Tesla Sales Rules Must Favor Consumers, Not Dealers: FTC
Via Bloomberg
States looking at challenges to Tesla Motors (TSLA) Inc.’s direct-sales model should put consumers’ needs ahead of auto dealers’ interests, three top staff members of the U.S. Federal Trade Commission said.
As Tesla fights state by state for the right to sell its electric cars to consumers over the Internet without dealers, officials should consider the potential harm of banning challenges to existing industries and sales models, the directors said in a post on the agency’s blog today. The FTC has responsibilities on a national scale to promote business competition and protect consumers.
“Consumers can benefit from change,” the officials said. “Regulators should differentiate between regulations that truly protect consumers and those that protect the regulated.”
Tesla, led by Chief Executive Officer Elon Musk, is appealing New Jersey’s ban on direct sales in state court. Texas, Arizona, Virginia and Maryland have also passed laws barring the Palo Alto, California-based company’s dealer-free system. Ohio and New York have passed measures negotiated with dealers that limit the number of company-owned stores.
“We didn’t get into this debate by choice, and we didn’t pursue the direct-sales model to disrupt traditional dealer practices,” Diarmuid O’Connell, Tesla’s vice president of business development, said in a phone interview.
“Statutes that may have been created to protect consumers many years ago have been implemented mainly to protect the dealer body in many states,” he said.
The electric-car maker is studying its options to overturn bans on direct sales, O’Connell said. The company “agrees wholeheartedly” with the sentiments expressed in the FTC blog, he said.
‘Simple Right’
The blog item was written by three FTC directors: Andy Gavil of the policy planning office, Debbie Feinstein of the bureau of competition, and Marty Gaynor of the economics bureau. The officials said they were expressing their own opinions, not that of the commission or any of its voting members.
Tesla accounted for a little over 22,000 of more than 15 million cars sold in the U.S. in 2013, the FTC officials noted. The volume “hardly presents a serious competitive threat” to established dealers, they said.
The model may be attractive to other manufacturers, and this has led to jurisdiction-by-jurisdiction battles “for the simple right to sell its automobiles directly to consumers,” they said.
The company has said rules restricting direct car sales were created to protect dealers from unfair competition and mistreatment by manufacturers of the brands they sold. Since Tesla has no franchised dealers, it argues such rules shouldn’t apply to its retail operations.
Tesla fell 0.1 percent to $207.82 at 2:06 p.m. in New York. The shares rose 38 percent this year through yesterday.
More Industry

Penske Auto Group Deal a Record
The deal to take the dealership and transportation services company private sets a new pace for industry buy-sell transactions.
Read More →
War Toll a Damper on Used Auto Prices
Cox Automotive found wholesale depreciation to be elevated in September amid high fuel prices and this year's unusual hurricane season.
Read More →
Bridge the Maintenance Gap
With many drivers missing recommended maintenance, service departments offering transparency and efficiency have a better chance of reaching financially strained consumers.
Read More →
California Store Has New Owner
The longtime dealership in the northern part of the state is known for robust fleet sales and has served the state capital for 115 years.
Read More →
BMW Plant Pursues Cleaner Energy
BMW Group Plant Leipzig has utilized hydrogen to help power its production since 2013, but a new pipeline is planned to take it to another level.
Read More →
Auto Affordability Inches Up
The latest Cox Automotive and Moody’s Analytics index shows a slight increase in new-vehicle affordability despite high prices.
Read More →
Ohio Auto Group Under New Ownership
After 79 years with the Schluter family, Mansfield Auto Group has been acquired by Missouri-based Clement Auto Group.
Read More →
RV Group Expands Carolina Footprint
Blue Compass RV Columbia Northeast is the 13th RV dealership owned by Blue Compass in the Carolinas.
Read More →
Agent Acumen
An Agent Summit panel of people who’ve been supporting auto dealers for years gave both timely and timeless advice for those starting out or mulling the prospect.
Read More →
Missed Maintenance Creates Opportunity
As families get back on the road and into daily school routines, service drives have an opportunity to capture customers who are behind on recommended vehicle maintenance.
Read More →