On the subject of Tesla Motors and its efforts to legally sell its electric vehicles directly to consumers without franchised dealerships, the FTC has taken aim at Missouri and New Jersey. The Commission hasn't made any nationwide decision on the subject quite yet, but in a May 16 statement it encouraged the two states to reconsider policies that would further prohibit automakers from selling directly to consumers. And the FTC didn't mince words, calling such laws an example of "protection that is likely harming both competition and consumers." This is much further than the FTC has ever gone before in support of direct vehicle sales.

FTC didn't mince words, saying such laws were "likely harming both competition and consumers."

The statement follows an April blog post from three FTC officials, who wrote that the anti-direct sales mandates were "protectionist" and "bad policy." Tesla has been doing battle with a number of states as well as lobbying efforts from the National Automobile Dealers Association (NADA), which represents 16,000 new car and truck dealerships representing about 32,000 domestic and international franchises. The NADA has been supporting dealers who oppose Tesla's direct sales for years.

In fact, Jonathan Collegio, vice president of public affairs for the National Automobile Dealers Association (NADA), maintained that the states need to retain the right to regulate the automobile sales distribution channel.

"These arguments ignore the fact that fierce competition between local dealers drives down prices both within and across brands. When three Ford dealers compete for the same customer, the customer wins, period," Collegio wrote in an e-mail to AutoblogGreen. "Finally, it's a major fallacy to compare buying cars with buying other goods, like books or computers. New cars are major purchases that require licensing, insurance, complex financing involving trade-ins, contain hazardous materials, and if operated incorrectly can cause serious bodily injury."

Tesla representatives didn't immediately respond to a request for comment from AutoblogGreen.

New Jersey and Missouri have both been in the news lately. Garden State politicos have created a bit of a grey area, first voting in mid-March to stop Tesla stores from selling cars starting April 1, then extending the deadline to April 15. Tesla appealed the ban with the state Superior Court last month, and the FTC says the " limited, selective set of exceptions" are "very likely anticompetitive and harmful to consumers." In Missouri, Tesla appears to be winning the on-the-ground fight, but if a proposed bill against direct sales there becomes law, it will "amplify the adverse effects of the current prohibition" and "discourage innovation," the FTC says. Read more below.
Show full PR text
FTC Staff: Missouri and New Jersey Should Repeal Their Prohibitions on Direct-to-Consumer Auto Sales by Manufacturers

May 16

Federal Trade Commission staff submitted written comments to Missouri State Representative Michael J. Colona and New Jersey State Assemblyman Paul D. Moriarty in response to requests for comment on legislative proposals that would alter the ability of automobile manufacturers to sell their cars directly to consumers. The proposed Missouri bill would expand current prohibitions of such sales by franchisors to also include sales by any manufacturer, regardless of whether they use independent dealers. In New Jersey, several bills would create limited exceptions to state law that, as currently interpreted, requires motor vehicles to be sold only through independent auto dealers.

According to the comments by staff from the FTC's Office of Policy Planning, Bureau of Competition, and Bureau of Economics, 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.

In Missouri, proposed amendments to current law would expand the scope of the existing restrictions on direct sales. Under the bill, all new motor vehicles in Missouri would have to be sold through independent dealers. As the staff comment states, current law limits franchising auto manufacturers' ability "to innovate in their methods of sale in ways that might be more cost-effective and responsive to consumer demand" and "is very likely harming both competition and consumers. By expanding the scope of the existing prohibition to include manufacturers that do not currently use, or even desire to sell through independent dealers, HB 1124 [the proposed amendments] would amplify the adverse effects of the current prohibition" and "discourage innovation."

In contrast, each of the legislative proposals in New Jersey would permit some manufacturers, under limited circumstances, to sell cars directly to consumers, and so would likely increase competition relative to the current blanket ban on all other methods of selling cars. But in the staff's view, the bills "do not go far enough. . . ." "New Jersey's consumers would more fully benefit from a complete repeal of the prohibition on direct sales by all manufacturers, rather than any limited, selective set of exceptions," the staff comment states, noting that "current New Jersey law . . . is very likely anticompetitive and harmful to consumers."

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.

