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ARS Technica – FTC doubles down on direct auto sales, says “it’s not just about Tesla”

FTC doubles down on direct auto sales, says “it’s not just about Tesla”

SOURCE: ARS Technica


Multiple directors at the Federal Trade Commission have put their name on a new blog post on the FTC’s site, calling for states to reexamine both current and upcoming legislation around how cars are sold. Most states make it difficult for manufacturers to sell directly to consumers, forcing would-be car buyers to buy from third-party dealers. The FTC’s post flatly states that “consumers would be better served if the choice of distribution method were left to motor vehicle manufacturers and the consumers to whom they sell their products.”

Unlike most other countries in the world, new car sales in the United States are almost exclusively required to be done through independent dealerships as opposed to the manufacturer being able to sell directly to a consumer. The ostensible reason for this is to prevent manufacturers from colluding and controlling the price of automobiles; it also funnels a tremendous amount of revenue into locally owned businesses rather than directly to the manufacturers. Though the original intent of state laws mandating the dealership buying experience might have been valid, the FTC contends that they have long since outlived their usefulness to consumers.

This isn’t the first time the FTC has expressed its displeasure with the current car buying landscape via a blog post—the agency said much the same thing last April. Last time, the FTC called state laws requiring consumers to buy from dealers “protectionist” and the reasoning behind them “unsupported.” This time, the FTC is taking somewhat of a broader tack.

Because of the company’s high profile and founder Elon Musk’s famously militant anti-dealer stance, discussions of direct-to-consumer auto sales are usually centered on Tesla Motors. Now, though, the FTC is bringing up other manufacturers that have expressed a desire to bypass the entrenched dealer model and sell directly to customers—companies like Elio Motors, which wants to market its three-wheeled $6,800 “car” without relying on a system of dealers. And the FTC says that there’s no reason Elio should have to.

“Protecting dealers from abuses by manufacturers does not justify a blanket prohibition like that in the current Michigan law, which extends to all vehicle manufacturers, even those like Tesla and Elio who have no interest in entering into a franchise agreement with any dealer,” says the blog post.

The dealership model has its supporters—most of whom are car dealers or their lobbyists. Trade groups like the National Automobile Dealers Association are spending time and effort attempting to convince consumers that the current model of obfuscatory pricing, predatory sales tactics, bargaining, and haggling is really awesome for consumers; state lobbying groups are also putting in tremendous amounts of money ensuring legislation passes that maintains the status quo. In Texas, for example, Texas Monthly reporter Paul Burka opined that Tesla lost its 2013 legislative push because it simply didn’t spend enough money on lobbyists. This year, Tesla is reportedly spending up to $1.18 million on 21 lobbyists to fight against the auto dealer associations’ own lobbyists.

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