FTC Calls State Bans On Direct Tesla Sales ‘Bad Policy’

Giuseppe Macri Tech Editor
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The Federal Trade Commission weighed in on the Tesla Motors’ direct sales debate this week and called various states’ bans against the company selling without dealers “bad policy.”

In a Thursday blog post the business, market and consumer protection regulatory agency said that though markets have evolved tremendously thanks to advances in technology, the automobile industry remains stubborn and resistant to change and that states’ bans against Tesla stifle competition.

“For decades, local laws in many states have required consumers to purchase their cars solely from local, independent auto dealers,” FTC directors Andy Gavil, Debbie Feinstein and Marty Gaynor wrote. “Removing these regulatory impediments may be essential to allow consumers access to new ways of shopping that have become available in many other industries.”

Out of 15 million automobiles sold in the U.S. overall in 2013, Tesla sold a mere 22,500 according to the FTC.

“This hardly presents a serious competitive threat to established dealers,” the FTC said. “What it could represent is a real change to the way cars are sold that might allow Tesla to expand in the future and prove attractive to other manufacturers, whether established or new ones that have yet to emerge, and consumers.

“Efforts to litigate, legislate, and regulate to eliminate Tesla’s perceived threat have forced it to battle jurisdiction-by-jurisdiction for the simple right to sell its automobiles directly to consumers.”

States including Arizona, Maryland, Texas and Virginia all have bans against manufacturers selling directly to consumers. New Jersey recently joined the list against Tesla after Gov. Chris Christie had initially endorsed the company’s direct sales plan.

According to the New Jersey Coalition of Automobile Retailers, allowing Tesla to sell direct would be an unfair advantage to other manufacturers denied the same privilege. They also maintain that dealers fulfill an important role by acting as middlemen advocates for consumers, and make sure manufacturers honor warranties and other standards.

Though the FTC endorsement is a PR boon for Tesla, the agency has no authority to back up its opinion legally, as such legislation is left up to states individually.

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