence rather than ideology.
- creer 3y ago
  The problem is (also) laws that will "just solve the problem right up". The premise that laws solve problems is false. A perhaps reasonable compromise would be to (1) not "solve the problem right up" until there is some solid evidence of both the problem and that the law would help it. In general that would require waiting for, indeed, evidence, before passing laws. Which would require not passing laws when the issue is still hot. And (2) making these laws temporary so that they might actually require evidence before becoming entrenched. Including preventing rubber-stamping a law into its next 10 years. Probably none of which makes sense anyway as long as "riders" exist. The current system is ridiculously corrupt and broken.
- sgregnt 3y ago
  The premise is not "always"... if anything, the premise is rathar that in this case it produces better outcome for the costomers? Also, the mechanism is explicitly outlined (of cause very briefly) in the comment, so no need to resolve to premises. If you do have something concrete to counteract and add for the discussion, that would be awesome!
  - CPLX 3y ago
    The mechanism of cause is what has the premise right in it. The premise basically states that those who add value cannot be exploited, marginalized, or excluded from the system. In real life of course they can, via market power, political power, violence, deception, or many other forces. It happens daily, probably to you or your family.
    - TeMPOraL 3y ago
      I think I get your point and I kind of agree, but one nit about phrasing: > those who add value There's a concept of "value-add" intermediary, and it pretty much universally means reducing value for the customer. Car dealerships are a typical example. I'm torn on this. On the one hand, it makes sense in theory that excessive vertical integration is bad for society, and local businesses are good for society. On the other hand, I observe that in practice, competitive markets are subject to Gresham's law[0] - the shitty ones win over the good ones. So it follows, and something I also observed to be good as a heuristic, that the more layers of competing intermediaries you add, the shittier it gets for the customer. -- [0] - https://en.wikipedia.org/wiki/Gresham%27s_law https://en.wikipedia.org/wiki/Gresham%27s_law - "Bad money drives out good".
      - CPLX 3y ago
        > There's a concept of "value-add" intermediary, and it pretty much universally means reducing value for the customer. Car dealerships are a typical example. That nonsensical. Dealerships of course add value, they allow you to actually see and test drive the car, they physically deliver the car, and they fix the car. You could argue that the value is not worth the cost. Maybe so. But middlemen almost always add some value. And that’s independent of the more meta-value, which is providing a check against the market power of manufacturers.
- CamperBob2 3y ago
  In a capitalist system the burden of proof falls on the one advocating state control. You're the one who will need to bring the evidence.
  - CPLX 3y ago
    In a democratic system the burden of proof falls on the one advocating a change in the status quo.
    - CamperBob2 3y ago
      Sounds good to me. Let's hold a vote on whether car dealers should be allowed to maintain their government-enforced monopoly. When can we set this up?
  - kelseyfrog 3y ago
    All claims require evidence. Capitalism included.
- AnthonyMouse 3y ago
  > Your comment contains the unstated premise that market forces always produce efficient outcomes. > That premise is false. "Markets are efficient" is not a law of physics, it's a heuristic. Given the free choice between two alternatives, people will tend to prefer the one which is to their advantage. There are cases where that isn't true. Market concentration, collusion, regulatory capture, information asymmetries etc. But if you're going to assert that one of these is the case, you should be ready to explain the failure mode and how your proposed solution is the best way to address it. In particular, most of the failure modes have known solutions. In case of market concentration, break them up. In case of regulatory capture, remove the rules that benefit incumbents. In case of information asymmetry, labeling and consent requirements etc. "Middlemen are required by law to participate in the transaction" bears a far closer resemblance to something that would cause market inefficiency than prevent it, so if you're going to respond with "markets aren't always efficient" in response to that, let's hear your reasoning for why that would increase efficiency in this case.
  - CPLX 3y ago
    > "Middlemen are required by law to participate in the transaction" This is a non-standard way of describing the concept here. The actual concept at work is a prohibition against vertical integration. There are plenty of examples of why this can be a problem dating back to the original Standard Oil trust that’s the archetypal example which spawned the need for antitrust laws. A very clear example of laws against vertical integration is finance, where it’s just illegal to operate without middlemen. For example one firm can’t be a broker, dealer, and custodian of assets all at once. For very good reasons. We’re seeing plenty examples of vertical integration being a problem today. One example is Amazon, another is pharmacy PBMs owned by insurers. Maybe it’s an issue in this example as well, maybe not. But consolidation leads to market power and concentration and market power and consolidation are the main barriers to free markets in the US today. Which means the original comment I’m responding to is just ideological blindness. The way to answer questions like this is by determining the actual consequences, not assuming a spherical cow.
    - AnthonyMouse 3y ago
yieldcrv 3y ago
maybe their was a problem they were initially trying to solve? maybe Ford wanted to avoid antitrust lawsuits and promoted a car store to dilute their participation? I’m curious
- flomo 3y ago
  There's a legend that General Motors tried direct sales way back when (when they had >50% of the market), and lost their shirts in the process. Traditionally, the domestic manufacturers would push as much product as they could onto the dealers, who then would pay them finance rates to 'floor' the cars until they were sold. So this was a mutually beneficial arrangement.
deleted 3y ago
[deleted]
AlotOfReading 3y ago
These laws come from a very different time. The original theory was that: 1) it's an easy way to do antitrust without breaking up the economics of scale in the manufacturing side 2) dealers would keep money locally / respond to local consumer demand better and 3) dealers were smaller entities that would negotiate better with consumers because they wouldn't have a monopoly on local supply of a manufacturer's vehicles None of these are regularly true today (and it's questionable how true they were at the time). There are far more viable automakers than when this regulation was originally passed and dealers don't offer better pricing or try to meet local demand more than manufacturers. Dealerships also typically aren't small local businesses anymore, but instead large corporate chains whose owners may live just as far away as the OEM.
- Plasmoid 3y ago
  They would also do maintenance. Cars used to require an absolutely huge amount of regular maintenance and having someone local to do it was a net win.
  - AussieWog93 3y ago
    Don't know what it's like in the US, but here in Australia we have a huge industry of independent mechanics - on the scale of maybe 10-20 independents for every one dealer.
    - steve_taylor 3y ago
      Also should mention that, by law, they can perform the regular servicing required by the manufacturer’s warranty.
    - Kye 3y ago
      We have that in the US, but the quality can vary from exploitative and/or incompetent to better than the dealer. They especially like to take advantage of women and visible minorities.
      - 3y ago
Qwertious 3y ago
>If dealers actually add a value they don’t need a law to protect them from direct sales. Not always true. The value-add could be a positive externality/hard to monetize.
pjc50 3y ago
Dealers are huge political donors. They tend to be the local financial elite of small states.

