Feds Tell States to Stop Picking on Tesla

FTC officials says laws protecting car dealers hurt competition and consumers.

People look at a Tesla Motors vehicle on the showroom floor at the Dadeland Mall on February 19, 2014 in Miami, Florida. Tesla said today it earned $46 million in the fourth quarter on a non-adjusted basis, or 33 cents a share, causing shares in the company to jump 12 percent.
National Journal
Laura Ryan
See more stories about...
Laura Ryan
April 24, 2014, 1:43 p.m.

Fed­er­al reg­u­lat­ors want auto deal­ers and state law­makers to play nice with Tesla.

The Cali­for­nia-based car man­u­fac­turer prides it­self on sleek show­rooms and white-glove ser­vice to sell its elec­tric sports cars, which start at $70,000. 

But Tesla’s prac­tice of selling its elec­tric vehicles dir­ectly to con­sumers has made the young car­maker un­pop­u­lar with auto deal­ers, who say the com­pany is vi­ol­at­ing many loc­al and state fran­chise laws meant to en­cour­age com­pet­i­tion.

Seni­or of­fi­cials at the Fed­er­al Trade Com­mis­sion dis­agree, say­ing in a blog post Thursday that these laws are bad for con­sumers and com­pet­i­tion. Con­sumer choice about where to shop is just as im­port­ant as what to buy, ac­cord­ing to the post. 

“We hope law­makers will re­cog­nize ef­forts by auto deal­ers and oth­ers to bar new sources of com­pet­i­tion for what they are — ex­pres­sions of a lack of con­fid­ence in the com­pet­it­ive pro­cess that can only make con­sumers worse off,” 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 at the FTC, wrote in the blog post, not­ing that the opin­ion rep­res­en­ted their views and not ne­ces­sar­ily the com­mis­sion’s.

They also point out that Tesla is hardly a threat”“only 22,000 of the 15 mil­lion cars sold in the U.S. in 2013 were Teslas, ac­cord­ing to the post.

The fran­chise sys­tem of in­de­pend­ently owned and op­er­ated car deal­er­ships dates back to the auto­mobile’s early years, when auto man­u­fac­tur­ers used in­de­pend­ent deal­ers to jump-start sales around the coun­try. As the auto­mobile in­dustry ma­tured, states ad­op­ted laws to pro­tect deal­ers from “ab­us­ive prac­tices” by man­u­fac­tur­ers.

But these laws have be­come “pro­tec­tion­ist” in­stead of “pro­tect­ing,” ac­cord­ing to the FTC of­fi­cials.

This feud between Tesla and auto­mobile sales­men came to a head last month when New Jer­sey’s Mo­tor Vehicle’s Com­mis­sion ad­op­ted a new reg­u­la­tion that re­quires every car deal­er­ship to op­er­ate as a fran­chise, ef­fect­ively block­ing the Tesla sales in the state.

“The ra­tionale giv­en for the reg­u­la­tion change that re­quires auto com­pan­ies to sell through deal­ers is that it en­sures ‘con­sumer pro­tec­tion,’ ” Tesla CEO Elon Musk wrote in re­sponse to New Jer­sey’s move. “If you be­lieve this, Gov. Christie has a bridge clos­ure he wants to sell you!”

Tesla is ap­peal­ing New Jer­sey’s ban, and dir­ect sales of Tesla are blocked in a hand­full of oth­er states, in­clud­ing Ari­zona and Texas. 

What We're Following See More »
WORDS AND PICTURES
White House Looks Back on bin Laden Mission
3 hours ago
WHY WE CARE
NO BATTLE OVER SEATTLE
SCOTUS Won’t Hear Appeal of Minimum-Wage Law
4 hours ago
THE DETAILS

"The U.S. Supreme Court on Monday rejected a sweeping constitutional challenge to Seattle’s minimum wage law, in what could have been a test case for future legal attacks on similar measures across the country. In a one-line order, the justices declined to hear a case by the International Franchise Association and a group of Seattle franchisees, which had said in court papers that the city’s gradual wage increase to $15 discriminates against them in a way that violates the Constitution’s commerce clause."

Source:
DOWN TO THE WIRE
Sanders Looks to Right the Ship in Indiana
4 hours ago
THE LATEST

Hillary Clinton may have the Democratic nomination sewn up, but Bernie Sanders apparently isn't buying it. Buoyed by a poll showing them in a "virtual tie," Sanders is "holding three rallies on the final day before the state primary and hoping to pull off a win after a tough week of election losses and campaign layoffs." 

Source:
CONSTITUTIONAL CONVENTION IN JUNE
DC to Release Draft Constitution as Part of Statehood Push
5 hours ago
WHY WE CARE

"The New Columbia Statehood Commission—composed of five District leaders including Mayor Muriel Bowser, D.C. Council Chairman Phil Mendelson, and D.C.'s congressional delegation—voted today to publicly release a draft of a new constitution for an eventual state next Friday, at the Lincoln Cottage." It's the first step in a statehood push this year that will include a constitutional convention in June and a referendum in November.

Source:
ALZHEIMER’S OUTCRY
Will Ferrell Bails on Reagan Movie
5 hours ago
THE LATEST

Amid outcry by President Reagan's children, actor Will Ferrell has pulled out of a movie that makes light of Reagan's Alzheimer's disease. A spokesperson for Ferrell said, “The ‘Reagan’ script is one of a number of scripts that had been submitted to Will Ferrell which he had considered. While it is by no means an ‘Alzheimer’s comedy’ as has been suggested, Mr. Ferrell is not pursuing this project."

Source:
×