This is an archived article that was published on sltrib.com in 2016, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
The recent story about a Provo-based custom roadster manufacturer being banned from an auto show in Sandy because it sells directly to customers rather than through dealerships reignited an ongoing argument about free market ideas in Utah.
Utah has a longstanding law requiring auto-makers to sell their cars through franchised dealerships rather than through direct sales from the manufacturer.
The most famous victim of that law is Tesla, which has created a unique marketing model by selling its cars directly, without the middle man. It seems like a good deal for the consumer who then doesn't have to pay a cut of the sales price to a dealer.
And, Utah boasts of being a free-market friendly state allowing businesses to operate with as little government regulation as possible getting in the way.
But here is a law that protects a monopoly, in a way, by requiring only those manufacturers with franchised dealerships be allowed to sell new cars, creating the middle man that increases the cost of the car.
Besides Tesla, two Utah-based manufacturers of custom-made roadsters are affected by the law — Kirkham Motor Sports and Vanderhall Motor Woks, both based in Utah County.
Both manufacturers specialize in custom, expensive sports roadsters that cater to a niche market and rely more on the cost of the specialized product than volume.
Vanderhall was the company that was not allowed to show its product at the auto show in Sandy after the New Car Dealers Association complained that it didn't comply with Utah law.
Freshman Rep. Kim Coleman, R-West Jordan, unsuccessfully ran a bill last year that would have opened the Utah market to Tesla, which just has a showroom and sells its cars by mail order instead of through a dealership.
That bill ran into heavy opposition from the Utah Auto Dealers Association and the Manufacturers Association, both of whom employed veteran lobbyists who are among the most generous in Utah in dolling out campaign contributions to legislators.
On the surface, the Legislature's opposition to opening up competition to other marketing models seems to belie its constant boasts of a free market, business friendly philosophy.
But there is another side and, with veteran Sen. Curt Bramble, R-Provo, coming on board as Coleman's Senate sponsor, those with knowledge of the inter-workings of the bill say it looks like a compromise has been reached that tries to accommodate everybody.
The argument on the other side is the fact that the local dealerships who win franchises from the auto manufacturers invest heavily in the bricks and mortar of the showrooms, service and parts departments and everything else that goes into the making of a small business.
To allow direct sales operators to compete with those who have absorbed the costs of all the building and maintenance necessary for the dealerships would be an unfair blow to longstanding businesses in the state, the argument goes.
So here is the compromise, whose details are still being fine-tuned: Tesla, Kirkham Motor Sports and Vanderhall Motor Works can sell their new cars in Utah, but on a limited basis, perhaps no more than 300 or 350 per year. And they can't keep an inventory in a showroom, selling their cars only online.
We'll see how that works out. —