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The FTC takes another stand against "harmful" laws forbidding direct-to-consumer auto sales

It looks as though Tesla Motors has some friends in high places. Just last month, three Federal Trade Commission (FTC) directors wrote a blog post in which they blasted states that have implemented laws to forbid Tesla from selling cars directly to the public.
 
“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,” wrote the directors in April. “We believe this is bad policy.”
 
Now the FTC staff has issued a press release that singles out Missouri and New Jersey for their bans on direct-to-consumers auto sales bans. The FTC’s Office of Policy Planning, Bureau of Competition, and Bureau of Economics note that both states “operate as a special protection for [independent motor vehicle dealers] – a protection that is likely harming both competition and consumers.”
 
The FTC singles out the abuse of Tesla in particular, stating:
 
The prohibitions on direct sales in Missouri and New Jersey particularly affect Tesla Motors, a relatively new entrant in the auto market that has been prevented from selling directly to consumers, the staff comment states. But their effects are likely more far-reaching.
 
The FTC goes on to conclude that the legislatures for the states of Missouri and New Jersey should “permit manufacturers and consumers to reengage the normal competitive process that prevails in most other industries.”

 
We have the feeling that National Auto Dealers Association (NADA) won’t take too kindly to the strong wording from the FTC. When the FTC’s pro-Tesla blog was posted last month, the NADA responded by claiming that “the fierce competition between local dealers in a given market drives down prices both in and across brands” and that “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.”
 
The NADA, which represents nearly 16,000 auto dealerships and 32,000 franchise locations, will likely also respond to the latest comments from the FTC, and we will provide you with an update once a statement is provided.

Source: Federal Trade Commission



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By skildner on 5/20/2014 12:02:48 PM , Rating: 2
Dealers work on commission. Tesla does not. The vehicle pricing is set. There is no pressure.

I'm not sure why the industry is the way it is, but I doubt auto manufacturers like the way their customers are treated at dealers. To me, it's comparable to trying to complete a transaction with a con-artist. They know every trick in the book to squeeze the last dime out of you. It has never been a pleasant experience for me. One person can walk out of dealer paying 10-20% more for the exact same vehicle as someone else. How is this a fair system?

If manufacturers sold their cars at set prices, which is how I believe manufacturers would sell their vehicles if they sold them directly, I think it would create more competition in the end. I think there would be pricing wars for vehicles competing in the same class, much as there are pricing wars in the airline industry.

Personally I think the high pressure sales system of the auto industry does nothing to benefit the consumer and if the industries sales practices were more like Tesla consumers would be happier.


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