Why can't this all be enforced using contract law? I don't see McDonalds having burger dealerships codified into law, but rather franchise contracts that let them sell billions of pounds of beef, chicken, and potatoes through their "dealers."
McDonalds doesn't need any arrangement like that because nobody's interested in mail-ordering cheeseburgers from them, and if HQ wanted to put them in supermarkets and sell direct-to-consumer, it wouldn't affect the franchises anyway -- frozen burgers are not a substitute good for drive-thru fast-food meals.
Cars are different. If the manufacturers sell direct-to-consumer, then they can always undercut dealerships (no property/staff/service overhead); there will be no profit in buying new vehicles to resell on a lot. There either won't be "new car" dealerships anymore, or they'll essentially become showrooms earning a small commission referring orders to the manufacturer.
Either way, the current business model cannot persist without the dealership laws simply by "enforcing contract law". The dealers have no contracts prohibiting manufacturers from selling direct-to-consumer, and they have no leverage to get them to sign such contracts. The dealers need the manufacturers, while the manufacturers need far fewer dealers than there are for service centers.
> McDonalds doesn't need any arrangement like that because nobody's interested in mail-ordering cheeseburgers from them
Mail-order isn't the issue. McDonalds can own their own restaurants right now if they want to, instead of franchising. This is similar to how Tesla wants to operate.
> If the manufacturers sell direct-to-consumer, then they can always undercut dealerships...there will be no profit in buying new vehicles to resell on a lot. There either won't be "new car" dealerships anymore, or they'll essentially become showrooms earning a small commission referring orders to the manufacturer.
Good? If they can't add value and only exist because a law creates a cartel, then good riddance. If they actually add value, I'm sure we'll see that represented by people choosing to buy through dealers anyway.
> The dealers have no contracts prohibiting manufacturers from selling direct-to-consumer, and they have no leverage to get them to sign such contracts.
If they have no leverage, why is it acceptable to force them via the law? They could draw up fair contracts where both parties are happy and if they aren't they can walk away from it. It sounds like you are saying it's unfair because the dealers don't have to worry about the value they add to the manufacturers. You readily admit that the current arrangement is inefficient.
Apart from a few cities, the nearest service center is a state and a half away. If you don't like the staff/service there, your next option is shipping your car two states away when it needs work. There are few enough car manufacturers that none of them will build out significantly more company-owned service centers than the others; you won't be able to "vote with your dollars" on better coverage now that an expansive dealer network can't be counted on for OEM service.
Dealers, right now, make a lot of money on service. Why the hell would manufacturers, in an alternative world where dealers are no longer protected by laws, skip out on that profit? There are also lots of independent auto workshops that never had anything to do with selling brand new cars.
Manufacturers can't count on bulk sales to dealers of each year's new models, so there's higher risk of a model not ramping up production fast enough to become profitable, and of the entire company going out of business in a recession.
Well yes, theres an inherent risk in running a business. Who knew.
Dealerships will be much smaller, no longer having to stock and earning a profit from new car sales; hundreds of thousands of jobs will gradually disappear. But new cars will get cheaper.
Jobs for the sake of "jobs" are not sane economic policy and will eventually be to the loss of everyone.
Comparison shopping gets much harder -- you won't be test-driving new and used cars of different makes on the same lot anymore. You probably won't be able to test-drive a new car and drive that car home the same day anymore either.
Why the hell not? Tesla offers testdrives, and you can even buy a car right now if they happen to have an orphaned one at a service center. They are still production constrained right now so thats obviously not how they can sell cars this very moment.
Other manufacturers can offer this easily.
> I answered your question of why the status quo cannot be enforced by contract instead of by industry-specific law; the status quo only exists because of those laws.
That wasn't my question. My question was why contracts cannot enforce this kind of behavior instead of heavy handed law, not if the parties would agree to those contracts. The fact that you think the parties would not willingly enter into this kind of contract makes it obvious to me that it is heavy-handed.
> If you prefer a country where everyone operates like Tesla -- your nearest service center is a state and a half away
That's a much more cynically view of dealerships than even i portrayed. Are you suggesting dealerships offer absolutely no value to customers and wouldn't have a sustainable business without the gov't protecting them? It almost sounds like you've come across a business idea in the event of a post-dealership-apocalypse world.
McDonald's do exploit and undermine local laws and use their bottomless pockets to grind down opposition. This isn't the same as what you are talking about I know, but its on the spectrum. http://m.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=...
I didn't see anything in that article talking about exploiting or undermining local laws. In fact the whole article talked about outrage at local politicians.
Not to say they don't, but the admirable qualities about the McDonald's corporation is that they are hyper-rational about business efficiency and public image. I don't see anything in the article illustrating that they were acting in a dirty manner.
Sorry, not the best link to illustrate the situation, it runs over many years. They were denied the right to build there, so they applied for something that would have minimal impact, got it accepted. Then applied for something else, with slightly more impact, got it accepted. Every step was careful, measured and calculated to go unnoticed by locals. Eventually they turned and said, well hey, if I can build X surely Y (McDonalds) will be fine.
There is also a history of McDonald's not abiding by their council consents (not collecting rubbish generated, opening for longer than agreed to, noise violations etc), but they can afford the fines.
Nothing illegal was done in this instance, they just managed to bypass local feeling and played a perfect game. Key takaway I guess, is that out of 872 submissions to the council regarding the plans, 860 were opposed to it. completely. http://www.theaucklander.co.nz/news/editorial-the-battle-of-...
