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FTC Goes To Bat For Tesla: Says States Shouldn't Limit Tesla Sales Model

from the good-for-them dept

Fri, Apr 25th 2014 5:33pm — Mike Masnick

We've pointed out how states banning Tesla's direct sales model seems like a perfect indicator of how corrupt a state is. State laws that require that only independent dealers can sell cars have no legitimate purpose whatsoever -- other than to make life better for dealers, who have tremendous influence over local politics. However, it looks like the FTC may be stepping in to tell states who go in this direction that they may be crossing the line in a way that will make the federal government unhappy. In a surprise blog post, some FTC officials have made it pretty clear that states shouldn't be blocking Tesla direct sales.

In buying cars, however, these new ways to shop may not be available to consumers. For decades, local laws in many states have required consumers to purchase their cars solely from local, independent auto dealers. Removing these regulatory impediments may be essential to allow consumers access to new ways of shopping that have become available in many other industries.

This very question has been raised across the country, as a still-young car manufacturer, Tesla, pursues a direct-to-consumer sales strategy that does not rely on local, independent dealers.

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. We believe this is bad policy for a number of reasons.

Later on the FTC fires the real warning shot:

Instead of “protecting,” these state laws became “protectionist,” perpetuating one way of selling cars—the independent car dealer.

The FTC completely dismisses the bogus claim from dealers that these laws "prevent abuses" by noting "this rationale appears unsupported." It's not clear if the FTC will actually step in and do anything here, but just making it clear that these kinds of laws blocking things like Tesla's sales model are a serious problem that is more protectionist than good for consumers, is a good step.

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Filed Under: autodealers, car sales, consumer protection, ftc, independent dealers, protectionism, sales models
Companies: tesla

49 Comments

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Anonymous Anonymous Coward, 25 Apr 2014 @ 6:32pm

Helpful?

"Instead of �protecting,� these state laws became �protectionist,� perpetuating one way of selling cars�the independent car dealer."

At least it is on record. I do not expect much from the states. Several or more of them might take it as Federal interference. The dealerships will take it as felony interference of their business model. Sounds like a long slow slog.
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Anonymous Coward, 25 Apr 2014 @ 6:35pm

Wait, the Feds are actually going to bat for competition? How much did Tesla bribe them?
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Mr Crowley, 25 Apr 2014 @ 6:41pm

All new Federal vehicles will be Teslas.
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John A, 25 Apr 2014 @ 6:59pm

Who can sell
I do not think Tesla should be forbidden to sell direct to consumer. But remember, the States are just following precedent. I once tried to buy a trash can (!!!) direct from the manufacturer, and was told that by law in my State they can only sell to a distributor. Too, the distributor could not sell to me, only to a retailer.

There are a number of other products for which this sort of thing was established decades ago.
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zip, 25 Apr 2014 @ 7:56pm

The Comcast Principle
Something is seriously wrong here: federal agencies are not supposed to rule against entrenched, deep-pocket commercial interests. Ever.

The NADA needs to fire whatever lobbyists they're using and get someone with a better inside track. If Comcast can completely "capture" the FCC, then NADA can certainly do the same with the FTC. And as Comcast has discovered, it's an investment that pays off in spades.
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Mason Wheeler, 25 Apr 2014 @ 8:18pm

It's nice to see a Federal agency getting things right for a change. We don't get too many stories like this lately.

The way I've got it figured, dealerships are a legitimate business model, and so is direct-to-customer. The Ford dealership I got my current car from had surprisingly good customer service, and I wouldn't want to see them shut down, but I think Ford should be allowed to sell cars directly to customers too, and let the customer decide which version they prefer to use. Likewise, once Tesla comes out with mass-produced cars, let Tesla dealerships spring up throughout the country if someone wants to start them, and let the public decide whether to buy from them or from Tesla.

Anything less than that is an insult to free-market principles.
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truth, 26 Apr 2014 @ 12:56am

electric cars, worlds biggest con!
Tesla is apart of their mission to get you thinking batteries and electric is the way of the future. The con is it costs way more and is way more harmful to the world due to the process of making the batteries and all sort. The fact that in 18-24 months them said batteries need replacing as battery technology sucks is also overlooked and will cost you way more than 50% of the original car just to replace these batteries that pollute the world more than burning petrol.

