FTC Comes Out Swinging in Defense of Tesla Motors; Singles Out Missouri, New Jersey
May 20, 2014 9:00 AM
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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
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.
Federal Trade Commission
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RE: to the NADA, Thanks but no thanks
5/20/2014 2:49:02 PM
Middlemen involvement and task / workflow consolidation are distinct from one another.
Any task that can be consolidated and executed via a middleman can be done in-house as well, with your own resources (human or otherwise) and probably for less than the "contact" of out-side resources.
The only time I can perceive a net-gain of value for a single sale involving a 3rd party / middle man is when costs were shifted from the present deal to another deal, which implies harming another purchaser which is the crux of the issue; it isn't about one deal, its about the experience across the board.
It isn't whether or not "middlemen are bad" as virtually all generalizations are destined for failure.
Rather, it's the insight that when operations are brought in-house that make sense for a business' services / products that there is high likely hood for "synergy" by better utilizing any and all available resources in a way that is simply not possible with a third party.
Instead of two private entities seeking distinct profit margins you have one entity looking for a single profit margin that can be made to be less than the sum of the latter via synergy.
I agree with your main point overall though; let both models exist and see which consumers gravitate to. I just think there's a lot of reason to support the thought that direct sales can and likely would lead to better consumer experience and lower bottom-lines for consumers.
RE: to the NADA, Thanks but no thanks
5/20/2014 4:36:17 PM
This entire situation played out in the PC market in the 80's and 90's. I owned a small shop at the time and reading the industry press (Computer Reseller News) it was interesting to see the focus on proving that the channel provided more value than just buying direct from Dell. Guess which one won that argument? Nowadays you are almost always better off just ordering direct, avoiding the disingenuous salesmen and getting better service even if its not always local.
"A lot of people pay zero for the cellphone ... That's what it's worth." -- Apple Chief Operating Officer Timothy Cook
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