Out of Control Policy Blog

Open Letter Challenges Autodealer Rent Seeking in New Jersey

University of Michigan law professor, Dan Crane and dozens of other economists have penned a letter to New Jersey Gov. Christie, imploring him to stand up against the brazen rent seeking of independent auto dealers. The letter, sent by the International Center for Law & Economics, urges reconsideration of recent regulations that are preventing Tesla from selling its cars directly to consumers (instead of selling them to an independent dealer) and explains why such protectionism is unjustified:

The Motor Vehicle Commission’s regulation was aimed specifically at stopping one company, Tesla Motors, from directly distributing its electric cars. But the regulation would apply equally to any other innovative manufacturer trying to bring a new automobile to market, as well. There is no justification on any rational economic or public policy grounds for such a restraint of commerce. Rather, the upshot of the regulation is to reduce competition in New Jersey’s automobile market for the benefit of its auto dealers and to the detriment of its consumers. It is protectionism for auto dealers, pure and simple.

Read the full letter here.

Last week Reason's Nick Gillespie wrote about the ridiculous Tesla regulation, as well as other anti-innovation rules being promulgated around the country to protect entrenched political interests:

That’s the only way to describe what’s happening to three wildly innovative and popular products: the award-winning electric car Tesla, taxi-replacement service Uber, and hotel-alternative Airbnb. These companies are not only revolutionizing their industries via cutting-edge technology and customer-empowering distribution, they’re running afoul of interest groups that are quick to use political muscle to maintain market share and the status quo....

If mobsters were pulling these sorts of stunts, we’d recognize the attacks on new ways of doing business for what they are: protection rackets.

For more background on the NJ regulation (which is modeled on similar laws in other states), see Bloomberg.com's write up from earlier this month, and commentary from Reason's Ed Krayewski.

Anthony Randazzo is Director of Economic Research


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