The Fiction of Locally Owned Mom and Pop Car Dealers: Some Data on Franchised Automobile Distribution in the State of Michigan

4 Pages Posted: 13 Jul 2017

See all articles by Daniel A. Crane

Daniel A. Crane

University of Michigan Law School

Date Written: July 10, 2017

Abstract

The State of Michigan is currently defending a constitutional challenge to its automobile direct distribution prohibition. The lawsuit was brought by the automotive manufacturer Tesla, which has been denied a license to open show rooms or service centers in the state. A 2014 amendment to Michigan’s vehicle franchise statute tightened the statute’s direct distribution prohibition to make clear that even a manufacturer like Tesla that did not franchise dealers at all is prohibited from opening its own showrooms or service centers and dealing directly with consumers in the state. That law has been widely criticized by economists, consumer protection organizations like the Federal Trade Commission and Consumer Federation of America, environmental groups like the Sierra Club, and free market organizations like the Institute for Justice.

In the Michigan litigation, the State is expected to rely on the assertion, frequently made by the dealers’ lobbyists, that maintaining a locally owned dealership system is beneficial to the State. Such assertions are grounded in the trope of the atomistic “mom and pop” dealer of American economic folklore — the family-owned, locally rooted dealership. This justification is increasingly a fiction. While some such dealerships may still exist, Michigan law does not require dealerships to be locally owned and operated or independent from other economic enterprises. Many are not.

Keywords: Automobile Distribution, Dealer Franchise Laws, Tesla

JEL Classification: K00, K20, K22

Suggested Citation

Crane, Daniel A., The Fiction of Locally Owned Mom and Pop Car Dealers: Some Data on Franchised Automobile Distribution in the State of Michigan (July 10, 2017). U of Michigan Public Law Research Paper No. 561; U of Michigan Law & Econ Research Paper No. 17-012. Available at SSRN: https://ssrn.com/abstract=3000497 or http://dx.doi.org/10.2139/ssrn.3000497

Daniel A. Crane (Contact Author)

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States
734-615-2622 (Phone)

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