Kristian Stout Quoted in GM Authority on the Hidden Cost of Franchise Laws
State franchise-dealership laws continue to shape how new cars are sold in the United States, even as the auto market has changed. A recent GM Authority article highlighted findings from ICLE’s Kristian Stout and Subi Ramakrishnan showing how these laws restrict direct-to-consumer sales and raise prices for car prices. Read the full article here.
The International Center for Law & Economics estimates that state laws requiring automakers to sell through independent dealers add between $3,934 and $4,992 to the average transaction price of a $50,000 car. Researchers call this the “middleman tax” – a surcharge born not of steel or silicon, but of statutory protection for an aging distribution channel.
Franchise laws date to the Great Depression, when small dealers needed protection from Detroit’s giants. “Protecting an incumbent distribution channel is not the same as protecting consumers,” the study reads. Tesla proved a direct-sales model could work, and newer brands like Scout now face legal battles for trying the same. Kristian Stout, ICLE’s director of innovation policy, puts it plainly: “The policy principle is simple: allow consumers to benefit from competition. States should not mandate a single distribution architecture when multiple models can compete to serve consumers.”