¹û¶³ÊÓƵ

Foster’s Daily Democrat has an editorial endorsing , arguing that tightening New Hampshire’s already strict limits on the franchise agreements that local car dealers sign with the manufacturer is common sense.

SB 126 has been the topic of two Foster’s Daily Democrat editorial board meetings — one last week with the representatives of the Alliance of Automobile Manufacturers and one this week with members of the New Hampshire Auto Dealers Association. The first is said to represent about 77 percent of automakers nationally and the latter the New Hampshire retail motor vehicle industry, (auto sales dealers, tractors, off-road vehicles etc.) many of them small businesses and family owned.

During the meeting with NHADA members we heard story after story of local dealers — your friends and neighbors, the ones who support local youth programs and booster clubs — being forced out of business or being strong armed to spend hundreds of thousands, if not at times millions, of needless dollars to build or rebuild showrooms every few years.

Foster’s can normally be counted on to oppose such Nanny State foolishness, but seems to have been swayed by a parade of horribles. Local car dealers may indeed have a long list of contract obligations that they find unreasonable. But we sign contracts so that we and others can be counted on to follow through on commitments that we would not otherwise make. Local car lots are selling someone else’s product, and the companies that make those cars has an interest in making sure customers have a uniform buying experience no matter which dealership they visit. In fact, that’s the power of the franchise business model, and the source of most of the value in a local auto franchise.

But there is more to SB 126 than giving local dealers a fair shot at doing business the way they feel they should to serve the local market while keeping costs down. SB 126 is a shop-local bill. A dollar spent locally to buy a sign can have a tenfold impact on the local economy — moving on to pay salaries then to buy groceries and more — locally.

This is just protectionist nonsense. Tilting government to favor local, popular businesses against less popular out-of-state companies may be quite tempting for politicians and advertising-supported media, but it makes no economic sense. Undermining the power of contracts simply inserts political meddling into the marketplace. Local car dealers complain that they lack leverage with the auto makers. This is simply untrue. In fact, state law already grants them far more leverage than they’ve earned from their place in the market. State laws in all 50 states prevent automobile companies from selling their product directly to their customers. This is a ludicrous and indefensible restraint on trade imposed on manufacturs because local dealerships have more political clout than market power.

Most of the value to the customer is added by the companies that assembles raw materials and subcontracted parts in a vehicle. Some, but much less, is added by the retail distributor. The vast majority of customers are buying based on the nameplate on the front of the car, not the dealer insignia attached to the back, whether you like it or not.

Moreover, such an argument for local control could just as easily be made for any local franchise. Allowing any McDonald’s, Starbucks, or Hampton Inn to ignore its contractual obligations would not increase local control. It would interfere with private contracts, and insert politicians as unnecessary micromanagers of every chain restaurant and hotel in New Hampshire.

Finally, if such franchise agreements are so costly and foolish, why did local car dealers sign them in the first place? They claim to lack any ability to say no. That’s flatly untrue. They are under no obligation to sell another company’s cars. They sign franchise agreements, including clauses that mandate the appearance and maintenance of their showrooms, because owning an exclusive territory selling a national car brand is immensely valuable. Now that they have this valable asset, they are asking state government to change the terms of their deal.

Caving in to their demands for protection from their own contracts would be arbitrary, unwise, and horrible public policy.