If dealers actually add a value they don’t need a law to protect them from direct sales. And if they don’t it’s just a lawful money extortion. Why such laws do exist?

CPLX 3y ago

Your comment contains the unstated premise that market forces always produce efficient outcomes. That premise is false. If you want to assess the value of car dealers you’ll have to use evidence rather than ideology.

creer 3y ago
The problem is (also) laws that will "just solve the problem right up". The premise that laws solve problems is false. A perhaps reasonable compromise would be to (1) not "solve the problem right up" until there is some solid evidence of both the problem and that the law would help it. In general that would require waiting for, indeed, evidence, before passing laws. Which would require not passing laws when the issue is still hot. And (2) making these laws temporary so that they might actually require evidence before becoming entrenched. Including preventing rubber-stamping a law into its next 10 years. Probably none of which makes sense anyway as long as "riders" exist. The current system is ridiculously corrupt and broken.
sgregnt 3y ago
The premise is not "always"... if anything, the premise is rathar that in this case it produces better outcome for the costomers? Also, the mechanism is explicitly outlined (of cause very briefly) in the comment, so no need to resolve to premises. If you do have something concrete to counteract and add for the discussion, that would be awesome!
- CPLX 3y ago
  The mechanism of cause is what has the premise right in it. The premise basically states that those who add value cannot be exploited, marginalized, or excluded from the system. In real life of course they can, via market power, political power, violence, deception, or many other forces. It happens daily, probably to you or your family.
  - TeMPOraL 3y ago
    I think I get your point and I kind of agree, but one nit about phrasing: > those who add value There's a concept of "value-add" intermediary, and it pretty much universally means reducing value for the customer. Car dealerships are a typical example. I'm torn on this. On the one hand, it makes sense in theory that excessive vertical integration is bad for society, and local businesses are good for society. On the other hand, I observe that in practice, competitive markets are subject to Gresham's law[0] - the shitty ones win over the good ones. So it follows, and something I also observed to be good as a heuristic, that the more layers of competing intermediaries you add, the shittier it gets for the customer. -- [0] - https://en.wikipedia.org/wiki/Gresham%27s_law https://en.wikipedia.org/wiki/Gresham%27s_law - "Bad money drives out good".
    - CPLX 3y ago
      > There's a concept of "value-add" intermediary, and it pretty much universally means reducing value for the customer. Car dealerships are a typical example. That nonsensical. Dealerships of course add value, they allow you to actually see and test drive the car, they physically deliver the car, and they fix the car. You could argue that the value is not worth the cost. Maybe so. But middlemen almost always add some value. And that’s independent of the more meta-value, which is providing a check against the market power of manufacturers.
CamperBob2 3y ago
In a capitalist system the burden of proof falls on the one advocating state control. You're the one who will need to bring the evidence.
- CPLX 3y ago
  In a democratic system the burden of proof falls on the one advocating a change in the status quo.
  - CamperBob2 3y ago
    Sounds good to me. Let's hold a vote on whether car dealers should be allowed to maintain their government-enforced monopoly. When can we set this up?
- kelseyfrog 3y ago
  All claims require evidence. Capitalism included.
AnthonyMouse 3y ago
