Texas House Bill 1131 Would Reduce Consumer Choices

Texas Citizens for a Sound Economy is concerned about legislation – though well intended – that would limit consumer choice and likely eliminate jobs in Texas.

HB 1131 by Rep. Flores and the companion bill, SB 435 by Sen. Carona, threaten existing Texas jobs by mandating divestiture of Allstate Insurance in a motor vehicle repair facility, Sterling Auto Body Repair. These bills are not free-market, nor are they pro-consumer. This is a pocket book issue, an issue of consumer choice, and an issue that challenges the appropriate role of government.

If passed, this legislation would not only harm Texas consumers by eliminating one of the choices currently available to consumers in the marketplace for auto body repair, but also would drive businesses out of Texas. Rather than benefiting consumers, the legislation protects one set of collision repair shops by mandating the elimination of their competitors.

HB 1131 and SB 345 would force 14 existing businesses out of our state and place in jeopardy the jobs of hundreds of hard working Texans who work in auto body shops owned in whole or in part by insurance companies.

In considering this bill, I urge you to ask three questions:

• What message will this legislation send to consumers who have used Sterling and been satisfied with their work?

• What message will this legislation send business about the Legislature’s willingness to regulate competition, mandate divestitures, and jeopardize existing Texas jobs?

• What signal will this legislation send to other companies seeking to satisfy consumer needs or companies looking to make corporate investments in our state?

We must not “change the rules” when companies have made legal investments to improve service and quality in industries that directly affect their customers. This bill would force divestiture of that legal investment, which is an extraordinary act for the Legislature to take, particularly in a very competitive marketplace where the firms in question comprise only a very small percentage of the total number of firms.

Today it’s insurance companies and collision repair shops. Tomorrow, which industries will be affected? Will we force auto dealers from being able to service the cars they sell? Will the Legislature intervene every time a company seeks to better serve its consumers just because it threatens competitors? Or every time a company makes a strategic investment in its supply or delivery chain? Isn’t this the basis of a competitive market—forcing firms to compete for customers by providing better goods and services?

No consumer organizations have signed on to support these bills, nor did any consumer organizations support similar legislation in California last year. Auto repair problems rank among the top five consumer complaints nationally. This is an industry that could benefit from increased competition to streamline service and reduce costs to the consumer. Instead, this bill would force existing shops out of the market and create special statutory protection from competition for the remaining auto body shops.

CSE has long held the perspective that government should not intervene to limit market competition, and this bill does just that – and it would do so at great cost to the state. This legislation is contrary to everything our organization represents—we cannot support protectionist, anti-competitive legislation that restricts consumer choice. Your vote on such legislation is a clear indication of whether you support the American business model and the competitive marketplace.

On behalf of the 25,000 members of Texas CSE, I urge you to oppose HB 1131 and SB 435.