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." 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.

"FTC staff offer no opinion on whether automobile distribution through independent dealerships is superior or inferior to direct distribution by manufacturers. . . .[C]onsumers are the ones best situated to choose for themselves both the cars they want to buy and how they want to buy them," the staff states.

The Commission vote to issue each of the staff comments was 5-0 . (FTC File Nos. V140010 and V140008; the staff contact is Patrick J. Roach, Office of Policy Planning, 202-326-2793).

The FTC's Office of Policy Planning works with the Commission and its staff to develop long-range competition and consumer policy initiatives, consistent with the FTC's unique mission to conduct research and engage in advocacy on issues that affect competition, consumers, and the U.S. economy. The Office of Policy Planning submits advocacy filings; conducts research and studies; organizes public workshops; issues reports; and advises staff on cases raising new or complex policy and legal issues. To reach the Office of Policy Planning, send an e-mail to opp@ftc.gov. Like the FTC on Facebook, follow us on Twitter, read our blogs, and subscribe to press releases for the latest FTC news and resources.


I'm reporting this comment as:

Reported comments and users are reviewed by Autoblog staff 24 hours a day, seven days a week to determine whether they violate Community Guideline. Accounts are penalized for Community Guidelines violations and serious or repeated violations can lead to account termination.


    • 1 Second Ago
  • 170 Comments
      Zoom
      • 7 Months Ago
      This will end up at the US Supreme Court, without a doubt.
        Larry Litmanen
        • 7 Months Ago
        @Zoom
        Dealers are smarter than people think, they are true evil. The only way to change the system is to pass a law thru Congress which SC may say is unconstitutional because states do have rights to pass their own laws. Which will mean to change the system you would have to change laws in all 50 or 57 states (depends on who you ask). I would not keep my hopes up to be honest.
          Dean Hammond
          • 7 Months Ago
          @Larry Litmanen
          no offense Larry, but how is EVERY dealer pure evil...without proof that blanket statement is without creedence.
          Zoom
          • 7 Months Ago
          @Larry Litmanen
          The interstate commerce clause in the existing constitution should rule here. No need for new rules.
      crzydavy
      • 7 Months Ago
      Woo hoo! Great ruling! I am so sick of these middle class car deanships that employ ten of thousands of middle class people getting in the way of our wall street billionaires. Why should Tesla care about middle class job or employing people when they can skirt the rules and lock in as much in profit for their investors as possible. This is triumph for rich democrats everywhere.
        jay s
        • 7 Months Ago
        @crzydavy
        I am so sick of the car dealerships ripping off the middle class of their hard earned income. They are of no use. They screw the uneducated/uniformed on the finance, on the car itself, on "add ons". Can not wait for the day they are all put out of business. I want to buy my next car from Costco.
          Dean Hammond
          • 7 Months Ago
          @jay s
          have YOU lost the abilty to research the deal you want or are you just lazy and want instant gratification?.....you ALSO have the capacity to say NO...correct?...also, take your car to Cosco for its service....and while you are at it, ask for the Cosco price on a Tesla...that should be humourous.
          AcidTonic
          • 7 Months Ago
          @jay s
          @Dean He is below average at negotiating so he wants to get rid of it and have everyone pay a flat price. However I'm good at negotiating and enjoy getting thousands off even if it means toying with a dealer for a month or two. So I want to keep it like it is and subsidize my great deal from people who are in too much of a hurry to properly haggle. I see no problem here :)
          Dean Hammond
          • 7 Months Ago
          @jay s
          Acid, we may not see eye to eye on a lot of things, however point is by having one entity control every sector of its product creates a monopoly, they can/ will name their own price, and your leverage, negotiation skills become redundant...so exactly who wins...in my opinion that title goes to the one in control, in this case Tesla....
        m_2012
        • 7 Months Ago
        @crzydavy
        How many middle class people does Tesla employ again? These 'middle class dealerships' only exist because of rich people enacting laws to protect themselves. If dealerships are so great, let them stand on their own merit, just like the Tesla stores are doing. They dont need laws to do business- oh wait, they do because its a giant scam. Bye bye middleman.
