5 ms·

Can anyone inform us on why there is such a law as "a factory cannot own a store" in the first place?

by ok_craig 14y ago

fossuser 14y ago
I believe it was because it would be unfair for a factory to begin to compete with its already franchised locations.
- visarga 14y ago
  Solution: don't enter into the franchise business, or enter with a clear contract including compensation in case the factory starts direct competition with its franchises. But to block a factory from selling its own products unless they go through a middleman, it's absurd. Especially if the plaintiffs didn't operate a Tesla franchise.
  - bgentry 14y ago
    What you describe is basically how the alcohol industry has functioned in this country since the end of prohibition. All sales are forced to go through distributors who then sell to stores who then sell to consumers. There is no purpose for this other than another level of bureaucracy, waste, and limiting of competition.
    - caf 14y ago
      You can't buy wine at the cellar door?
      - woodchuck64 14y ago
        http://en.wikipedia.org/wiki/Three-tier_%28alcohol_distribution%29 http://en.wikipedia.org/wiki/Three-tier_%28alcohol_distribut... "States have various exceptions to this rule, the most prevalent one being the case of a brewpub, which is simultaneously a producer and retailer, and has no requirement to sell to a distributor. Some states allow an entity to have a part in two of the tiers, letting small breweries act as their own distributor, for example. Many states permit wineries to sell bottles of wine on-site to customers."
    - refurb 14y ago
      I wouldn't say it severe no purpose other than bureaucracy, waste and limiting competition. My understanding was that the 3 tiered system came about as a method to closely monitor and control alcohol sales. For example, medicinal brandy was still legal during prohibition and much of it was diverted for recreational use. Tightly controlling manufacturers, distributors and retailers helped keep that sort of stuff under control (kinda of... not really). I don't disagree that it serves a very limited purpose now.
  - fossuser 14y ago
    Yeah I definitely don't agree with it - and in Tesla's case since there were no franchises it isn't even relevant. This was an obvious case of the current car companies fearing competition. The current car franchise system sucks (which Tesla is acutely aware of) and with selling something new requires a good team to do it. I have an example first hand when I went to check out the Volt after it first launched. I kept hearing the advertising saying its 'range' which confused me since I thought the gas generator could power the electric motor after the batteries were exhausted and you could just refill the gas. I started thinking maybe the gas generator could only extend the range or something (the internet wasn't clear since things were new). When I went to the Chevy dealers they were worse than useless, they knew nothing about the volts they had and what they did tell me ended up being wrong. It turned out the advertised range was just terrible marketing.
    - MichaelApproved 14y ago
      That story isn't unique to the Volt. In my experience, sales people rarely know the details of the products they sell. Best Buy is a classic example when the sales people tend to read the box for answers to questions. Of course, you'd think that an expensive product, like a car, would be different, but its not. It goes to show how sales is about so much more than the product itself.
boredguy8 14y ago
These laws were established in the 1930s when factories would establish franchisees in (what was to them) low-value regions. As they grew more valuable, they would move into the region with factory-owned dealerships & start gouging franchisees. Since then, lobbying power has undoubtedly extended dealership power further than what's generally beneficial. But the starting point, it seems to me, made sense. For a fairly balanced (but not up-to-date as far as the status of legal challenges) starting point: http://autos.yahoo.com/blogs/motoramic/tesla-plans-short-circuit-car-dealers-194619627.html http://autos.yahoo.com/blogs/motoramic/tesla-plans-short-cir...
- MichaelApproved 14y ago
  "But the starting point, it seems to me, made sense." It doesn't make sense to me. This could be handled with contracts, not laws. When signing a franchise with a factory, you stipulate that they can't enter your market or otherwise infringe on your territory by doing ___________. It's a perfectly fine contract clause that unnecessarily turned into a law.
  - boredguy8 14y ago
    If you can't see why that makes sense, I'm concerned for you. You may disagree that it's the right approach, but to say it's not sensible strains credulity. (As to the idea that individual contractors were well-enough connected with each other to guard against the manufacturer's ability to screw them seems unlikely in 1930...but your foray into anarcho-syndicalism hardly seems the point of this thread, aye?)
    - icebraining 14y ago
      They weren't individual contractors, they were wealthy dealership owners, and the proof that they were well connected in their local communities is the effectiveness of their lobby, which created these restrictions in the first place. http://www.econtalk.org/archives/2009/06/munger_on_franc.html http://www.econtalk.org/archives/2009/06/munger_on_franc.htm...
  - 14y ago

