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selling cars right
The etymology of "privilege" is helpful to consider as a framework for political economy - privus+lex = private law, "a special right, advantage, or immunity granted or available only to a particular person or group of people" (thanks, Mr. Google). One of the precepts of fairness that I value is equal treatment before the law, so when the law provides for privilege then I start to raise objections. A pity it is not more difficult to find examples, but sometimes there are layers of privilege that cloud the issue.
The Seattle Times reported on legislation recently passed in Washington that seems to put the Tesla motor company in a favored position ("Legislature acts to allow Tesla to sell cars directly"), with the writer Ashley Stewart aiming in the first sentence to make the connection explicit
"Tesla can continue to sell cars directly to customers under amended bills passed in the state House and Senate, but it will be the only car manufacturer with that privilege."
To be clear, this new legislation does seem to put the Tesla company in a favored position as compared to other automobile companies, both current and possible future upstarts, because it allows for more alternatives to be arranged in the purchase and sale agreements made between Tesla Motors and their potential customers. The new rules don't forbid a dealership model such as used by other car companies, so that option remains available to Tesla in addition to the direct sales approach.
To ask why it is that other car companies are not allowed to sell their product directly to consumers starts to expose how the layers of rules obscure who is really in the privileged position. For decades in Washington and elsewhere, the State legislature has made it illegal for car companies to sell directly to the public, has forbidden the option of consumers to negotiate directly with those producers to arrange the most advantageous deal that suits their needs and pocketbook. Instead, car buyers across the country have no other option than to make those deals through the middleman represented by local dealerships.
From here it is not difficult to recognize that those dealerships are the ones given the privilege. They are the ones with the local political connections who legislate guaranteed business arrangements in direct conflict with the interests of the consumer. The politicos claim to protect the poor car buyer from rapacious auto manufacturers, but this is a smokescreen to their collusion with local business owners to restrict competition and keep prices higher than they would otherwise be.
The situation becomes even more obvious when considering whether legislation prohibits consumers of other goods from making purchase directly from the producer - public choice theory and practical observation tells us this happens whereever people think they have a political advantage, but auto dealers are clearly among those given a unique advantage against consumers and other businesses.
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The politically supported adversarial relationship between dealers and manufacturers had a part in the recent failure of GM and Chrysler, because those state laws also restrict the ability to close down unprofitable car lines. The dealership sales campaigns are also weirdly convoluted, as described in narrative by This American Life of the challenges in making monthly quotas for a typical dealership, and through this interview by Russ Roberts with the sales manager of a dealership where he recently purchased a car.
This entry was posted on March 2nd, 2014 at 13:17:00 by Adumbrator and is filed under Politics.
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