By Jeffrey Dorfman
Every member of the Georgia Legislature was elected this past November. Thus, one would expect those legislators to hold the citizens who elected them in high esteem; after all, they were wise enough to elect them, right?
The next month or so will determine whether those legislators actually trust their voters to make independent decisions in the marketplace or they believe the citizens need to be protected from decisions elected officials don’t think we are capable of making on our own.
Two bills before the Legislature demonstrate the choice before these politicians. One would allow craft brewers and brewpubs to actually sell beer for customers to take home; another would allow Tesla to sell cars directly to consumers. Both actions may seem like simple consumer purchases that are only shocking in that they are currently illegal, yet current Georgia law insists that consumers need the help of an independent professional to sell them both beer and cars.
Today, citizens of Georgia can take beer home only after it has been purchased from the manufacturer by a beer distributor, then sold to a retailer and, finally, bought by the consumer. Georgia law also requires car sales to go through an automobile dealer and does not allow direct-to-consumer sales. Tesla has enjoyed an exception for 199 cars per year, but after that Georgians cannot purchase a Tesla because Tesla does not have a network of dealers.
Middlemen such as beer distributors and car dealers surely play valuable roles and many customers would surely continue to avail themselves of their services even if not legally obligated to do so. But that is not a sufficient reason to guarantee them an exclusive role by law. The Internet and e-commerce have been all about disintermediation, about eliminating middlemen. Why, after a quarter century of the Internet allowing for more direct connections between buyers and sellers, would the Georgia Legislature want to stand in the way of that progress?
Such laws protecting established businesses are similar to attempts to ban ridesharing services in order to protect entrenched taxi companies. Established car dealers, who have invested millions of dollars in their dealerships, would have good reason to be upset if the manufacturers they sell for cut them out of the transaction. Nevertheless, that is more a matter to be settled between the dealer and the automobile manufacturers who already have a contractual relationship that most likely addresses this exact issue. If it doesn’t, that is more a failing of the dealers and their attorneys, not a reason to deprive consumers of freedom of choice on the channel through which they wish to purchase a car.
No safety concerns enter into the arguments against either proposal. Beer can already be consumed by people on premises, so the state has already certified it as safe and is responsible for regular inspections. Any cars sold directly to consumers would still need to meet all the federal safety standards. The middlemen in question provide logistical and informational services; it seems reasonable to let consumers choose whether those services are something they need.
The Georgia Legislature is likely to allow Tesla to sell direct-to-consumers, but anyone wanting to buy any other brand of car will still be forced to go through a dealer. Whether small brewers and brewpubs will see passage of a small exemption is a trickier question. Beer distributors are very protective of their role and have great political power and the decision may turn on whether the beer distributors see any exemption as a slippery slope to further deregulation or simply a reasonable exception that will go no further.
The question before the Georgia Legislature is this: Do they want Georgia’s citizens to enjoy the full benefits of direct-to-consumer sales if it increases options and lowers prices? If the Legislature is on the side of its citizens, it will not only approve these measures but search through Georgia code for other outdated laws used to protect businesses that would otherwise be replaced by the new forms of commerce.
Fewer steps between manufacturer and consumer mean a lower consumer price. At a time when raises have been hard to come by for many Georgians, anything that can be done to provide savings to consumers is a good thing.
Jeffrey Dorfman is a professor of economics at The University of Georgia, a Senior Fellow at the Georgia Public Policy Foundation, and a regular contributor to Forbes.com and RealClearMarkets.com.