FTC officials question 'bad policy' that stops Tesla's direct sales

It looks like Elon Musk has a new group of allies over at the Federal Trade Commission. Writing on the FTC blog, three high-level FTC officials came out against the "protectionist" network of laws in the US that govern automotive dealers and prevent, in some cases, Tesla Motors from selling its cars directly to customers. They called the rules, "bad policy for a number of reasons."

They write:

[The legal] protections expanded until in many states they included outright bans on the sale of new cars by anyone other than a dealer-specifically, an auto manufacturer. Instead of "protecting," these state laws became "protectionist," perpetuating one way of selling cars-the independent car dealer.

The post is not a call to arms, but more of a position statement co-authored by Andy Gavil (director of the Office of Policy Planning), Debbie Feinstein (director of the Bureau of Competition), and Marty Gaynor (director of the Bureau of Economics).

"The collective [cost] impact of [the state-by-state battles] is one of the major concerns here. [Tesla is] just trying to sell their cars" – Andy Gavin

Gavil told AutoblogGreen that the main goal was to bring attention to the issue, which the post has certainly done. There are so many of state fights going on, he said, that this was a way to reach a lot of people at once. "We've been watching this for months," he said. "It's very clearly a state-by-state battle. We are concerned about Tesla litigating state-by-state. The collective [cost] impact of that is one of the major concerns here. They're just trying to sell their cars. The way the industry is reacting shows that it's about more than that."

Gavil wouldn't go so far as to say that there should be new national rules – it's up to Congress to do that, he said - but he has also been looking at the taxi industry and the upstarts like Lyft and Uber. The competition angle sometimes doesn't get the attention it deserves, he said. "If there's a more open debate about it, that can only be a good thing."

One of the groups opposed to Tesla's direct sales is the National Automobile Dealers Association (NADA), which represents 16,000 new car and truck dealerships with about 32,000 domestic and international franchises. Jonathan Collegio, NADA vice president of public affairs, sent a statement to AutoblogGreen:

For consumers buying a new car today, the fierce competition between local dealers in a given market drives down prices both in and across brands – while if a factory owned all of its stores it could set prices and buyers would lose virtually all bargaining power. And buying a car isn't like buying a pair of shoes online. Cars require licensing to operate, insurance and financing to take home, and contain hazardous materials, so states are fully within their rights to protect consumers by standardizing the way cars are sold.

Tesla, unsurprisingly, says the FTC officers are on target. The automaker said in a statement to AutoblogGreen that, "We agree wholeheartedly with the FTC's conclusion that restricting Tesla's direct sales model is 'bad policy.'"

Reuters called what the three FTC officers wrote "unusual," but the FTC press officer we spoke with gave a softer spiel. She expanded on the disclaimer at the bottom of the blog post - which says, " The views expressed are their own, and do not necessarily reflect the opinion of the Commission or of any individual Commissioner" - and said that the thoughts were just something that was shared on the FTC blog, which is used by all of the staff members. The words and the ideas were not something that was voted on by the commission. Either way, if Musk really wants to take his fight against the dealership model nationwide, he's got some back-up.

For an excellent and short history of dealer laws in the US, listen to this.