People are so stupid they don't think how much energy is needed to make the final product and realise its less efficient, more distinctive and putting more power intk the hands of the few, again!

Tesla is not a good company and them not bei g able sell cars is just a distraction so you don't look at he serious loop holes with electric cars by using your brains!
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Anonymous Coward, 26 Apr 2014 @ 1:41am

what is/was happening here is exactly the same with lots of other items and industries, so why is it that sense is now being used over the selling of a car and that it should not be restricted just to protect the sales outlets, but the exact opposite thing is done over music and movies? what a strange system operates here. but then i suppose it changes depending on who is friendly with who and who can throw the most money at who
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avideogameplayer, 26 Apr 2014 @ 3:04am

Why doesn't the FTC go after the telecos next?
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Anonymous Coward, 26 Apr 2014 @ 8:19am

Re: Helpful?
GO TESLA

Back Off OHio
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zip, 26 Apr 2014 @ 8:51am

Re:
"Why doesn't the FTC go after the telecos next?"

Wrong federal agency. It seems that in Washington, if one agency "regulates" an industry, all the others must keep their hands off, apparently.

That's why the FDA was unable to ever touch tobacco products due to health concerns, because the ATF oversaw the tobacco industry -- despite the fact that the ATF has always been a tax-collection agency unconcerned with public health issues.
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nasch (profile), 26 Apr 2014 @ 9:12am

Re:
Wait, the Feds are actually going to bat for competition?

Don't worry, it's in a case where they don't have any authority to actually make a difference.
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nasch (profile), 26 Apr 2014 @ 9:13am

Re: The Comcast Principle
The NADA needs to fire whatever lobbyists they're using and get someone with a better inside track.

No need. The state laws they already have are working fine. They don't need federal protection on top of that.
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nasch (profile), 26 Apr 2014 @ 9:17am

Re: Re:

That's why the FDA was unable to ever touch tobacco products due to health concerns, because the ATF oversaw the tobacco industry

Well, they can now:

http://www.fda.gov/AboutFDA/Transparency/Basics/ucm194423.htm
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vancedecker (profile), 26 Apr 2014 @ 10:43am

Dealerships Are An Indispensable Part of Process
Many people need experienced dealers in order to educate them during the car buying process. If you allow anyone to sell cars then you are going to end up with a lot of people choosing the wrong car or paying too little for a car which could have sold for more.

How many people are going to get home and then realize that they have to plug in their new car. As far as I know, there are no laws protecting consumers in that regard.
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vancedecker (profile), 26 Apr 2014 @ 10:55am

Re: electric cars, worlds biggest con!
I could not agree more if I tried! Electric cars have been proven to cause more air pollution than diesel trucks.

Also, the design of the Tesla looks too 'sports car' like and will probably encourage drivers to go at unsafe speeds. No car should be fully electric! At most they can hybrids, and should be made to look as absurd as possible, like the prius or volt.
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zip, 26 Apr 2014 @ 11:03am

Re: Re: Re:
It took a specific federal law to allow the FDA to violate ATF's home turf, and have any say whatsoever over raw tobacco products(though oddly enough e-cigarettes were banned by the FDA for decades prior to that law).

The ATF's regulation 'stable' also keeps the Consumer Product Safety Commission from regulating firearms -- unquestionably one of the most dangerous consumer products on the market.

These federal agencies can essentially do anything they want, interpreting laws (and expanding on them) as they see fit, and the only thing that effectively stops them is a competing federal agency claiming the turf as their own. It's funny how a whole branch of government sprang up completely outside the Constitution, and these unelected lawmakers grew into the most pervasive authorities of this modern nanny-state we live in.
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nasch (profile), 26 Apr 2014 @ 11:03am

Re: Re: electric cars, worlds biggest con!

Also, the design of the Tesla looks too 'sports car' like and will probably encourage drivers to go at unsafe speeds.

This looks like a sports car to you?

https://www.google.com/search?q=tesla+model+s

And don't worry, most drivers are smarter than you and don't speed because of how their cars look. I know that was rude but I couldn't resist. Or maybe just didn't want to resist.
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Anonymous Coward, 26 Apr 2014 @ 11:05am

Re: electric cars, worlds biggest con!
The fact that in 18-24 months them said batteries need replacing as battery technology sucks is also overlooked and will cost you way more than 50% of the original car just to replace these batteries that pollute the world more than burning petrol.

