The explanation, offered by James Surowiecki in the New Yorker, is right on the mark: In the American political system, a highly focused, well-funded lobby with tight connections in every House district is almost unbeatable when it chooses to play rough. And since this particular political game is over, we won’t rehash arguments about whether the proposed curbs on their behavior would have made sense. But their surprising (to some) escape from federal oversight does offer a nice excuse to remind readers that auto dealers aren’t always against regulation. Indeed, it is hard to think of an industry that depends so heavily on government protection from the cruel realities of the free market for their daily bread, not to mention their vacation homes in Florida.

The protection in question is auto dealer franchising laws, which vary a bit from state to state, but are generally the very model of what government ought not to do. Starting in the 1930s, car dealers organized to get Congress to, in effect, set minimum standards of treatment in their franchise agreements. As Jessica Higashiyama, who recently received her JD from UC San Francisco’s Hastings Law School, recounts, Congress was happy to oblige, but the federal courts were less receptive to the idea that Detroit had duties to franchisees beyond those spelled out in the contracts that both parties had voluntarily signed. So the dealers turned to state legislatures and managed to get some remarkable deals from many of them.

Pretty much all the auto franchise laws give dealers immense bargaining power in obtaining compensation if a car maker chooses to stop selling a model line (think Pontiac) or to stop selling cars entirely though a particular dealer. Indeed, GM and Chrysler had to back away from tough dealer-streamlining plans in bankruptcy because the process was too expensive. Some states make it illegal to sell cars at lower prices to high-volume dealers than to low-volume franchisees. Some prohibit car companies from selling directly to the public (say, via the Internet) because it would adversely affect the competitive position of the dealers. And a number are even considering laws requiring the automakers to compensate dealers for warranty repairs at the dealers’ bloated retail repair rates.

Is there ever a good economic case to be made for government intervention in a franchise relationship beyond the protections afforded by contract, fraud and antitrust laws? Consider it a challenge, dear readers, to think of one. What we are pretty sure of, though, is that car dealers’ friends in state legislatures won’t be waiting around for the law-and-economics types to debate the matter.

Using data from thousands of auto injuries between 1987 and 2002, the two economists estimated that a 10 percent increase in state court budgets leads to a 3 percent increase in the probability that a lawsuit will be filed in any given case. And that potential increase represents a lot of time and money: If all tort claimants behave like parties to auto injury cases, a 10 percent increase in outlays for courts means 60,000 more lawsuits annually. Note, moreover, that easier access to court tilts settlements a bit in favor of plaintiffs. Heaton and Helland estimate that a 10 percent increase in court budgets would raise total settlements by $1 billion annually in auto injury cases alone.

Are more suits good or bad? We’re inclined toward the latter view: Litigation seems to be the last thing America needs more of. But it is very hard to say for sure because every extra case that is filed generates unknown benefits (as a deterrent to injury) along with too-well-known costs.