Recently, we have pointed to examples where Tesla has met barriers to market entry, effectively being blocked from selling electric cars to consumers. Well, it now appears that Tesla is trying to get legislation to provide it a leg up on its competition by limiting how competitors can sell their electric cars. In ACI’s view, competition means a level playing field, not protecting competitors. Here is our recent piece in Pennlive.com on what is happening in Pennsylvania:
Electric Car Cronyism
Not long after the Ten Commandments, lawmakers have added many more “Thou shalt nots” and a few “Thou shalts.” These laws often deal with what the government can and cannot require of its citizens, or what citizens can and cannot to do each other; and what businesses can and cannot do to each other or their customers or their employees.
One such “Thou Shalt” falls under the umbrella of what are known as “franchise laws.” These are sometimes laws that state legislatures have developed to help define the relationship between a major manufacturer and those who distribute or sell their products to the public. The relationship between major automobile manufacturers and their dealers is a pretty good example.
If I want to be a new-car dealer selling, say, Packards or Studebakers (to name a couple of brands that no longer exist), I would enter into an agreement with the manufacturer of that brand that would probably include requirements for me to build a showroom meeting certain specifications, having a repair facility that would have trained mechanics, commit to a certain level of advertising, and so forth.
The State Legislature in Pennsylvania has an interest in these kinds of arrangements because they are typically between two commercial entities – the car manufacturer and the car dealer – and there is no advocate to protect the car buyer. Inasmuch as Packard (in its day) was a far larger entity than “Steve’s Packard” dealership could ever hope to be, the State also has an interest in making certain that Packard’s requirements are fair and equitable thus protecting the dealerships.
Times change, brands like Packard fade into memory, and new brands occasionally arrive on the scene. The new brand poking its head out onto the automotive stage is the Tesla – the all-electric vehicle that every reporter, it seems, wants to test drive.
Without getting into a discussion about whether electric vehicles are far better for the environment, there is an issue now before the state legislature that would exempt Tesla from the Commonwealth’s franchise laws.
Tesla wants to sell its cars directly to consumers. They do not want to use the kinds of dealer networks that Ford or Mercedes-Benz use. That, in and of itself is not a problem, and competition is always good for consumers. However, the problem is that this proposed legislation would only exempts Tesla from the state’s franchise laws, which means that the legislations may, in fact, be anticompetitive and not good for consumers.
In reflection, no other car manufacturer in the world is currently allowed to sell its products directly to consumers. With this legislation, only Tesla would. It is not as though Tesla produces the only electric car. It produces the most expensive electric car, but that shouldn’t allow them to skirt the same laws that every other electric car – Leaf and Volt to name but two – have to follow.
If Tesla doesn’t need to follow franchise laws that all others do – then why have the law at all? Effectively, the state legislature is considering the creation of a specific class of new car – not just electric, but electric built by a single manufacturer – for special treatment. Instead of enabling competition, the proposed legislation appears to protect a competitor. This is a very bad precedent.
If such laws are going to be passed, then they should allow manufacturers the same opportunity to sell directly to potential customers. That will heighten competition and benefit consumers. Simply put, thou shalt not grant special treatment.
Steve Pociask is president of the American Consumer Institute Center for Citizen Research, a nonprofit educational and research organization. For more information, visit www.theamericanconsumer.org.