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Comment by afternooner | Hacker News Reader

Question for those who understand this, why can the government force a middle man to exist in the first place? It seem to a layman to violate several other rights.

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Planet Money has a great podcast explaining the reasons why car dealers exist.

http://www.npr.org/blogs/money/2013/02/12/171814201/episode-...

I'd really like to know what the legal framework is for securing a market position by law.

I constantly hear the argument that by codifying contemporary business models they've secured jobs.

Using this logic we should still have manually switched phone networks where people move around cables on giant boards all day long and rooms full of people using typewriters who have to start over again if they have a spelling error. There should be artificial $1 taxes for emails to keep the physical post in business and other nonsense.

I really don't see how the argument is valid.

I'm just surprised that there isn't some landmark labor case that would invalidate laws which artificially perpetuate inefficient vestigial processes or explicitly ban a market from evolving.

What would the legal argument for invalidating the law be? There is no constitutional right to efficient markets that would lead the supreme court to strike down the law. I think the court would declare this a "political question" and refuse to grant cert thereby not ever hearing the case.

I was thinking it would have been from English Common law - you know, from like the 14th century or so.

I find the reasons presented for these types of laws to always be patently absurd when generally applied and it just seems like an obvious shoo-in that should have been there since like the hundred years war.

Why would there have been anything about efficient markets back in the hundred years war? Adam Smith wasn't publishing until around the French and Indian war (AKA 7 years war) 300 years later.

Also, what leads you to believe that creating economic inefficiency to the benefit of some special interest is somehow against ancient and established traditions?

>Using this logic

Well, that is the logic. And you'll note that, despite that logic, we have the internet, cell phones, and the national postal services are going bankrupt.

There's a tenuous balance between maintaining global competitiveness and promoting technological advance, and making sure that your middle-class have blue collar jobs that afford them the ability to participate in the financial gains of of your nation.

The changes will occur; you can't hold them back. But sometimes you have to ease them in. It does the world no good to put thousands of "luddites" out of work overnight. The idea that they'll "find other work" makes sense on the macro level, but not the micro level; transitions take time.

Car manufacturers created the franchise system as a way to avoid them having to carry the cost of vehicle inventories and repair facilities across the country. Having done so, the dealerships lobbied the state legislatures to formalize their status in law, so that they couldn't be disintermediated by the manufacturers later.

I believe that the argument in their favor, other than blatant self-interest, was that dealerships provide post-sales warranty service, which would otherwise not be readily available. In some states, IIRC, the statutes are written to say that vehicles can only be sold from a location that also offers warranty service.

Dealerships have always felt to me to be some of the sneaky-est, deceptive and sometimes shady businesses I've had experience with. I think direct sales from manufacturers makes more sense...

If Tesla attempts to prevent independent service facilities from providing warranty and service work then be very worried. Laws exist to give consumers the choice for a reason.

With multiple dealers at least you can choose which one to buy from, who has better people, better service, and better pricing. Why people want Tesla only stores is beyond me, one choice means no choice.

It's not about wanting only Tesla stores. It's about wanting Tesla stores at all.

If consumers really do value dealers, then dealers will continue to exist. The reason that dealers are scared is that the dealers themselves do not believe that they provide a valued service.

I think the part most people are having trouble with is not what is contained in your first paragraph, but how the legislature/executive goes from there to "Every manufacturer, including those that never set up franchise agreements, must sell through a dealership." The especially galling part of the New Jersey kerfuffle is that Tesla was defined to be a "franchisor" despite the fact that they have never entered into a franchise agreement!

TL;DR: To save y'all from listening to the (interesting) Planet Money podcast:

Back in the early C20 depression the auto makers were the biggest companies in the USA. And they'd force the franchisees to purchase cars or lose their franchise.

So states enacted legislation to ensure the auto makers couldn't close a franchise. Nor could the auto maker grant a second franchise in the same location. And (I think I'm inferring as I can't remember hearing this explicitly) could not open their own dealership that competed with the existing franchise.

A great example of "The Law of Unintended Consequences"?

A law meant to help the people, hinders the people later on. Getting this stuff right isn't easy.

Which rights would it violate? (specifically, those that have been enumerated in the US or NJ constitution, or have been affirmed by a court).

The equal protections clause, as other people are not required to sell through an independent middle-man. Perhaps the due process clause as well, depending on how the statute is written and enforced.

I don't believe the equal protection clause would be applicable. All residents of New Jersey are subject to the same standards, and the state would be able to articulate a rational basis for the restriction (ensuring consumer access to repair and warranty service, for example). Same with the due process clause, the state merely needs a rational basis, or a "legitimate governmental interest", which is reasonably trivial for consumer protection legislation.

State commerce seems like a much more reasonable limitation on states rights as dealerships are in effect a tax on imports from another state. Presumably, consumer protection rules like forcing any place that sells cars to also repair them, but states can't for example prohibit someone buying a car in another state.

Government is the biggest middleman in existence.

Middlemen implies no or little value derived from the middleman's place. A stable, powerful and secure government is required for value of any meaningful value to exist in the first place.

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