How regulation extends the lives of dying businesses

Irwin Stelzer explores for The Weekly Standard the role of regulation in extending the lifespan of businesses — and even entire industries — that are ripe for extinction.

“The dinosaurs surviving the crunch” was how Stephen Sondheim described women living an outdated lifestyle and grimly aware that “everybody dies.” If Sondheim had the slightest interest in the less exalted subject of economics, he would apply that descriptive to a host of companies and industries trying to beat the hooded man with a scythe, aided by their regulators.

The most recent example comes to us courtesy of New Jersey’s automobile dealers—with an assist from their regulators and Governor Chris Christie—who have decided to follow the lead of Texas, Maryland, and Virginia and declare that Tesla, the maker of electric cars, has violated state law by attempting to sell its cars through its own network of stores rather than through franchised dealers. The New Jersey Coalition of Automotive Retailers (NJCAR), feeling threatened by a firm that sells fewer cars in a year than General Motors sells in a day, contends that the regulations do nothing more than bring Tesla into line with other manufacturers to create a level playing field, the sort on which beleaguered competitors prefer to compete so long as the referee/regulator is on their team. For “level playing field” read status quo.

If Tesla is allowed to eliminate the middleman, Ford, General Motors, and other manufacturers will follow suit, whines NJCAR. Yes, the consumer would save money, but if Governor Christie allowed this new and possibly more efficient method of distribution to take hold in New Jersey, he would surely lose lots of dealer votes and their financial support. So Christie, no stranger to issues in the transportation sector, told Tesla it can keep its stores as galleries but not discuss price or take orders.

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