In the past decade they have been the driving force behind some of the most conservative political campaign groups in the United States, pouring hundreds of millions of dollars into Super PAC campaigns and benign-sounding organisations with ultra-conservative goals. They’re vocal in their opposition of 2010 Patient Protection and Affordable Care Act, have fought time and time again with environmental groups over matters of clean energy, and are some of the most vocal and powerful funders of anti climate-change science.
You’d think then that Charles and David Koch, heads of the massively wealthy Koch Industries, heirs to the Koch fortune built by their late father Fred C Koch and two of the largest politically-active businessmen in conservative politics today, would be unlikely supporters of the environmentally-conscious, fossil-fuel beating Tesla Motors.
Yet as a letter just sent to lawmakers on Capitol Hill shows, the Koch-funded Americans for Prosperity is among ten public-interest groups calling for U.S. Governors and legislators to support the right of Tesla Motors [NASDAQ:TSLA] to sell environmentally-friendly electric car direct to customers across the U.S. rather than be forced by state legislators and powerful auto dealer associations to sell through only franchised dealerships.
Political allies, it seems, can come from the strangest places.
Alongside the Koch-funded political action group, other signatories include Environment America and the Sierra Club, campaign groups which ordinarily wouldn’t make good bedfellows for the right-wing campaign group.
Other signatories include the Consumer Federation of America, the American Antitrust Institute and The Information Technology & Innovation Foundation. Earlier this year, the last of these nominated the states of Michigan, Arizona, New Jersey and Texas as joint finalists in the inaugural 2014 Luddite Awards, a suitably derogatory award to the state(s), groups, or businesses which have most stood in the way of technological, social and economic innovation.
In the letter, which was sent to lawmakers yesterday, the ten different signatories acknowledge their disparate backgrounds and usual conflict, but underline the importance of working together to support the innovative, forward-thinking automaker.
“Some of us frequently find ourselves on different sides of public policy debates,” it reads. “However, we now find common ground on an issue of considerable public importance concerning state laws that restrict the purchase and sale of automobiles. In short, we oppose efforts by state legislatures or regulatory commissions to forbid car manufacturers from opening their own stores or service centres to deal directly with consumers.”
As the letter points out, most historical statues mandating automakers sell their cars through franchised dealers rather than directly to customers were passed to protect small, independent ‘mom and pop’ auto dealers from the unfair advantage leveraged against them by automakers. Due to their larger size and stock, automaker-owned dealerships were offering lower prices and better deals than their own independent franchised dealerships, a practice which was seen at the time to be damaging the free market.
Today, those same laws are being used to give auto dealers the unfair advantage, allowing them to add a plethora of ‘extras’ on top of a car’s official MSRP, add ‘market adjustments’ and limit customer choice.
Moreover, those who support the ageing, outdated legislation are using it to prevent Tesla Motors from selling its cars direct to customers at Tesla-owned ‘Tesla Stores.’
“However valid these concerns may or may not have been at the time when the “Big Three’ manufacturers dominated the market, it is important that the law keep up with the changes that have occurred in the automobile market today,” the letter says of the original legislation. “The automobile industry is far more competitive today than it was in the 1950s with many more manufacturers participating on a significant scale. This increased competition gives dealers more choice in franchising relationships and greater bargaining power to protect themselves against unfair trade practices by manufacturers, thus undercutting the original rationales for these laws.”
“Tesla has explained that its direct distribution model is necessary, in part, because many traditional car dealerships have been unwilling or unable to promote electric vehicle sales with sufficient expertise or vigor. Tesla’s market entry through direct distribution is providing consumers with beneficial new choices on what vehicles they buy and how they buy them. Moreover, our concerns are not limited to Tesla, as these laws have similarly negative effects on any company seeking to distribute their cars directly to customers,” it continues.
And it’s at this point that the interest from the (more recently) conservative Koch Brothers becomes clear. For the multi-billionaires, the current legislation threatens one of their key beliefs: a free, open market.
We’d like to remind readers that while the Koch Brothers have become some of the most powerful forces behind the modern conservative movement, there was a time when the Koch Brothers supported more libertarian campaigns, especially if resulted in less governmental influence and more business influence.
Freedom to do business essentially comes first. And that’s why Americans for Prosperity is standing side by side on this occasion with the environmentally-conscious Sierra Club.
You’ll find the letter reproduced verbatim below, along with the complete list of signatories. But first, we’re curious to know what you make of this letter. Will it help the (usually) conservative-leaning politicians who have so far sided with auto dealer associations change their minds on the whole matter of franchised dealerships? Is this an issue we’ll see discussed during the next Presidential campaign?
