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Car dealers are lobbying to make sure consumers must keep haggling with high-pressure salesmen
Lobbyists for some of Florida's biggest car dealerships have written legislation that would block consumers from buying electric cars directly from manufacturers like Ford and Honda.
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Florida’s car dealers want to make you haggle with a high-pressure salesman if you want to buy a new electric car from a company like Ford or Honda.
Amid a growing national push to let more car manufactures sell electric vehicles directly to consumers, lobbyists representing some of the state’s biggest dealerships have written legislation that would strengthen a decades-old state franchising law that forces Florida consumers to buy most new cars through middlemen dealers, each of whom controls their own territory.
The bills (HB 637, SB 712) would cement the role of dealers in a variety of ways. For instance, they would make it illegal for car manufacturers to make their dealers set transparent, non-negotiable prices for vehicles — allowing the dealers to continue hiding prices and layering in lots of last-minute fees. They would also block manufacturers from making dealers establish clear and consistent terms for trade-ins, insurance and financing.
The bills would even prevent Floridians going directly to an established car company like Ford, ordering a customized car online, and choosing where to have it shipped for delivery.
“We want to make sure that dealers continue to be allocated vehicles — that we don’t become a system where the manufacturer directly takes reservations from customers…and then the customer tells the manufacturer, ‘Send it to this dealer, send it to that dealer,’” John Forehand, the general counsel for the Florida Automobile Dealers Association said in a video explaining the legislation.
Dubbed by lobbyists as the “Dealer Bill,” the legislation gets its first hearing Thursday morning in the House’s Regulatory Reform & Economic Development Subcommittee. The House version is sponsored by Rep. Jason Shoaf, a Republican from Port St. Joe.
One week after filing the Dealer Bill in the state House, records show Shoaf received a $10,000 campaign contribution from Braman Motors — the dealership company owned by billionaire magnate Norman Braman and one of the companies that helped write the legislation, according to the dealers association.
Shoaf is hardly unique. Records show that the Florida Automobile Dealers Association showered more than $1 million on Florida politicians over the past two years — which included $230,000 to committees controlled by Senate President Kathleen Passidomo (R-Naples) and another $50,000 to Sen. Ben Albritton (R-Wauchula), the second most-powerful state senator. Braman Motors has plowed more than $600,000 more into Florida politicians over the same period.
Gov. Ron DeSantis, who would have to sign or veto this legislation, has raised more than $2 million from car dealers over the past two years — including $225,000 from Daytona Toyota, $75,000 from Norman Braman and Braman Motors, and $50,000 from Bozard Ford in St. Augustine.
The “Dealer Bill” flies in the face of recommendations from independent economists, who say states should be loosening anticompetitive regulations that protect the profits of car dealers at the expense of higher prices for consumers — not strengthening them.
“All up and down the line, the dealers are getting protected in a variety of ways,” said Roger Blair, an economics professor at the University of Florida. “Part of the reason is that it looks appealing — that we’re protecting businesses from these big, bad manufacturers in Detroit or in Japan or in Germany….But, of course, it comes at the expense of the consumer. The consumer is charged more as a result.”
Blair was one of more than 70 professors around the country who signed an open letter in April 2021 urging states to let more car manufacturers sell directly to the public. The academics said direct sales would lead to lower prices for consumers while also driving more rapid adoption of electric cars, which replace the gas-guzzling vehicles that are intensifying climate change.
“The dealer protection laws were written for the mid-twentieth century,” they wrote. “It is time for a new approach.”
Cutting progress off at the pass
The legislation comes as car dealers across the country are scrambling to save themselves amid disruption in the car-buying business sparked by start-up electric-vehicle manufacturers like Tesla, Rivian and Lucid.
Because those newer car companies aren’t as encumbered by the same old franchising laws as traditional manufacturers, they have been able to sell cars straight to the public. That gives them an enormous competitive advantage: A 2009 report by the U.S. Department of Justice estimated that direct selling could cut the average cost of a car by $2,225 — nearly 9 percent per vehicle.
Now, more legacy carmakers want to emulate all or parts of the Tesla distribution model. Ford, for instance, announced plans last year to make its dealers commit to up-front, no-haggle pricing if they want to sell Ford’s new line of electric vehicles. Ford President and CEO Jim Farley has told investors that Ford’s distribution costs are about $2,000 per vehicle more expensive than Tesla’s.
Lobbyists for the car dealers, who started working on this year’s legislation nearly a year ago, are trying to cut plans like Ford’s off at the pass.
