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Federal Trade Commission Speaks up Regarding Tesla Motors

FTC on ADAs and Tesla Motors "Hold Your Horses!"
FTC on ADAs and Tesla Motors “Hold Your Horses!”

Tesla Motors has no problem selling cars in California, China, or Germany, since direct sales are no problem in these places.

On the other hand, the situation is very different in Texas and New Jersey, and some other states, where direct sales by automakers to customers is prohibited. These laws have been in place for decades to protect the dealerships from competition with their own suppliers. Even in places where Tesla Motors has no dealerships, which is everywhere, because Tesla Motors has never sold a franchise, and doesn’t want to, the ADAs (Automobile Dealership Associations) have pushed for laws that specifically rule out Tesla Motors’ direct sales tactics.

The federal government has been quiet regarding these State squabbles, but this week three Federal Trade Commission (FTC) officials effectively told the ADAs they should just shut up and go back to protecting the dealerships and stifling competition. Sorry, that last part was mine. The ADAs assert that Tesla Motors’ direct sales will be bad for competition, and therefore, bad for the consumer. The reality is that the dealerships are just protecting their stranglehold on the automobile market. Their contention with Tesla Motors is really unfounded, perhaps more a show of fear than anything else.

Still, what could the ADAs possibly fear from Tesla Motors? According to the FTC, not much. From the FTC blog, these two quotes merit serious consideration by law makers and the ADAs who are pushing them. “Out of 15 million cars sold in the U.S. in 2013, Tesla accounted for a little over 22,000. This hardly presents a serious competitive threat to established dealers. … 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.”

Photo credit: sara~ / Foter / Creative Commons Attribution-ShareAlike 2.0 Generic (CC BY-SA 2.0)

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  1. LoneWolffe beepee  Yeah, why don’t they make money the old fashioned way “earn it” (through competition),  That’s what made America great – not being afraid to compete on a National or even Worldwide stage,

  2. beepee  big money and innovation have never really been on the same side. Tesla doing something different goes against every grain in their status-quo brains. interestingly, in spite of Tesla having such a small market share, the ADAs and automakers are seeing the threat that Tesla represents. instead of heading up innovation themselves, however, they prefer to try to squash Tesla, “framing mischief by decree,” as it were.

  3. In a nutshell  –  We come from a free enterprise base concept that should reward innovation through competition.   Sour grapes on GM, the FTC and the ADA.  I can remember when there were 8-10 U.S. auto manufacturers.  When some of those manufacturers disappeared, it wasn’t like tech companies gobbling and buying-up the lesser companies (along with their products), it was more like competition and beating the other guy to market with innovation.

    I perfectly understand the ADA, and I firmly believe that, beneath it all, the Govt is involved only because we can’t rely on businesses to always do what’s in the best interest of the consumers or the Country in general.

    Direct sales by Tesla (or by any other name) will be of little significance when auto manufacturers get off of their collective duff’s, and produce competitive EV’s on a large scale.  Of the Big Three, only Ford is putting forth and effort (though they’re basically making Toyotas).  But at least you’ve got choices within the ADA framework.  GM once had a 30% share in total U.S. sales, yet now they have 2 EV’s (ELR/Volt) and one TDI equivalent Diesel.

    The day when ADA associates begin funding recharging/battery swap stations, please, please let me know  –  or better yet, let me know when big oil begins growing veggies and refining veggie fuels.


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