Bring The Free Market To Car Lots

We're always tickled to hear about arcane laws that promote monopoly and thwart competition in the interstices of America's otherwise free-market society. New York City has two of our all-time favorites: the rent stabilization laws that bar landlords from charging market rates for apartments, and the scheme that limits the number of yellow cabs on the streets to 11,787, the same number as in 1937. (O.K., so after hiking fares by 20%, New York will soon put 400 more cabs on the street. Thanks a lot.) We also really appreciate the American Medical Assn.'s recent call to limit the number of doctors in America because there were, by their measure, too many. Too many for what, we wonder.

The latest entry in our collection of America's Funniest Monopolies is the auto dealer franchise law. There are dozens of these state laws that protect car dealers from competition by making it hard for national retailers to enter the new-car business. Dealers, you should know, provide up to 20% of all state taxes in many states, as well as a big share of local newspaper and TV advertising. They have political clout.

Consumers don't. Many, especially women, hate buying cars from smarmy, arrogant dealers and welcome the revolution in selling cars through CarMax, AutoNation, and a whole new generation of national merchandisers. But the revolution is being slowed by those franchise laws. The states should take the advice Washington is fond of giving Japan. Open those markets to competition. Consumers will love you.

Before it's here, it's on the Bloomberg Terminal.