Meanwhile, back in the real economy
While DoJ pretends to be defending consumers from companies like MSFT check out today's article in the WSJ on how local car dealers are actively using every trick in the book (including strong-arming State legislatures) to protect their monopolies on new car sales in the face of Internet competition and how this costs car buyers thousands.
Full article at interactive.wsj.com
Excerpt:
Auto Dealers, Fearing That Detroit
Will Hog the Web, Are Fighting Back
TALLAHASSEE, Fla. -- From his one-story law office here in Florida's hot and sticky capital, a former mobile-home dealer is helping foment a nationwide revolt.
Dan Myers, dressed in loafers and a Hawaiian-style floral shirt, looks better prepared to host a cocktail party than to lead a guerrilla effort. But his voice-mail greeting presents his firm's battle cry: "Myers," it says, "is out protecting car dealers from the evil empire."
The dark side, in Mr. Myers's view, is on the Internet. Eager to cash in on the online boom, car makers and companies such as CarsDirect.com want to use the Web to sell directly to consumers -- and bypass the traditional dealers that control access to customers in the $350 billion new-vehicle business.
To gain the influence over their retail networks that such an overhaul requires, the world's two biggest auto makers, General Motors Corp. and Ford Motor Co., have in the past two years flirted with buying and operating dealerships, selling cars and offering services such as financing via the Net.
Car dealers, the quintessential middlemen, see the manufacturers' experiments as a mortal threat. So they are fighting back. And despite predictions that they would be no match for the mighty forces of the New Economy and the global auto giants, the dealers are largely winning.
Using their control over distribution systems, dealers have managed to cow GM and Ford into abandoning, at least publicly, their ambitious plans to sell vehicles directly to consumers. Now, having slowed the manufacturers' incursions onto their turf, the dealers are rushing to construct their own online-based car-retailing world with themselves at the center. They are setting up Web sites, buying into online services, and even posting invoice prices on the Net.
The result: Americans in the future may buy more cars through the Internet, but the same people who for decades have been peddling cars off the lot will still be taking their cut. Indeed, the dealers' challenge offers a warning to Web-heads in every industry who dream of cutting out the middleman and selling directly to customers online.
For most consumers, the clash between dealers and big car companies over who will control auto retailing in the Internet Age may seem distant and arcane. Except for this: The current system for retailing cars and trucks is notoriously inefficient, accounting by some estimates for as much as 25% of the cost of a car. Using the Internet to streamline the process by cutting out dealers could save $1,000 or more a vehicle.
For now, the pendulum is swinging in the opposite direction: In state legislatures, car dealers, whose sheer numbers ensure that they are among the most influential lobbies in most states, are pushing to bolster the bulwark of so-called franchise laws to prevent car makers from using the Web -- or any other means -- to sell directly to consumers. In September 1999, 32 states had laws restricting manufacturers from competing with their dealers. Since then, 12 states have passed such rules, including some that toughened regulations already on their books.
Already, state franchise laws ensure that independent online sites such as CarsDirect are just fronts for franchised car dealers. That is because those laws mandate that only franchised dealers can sell a new vehicle -- and only franchised dealers can get the cars at true wholesale cost. What's more, franchise laws in most states bar car makers from giving price breaks to certain dealers -- high-volume operations, for instance -- and not to others. So traditional car dealers have a lot more protection from Internet challengers than, say, book sellers did from Amazon.com.
The dealers' most sweeping victory in the franchise squabble came last month in Arizona, where they persuaded lawmakers to beef up the law specifically to restrict makers' ability to sell directly online. Among other things, that law bars manufacturers from circumventing local dealers when passing along the name of potential customers -- or "leads" -- including those gotten on the Internet. Manufacturers are considering filing a lawsuit against the Arizona law on constitutional grounds when it takes effect in July. Dealers hope to replicate it in other states as soon as next year |
