Last fall, a young staffer in the office of Michigan Secretary of State Candice Miller wrote a memo inviting legislators to co-sponsor a package of bills that would (among other things), explicitly include small-time "curbside" auto dealers in the definition of people "in the business" and required to obtain a license to practice their trade.

The staffer wrote that with these changes, the department "can assist customers by providing protection and recourse that the customer cannot utilize now.  At the present time, if a deal goes bad, they have the option of either going to court or the Attorney General's office for assistance."

Note the explicit promise: if we will only give the state government regulatory authority over yet another commercial activity, we will be protecting Michigan citizens and even providing a substitute for litigation. 

Here, in a nutshell, is the rationale for bigger and bigger government taking over more and more of our daily lives.  If you asked them, most people probably would agree that licensing protects the public by screening applicants, providing oversight, and transferring adjudication of civil disputes from the courts to a state agency.  Those same people would probably expect that those calling for state licensure of this or that commercial activity are public interest groups or lawmakers trying to look out for the interests of their constituents.

If only that were true.  The dirty little secret about state licensure is that the people who lobby for it are usually the stronger competitors of those who would be licensed.  Their goal is not to protect the public, but instead to raise barriers to new competitors who might cut prices and lower profits.  In the case of "curbside" auto dealers, those pushing licensing are the bigger dealers, who want the curbsides shut down.  To sell the scheme, lawmakers wink and talk about protecting the public, sensing an opportunity to show they "care" and are "doing something."

Does licensure actually guarantee quality? As a legislative staffer myself, I once asked my colleagues whether, out of the hundreds of licensure complaints they had referred, any problems actually were resolved for the constituent.  Few could name any. In my experience and that of these more experienced staffers, it appeared that innumerable complaints were merely recorded and filed away, with an occasional wrist slap, and rare cases of restitution or license revocation. In most cases, our experience indicated that aggrieved citizens still had to sue in court for compensation, despite the very licensure laws that were supposed to avert that expensive outcome. (Many of the complaints legislative staffers receive are frivolous, but there are enough serious ones to give the impression described.)

An experienced bureaucrat with the Michigan Department of Consumer and Industry Services once acknowledged to me that licensure is oversold.  It makes his job harder, he explained, because citizens expect more than he can deliver.

For example, there are thousands of private contractors who perform literally millions of operations for the government every year.  No matter how many bureaucrats are hired, they can't possibly monitor every action on every job site, and the contractors know it.  Should a builder cut corners by not digging below the frost line when pouring a concrete footing for a garage, for example, he doesn't fear loss of his license nearly as much as he fears a ruinous lawsuit.

It will be no different with curbside auto dealers.  Under the package of bills currently before Michigan's House Committee on Commerce, a handful of bureaucrats would pretend to "regulate" an amorphous and ever-changing number of "curbsiders."  No one expects regulators to perform a mechanical "lemon check" on every car—they're paper pushers, not wrench-turners.  Of what value, then, would it be to explicitly include "curbside auto dealers" in auto dealer licensure requirements?

The answer is: of great value—to the bigger auto dealers, who despise the "curbsides."  What will happen is that politics will supplant economics (to a greater degree than is already the case) in determining who sells automobiles in Michigan.  The bigger dealers will use their pull with the bureaucrats to call for costly requirements (all to "protect the public") that keep smaller, newer operators from entering the market.

Michigan citizens should always be suspicious whenever a politician, bureaucrat, or trade group agitates for requiring a new "license" to practice what before was a free economic activity.  The watchword should always be the question: Who gains?  Usually, it's not average Michigan citizens.


(Jack McHugh is a legislative analyst with the Mackinac Center for Public Policy.   Permission to reprint in whole or in part is hereby granted, provided the author and his affiliation are cited.)


In the name of "protecting the public," a recently proposed package of bills would require small-time "curbside" auto dealers to obtain a state license before they could sell cars. But instead of protecting the public, licensure laws are often used by larger businesses as a way to raise barriers to new competitors and restrict consumers' choices.

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