THIS STATEMENT IS SIMPLY UNTRUE.
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Anonymous Coward, 26 Apr 2014 @ 11:19am

Re: Dealerships Are An Indispensable Part of Process
Having trouble keeping busy at your dealership?
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vancedecker (profile), 26 Apr 2014 @ 11:19am

Re: Re: Re: electric cars, worlds biggest con!
Yes:
http://jacobfoxx.com/wp-content/uploads/2013/08/tesla-model-s.jpg

...the point is that we don't know anything about these Tesla people, whereas Ford is a large company with lots of people working for it. There is a reason that the volt and prius look the way they do. There is no reason why a fully electric car like the Tesla should be masquerading as a regular car. It should say, through it's design that it's not just like every other care. Will people who buy this car accidentally, be able to return it? Are there consumer protections in place?
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vancedecker (profile), 26 Apr 2014 @ 11:22am

Re: Re: Dealerships Are An Indispensable Part of Process
So anyone should be able to just hop on ebay and buy a car? Like you would buy some glass casserole dish or pod-based coffee maker?

Dealerships provide service before, after, and during the life of the vehicle. You can't just appeal to the lowest common denominator like some sort of Costco mattress bin.
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Anonymous Coward, 26 Apr 2014 @ 11:35am

Re: Dealerships Are An Indispensable Part of Process
Many people need experienced dealers in order to educate them during the car buying process.

The arrogant cry of middlemen everywhere. The dealer has no more interest in educating a customer properly than the manufacturers, they want to sell them the most expensive model that will meet the customers need, with the highest trim level that they can get the customer to spring for.
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zip, 26 Apr 2014 @ 11:50am

Re: Dealerships Are *NOT* An Indispensable Part of Process
"Many people need experienced dealers in order to educate them during the car buying process"

It's common knowledge that a car dealer has only one concern to the exclusion of all else: to close the deal and extract as much money as possible out of a customer. Let's not confuse "educate" with sales pitch .

A car salesman is just about the most disreputable profession around, and everyone knows it. The only good thing I can say about dealerships is that "hard sell" techniques have largely gone out of fashion. I suspect especially in states that issue concealed handgun permits. I know I would have been tempted to shoot my way out that tiny office room with up to three barroom-bouncer-type guys at a time blocking the door while refusing to take 'no' for an answer.
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vancedecker (profile), 26 Apr 2014 @ 11:57am

Re: Re: Dealerships Are An Indispensable Part of Process
If you buy a car on your own, will you know that you need to spray the undercarriage with an anti-rusting agent? There is a lot of value-added services that come with car dealerships.
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zip, 26 Apr 2014 @ 12:07pm

Re: Re: Re: Dealerships Are An Indispensable Part of Process
All manufacturers of US-sold cars have employed multi-step factory rustproofing techniques (like hot-dip galvanizing) for decades. Dealer-applied spray-on coatings are thought by some to actually increase the potential of rust by trapping moisture.
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vancedecker (profile), 26 Apr 2014 @ 12:13pm

Re: Re: Re: Re: Dealerships Are An Indispensable Part of Process
Dealerships work for you, often they will go above and beyond in trying to get the best financing deal for you from the banksters. You can't just go to LendingBush or QuickieCash to get a car loan. It's a complicated process, which is based on your history and ability to repay that loan.

You're simplifying a very complicated buying process, and perhaps for you, in your income range, it's okay, because at most, you're only losing a couple of grand. It's like mattresses, people who have money know that you want to go a specialized store which only deals with mattresses and have expertise in the mattress industry. Same thing with cars. You want to stick with professionals, who know the business.
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zip, 26 Apr 2014 @ 12:25pm

electric car documentary
I'll take a short break from playing whack-a-troll to say that I was watching an interesting ("Michael Moore-style") documentary from 2006 about electric cars (one in particular) called "Who Killed The Electric Car?"

Although I got it from another source, it's on YouTube.

http://www.youtube.com/watch?v=bTHsTCBxDM8
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vancedecker (profile), 26 Apr 2014 @ 12:54pm

Re: electric car documentary
...2006? Whatever. And car companies conspired to destroy public transit by buying up all the railcars in Los Angeles.

