Wednesday, October 12, 2005

Unfair Comepition? Deal With It!

John Stossel outlines a precarious situation brewing among the nation's car dealers in his column, "Let the free market be free." In this day and age where competition is being stifled by conglomerations such as Microsoft and Google (not that it's entirely bad), markets have increased competition through online sales which eliminate much of the hassle involved with working through middlemen. He aptly quotes Adam Smith who saw this problem way back in 1776 by stating in The Wealth of Nations, "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."

However, with the flourishing internet trade taking some of the business away from dealerships, automakers and their dealers are diverting their millions away from fighting government regulation to seek its help in promoting their own greedy ends. A spokesman for the National Automobile Dealers' Association told Stossel, "If the manufacturer sells directly over the Internet, it leaves the dealer in an unfair competitive situation." Excuse me, but isn't that the point of a free market? If a competitor finds a better way to sell a product, suck it up and find a new marketing strategy. How else do unproductive or unsuccessful producers and sellers get flushed out of the markpetplace but through competition? Government regulation of the market will have this result, but to a far worse end. It will stifle competition and result in movement towards oligopoly or monopolistic competition, both of which are undesirable for a free market.

Similarly, Stossel outlines the same disturbing trend in the housing market, with "discount" brokers and "For Sale by Owner" websites taking some of those precious 6 percent commissions from real estate brokers. When they noticed that people could get the same ends met at a cheaper price, the realtors sought to use government intervention to hike up prices to the consumer from these alternative brokers in the form of requiring them to perform "more services." Well wait a second, if consumers are happy by getting their house sold with a minimal amount of services provided by middlemen, why would it be advantageous to have more services provided? The truth is that it wouldn't, but you wouldn't get that response from a real estate broker looking to collect a cool 6%.

As Stossel puts it, "If the Realtors think 'for sale by owner' and discount brokerages are bad options, they should -- as they do -- make their case through advertising." The logical conclusion for any competitive producer should be to emphasize why their product is worth buying, not to seek government help when they can't sell their product anymore. If dealerships and realtors find themselves in situations they claim is "unfair competition," I say DEAL WITH IT! If you don't like the system here in America, try selling your product in a centrally-planned economy. You'd find the profits much lower, your salaries much lower, and your freedoms non-existent.

No comments: