Tesla Gains New Ally in Fight to Sell Its Vehicles

FTC directors suggest maker should be able sell direct to buyers.

by on Apr.24, 2014

Tesla CEO Elon Musk has been working to change franchise laws to allow Tesla to sell its vehicles directly to the customer.

Tesla’s long-standing fight with dealers to sell its cars at it’s own retail locations just got some support from an unexpected source: the Federal Trade Commission.

Three FTC directors in a blog on the commission’s webpage said the laws preventing new vehicles from being sold outside of the dealer franchise system were antiquated. Such laws are currently in place in Arizona, Maryland, New Jersey, Texas and Virginia.

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“We believe this is bad policy for a number of reasons,” the trio of Andrew Gavil, director of the FTC’s Office of Policy Planning; Deborah Feinstein, director of the Bureau of Competition; and Martin Gaynor, director of the Bureau of Economics, wrote in the blog.

Since the dealer franchise system took shape in the middle of the last century, the way consumers purchase a variety of goods has changed significantly. However, buying an automobile has not. They also note that more than 15 million new cars were sold in the U.S. last year and Tesla sold 22,000 of them.

“This hardly presents a serious competitive threat to established dealers,” they wrote.

It should be noted that the blog doesn’t represent an official position by the FTC on the subject. It’s also not clear that the commission is considering some sort of action on the subject.

Tesla’s founder and CEO Elon Musk has been wrestling with dealers for years, but the conflict has come to a head as some states consider laws, or in the case of the aforementioned five, enact laws preventing Tesla from selling out of its own locations.

(SEC launches GM probe. For more, Click Here.)

Dealers have long argued the franchise model is good for consumers because dealers compete on price and offer long-term service. It also protects them from being bullied by automakers. They see direct sales as a threat to their long-term viability.

(Click Here for more about GM’s Barra being 100 most influential people.)

However, the trio of directors had a different view.

“How manufacturers choose to supply their products and services to consumers is just as much a function of competition as what they sell – and competition ultimately provides the best protections for consumers and the best chances for new businesses to develop and succeed,” they wrote.

(To see how Acura’s new boss plans to make it a luxury leader, Click Here.)

“Our point has not been that new methods of sale are necessarily superior to the traditional methods – just that the determination should be made through the competitive process. Change is a critical dimension of that competitive process.”

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One Response to “Tesla Gains New Ally in Fight to Sell Its Vehicles”

  1. Jorge M. says:

    History has shown that politicians, government officials and judicial process is often for sale to the highest bidder.

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