UPDATE: FTC Backs Up Tesla, Says States Shouldn’t Block Direct Auto Sales
April 25, 2014 3:34 PM
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FTC states that dealerships are scared of competition
It looks as though
and the auto company he helms, Tesla Motors, just gained a few new friends. In a new blog post, the Federal Trade Commission (FTC) came out with guns blasting against states that have rallied around automobile dealers in an effort to
prevent Tesla from directly selling vehicles to consumers
The blog was written by Andy Gavil, the FTC director for Office of Policy Planning, Debbie Feinstein, director of the Bureau of Competition, and Marty Gaynor, director of the Bureau of Economics.
The blog post pointed out that times are changing and it’s no longer the 1900s. The officials point to the fact that just as consumers used to buy directly from local stores only to then move to mail-in order catalogs and now internet shopping, that businesses must adapt to survive.
Tesla CEO Elon Musk and President Barack Obama
“For decades, local laws in many states have required consumers to purchase their cars solely from local, independent auto dealers,” noted the FTC officials. “Removing these regulatory impediments may be essential to allow consumers access to new ways of shopping that have become available in many other industries.”
“In this case and others, many state and local regulators have eliminated the direct purchasing option for consumers, by taking steps to protect existing middlemen from new competition. We believe this is bad policy for a number of reasons.”
The officials also pointed out that Tesla poses no serious threat to auto dealers seeing as how it
only managed to sell 22,000 cars
compared to the 15 million total sold in the U.S. in 2013.
Tesla Model S
More poignantly, the FTC officials asserted, “These protections expanded until in many states they included outright bans on the sale of new cars by anyone other than a dealer—specifically, an auto manufacturer. Instead of ‘protecting,’ these state laws became ‘protectionist,’ perpetuating one way of selling cars—the independent car dealer.”
In the end, the FTC officials warned that dealers (and their lobbyists) should welcome competition in the auto sales space, and should not keep barriers to competition as the status quo, stating, “Our point has not been that new methods of sale are necessarily superior to the traditional methods—just that the determination should be made through the competitive process.”
“We hope lawmakers will recognize efforts by auto dealers and others to bar new sources of competition for what they are—expressions of a lack of confidence in the competitive process that can only make consumers worse off.”
Updated 4/25/2014 @ 3:34pm
The National Dealers Association (NADA) has responded to the FTC officials
with the following statement
“For consumers buying a new car today, the fierce competition between local dealers in a given market drives down prices both in and across brands – while if a factory owned all of its stores it could set prices and buyers would lose virtually all bargaining power,” said Jonathan Collegio, NADA vice president of public affairs. “And buying a car isn’t like buying a pair of shoes online. Cars require licensing to operate, insurance and financing to take home, and contain hazardous materials, so states are fully within their rights to protect consumers by standardizing the way cars are sold.”
This article is over a month old, voting and posting comments is disabled
4/25/2014 10:59:06 AM
I hope the FTC acts as a body and issues a ruling or statute on the subject.
Whoa slow down there, Adolf. There's a little thing called "States rights" here, maybe you've heard of it.
I don't personally like what the States are doing, but unless it's expressly Unconstitutional or illegal in some way, the FTC doesn't have much of a case.
This is best handled by Congress and the States, not unilateral action by the President or some agency.
4/25/2014 11:45:11 AM
I actually agree with what you are saying, and understand it should be the state's perogative to limit dealerships (even if I think it is anti-competitve and has bribes written all over it).
There is one place where I do think it is the FTC that should be involved, and that is if you order online, and it is coming from another state, it is not really the state that should regulate it, it is the federal government. Interstate commerce should be regulated at the federal level imo.
4/27/2014 11:35:03 AM
Godwin alert! Your argument is ended before it even really started.
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