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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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RE: to the NADA, Thanks but no thanks
By Reclaimer77 on 5/20/2014 1:09:32 PM , Rating: 1
quote:
I highly doubt a direct sales auto manufacturer is going to spend the post-sale trying to convince me that the new car I was just convinced was awesome needs a special undercoat, special regional weatherization, and a special after market warranty and care package.


Again I'm just curious, what are you basing this belief on?

Seriously, I highly doubt direct sales means up-selling the consumer won't exist anymore. And optional equipment will be reasonably priced. I mean...based on what evidence?

I'm just asking for someone to back this belief that car manufacturers aren't JUST as motivated to make money as dealerships are. So far I'm not really seeing much concrete.

quote:
If I'm buying a Chrysler


Well lets just hope that's a big IF :)


RE: to the NADA, Thanks but no thanks
By Reflex on 5/20/2014 2:12:23 PM , Rating: 1
I drive a Jeep now, its a diesel 2006 Liberty. Its fantastic. So no, its not a 'big if'. Its been reliable, tows great and gets great fuel economy. Plus its basically impossible to get it stuck anywhere.

As for the rest, the point is that dealers really do not compete with each other, at least not in the same sense. Most dealers carry multiple brands, and in fact most are owned by only a few super chains nowadays that have no motivation to compete based on vehicle brand at all. As a result, the competition is not really between Ford/Dodge/Chrysler/Toyota/etc, its between Automall, Lithia Auto Group, and so on, and they sell all brands.

Permitting direct sales would put Ford in the position of competing on both product and services directly against GM, Chrysler, Toyota and others, with much stricter control of the end to end experience. A crappy experience could not be written off to the 'dealer' but instead would be a black mark against the automaker itself. That's huge.

As I, and many others I know always say, the worst part of buying a car is the dealer.


RE: to the NADA, Thanks but no thanks
By Reclaimer77 on 5/20/14, Rating: 0
RE: to the NADA, Thanks but no thanks
By Reflex on 5/20/2014 4:32:49 PM , Rating: 2
I do not know anyone who assumes when they buy a Ford it is from Ford directly. Honestly, who believes that? And how are they not confused as hell when their Ford dealer also sells another major brand alongside Ford like some of the mixed dealers I've seen selling new cars from multiple majors on the same lot?

That assertion really makes no sense at all, sorry. I am pretty certain most people know when they go to a dealer they are buying from the dealer, not the OEM.


RE: to the NADA, Thanks but no thanks
By Reclaimer77 on 5/20/14, Rating: -1
RE: to the NADA, Thanks but no thanks
By Reflex on 5/20/2014 5:58:16 PM , Rating: 5
Huh? I don't know how informed you have to be to read the sign out front that says "Lithia Chrysler-Jeep-Dodge" with the sign right next to it that says "Lithia Nissan".

Seriously, in your world does everyone have an IQ of 80 or is it just you?


By maugrimtr on 5/21/2014 8:50:33 AM , Rating: 2
Why is this even an argument?

In order for dealers to make profits, they need to buy cars at cost, and sell them to consumers with a mark up, i.e. dealerships make cars more expensive. This is basic economics.

Dealerships also homogenize cars. If a dealership is selling >1 brands then, all other things being equal, they have no motivation to promote one over the other.

If you eliminate dealerships, then the market is suddenly open. Manufacturers will have to compete for business, standardised fixed pricing on a national basis will become normal, consumer guesswork will be eliminated, and basically this makes competition far more likely since every consumer can quickly assess the standard fixed prices and compare them across all manufacturers.


"Well, there may be a reason why they call them 'Mac' trucks! Windows machines will not be trucks." -- Microsoft CEO Steve Ballmer














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