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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 EricMartello on 4/30/2014 7:53:19 PM , Rating: 2
The FDA does NOT have a right to enact anti-competitive policies to block business owners from rights to sell their product.

I agree, the FDA has too much regulatory power which has resulted in a pay-to-play environment for drug companies, and to a lesser degree, people selling food or other consumable products. They were actually talking about relaxing some clinical trial policies to allow people to use experimental treatments without having said treatments "officially" cleared for human use - supporting the notion that their regulations are onerous and often without benefit considering how they stifle development for treatments of diseases and other afflictions.

See what I did there? It's a matter of perspective. This issue isn't as black and white as you make it out to be. From the NADA's perspective, they are protecting consumers from bla bla bla. Sure it's a pile of crap, but it's legal crap.

The word you're looking for is protectionism and this is just another example of it. I don't much care for electric cars in general, but Tesla should be able to sell them however they please and not be forced to set up a "dealer network" simply because that's what years of lobbying has produced. Legality is always subject to debate and open to interpretation.

Anti-Competitive? Again, that seems like hyperbole here. Tesla is allowed to compete all they want, as long as they follow the same rules ALL players have to adhere to. Is that truly anti-competitive?

I wouldn't use the word anti-competitive to describe this situation, but it is unamerican. Laws that cannot prove their worth or justify themselves by using objective, concrete data (not doctored stats and "expert testimony") should be struck down.

Being forced to invest in a dealer network rather than allowing factory-direct sales can be construed as placing an undue burden on Tesla, and without there being a demonstrable reason for doing so, they should be allowed to sell direct.

Of course, the benefit of having a dealer network is that you have a place to get your car I'm not necessarily advocating their business model - but I'm saying they should be able to run their business that way if they choose.

Nobody is telling Tesla they flat out cannot sell vehicles in their state. Can we at least agree on that much?

Creating unreasonable stipulations on how a product can be sold is effectively banning sales.

I just have a problem with the increasing Banana Republic behavior of our Federal Government. We're supposed to be a Constitutional Republic with VAST States Rights, nay, State SOVEREIGNTY.

More fundamental than that, the laws and regulations of any government - state or federal - should follow the guiding principles of the constitution. Laws that got on the books because someone somewhere paid off a politician are not just laws.

I want this changed as much as you do. I just want the legal process and rule of law to be adhered to. Not the FTC or whomever to take unilateral action.

Protectionism is one result of cronyism, and it comes to pass by manipulating or circumventing the rule of law. To undo it "by the book" requires too much time and effort, all for an uncertain result. These kinds of laws simply need to be evaluated by objective entities that DO NOT have a conflict of interest, and struck down or upheld on their merits alone.

This is an issue between the people, the manufacturers, and the States. And it should STAY that way. We cannot continue having the Federal Government involve itself in every goddamn issue.

True, but an issue where the fed gets involved to ensure the playing field isn't stacked against newcomers (as it is within the auto industry) is one task that the fed should be involved with.

"The whole principle [of censorship] is wrong. It's like demanding that grown men live on skim milk because the baby can't have steak." -- Robert Heinlein

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