Senate Bill 126 will destroy auto dealers
New Hampshire has always been governed by the “Live Free or Die” mentality: Protect the state’s competitive business climate while keeping the needs and interests of consumers of paramount importance. A nanny state legislative initiative now moving through state chambers, however, undermines such notions and negatively impacts the Granite State’s economy and consumer confidence. While it might not be a household name now, if Senate Bill 126 passes it could soon affect you.
The legislation seeks to assert greater government involvement in the relationship between automobile manufacturers and New Hampshire dealers, and will broaden regulations so that lawn tractors, farm, construction and forestry equipment so they are treated as automobiles. Up until now, the relationship between automobile manufacturers and New Hampshire dealers has been governed by fair, balanced and strict franchise agreements that protect each selling partner and help keep prices low for consumers. While proponents claim S.B. 126 is designed to help New Hampshire auto dealers, the reality is that the legislation simply allows dealers to ignore the contracts they’ve signed with automakers, which includes things like periodical show room renovations.
Those contracts, however, play a valuable role in the marketplace, as they ensure both parties can be counted on to fulfill corporate commitments. In saying auto dealers no longer are required to hold up their end of the bargain, the government would vastly expand its power, allowing politics to override free-market principles and tilt policies in favor of one segment of an industry over the other. Such policymaking will lead to increased government involvement in the business process, the prioritization of litigation, and ultimately higher prices for products sold by the auto industry — all of which will contribute to rising prices for automobiles that consumers will be forced to absorb.
Moreover, by enabling one party to ignore contractual obligations, the state government would set the stage for more legal disputes. This too increases the government’s involvement in the day-to-day business process, as the courts are now allowed to decide whether or not business contracts need to be honored. There is no doubt this will also strain the relationship between dealers and manufacturers.
The increased cost hurdles threatened by this strained relationship may encourage many manufacturers and dealers to withdraw from using certain popular incentive programs to avoid the added economic costs of inevitable litigation — driving up the cost of purchase for the consumer. Of course, by diminishing such incentive programs and driving up prices for vehicles and repairs at New Hampshire dealerships, it won’t be long before New Hampshirites will head to bordering states to buy their cars and avoid the added costs for repairs and production. Why would you pay a premium in New Hampshire when a short drive to a Massachusetts, Vermont or Maine dealership will offer you a better deal?
The legislation also directly targets an industry that employs more than 14,000 New Hampshire residents. With the automobile industry already struggling in the state, we cannot afford to have even more uncertainty added to the sector’s economic outlook and bottom line.
When passing legislation that reforms existing business practices — especially business practices that already work well and are well ingrained in commercial culture — it is important lawmakers make sure it will benefit all individuals involved in the process – the most important of which is consumers. The fact of the matter is that S.B. 126 is not a “shop local” bill: It encourages a nanny state mentality, increases costs, and damages the state’s economic competitiveness.
What New Hampshire needs is legislation that recognizes manufacturers and dealers as partners and creates pro-business advantages that are based on free-market principles. We must continue New Hampshire’s “Live Free or Die” tradition, rather than allowing the state to pick winners and losers among manufacturers and dealerships.
Stephen DeMaura is President of Americans for Job Security, the only independent, bipartisan, pro-business issue advocacy organization in America, and former Executive Director of the New Hampshire Republican State Committee.