          Dean Hammond
          • 7 Months Ago
          @m_2012
          and hello to MSRP pricing...with Tesla at least you may get what you wished for...this will be interesting for sure. And...please, not all dealers operate in accordance with your stereotype...
          wendavid99
          • 7 Months Ago
          @m_2012
          "and hello to MSRP pricing..." direct manufacture-to-consumer MSRP is probably less than invoice of today's dealer-to-consumer, more in line with true market price.
        Nathan
        • 7 Months Ago
        @crzydavy
        Typical "it creates jobs" fallacy. That's like saying we shouldn't try to lessen the amount of lawyers, tax accountants, or paper-pushing do-nothing government workers since hey they have jobs. When those jobs are a net negative to society they hurt, don't help, the economy. Why not make it illegal for people to drive themselves to work in the morning? Just think of the amount of jobs that would be created as private chauffeurs.
      Nick
      • 7 Months Ago
      Good for the FTC.
      DKY
      • 7 Months Ago
      This Collegio guy sounds like a major douche. "New cars are major purchases that require licensing, insurance, complex financing involving trade-ins, contain hazardous materials, and if operated incorrectly can cause serious bodily injury." How is any of this different than a private seller selling their used car? But they can do it. New cars aren't any different. Its the same kind of B.S. cars salesmen give you, straight from their ass and out of their mouth.
        Bernard
        • 7 Months Ago
        @DKY
        Also, what does a dealership add to any of that which the auto manufacturer cannot do?
          Dean Hammond
          • 7 Months Ago
          @Bernard
          what happens when you buy a car second hand...private party....answer, anything gos wrong youre on your own...thats one thing. And Dealers are representativeof the manufacturers, its part of their franchaise agreements. they supply an outlet for Parts , Service and biodywork...so, unless a Manufacturer wants to pony up some MASSIVE $, then they rely on individuals whom bought dealerships on their own notes to do their gruntwork. Imagine after all these years GM decided to "go their own way" and purchase their own outlet stores along with their own bodyshops and parts outlets. It would put them under very quickly. Bedsides that they would still need the eprsonnel, be able to pay/ insure them AND supply the premises. Now, at this stage tesla may be able to do this, but scale it up to the size of GM and the circumstance change dramatically ....
        SloopJohnB
        • 7 Months Ago
        @DKY
        Not so. Dealers are subject to a host of laws that private sellers are not.
      filthyr91
      • 7 Months Ago
      "...Complex financing involving trade ins..." This is only complex if the dealer sales rep wishes it to be so.
        Dean Hammond
        • 7 Months Ago
        @filthyr91
        not necessarily....some customers have a value in their head on their trade, which is beyond reality....much like someone has a payment in mind thats beyondattainable....two way street
        m_2012
        • 7 Months Ago
        @filthyr91
        They find addition and subtraction complex. Its all relative.
      purrpullberra
      • 7 Months Ago
      It is scary how stupid a person has to be to continually mistake the idea of Tesla competing against other manufacturers with Tesla competing against dealers. Tesla competing with other manufacturers is the competition that the US is built upon and which is commonly referred to as 'capitalism'. Tesla competing with dealerships is the type of competition where the consumer must be allowed to decide if they want to suffer through a dealership experience or try something new if they want. No harm in that. Ford, GM, BMW etc keep Tesla from having a monopoly on car sales! If you don't like Tesla's price BUY ANOTHER CAR. No one has the right to buy a Tesla for less than what Tesla wants to sell it for. That is not how the dealership/factory relationship happens to work. Any of our discussions where MSRP is brought up is garbage (and so is the person who brings it up generally). MSRP is a meaningless remnant that Tesla's business choice obviates (makes unnecessary). The factory wants a certain amount of money for the cars they build. Is there a middleman between factory and buyer or not? That is the discussion. And there is literally no way that the method with the middleman can result in lower prices overall for the end consumer. People who pretend dealers make car prices LOWER are LIARS. If a dealership makes any money, and they have, it has to come from somewhere and it isn't the