Don't believe everything you see. Los Angeles got rid of the public transit system because unlike NYC and Boston who are supplied with an endless rivers of money to build tunnels and train tracks everywhere, it doesn't have this endless funding stream. It has to support both it's own and part of Mexico's population, and realized that Buses were a much more cost effective solution. If you don't believe me, there is a lot of material and studies on it by the CATO institute and Reason magazine.
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Anonymous Coward, 26 Apr 2014 @ 1:38pm

Re: Dealerships Are An Indispensable Part of Process
paying too little for a car which could have sold for more.

Why do people struggle so with detecting the most obvious sarcasm?
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nasch (profile), 26 Apr 2014 @ 2:33pm

Re: Re: Re: Re: electric cars, worlds biggest con!
It should say, through it's design that it's not just like every other care. Will people who buy this car accidentally, be able to return it?

Just so we're clear, you think people are buying Tesla Model S cars thinking they're gasoline powered?
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any moose cow word, 26 Apr 2014 @ 2:33pm

Re: Re: electric car documentary
CATO institute? No thanks.

Many other cities had public rail or street cars that were bought out or pushed out by oil and car companies.
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nasch (profile), 26 Apr 2014 @ 2:35pm

Re: Re: Re: Dealerships Are An Indispensable Part of Process
Dealerships provide service before, after, and during the life of the vehicle.

So people who want the assurance of knowing there's a local dealer they can take their car to can buy that way. What's wrong with allowing another way of buying too? And do you think people should be prohibited from buying a car unless there's a dealership servicing that brand in their home town? If not, how is buying from a company with no dealerships any different?
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nasch (profile), 26 Apr 2014 @ 2:36pm

Re: Re: Re: Dealerships Are An Indispensable Part of Process
If you buy a car on your own, will you know that you need to spray the undercarriage with an anti-rusting agent?

Voted funny.
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nasch (profile), 26 Apr 2014 @ 2:36pm

Re: Re: Re: Re: Re: Dealerships Are An Indispensable Part of Process
You can't just go to LendingBush or QuickieCash to get a car loan.

No, you should go to your credit union. Generally they'll take good care of you.
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zip, 26 Apr 2014 @ 2:38pm

Re: Re: electric car documentary
And jobs, don't forget jobs. Plenty of jobs created in Los Angeles demolishing the old rail lines and turning them into roads. And then later, more jobs were created turning many of those same roads back into rail lines. Never mind that they ended up with the same thing they started with. Jobs, jobs, jobs!
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Anonymous Coward, 26 Apr 2014 @ 2:53pm

Re: Re: Re: Dealerships Are An Indispensable Part of Process
Oh.....Oh.....

Don't forget the invaluable fabric guard!!! And the must-have pin stripes and floor mats.

There's a special place in hell for you charlatans. The rustproofing you charge and arm-and-a-leg for voids most manufacturers own rust warranty.
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Anonymous Coward, 26 Apr 2014 @ 3:11pm

Re: Re:
Actually, they do: if the states are interfering with interstate commerce by blocking sales, that's a Federal offense. The Feds can make a difference by taking the individual State's interstate commerce privileges away.
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zip, 26 Apr 2014 @ 3:27pm

Re: Re: Dealerships
Maybe we all need an excuse sometimes to vent about something that makes our blood boil, and aren't paying too much attention to the details.
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Gwiz (profile), 26 Apr 2014 @ 3:53pm

Re: Re: Re: Re: Re: Dealerships Are An Indispensable Part of Process
Dealerships work for you, often they will go above and beyond in trying to get the best....

If the dealerships offer all of that value, why are they so worried about competition from online in the first place then? If your sales pitch really is the truth, then no one will want to purchase online anyways because they don't offer all of that....um.....stuff you mentioned.