And more importantly, will it have an effect on the statute of the many states with statues prohibiting direct-to-customer sales?
Leave your thoughts in the Comments below.
Sign-on Statement to State Government Leaders About the Anti-Consumer Effects of Laws Prohibiting Direct Distribution of Automobiles
We, the signatories of this letter, represent a broad range of public interest organizations. Our individual interests include such diverse matters as environmental protection, economic freedom, fair competition, consumer protection, and technology and innovation. Some of us frequently find ourselves on different sides of public policy debates. However, we now find common ground on an issue of considerable public importance concerning state laws that restrict the purchase and sale of automobiles. In short, we oppose efforts by state legislatures or regulatory commissions to forbid car manufacturers from opening their own stores or service centers in order to deal directly with consumers. Such laws are unnecessary for consumer protection, interfere with competition and efficient distribution, increase costs to consumers, and mount barriers to the introduction of innovative and beneficial new technologies.
At present, many states have on their books decades-old laws addressing the relationship between car manufacturers and their franchised dealers. These laws were ostensibly designed to protect dealers from unfair practices by their franchising manufacturers. Among the provisions in many of these state laws are prohibitions on automobile manufacturers opening their own showrooms and service centers and dealing directly with consumers. At the time these laws were passed many decades ago, the car dealers argued that manufacturers should not be allowed to compete directly with their own franchised dealers, since they might then be able unfairly to undercut their dealers on price.
However valid these concerns may or may not have been at a time when the “Big Three” manufacturers dominated the market, it is important that the law keep up with the changes that have occurred in the automobile market today. The automobile industry is far more competitive today than it was in the 1950s, with many more manufacturers participating on a significant scale. This increased competition gives dealers more choices in franchising relationships and greater bargaining power to protect themselves against unfair trade practices by manufacturers, thus undercutting the original rationales for these laws. More fundamentally, there are no valid reasons to use these laws that were intended to protect dealers in franchising relationships to thwart new market entry and competition from companies that do not seek to use franchised dealers at all. While we take no position in this letter on the appropriateness of many other aspects of dealer protection laws, we are strongly opposed to efforts to use these laws to block direct distribution.
Much of the recent public debate on this issue has centered on Tesla Motors, which makes all-electric vehicles, and seeks to distribute and service its cars directly to consumers. Tesla has explained that its direct distribution model is necessary, in part, because many traditional car dealerships have been unwilling or unable to promote electric vehicle sales with sufficient expertise or vigor. Tesla’s market entry through direct distribution is providing consumers with beneficial new choices on what vehicles they buy and how they buy them. Moreover, our concerns are not limited to Tesla, as these laws have similarly negative effects on any company seeking to distribute their cars directly to consumers.
These laws have negative consequences for the entire automotive industry— including what kinds of cars are built and sold, how they are powered, and what innovative new technologies can reach the market. Direct distribution could significantly reduce costs for consumers and increase consumer satisfaction. 1 These laws retard innovation by making it harder for new technologies to achieve wide distribution and hence reach an adequate scale to be sustainable in the market. They put one more obstacle between consumers and the technologies that can help reduce carbon emissions and prevent consumers from accessing clean cars. Finally, these laws do not rest on a legitimate public policy basis for constraining the ability of a company to choose how to operate its business.
The diversity of perspectives represented in the coalition signing this letter reflects the importance of this issue on multiple fronts. We call on legislators, governors, and other public servants across the political spectrum to take a stand against laws that block direct automotive distribution to the detriment of innovation, the economy, consumers, and the environment.
Institute Americans for Prosperity
Consumer Federation of America
Consumer Action Consumers for Auto Reliability and Safety (“C.A.R.S.”)
Environment America 2
Institute for Justice
The Information Technology & Innovation Foundation
Sierra Club – National
1 See Gerald R. Bodisch, Justice Department Economic Analysis Group, Economic Effects of State Bans on Direct Manufacturer Sales to Car Buyers, May 2009, http://www.justice.gov/atr/public/eag/246374.htm.
2 Including Environment America National and the following state chapters: Environment Maine; Environment New Hampshire; Environment Massachusetts; Environment Rhode Island; Environment Connecticut; Environment New York; Environment New Jersey; Environment Maryland; Environment Virginia; Environment Georgia; Environment Florida; Environment Ohio; Environment Michigan; Environment Illinois; Wisconsin Environment; Environment Iowa Environment Missouri; Environment Minnesota; Environment Texas; Environment New Mexico; Environment Colorado; Environment Montana; Environment Washington; Environment Oregon; Environment California; Environment Arizona; Environment Nevada; Environment North Carolina.
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