House Bill 296 — Vehicle manufacturers, licensure

House Bill 296 — Vehicle manufacturers, licensure

by
Parrish Miller
March 6, 2021
Parrish Miller
March 6, 2021

Bill Description: House Bill 296 expands and strengthens the prohibition on automotive manufacturers selling their products to consumers. 

Rating: -3

Does it increase barriers to entry into the market? Examples include occupational licensure, the minimum wage, and restrictions on home businesses. Conversely, does it remove barriers to entry into the market?

Idaho law is already quite unfriendly to automobile manufacturers that wish to do business directly with consumers without going through an intermediary, but House Bill 296 exacerbates the existing problems considerably. It does this first by amending Section 49-1613, Idaho Code, to expand a slate of onerous regulations currently imposed on vehicle manufacturers and distributors to include "any factory branch, factory representative, agent, officer, parent company, wholly or partially owned subsidiary, affiliated entity or other person controlled by or under common control with a manufacturer, distributor, factory branch, or factory representative, or any affiliated entity."

(-1)

The bill rewords a regulation that will be newly applied to all the above listed entities to say that they cannot "engage in the distribution, sale, offer for sale, or lease of a new motor vehicle to purchasers who acquire the vehicle in this state except through a franchisee with whom the franchisor has established a written franchise agreement."

This change appears to be aimed specifically at companies like Tesla that prefer to do business directly with the consumer.

(-1) 

Finally, the bill amends Section 49-1602, Idaho Code, to say, "After the effective date of this act, the department shall deny a license under this chapter when the issuance of a new license or establishment of a new subagency would cause a manufacturer, distributor, factory branch, or factory representative or an agent, officer, parent company, wholly or partially owned subsidiary, affiliated entity, or other person controlled by or under common control with a manufacturer, distributor, factory branch, or factory representative to be in violation of section 49-1613, Idaho Code. This section does not preclude the department from taking an action against a current licensee."

Once again, these regulations are a direct attempt to prevent Idahoans from voluntarily engaging in business with Tesla and other manufacturers that prefer to skip the hassle and markup associated with franchising.

It should also be noted that these onerous regulations are uniquely applied to automobile manufacturers. You can visit an Apple Store to buy the latest iPhone or (until last year when they closed) a Bose store to buy audio/video equipment, without going through an intermediary. Casper, an online mattress company that manufactures and markets its own products, announced in 2018 that it would open 200 self-branded stores. Clothing and fashion brands routinely run their own stores as well.

There is no reason why a business model that works well in many different industries should be outlawed for motor vehicles. That this antiquated process — begun in 1898 — is still the only way to purchase a vehicle is a testament to how dealers have worked to remain politically connected and used their connections to prevent manufacturers from engaging in direct sales to consumers. 

(-1)

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