As an aside: Your sales pitch doesn't really sound all that great to me personally, it sounds like you'd rather have an uninformed customer over someone with knowledge and that's not someone I really want to do business with.
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That One Guy (profile), 26 Apr 2014 @ 5:54pm

Re: Re: Dealerships Are An Indispensable Part of Process
Everyone gets tripped up by good old Poe's law at times, what's more, with the really good ones, you're never quite sure if it was, or wasn't, sincere, since people really can get that crazy(on pretty much any topic you can think of).
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That One Guy (profile), 26 Apr 2014 @ 6:00pm

Re: Re: Re: Re: electric cars, worlds biggest con!
I'm calling Poe on this one, but on the off chance you're serious, do you really hang around people that stupid on a regular basis, that you think people would go through the process of picking out and purchasing a car, paying thousands on their purchase and signing themselves to paying even more as time passes, without once noticing or realizing, that hey, this car is electric, it has different requirements than a gas powered one?

Assuming the answer is 'yes', anyone that boneheaded either has money to burn, or is likely dead broke from falling for every two-bit scam or 'special offer' they run across.
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John Fenderson (profile), 27 Apr 2014 @ 8:43am

Re: electric cars, worlds biggest con!
Even if all that is true, they (and all companies) should still beable to sell their wares directly to the end customer.
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John Fenderson (profile), 27 Apr 2014 @ 8:45am

Re: Dealerships Are An Indispensable Part of Process
Dealerships tend to be scum looking to rip off as much as possible without actually breaking the law.
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Anonymous Coward, 27 Apr 2014 @ 1:11pm

Re:
Tesla got Department of Energy loans that they paid off nearly a decade early. So in this case their success makes them look good even if they have no longer have a direct fiscal incentive they still have a reputation incentive.

Tesla's success says that their policy was a good idea and any further success on their part vindicates them further. If Tesla were to for example eventually make gas cars fully obsolete they could still claim some credit for enabling it.

While they may be potentially doing it for selfish reasons in this case it is doing good.
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Eldakka (profile), 28 Apr 2014 @ 1:36am

Re: Re: Re: Dealerships Are An Indispensable Part of Process
So anyone should be able to just hop on ebay and buy a car? Like you would buy some glass casserole dish or pod-based coffee maker?

Yes, and you already can buy a car online with ebay. Or carsales.com.au, or drive.com.au, other places too.

All you need is a spec sheet, some ability to use google to find out anything you don't understand, or maybe ask your more knowledgeable friends. Consumer review sites too.

Actually, one thing a dealership is good for, somewhere to go to test drive a car before you order it online.

There's a reason car salesman are used as the butt of jokes regarding:
1) high pressure sales tactics;
2) lieing;
3) overcharging.

Because they do all of the above.

"Yes love, you really need the genuine $600 floor mats, you can't trust those $30 auto-parts store ones that are made of the same material and probably come from the same production line in china"
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Anders K. Nielsen, 28 Apr 2014 @ 2:48am

Re: Who can sell
I never understood this, why shouldn't the manufacturer be able to sell directly, and cut out the middleman. If they don't need them, they shouldn't artificial keep them on.
It works like this: Manufacturer comes first, distributor came afterwards because of demands for it. Not the other way around, the manufacturer doesn't OWE the distributors anything.
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Just Another Anonymous Troll, 28 Apr 2014 @ 9:30am

Re: Dealerships Are An Indispensable Part of Process
So... I choose a car I like without dealer assistance, but it can somehow be the 'wrong' car despite me liking it and it fitting all my needs? And then I will pay less than I should, oh, the horror!

If the consumer is too stupid to realize that their car is electric, then that's their fault. I don't see why that would be so earth-shattering to them, just plug it in to an external outlet.

I see OOTB has made a new account...
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Anonymous Howard (profile), 29 Apr 2014 @ 4:50am

Re: electric cars, worlds biggest con!
[citation needed]

Here's some:
"The Model S battery is guaranteed by Tesla Motors for eight years or 125,000 mi (201,000 km) for the base model with the 60 kW�h battery pack. All models with the 85 kW�h battery pack are guaranteed for eight years and unlimited miles.[72]

A battery replacement option may be purchased for a cost of US$10,000 for the 60 kW�h battery and US$12,000 for the 85 kW�h battery and will provide a replacement battery anytime after the 8th year of operation of the original battery.[73]"

In case you're not a paid shill, I can't believe people in their right mind would think that burning liquified dinosaur corpses (which will run out in the near future, already sparking conflicts and war. aka US War on Tehror) at 20% efficiency is somehow more progressive than using a power source that can be produced much more environment friendlyer (like nuclear power plants, renewable energy etc)
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