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FTC states that dealerships are scared of competition

It looks as though Elon Musk 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.”

Source: FTC

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RE: Good!
By Reclaimer77 on 4/25/2014 3:37:55 PM , Rating: 0
It sets an artificial barrier to the market and prevents start-ups like Tesla from entering the market.

How so?

Tesla is thriving as a start-up by all accounts. It's hard to make the argument that their being harmed financially. I thought they sold EVERY car manufactured? The wait time for an 85kw Model S is something like 90 days last I checked.

The Government, which you people think is the answer, sets up UNBELIEVABLE barriers to commerce every day. Just think about that.

I'm not going to defend the dealership model, I just cannot support Federal action forcing the States to do things it's way on this. Change needs to come from within, legally and Democratically.

There are supposed to be no trade barriers between states.

How in the hell can this possibly be viewed as a trade barrier between the States?

Look there are lots of laws I don't like, but the law is the law as they say. It's Elon Musk who's creating this "trade barrier" by refusing to do business in States that require dealerships. It's a crappy situation, but the States are NOT creating a "trade barrier".

If this hits comes in front of SCOTUS, it most likely will rule against the States.

And I would be fine with that. Let's wait for that ruling shall we?

RE: Good!
By drlumen on 4/25/14, Rating: -1
RE: Good!
By ven1ger on 4/25/2014 5:13:51 PM , Rating: 5
Ever went to a state where the dealership is the only dealership to sell that particular car? In Hawaii, all the Toyota dealerships belong to one company. No options to get a better deal at another dealerships since same owner.

Does that mean that we should ban all internet sales, as internet companies can be considered not competing fairly in each state vs brick and mortar companies that have to maintain a physical location and pay local taxes on each sale. Brick and mortar companies have learned how to adapt by offering services, better pricing, incentives and even engaged in internet sales or closed up because they couldn't or wouldn't adapt.

The business models have changed, and using the law to prevent this only hurts the consumer.

RE: Good!
By captainBOB on 4/25/2014 6:23:12 PM , Rating: 2
You aren't very familiar with dealerships then, they share the podium with ISPs for the most anti-competative practices out there.

In many parts of Texas for example all the dealerships with different names are all actually owned by the same parent company. The different names are a disguise to make it seem like there is competition. When in reality there is no such thing.

In larger metropolitan areas like Houston where there are potentially 3 auto groups with hundreds of dealerships, the relationship between the companies is much more akin to ISPs than to actual competing businesses. There is no actual competition going on.

When you work for a dealership selling cars, your only objective in selling cars is to "protect the cheese", or in layman's terms: Sell the car for as high a markup as you can maintain, selling the car at MSRP is not an option. Everything else like customer service is lipstick on a very ugly pig.

RE: Good!
By Reclaimer77 on 4/25/14, Rating: 0
RE: Good!
By littlebitstrouds on 4/26/2014 12:53:42 PM , Rating: 2
How is it, that I can leave anantech for 6 months and Reclaimer is still trolling these boards with nonsense. Do you really not get how rich white guys have been influencing local policy for years.

RE: Good!
By wordsworm on 5/1/2014 12:03:16 PM , Rating: 2
I agree with you for once. I want to be able to buy my weed without any government interference. Unfortunately, the worst level of government for creating barriers to commerce are usually local: mayors and city councils are often the ones who overregulate to the point of suffocating the economy.

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