They got more than they wished for…

A story in last week’s Albuquerque Journal about Tesla opening a factory outlet in New Mexico led me to reflect on a somewhat similar set of circumstances in the state several years ago. Both involved efforts by trade groups to protect their turf in the Land of Enchantment.

The Tesla outlet, the Journal reported, will be opened on the Nambe Pueblo, just north of Santa Fe. 

The Journal reported that Tesla chose the location, no so much as to be near two upscale New Mexico cities — Santa Fe and Los Alamos — but because they could avoid a restrictive New Mexico law by opening shop on a Native American pueblo. It’s the first such operation on Native American land, according to Tesla officials.

Tesla sells its cars directly to its customers, not through a locally owned franchises, as is the case with most other new car/truck operations. In New Mexico, that was a problem because the New Mexico auto dealers organization had long opposed direct sales by manufacturers to customers, hoping to protect their franchise interest and profitability. 
They also claimed the franchise system led to more local jobs in the state and additional tax revenues. Efforts to change the law to allow direct sales to customers from manufacturers had “repeatedly failed in the (New Mexico) legislature, often amid tense debate,” the Journal said.

So Tesla found a convenient loophole by locating within the boundaries of a tribal nation, circumventing  the state law requiring vehicles to be sold through franchises.  So now, instead of having to drive to Arizona or Colorado where direct vehicle sales are permitted, you can cruise up to the Nambe factory Telsa outlet, pick up something on the lot or drive off in your specially ordered Tesla through  what the company calls “touchless delivery.”

The decision brings to mind the question of whether other such franchise protection measures may be made moot when manufacturers of cars — or other products or services — merely move operations on to any one of many Native American pueblos or reservations in the state in order to circumvent certain state laws. 

What this circumvention reminded me of was a somewhat similar situation regarding sales of beer in New Mexico in the late 1970s and 1980s. The state’s liquor distributors had lobbied for and convinced the legislature to pass the “beer price affirmation law” in 1979 that essentially said beer manufacturers could not charge higher prices for the same product in New Mexico that was charged in other states.  Beer distributors said they were having to pay more for the same 12-ounce bottle or can of beer than distributors in other states. Manufacturers argued that because of the state’s sparse population and expansive geography, it cost more to get its products distributed to all far flung corners of the Land of Enchantment. 

Beer brewers took umbrage at the new law and responded by changing the size of the beer bottles or cans that were sold in New Mexico. By doing so, they were able to claim that the product they sold in the state was unique to the state and not like any other beer sold in the rest of the United States,. As a result, they could charge distributors whatever price they wanted for their uniquely sized beer offering. Anheuser Busch, maker of Budweiser and Michelob, went from the traditional 12-ounche bottle or can of beer to a 10-ounce size and charged essentially the same for what the 12-ounce version had been sold to the distributor. They surreptitiously marketed their beer as “the perfect 10” size, and of course sales cratered. Eventually, the distributing company, which had held the Anheuser-Bush franchise for years in New Mexico, was sold largely due to the fiasco. Other brands increased the size of their product by one-half an an ounce — creating a uniquely sized New Mexico offering — and increased their prices, reducing those distributors’ profits.

The New Mexico beer distributors eventually had to retreat from their stand and the legislature repealed the law. The only winner in the short term were lawyers who lined their pockets as a result of endless lawsuits. Beer drinkers either got less of the frothy brew  for the same amount of money or a tiny bit more for a lot more money.

 

 

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