This is why the FTC took a few baby steps towards loosening these regulations yesterday. Outside of unhappy customers, the biggest player trying to get the laws changed for the past few years has been Tesla Motors, which sells its electric cars directly to buyers wherever it can. While large automakers are prohibited from doing this, a number of FTC representatives have expressed support for Tesla's efforts. The FTC as an organization has not come out one way or the other on the issue, but it did hold an "Auto Distribution" workshop in Washington, DC yesterday, and if you read between the lines you might see that there's some movement towards rethinking the whole darn system.
Current dealership laws make buying a car less fun.
In her opening remarks, for example, FTC chair Edith Ramirez said that, "The automobile marketplace may be on the precipice of dramatic change." Now, nothing has been officially decided here, and the workshop was an official and public chance for the FTC to hear from a variety of speakers on different sides of the issue: auto dealers who like the status quo (and some who just want to tweak it), automotive start ups Tesla and Elio Motors that are trying to change the direct sales landscape, and professors from a number of universities who analyzed the current rules from a number of perspectives (you can see the full list here). I was in the room all day and, to me, the hints were clear.
There was Dan Crane, a professor from the University of Michigan, who went through three arguments for keeping the dealership laws in place and then blew holes in all of them. There was Fiona Scott Morton, a professor at Yale University, who said that if the FTC really wants to help the average car buyer, it should allow "vertical integration" (i.e., direct sales from automaker to car shopper). And while we don't know which automakers were on the original invite list, there were no representatives of any OEMs other than the two that want the laws to change (Tesla and Elio).
There were no OEM representatives other than those who want the laws to change.
Voices of support for keeping some or all of the current dealer network were there, too, of course. Steven McKelvey, a partner at Nelson Mullins, for example, said that traditional automotive dealers do serve an important function, even if the rules could use some updates. The problem is not the franchise/dealer model itself, he said, but the overreaching laws that prevent traditional manufacturers from having the option to respond to consumer demands. And Peter Welch, the president of the National Automobile Dealers Association, said repeatedly that dealership laws help American consumers, and anyway, there are only a few states where companies like Tesla are expressly forbidden to sell their vehicles.
Coming out of the meeting, the feeling that there might be a change in federal regulations at some point was strong. For now, this is a battle that is taking place only at the state level. See, for example, Tesla's efforts in Michigan, California, or Texas. There is a public comment period open until March 4, 2016. After that, we'll see if the FTC sends up any other signal flares.