I am starting to think there is a lesson in here for other start ups:
Get as many people betting on you as possible, otherwise they could be convinced to bet against you.
Trouble in Missouri
21–30 of 56 posts
Re: Trouble in Missouri
#22I find this kind of thing disturbing. How often do companies exploit the legislative process like this but with no opposing side to complain? How much lobbying machinery and back room dealing is designed to achieve precisely this at any level of government? Is there even any way to know, much less do something?
How often do companies exploit the legislative process like this but with no opposing side to complain?
All the time, or at least as often as possible.
How much lobbying machinery and back room dealing is designed to achieve precisely this at any level of government?
All of it. However, it is also sometimes done for things you or I agree with.
Re: Trouble in Missouri
#23Can someone explain to me why it should be illegal for Ford or Chevy to sell their cars directly? Is it really anti-competitive? Apple sells their phones directly, AT&T sells Apple phones directly, and resellers like Best Buy or Radio Shack sell Apple phones, and they're all doing pretty well economically. Not even arguing that Tesla should be allowed to sell cars without a dealership, why bother preventing direct sa…
(1) Local protectionism
but also
(2) Car dealerships need expensive inventory of illiquid assets and franchise licenses. If the franchise contracts aren't well written (perhaps collusion between manufacturers prevents competition over franchise rights), then a big auto company can maximize profits by selling franchise rights and then a couple years later looking at volumes of sales for which areas it makes sense to set up their own stores and undercut the franchise owners. The franchise owners need to amortize their franchise costs, but not so for the direct sales shops. The argument becomes that the historical implication has been that in the auto industry selling local monopoly franchise rights has implied no direct competition from the manufacturers.
Perhaps a better law would be that no manufacturer with existing franchise owners in the state can have direct sales in the state.
Re: Trouble in Missouri
#24Can someone explain to me why it should be illegal for Ford or Chevy to sell their cars directly? Is it really anti-competitive? Apple sells their phones directly, AT&T sells Apple phones directly, and resellers like Best Buy or Radio Shack sell Apple phones, and they're all doing pretty well economically. Not even arguing that Tesla should be allowed to sell cars without a dealership, why bother preventing direct sa…
Let's say you borrow money, and open a nice profitable dealership. The manufacturer, then decides to steal your profits by raising the wholesale price of cars for you until you are bankrupt, and the manufacturer buys the dealership out from under you in bankruptcy court. That type of behavior is what created franchise laws in the first place.
You shouldn't have opened the dealership without an agreement with the manufacturer giving you exclusive rights to sell in your market for enough time to justify your investment.
Re: Trouble in Missouri
#25Can someone explain to me why it should be illegal for Ford or Chevy to sell their cars directly? Is it really anti-competitive? Apple sells their phones directly, AT&T sells Apple phones directly, and resellers like Best Buy or Radio Shack sell Apple phones, and they're all doing pretty well economically. Not even arguing that Tesla should be allowed to sell cars without a dealership, why bother preventing direct sa…
NPR's Planet Money did a great program on this topic, "Why Buying A Car Is So Awful"
http://www.npr.org/blogs/money/2013/02/12/171814201/episode-...
Re: Trouble in Missouri
#26Can someone explain to me why it should be illegal for Ford or Chevy to sell their cars directly? Is it really anti-competitive? Apple sells their phones directly, AT&T sells Apple phones directly, and resellers like Best Buy or Radio Shack sell Apple phones, and they're all doing pretty well economically. Not even arguing that Tesla should be allowed to sell cars without a dealership, why bother preventing direct sa…
(1) Local protectionism but also (2) Car dealerships need expensive inventory of illiquid assets and franchise licenses. If the franchise contracts aren't well written (perhaps collusion between manufacturers prevents competition over franchise rights), then a big auto company can maximize profits by selling franchise rights and then a couple years later looking at volumes of sales for which areas it makes sense to s…
Perhaps a better law would be that no manufacturer with
existing franchise owners in the state can have direct sales
in the state.
Re: Trouble in Missouri
#27Earlier quoted context omitted.
As an example - Official Apple Stores have hurt mom&pop Apple stores. Apple ultimately makes money either way, but they make more money if they sell them at their own Apple store. Why would you go to the mom&pop store if an Apple store were nearby? There have also been reports that they don't give the 3rd party shops new models until much later, so they are at even more of a disadvantage. Try buying that new Macbook…
One thing I don't understand is why the dealers didn't play the manufacturers off each other to mitigate the problems. I can see that, for Apple dealers, it could be a major problem. Apple products are a specific niche, and you can't take your Apple dealer and turn it into something else with much hope of success. Selling PCs is a pretty different business. But when it comes to car, surely selling Fords is much the s…
I'm going to guess there's a pretty strong non-compete built into the standard dealership contract.
Re: Trouble in Missouri
#28Earlier quoted context omitted.
(1) Local protectionism but also (2) Car dealerships need expensive inventory of illiquid assets and franchise licenses. If the franchise contracts aren't well written (perhaps collusion between manufacturers prevents competition over franchise rights), then a big auto company can maximize profits by selling franchise rights and then a couple years later looking at volumes of sales for which areas it makes sense to s…
Perhaps a better law would be that no manufacturer with existing franchise owners in the state can have direct sales in the state. As arbitrary a distinction as that may be, it honestly sounds like this would satisfy everyone involved.
Except the manufacturers that don't want another manufacturer to able to sell in the state. Especially since that new manufacturer will be selling directly allowing their cars to be sold for less than if a franchise fee had to be amortized into every vehicle sold (in other words, they'll have lower overhead costs), which still affects the existing dealerships who won't be happy as they will be at a slight disadvantage.
Re: Trouble in Missouri
#29I find this kind of thing disturbing. How often do companies exploit the legislative process like this but with no opposing side to complain? How much lobbying machinery and back room dealing is designed to achieve precisely this at any level of government? Is there even any way to know, much less do something?
What's more troubling is that this particular case is in no way "back room dealing." It's not kept secret at all. I think most people are aware of this kind of thing and actually think it's a reasonable idea for "consumer protection" or "preventing anti-competitive behavior" or some other talking point that I consider utter nonsense.
Re: Trouble in Missouri
#30Earlier quoted context omitted.
Let's say you borrow money, and open a nice profitable dealership. The manufacturer, then decides to steal your profits by raising the wholesale price of cars for you until you are bankrupt, and the manufacturer buys the dealership out from under you in bankruptcy court. That type of behavior is what created franchise laws in the first place.
You shouldn't have opened the dealership without an agreement with the manufacturer giving you exclusive rights to sell in your market for enough time to justify your investment.
How would that matter? You are bankrupt, so you'd be forced to sell the rights to pay back the bank.