Car Dealerships and Wine Wholesalers: “Daddy, Please Help Me”
Remember what happened back in grade school when the bully started telling you how it was going to be and you decided to push back. Immediately the bully would run to the principle in tears, tell a lie or two, then beg for protection.
Yes, I’m describing middlemen wine wholesalers who tend to run to daddy-lawmaker whenever they face the slightest bit of competition. They tell their lies about how the three-tier system is actually good for consumers or how children will get drunk on direct shipped wine, or how if they don’t get one-sided, protectionist Franchise laws they will go out of business. They cry like little girls with a skinned knee, beg for help so they don’t actually have to provide good service and innovate, shove a few thousand dollars at daddy-lawmaker, then wipe their noses and go about their business.
Well it turns out that alcohol wholesalers aren’t the only ones who run for cover from the state at the first sign they might actually have to face competition from innovators. This week New Jersey Governor Chris Christie approved a rule change in the state that will force Tesla Motors to abandon their direct to consumer sales model and work through middlemen auto dealer franchises. It’s pure protectionism that the auto franchise dealers ships begged for.
The Tesla direct sales model threatens traditional auto dealers because direct from manufacturer sales saves consumers thousands of dollars and represents real innovation. It’s no different from direct to consumer sales from winery or retailer to consumers. Wholesalers hate it because it upsets their cozy, daddy-help-me, protected industry and protects them from actually having to innovate or provide a service with modern value.
In response to Governor Christie’s move, the Wall Street Journal wrote:
“Rather than selling to dealerships, which then mark up the vehicles that we eventually buy, Tesla prefers to sell its cars directly to consumers. It’s not surprising that middleman dealerships would oppose direct sales, but it’s too bad that the dealers found an ally this week in New Jersey’s Republican Governor Chris Christie….New Jersey isn’t the only state where Tesla is having this fight, and car dealerships aren’t the only middlemen who run to politicians for legislative cover. For more than a decade wine retailers and wholesalers have been battling wineries that want to sell directly to consumers. But when protectionism prevails, competition is limited and consumers are worse off.”
It’s taken wine producers a millions of dollars in litigation, a Supreme Court Decision and years to open up 40 states for direct to consumer wine shipping. And even with that effort, 35 states still outlaw the delivery into their states of imported wines. Because the auto dealership franchises have the same “daddy-please-help-me” worldview, Tesla better gear up for a long fight.