factory. No car factory has ever been used to help finance (or justify) car dealerships. That means every penny that ever went into a dealership was STOLEN/TAKEN FROM THE CAR BUYING PUBLIC. Tesla aims to remove this parasitic loss from the car buying equation. Dean Hammond and Express2day will try to lie as long as anyone is dumb enough to listen to them but that can't change the salient facts which show them to be liars. And I'll say it again, I had a pretty good time buying my Scion. I wasn't ever really unhappy with my dealership. This isn't a personal issue with me as a car buyer. I have an issue with what the NADA and its members are doing as a decent American who despises the anti-Tesla mindlessness that comes exclusively from fully-baited tools.
        Dean Hammond
        • 7 Months Ago
        @purrpullberra
        Ive, and I would have to beleive anyone else that cant ignore your dribble, that it is impossible to be civil with you Purrpullberra...diabolical ignorance 101.
          Dean Hammond
          • 7 Months Ago
          @Dean Hammond
          no, thats a lie in itself, youve proved nothing more than you are an abusive child in need of some serious therapy.
          purrpullberra
          • 7 Months Ago
          @Dean Hammond
          I'm civil with everyone who isn't a liar.
        Dean Hammond
        • 7 Months Ago
        @purrpullberra
        Rubbish, unlike youreself im not speculating and accusing others of "lying:, when YOU have been affiliated with the actual business you are son criticising then maybe you have grounds to have your OPINIONS considered, until then you really dont know what the hell you are talking about. So keep accusing. And once again, why is a 10c cup of coffee from Starbucks, any different from teh same 10c cup of coffee purchased elsewhere...THATS my point, your angst against the dealer body is COMPLETELY illfounded...oh, and PPS, YES theres manufacturers participation in dealerships, in fact there is in most....they also help in dealers advertising costs, upkeep etc. For that participation they are kept to strict outlines which can be read in their franchaise agreements...so, exactly WHO is "lying"?....I would say that onus is either on you or you basically dont know your ass from your elbow. Case close, Purrpullberra, you have been found guilty of groundless claims...AGAIN>
      raughle1
      • 7 Months Ago
      Reality show idea: i'd like to see auto dealers compete with realtors and travel agents to see who can provide the least amount of value to the consumer in the Internet era. Battle Royale!
      OnTheRocks
      • 7 Months Ago
      I'd like to see Ford (or someone) offer a "Factory Direct" way of selling cars. Yeah, you might have to pay MSRP, but it could be a simple, painless process. Heck, you could employ a whole fleet of people just to deliver customers new cars to their homes. June or July could be "No-Charge Delivery" month. The dealers could still remain. And as another commenter pointed out, this could also be a terrible idea. Hey, I didn't go to business school.
        express2day
        • 7 Months Ago
        @OnTheRocks
        If a buyer is ok paying MSRP then they can go to any dealership today and get a car without any need for negotiation except maybe on things like trade value. I'm sure the dealer would be more than happy to deliver to their home or office for free especially if paying full MSRP. Besides, you can already buy new cars today (below MSRP!) without leaving your house. I think the vast majority of people make at least one trip to a dealership though, because they rather see cars in person first and compare colors, models, take test drives, etc.. Even there, dealers are often willing to bring a car to you at home to look at but I personally feel it's better to go to a dealership and see "everything" rather than one car at a time unless perhaps you are looking at a very specific, niche, rare, low production model.
          Julio B
          • 7 Months Ago
          @express2day
          During the last 7 years I bought two brand new vehicles online, and never visited the original dealers. I sent them pictures of the trade, someone drove the new vehicle to my wife's job (was a gift) and drove the trade back. The second one, it was delivered on a trailer to my house. I registered both myself without a single hitch. I can imagine readjusting the MSRP of new vehicles after eliminating the middleman, would be beneficial for the customer. I have never been to a dealer where the salesman knows more about the car I'm about to buy that myself... Sad but true.
          Dean Hammond
          • 7 Months Ago
          @express2day
          BINGO! thankyou express2day, and thats my exact point....who wins out of this???? I question its the consumer.....
          tegdesign
          • 7 Months Ago