Can anyone inform us on why there is such a law as "a factory cannot own a store" in the first place?

fossuser 14y ago

I believe it was because it would be unfair for a factory to begin to compete with its already franchised locations.

visarga 14y ago
Solution: don't enter into the franchise business, or enter with a clear contract including compensation in case the factory starts direct competition with its franchises. But to block a factory from selling its own products unless they go through a middleman, it's absurd. Especially if the plaintiffs didn't operate a Tesla franchise.
- bgentry 14y ago
  What you describe is basically how the alcohol industry has functioned in this country since the end of prohibition. All sales are forced to go through distributors who then sell to stores who then sell to consumers. There is no purpose for this other than another level of bureaucracy, waste, and limiting of competition.
  - caf 14y ago
    You can't buy wine at the cellar door?
    - woodchuck64 14y ago
      http://en.wikipedia.org/wiki/Three-tier_%28alcohol_distribution%29 http://en.wikipedia.org/wiki/Three-tier_%28alcohol_distribut... "States have various exceptions to this rule, the most prevalent one being the case of a brewpub, which is simultaneously a producer and retailer, and has no requirement to sell to a distributor. Some states allow an entity to have a part in two of the tiers, letting small breweries act as their own distributor, for example. Many states permit wineries to sell bottles of wine on-site to customers."
  - refurb 14y ago
    I wouldn't say it severe no purpose other than bureaucracy, waste and limiting competition. My understanding was that the 3 tiered system came about as a method to closely monitor and control alcohol sales. For example, medicinal brandy was still legal during prohibition and much of it was diverted for recreational use. Tightly controlling manufacturers, distributors and retailers helped keep that sort of stuff under control (kinda of... not really). I don't disagree that it serves a very limited purpose now.
- fossuser 14y ago
  Yeah I definitely don't agree with it - and in Tesla's case since there were no franchises it isn't even relevant. This was an obvious case of the current car companies fearing competition. The current car franchise system sucks (which Tesla is acutely aware of) and with selling something new requires a good team to do it. I have an example first hand when I went to check out the Volt after it first launched. I kept hearing the advertising saying its 'range' which confused me since I thought the gas generator could power the electric motor after the batteries were exhausted and you could just refill the gas. I started thinking maybe the gas generator could only extend the range or something (the internet wasn't clear since things were new). When I went to the Chevy dealers they were worse than useless, they knew nothing about the volts they had and what they did tell me ended up being wrong. It turned out the advertised range was just terrible marketing.
  - MichaelApproved 14y ago
    That story isn't unique to the Volt. In my experience, sales people rarely know the details of the products they sell. Best Buy is a classic example when the sales people tend to read the box for answers to questions. Of course, you'd think that an expensive product, like a car, would be different, but its not. It goes to show how sales is about so much more than the product itself.

boredguy8 14y ago

These laws were established in the 1930s when factories would establish franchisees in (what was to them) low-value regions. As they grew more valuable, they would move into the region with factory-owned dealerships & start gouging franchisees. Since then, lobbying power has undoubtedly extended dealership power further than what's generally beneficial. But the starting point, it seems to me, made sense. For a fairly balanced (but not up-to-date as far as the status of legal challenges) starting point: http://autos.yahoo.com/blogs/motoramic/tesla-plans-short-circuit-car-dealers-194619627.html http://autos.yahoo.com/blogs/motoramic/tesla-plans-short-cir...

MichaelApproved 14y ago
"But the starting point, it seems to me, made sense." It doesn't make sense to me. This could be handled with contracts, not laws. When signing a franchise with a factory, you stipulate that they can't enter your market or otherwise infringe on your territory by doing ___________. It's a perfectly fine contract clause that unnecessarily turned into a law.
- boredguy8 14y ago
  If you can't see why that makes sense, I'm concerned for you. You may disagree that it's the right approach, but to say it's not sensible strains credulity. (As to the idea that individual contractors were well-enough connected with each other to guard against the manufacturer's ability to screw them seems unlikely in 1930...but your foray into anarcho-syndicalism hardly seems the point of this thread, aye?)
  - icebraining 14y ago
    They weren't individual contractors, they were wealthy dealership owners, and the proof that they were well connected in their local communities is the effectiveness of their lobby, which created these restrictions in the first place. http://www.econtalk.org/archives/2009/06/munger_on_franc.html http://www.econtalk.org/archives/2009/06/munger_on_franc.htm...
- 14y ago