> Your comment contains the unstated premise that market forces always produce efficient outcomes. > That premise is false. "Markets are efficient" is not a law of physics, it's a heuristic. Given the free choice between two alternatives, people will tend to prefer the one which is to their advantage. There are cases where that isn't true. Market concentration, collusion, regulatory capture, information asymmetries etc. But if you're going to assert that one of these is the case, you should be ready to explain the failure mode and how your proposed solution is the best way to address it. In particular, most of the failure modes have known solutions. In case of market concentration, break them up. In case of regulatory capture, remove the rules that benefit incumbents. In case of information asymmetry, labeling and consent requirements etc. "Middlemen are required by law to participate in the transaction" bears a far closer resemblance to something that would cause market inefficiency than prevent it, so if you're going to respond with "markets aren't always efficient" in response to that, let's hear your reasoning for why that would increase efficiency in this case.
- CPLX 3y ago
  > "Middlemen are required by law to participate in the transaction" This is a non-standard way of describing the concept here. The actual concept at work is a prohibition against vertical integration. There are plenty of examples of why this can be a problem dating back to the original Standard Oil trust that’s the archetypal example which spawned the need for antitrust laws. A very clear example of laws against vertical integration is finance, where it’s just illegal to operate without middlemen. For example one firm can’t be a broker, dealer, and custodian of assets all at once. For very good reasons. We’re seeing plenty examples of vertical integration being a problem today. One example is Amazon, another is pharmacy PBMs owned by insurers. Maybe it’s an issue in this example as well, maybe not. But consolidation leads to market power and concentration and market power and consolidation are the main barriers to free markets in the US today. Which means the original comment I’m responding to is just ideological blindness. The way to answer questions like this is by determining the actual consequences, not assuming a spherical cow.
  - AnthonyMouse 3y ago

yieldcrv 3y ago

maybe their was a problem they were initially trying to solve? maybe Ford wanted to avoid antitrust lawsuits and promoted a car store to dilute their participation? I’m curious

flomo 3y ago
There's a legend that General Motors tried direct sales way back when (when they had >50% of the market), and lost their shirts in the process. Traditionally, the domestic manufacturers would push as much product as they could onto the dealers, who then would pay them finance rates to 'floor' the cars until they were sold. So this was a mutually beneficial arrangement.

deleted 3y ago

[deleted]

AlotOfReading 3y ago

These laws come from a very different time. The original theory was that: 1) it's an easy way to do antitrust without breaking up the economics of scale in the manufacturing side 2) dealers would keep money locally / respond to local consumer demand better and 3) dealers were smaller entities that would negotiate better with consumers because they wouldn't have a monopoly on local supply of a manufacturer's vehicles None of these are regularly true today (and it's questionable how true they were at the time). There are far more viable automakers than when this regulation was originally passed and dealers don't offer better pricing or try to meet local demand more than manufacturers. Dealerships also typically aren't small local businesses anymore, but instead large corporate chains whose owners may live just as far away as the OEM.

Plasmoid 3y ago
They would also do maintenance. Cars used to require an absolutely huge amount of regular maintenance and having someone local to do it was a net win.
- AussieWog93 3y ago
  Don't know what it's like in the US, but here in Australia we have a huge industry of independent mechanics - on the scale of maybe 10-20 independents for every one dealer.
  - steve_taylor 3y ago
    Also should mention that, by law, they can perform the regular servicing required by the manufacturer’s warranty.
  - Kye 3y ago
    We have that in the US, but the quality can vary from exploitative and/or incompetent to better than the dealer. They especially like to take advantage of women and visible minorities.
    - 3y ago

Qwertious 3y ago

>If dealers actually add a value they don’t need a law to protect them from direct sales. Not always true. The value-add could be a positive externality/hard to monetize.

pjc50 3y ago

Dealers are huge political donors. They tend to be the local financial elite of small states.