          @express2day
          Yep. If you don't like the MSRP then buy a different kind of car. If everyone goes elswhere because MSRP is too high then the manufacturer brings the price down to be competitive. No magic there, but market forces which effect every product, even cars sold at dealers. But in that case the numbers are more hidden and convoluted, but same market forces. It's like gravity, inescapable.
        Dean Hammond
        • 7 Months Ago
        @OnTheRocks
        GM tried it with Saturn. Guess what...also, delivery to homes would be veiwed as an overhead, so would probably add to an inflated MSRP to cover the costs....
          jefmad
          • 7 Months Ago
          @Dean Hammond
          Yes Dean, people hate buying a car that way as evidenced by the dismal failure of Carmax. Whoops.
          John Hansen
          • 7 Months Ago
          @Dean Hammond
          It worked very well for Saturn. They had some of the highest customer satisfaction scores in the industry. They were also profitable. What killed them was when GM stopped allowing them to develop their own products and instead started re-badging other GM products as Saturns (and poorly re-badged at that). Their sales model is what kept them alive for as long as they did.
          Dean Hammond
          • 7 Months Ago
          @Dean Hammond
          John, seriously....point is where are they now, after the "novelty" wore away they went the way of the Dodo, that said, their product didnt hold a candle to teslas....
          Susan
          • 7 Months Ago
          @Dean Hammond
          The Saturn experiment was an amazing success story for the first decade or so. This was one of Roger Smith's only good ideas. Many people were perfectly happy to see a fixed price on the product and not be jerked around by employees who tried to add bogus costs or options. And the first Saturns were decent little cars. But GM stopped investing in new Saturn product and the cars became noncompetitive. I bet there was a lot of corporate back-stabbing going on at GM headquarters in the Renaissance Center.
          Dean Hammond
          • 7 Months Ago
          @Dean Hammond
          @jefmad, my apologies, I read Cosco, not carmax.....and Carmax , as far as i know sells nothing but used cars.....used cars are EXTREMELY difficult to cross shop as no two are exactly the same..
          jefmad
          • 7 Months Ago
          @Dean Hammond
          Dean, I mentioned nothing about Costco. I mentioned Carmax and their business model. They have competitively priced cars at non negotiable prices and that has made them the largest car dealer in the country. Yes, you can walk into a new car dealer and not negotiate pricing, but you will not get a competitive price.
          Dean Hammond
          • 7 Months Ago
          @Dean Hammond
          @jefmad.........have you tried to purchase a tesla through Cosco?...and PPS, ever stop to think that Cosco is a middle man, they are, and guess what, they CHARGE dealers for the "privilidge " of serving their customers....but apparently you think Cosco is a non- profit organization....WHOOPS.
      Greg
      • 7 Months Ago
      I recently visited a couple dealerships that
      bluepongo1
      • 7 Months Ago
      BEV + FTC - NADA = FTW!!!! Hey dealers, regret paying off **(D) & (R) ** ( bigger lying parasites than you to criminally undermine trade , harm , and decieve consumers.) ?
      icemilkcoffee
      • 7 Months Ago
      About time the FTC puts its foot down.
      Dave D
      • 7 Months Ago
      So why has Dean appointed himself "prostitute to NADA"? Does he really think he's convincing anyone on here that they should be happy to be FORCED to go through a middleman and pay extra money? Or does he really think he can convince us that the dealers are magically going to make the price lower than buying direct from a manufacturer? Sure Dean, the Dealers are charity organizations and NADA is the bloody Red Cross! I can't understand what kind of delusions make him think he's convincing everyone that they should listen to his inane comments. "Ignore the man behind the curtain. I am the great and powerful Oz!!!" LMAO
        purrpullberra
        • 7 Months Ago
        @Dave D
        These lie-filled pus-bags like FoulFuel2Fire and even dear Dean LIVE LIES. Every day at the job is FILLED WITH LIES. Every show on TV and radio they watch is FILLED WITH LIES. So of course these sh1+'s train their little brains into buying the lie-filled fantasy. Even uber-business genius Romney was completely blind to the truth that he was going to be MASSACRED on election day, with all the proof any sensible person would need being shoved in his face, yet he still bought the lie he kept telling and kept hearing. The most closed-minded people on Earth are the ones who travel the least, think the least and meet the least new people. Car salespeople spend WAY TOO much time with each other and they are spoiled for it. Dealerships are cancers. They should be excised with extreme prejudice.
