Tesla Gets Backing from FTC
Many states have laws that restrict automobile sales by the manufacturers themselves. Tesla has been fighting to maintain its current model of selling cars directly to consumers without the use of an independent dealer network. Tesla just got some major support from the Federal Trade Commission. The FTC recently released this statement regarding the recent activity by the Missouri and New Jersey legislatures against Tesla.
(…) current laws in both jurisdictions “operate as a special protection for [independent motor vehicle dealers] – a protection that is likely harming both competition and consumers.” The comments note the staff’s strong opposition to state laws that mandate a single method of distributing automobiles to consumers.
The FTC reiterates what a lot of people have been saying about the way automobiles may be sold in certain states. Limiting the variety of distributing models harms consumers. Tesla has made this argument before, and more so, they argue that using an independent dealer network would also harm Tesla.
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.
Such changes “would facilitate the development of new methods of distribution and possibly . . . the arrival of new motor vehicle manufacturers,” benefitting motor vehicle buyers of Missouri and New Jersey.
Current auto-dealers know this. They are using the sales-bans as a way to restrict competition. Tesla is the target not only because they sell electric vehicles, but also because their dealerships or showrooms operate with highly trained personnel that do not engage in the traditional auto lot sales tactics.
The staff comments encourage the Missouri and New Jersey legislatures to consider abandoning existing law and to “permit manufacturers and consumers to reengage the normal competitive process that prevails in most other industries.”
Consider the personal computer market. Apple computers are available at a variety of retailers. But, Apple also operates their own stores. Apple stores have been a huge success. How many people would argue that Apple shouldn’t be able to sell its computers directly to consumers? Why must the auto industry be any different?