The free market is being heavily debated in the halls of the state legislature, which should give the business community cause for concern, particularly with lawmaker’s penchant for overregulation.
But politicians aren’t always the sole source behind red tape.
While businesses often err on the side of less government involvement, at times it’s industries themselves that push for greater oversight, showing less concern for Adam Smith’s free-market principles and more on creating their own competitive advantage.
Take the current debates over Tesla car sales and ride-sharing services, which have two Connecticut industries — cab companies and auto dealers — pushing for greater government oversight.
California electric car maker Tesla wants permission from state lawmakers to sell its vehicles directly to consumers, bypassing current laws that require dealerships, many of them family-owned businesses, to be intermediaries between motor vehicle manufacturers and purchasers.
Those favoring a free-market approach would side with Tesla, which is essentially vying for deregulation. Requiring the electric car maker, and other car manufacturers, to use a middleman to sell its vehicles in Connecticut is simply an added restriction that increases consumers’ costs.
Auto dealers, however, are waging a major lobbying campaign against Tesla, arguing that direct-to-consumer sales pose major consumer protection threats, particularly if the company folds. The Connecticut Automotive Retailers Association makes some valid points, but its push to maintain a more stringent regulatory environment is not altruistic.
Auto dealers are simply looking to preserve their business model, which would be under major threat if Tesla and other car manufacturers were given the freedom to bypass local dealerships. There is a lot at stake: Auto dealers say they are trying to safeguard 13,000 jobs employed by their industry.
In another hotly contested issue, Connecticut’s taxi cab industry is demanding that lawmakers place much stricter regulations on ride-sharing services offered by Uber and Lyft, which allow consumers to hail a ride via mobile app.
Since the two California-based transportation network companies don’t own cars or employ drivers, they don’t have to abide by Connecticut’s century-old livery services regulations, which place strict consumer protection, pricing, and other controls on cab companies and their drivers.
While lawmakers consider legitimate consumer protection concerns posed by Uber and Lyft — price gouging, driver background checks, etc. — the livery services industry is pushing for more oversight because their traditional business model is under serious threat.
If Uber and Lyft can bypass the extra costs associated with abiding by Connecticut’s livery services regulations, they gain a competitive advantage.
We aren’t taking sides on either of these issues, but we are pointing out the gray areas that exist at the intersection of business and politics. As much as Connecticut Inc. derides the state’s regulatory environment, it sometimes isn’t shy about preserving the status quo, or adding regulatory hurdles when it benefits the bottom line.