          purrpullberra
          • 7 Months Ago
          @purrpullberra
          Dean Hammond wannabe car dealer: Your 'opinions' are just instances of you being 100% wrong about facts. You are NOT allowed to have 'opinions' about facts. You are just wrong. The difference between Tesla selling a car and a dealer selling a car is TESLA DOING WHAT IT WANTS TO DO NOT WHAT DEALERSHIP SCUM WANT TESLA TO DO. Do you get that America is the home of the FREE? That means Tesla is FREE to sell cars the way they want to. Who cares what scumbag dealers like you think? You are cancerous scuzballs, why do you think anyone cares about all your pathetic lies? You are consistently downgraded and belittled for your unswerving tool-ness, you're just spewing the lies you've been trained to spew. I am just baiting you and you always rise to it, like the puppet you are. Thanks for always exactly proving my point for me. My mind is always open to the truth and you are as far from truth as is possible.
          Dean Hammond
          • 7 Months Ago
          @purrpullberra
          interesting, and completely classless comment purrpullberra...spouting brazen comments, accusations, namecalling and vain attempts at justification only serve to point out how ill informed you actually are, let alone COMPLETELY unable to grasp the fact that most of what you are spouting off is inaccurate bias. If you are incapable of weighing anothers opinion other than your own, then just go away, you are bringing absolutely NOTHING to the table, and its people like yourself thatactually hurt Teslas cause. The name calling is priceless though, takes me back to kindergarten......cancerous scuzballs, liars, toolness, spew, baiting, puppet, scumbags, nice thesaurous...and its the dealers that arent classy....bwahahaha, thats funny. Grow up.
          Dean Hammond
          • 7 Months Ago
          @purrpullberra
          jesus Purrpullberra, is it impossible for you to apply ANY common sense and actually appreciate some may have a differing opinion than yourself, i have NEVER encounted a more closed minded blogger as yourself, NEVER, your girlfriend must think she has a winner in a total control freak, my goodness man, TAKE OF THE BLINDERS and realize your opinion, whilst tolerated, ISNT the only one out there. cheers.
        Dean Hammond
        • 7 Months Ago
        @Dave D
        Dave, im just offering a differing opinion, its interesting having the capacity to evaluate both sides of an argument....thats where my conclusion comes from, unlike your own.
          Dave D
          • 7 Months Ago
          @Dean Hammond
          No, I have no problem at all if you want to buy from a dealer. It's your right to choose who you buy your goods from and more power to you. If you were defending an organization who wanted the *right* to see cars in competition, then I'd say more power to you. But that is NOT what you're doing. You are defending an organization that wants to force every consumer in America to buy from them as a middleman instead of allowing us the *choice* to buy from them if they offer a compelling business model. But that is only half the story. You insist on telling us that they are doing this in our best interest and insist that we should all believe this because you say it over and over and over again. If they have a compelling *choice* to offer us, then let them state their case for our business as a channel we can choose from. Otherwise, I have no interest in hearing from them, or you, on their behalf.
          Dean Hammond
          • 7 Months Ago
          @Dean Hammond
          PPS Dave, im not defending anyone, im just questioning the benefits of Teslas business stance/ case...and I am DEFINITELY not defending the NADA, far from it, but still, theres yet to be one person state exactly the difference between a franchaised dealer selling a product and Tesla selling their own product...some here are off on the"savings" tangent...so WHERE exactly are the savings...?answer, there arent any, it just means Tesla pockets it all.....but apparently a dealer that would be selling teslas product at the same price ( remember MSRP stands for MANUFACTURERS suggested retail price ) as Teslas own "outlets" is robbing the public blind...so lets analyse the difference between $80000 model S from Tesla of Irvine, or $80000 model S from Earnhearts Tesla of Mission Veijo....Bueller?....
          Dean Hammond
          • 7 Months Ago
          @Dean Hammond
          so Dave...only having one option where to buy a Tesal is different HOW?....
          Dean Hammond
          • 7 Months Ago
          @Dean Hammond
          sorry..Tesla.....
    • Load More Comments