“We’ve really tried to anticipate the things that are happening in the market…and a lot of the things that we have in the bill actually address issues that are in the Ford EV program that came out of October,” Forehand, the dealers association general counsel, said in the video explaining the legislation. “We kind of knew where the manufacturers were headed, and we’ve done the best we can to cover those things up.”
Representatives for Ford and other individual car manufactures either declined to comment or did not respond to comment. But they’re expected to oppose this legislation.
“The automotive franchise system works well, but many of the laws governing it today are outdated, add unnecessary costs, and make it harder to adapt to changing market demands and customer expectations,” said Brian Weiss, a spokesperson for the Alliance for Automotive Innovation, an lobbying group for the carmakers.
It pays to the be the middleman
It’s probably worth remembering why buying a car is so much more painful than purchasing a refrigerator or a computer.
Decades ago, in the early years of the American car industry, car manufacturers started contracting with local dealers to sell their vehicles, both as a way to quickly raise money and in order to focus on their core business of building cars.
But there was an enormous imbalance of power: The “Big Three” automakers — Ford, General Motors and Chrysler — dominated the manufacturing market, whereas most dealerships were small, family-run operations. And the carmakers sometimes wielded their market power like a predator. During the Great Depression, Henry Ford allegedly kept his factories running at full capacity by forcing dealers to buy his cars even though they had no way to resell them.
Most states eventually passed laws to protect car dealers. Among other things, those laws prohibited manufacturers from flooding a market with new dealer franchises that encroach on existing dealer’s territory. They also prohibited car makers from bypassing dealers and selling directly to consumers themselves.
But the car business looks much different today. There are now more than a dozen major car manufacturers selling vehicles in the U.S
And the dealers have ballooned into big businesses. Publicly traded AutoNation Inc., which is headquartered in Fort Lauderdale, did $27 billion in sales last year and turned a $1.4 billion profit.
Of the 80 largest privately held companies in Florida, 17 are car dealers, according to Florida Trend magazine. Thirteen of them did more than $1 billion in sales last year. The biggest — Morgan Auto Group of Tampa — did more than $5 billion in sales.
The state laws that protect the position of car dealers are similar to the Prohibition-era statutes that keep territorial beer and liquor distributors standing between brewers, distillers and the public. They’re why it takes years of lobbying in Tallahassee to make even a simple, popular change — like allowing a microbrewery to sell a 64-ounce growler of beer to a customer.
These state-sanctioned protection schemes are also incredibly lucrative for the middlemen.
In 2019, economists at the University of California, Berkeley, published a paper called “Capitalists in the Twenty-First Century” that used de-identified tax data to analyze how the top 0.1 percent of Americans by income make their money.
They found the list filled with car dealers and beverage distributors.
“A typical firm owned by the top 0.1% is a regional business with $20M in sales and 100 employees, such as an auto dealer, beverage distributor, or a large law firm,” they wrote.
‘The Politics of Crony Capitalism’
Ultimately, the car dealerships fear they would eventually be driven out of business if manufacturers were permitted to sell to consumers themselves — whether directly, as with online sales, or indirectly, by controlling key terms like pricing and financing.
But the dealers claim they aren’t just trying to protect their own investments and profits. They say they are trying to protect the car-buying public, too.
For instance, Ron Book, a lobbyist for AutoNation, said that keeping bricks-and-mortar dealerships in local communities ensures “accountability and responsiveness” for consumers.
“At the end of the day, the consumer is better served when there is one throat to choke here locally, not somebody far away,” he said.
The car dealers also argue that the current system leads to better prices for consumers.
The claim goes something like this: While each dealer for a manufacturer like Ford might have its own monopoly territory, they must still compete with Ford dealers in neighboring territories. But if Ford were allowed to sell directly to consumers, the company would elbow out independent dealers, leaving Ford itself as the only place to buy Ford vehicles.
“Our advantage is the fact that you guys all determine pricing for vehicles separate from other dealers who determine pricing. And that competition is what makes our system work,” Ted Smith, the president of the Florida car dealers association, said in one of the association’s videos explaining the bill. “If the factories take over those functions, we’re going to have one price — and it’s not going to be a good one for the customer.”
There’s just one problem with this argument: It’s “farcical,” according to Daniel Crane, a professor of antitrust law at the University of Michigan and the author of a 2016 paper chronicling the dealer industry’s lobbying efforts to stop even Tesla from selling directly to consumers.
“It is possible that retail distribution through independent dealers could lower prices to consumers, but only if the dealers were more efficient at retail distribution than the manufacturer,” Crane wrote his paper, which was called, “Tesla, Dealer Franchise Laws, and the Politics of Crony Capitalism.” “But, in that case, the manufacturer would have every incentive to distribute through dealers, which would increase its wholesale sales…and hence its profits.”