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
5/21/2014 8:50:33 AM
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.
"My sex life is pretty good" -- Steve Jobs' random musings during the 2010 D8 conference
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