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FTC Approves Tesla's Direct Sales Model
cartechboy (2660665) writes "We've all read about Tesla and the ongoing battles its having with different dealer associations. Basically, dealer associations aren't too pleased about the Silicon Valley startup's direct sales model. Today the FTC has had made a statement on the matter and it's actually in favor of Tesla's direct sales model. 'In this case and others, many state and local regulators have eliminated the direct purchasing option for consumers, by taking steps to protect existing middlemen from new competition. We believe this is bad policy for a number of reasons,' wrote Andy Gavil, Debbie Feinstein, and Marty Gaynor in the FTC's 'Who decides how consumers should shop?' posting to the Competition Matters blog. The FTC appears to take issue not with those laws, but with how they're being used, and with the direct-sales bans being passed in several states. Now the only real question is how long will it be before Tesla prevails in all states?"
To be clear, FTA staff wrote a blog posting in which they approve of new ways in which consumers can shop for goods. They have not approved any new regulations related to Tesla. The summary is accurate, but the headline is a little off.
So, this doesn't sound binding, nor explicit. If the statement was "state laws restricting interstate commerce are unconstitutional, and anyone enforcing those laws will be taken to court by the US government" then it might mean something, but "we think its bad policy" means nothing. Socks with sandals is bad policy, but that doesn't mean the FTC will do anything about it.
Learn to love Alaska
I'm from Seattle, you insensitive clod!
There's no place I could be, since I've found Serenity...
Frankly the stakes are so high that i would not be shocked to see murders in an effort to shut down Tesla. We all need Tesla to succeed big time. The powers that be would do far better to develop a cheaper, better, electric car in order to compete with Tesla than playing all kinds of negative games trying to do Tesla harm. Change is upon us all and there are times when change can sting us all a bit. That does not mean we should get all negative and perverted in our responses to change.
Thus several laws were passed to protect the car dealer from to much pressurer by the manufacturer, and one important detail was forbidding car manufacturers to operate their own dealerships in competition to the independent dealer. But Tesla Motors doesn't even sell via independent car dealers, thus they aren't in competition to dealers of their own products. In this case, all the laws passed to protect independent dealerships from too much leverage of their own supplier don't make sense, as there is exactly zero pressure from Tesla to its dealerships, as as there are none.
this is a product designed for the 0.0001%.
Come on now...
Society worldwide is changing towards renewable energy. While Tesla's cars might not be perfect right now, they are a step in the right direction. It is so hard to go up against an established industry, especially when they have such large lobbying budgets. I hope you can understand that this isn't just about Tesla, it's about new businesses being able to compete.
And for the 0.0001% give me a break. These cars may be expensive and considered a luxury item, but it doesn't mean they cannot be afforded by middle to upper middle class. Also, new technology is expensive, that's how it works. If they don't sell any new cars due to archaic laws, how do you expect the price to drop?
This topic is very interesting to watch unfold, and I think many slashdotters would agree with me.
I'm not sure why this "pressure" that car manufacturers put on dealers is a bad thing. They manufacture the product, and if they have the leverage to dictate how it will be sold, good for them. I'm not sure what compelling state interest is served by artificially restricting the way manufacturers can sell their cars.
I don't think anyone has a god given right to be a dealer and sell someone else's cars. Sure, it sucks to be a dealer who has no choice but to agree to a car manufacturer's conditions...but so what? Life is tough...
100 years ago wasn't the alternative a horse?
Not to say the horse wasn't an alternative (it still is, really), but the modern automobile dates from ca 1886. Mass production started as early as 1902. The first truly affordable model (Ford Model T) didn't come out until 1927, but since we're talking about Teslas, we're not really comparing to "affordable" cars. Yeah, I know, the economics behind an electric vehicle are a bit different, but it's still a fairly huge expenditure.
Thus to answer your question: Yes, 100 years back sounds about right.
If there was a group that benefitted financially by the presence of start button, and it lobbied state governments to prevent Microsoft from taking it away then you would have the comparison right and you realize how ridiculous it is.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
The reasons all these states have this law related to cars is because they are big purchase items and based on past problems they are requiring that the purchaser has some in state method of getting the product fix or for resolving problems.
That is a typically stupid thing to say on slashdot. The reason that all these states have these laws is massive lobbying. If the goal were to protect the consumer, then all of these states would mandate that repair information down to every last OBD-II code or similar (all the info needed to reprogram and/or recode all the modules) would be available to the purchaser of the vehicle, and that they could freely redistribute it to anyone who was working on the vehicle. That's not the laws we have. Instead, we have protectionist laws which actually screw the customer, by preventing competition. The laws are actually for the opposite purpose that you think; they're there to make it harder to service your vehicle, so that its value depreciates more rapidly, and you are forced to buy another one before it can no longer be repaired because it can no longer practically be repaired.
Why is there so much about tesla anyways this is a product designed for the 0.0001%.
You must be new here.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
No, that doesn't make sense. Because you are saying that New Jersey cannot regulate sales of cars in their own state because of where they are made.
New Jersey should NOT have the right to restrict a citizen from purchasing a product made in another state (or even within New Jersey) in order to protect an unnecessary middleman in the transaction. That is what is happening here. The laws are not in place to protect citizens, they are in place to protect dealers and their frankly obsolete business model.
The model T was introduced in1909, 1927 was the end of it's run.
That's a pretty small market segment, 0.0001% of 330 million US citizens comes out to a few thousand Teslas.
BTW, the Tesla 'S' lists for just under $60K/year, it isn't that much more than a well-equipped Chevy Suburban or imported SUV (Mercedes, BMW, Land Rover). Based on combined sales volumes, that may put it squarely in the 10%er's price range...
Ken
I'm firmly on the side of allowing Tesla to try out an unconventional sales model, but what does happen, exactly, when your Tesla needs service? Are you supposed to handle in-warranty service using the standard electronics model - request an RMA, mail your car in to Moonachie, NJ, and then wait several weeks? Conventional dealerships are used by many buyers as a trusted service base, and this is especially going to be true for the early adopters who are buying Teslas now.
And since it will be years before regular garage mechanics will be able to work on Teslas, how does the company intend to handle road service and after-warranty service?
The E will be cheaper, targeting $30k range. They had a $45k target S, which I believe became the E.
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What this means is that the FTC does not like these laws, but it does not have any authority to intervene because Congress has not actually passed any laws regulating this sort of thing. Congress did not delegate its constitutional authority to regulate interstate commerce (and I would argue that it cannot without amending the Constitution). Congress delegated the authority to enforce the laws it has passed regulating interstate commerce to the FTC. If Congress has not passed a law on this, the FTC has no authority to regulate it. If Congress has passed such a law, the FTC would already be regulating it.
The truth is that all men having power ought to be mistrusted. James Madison
Tesla can sell all the cars they want, as long as they use local dealers to do so. Therefore interstate commerce is not prohibited.
True but like many laws whose time has come and gone the market has changed and there is no reasonable argument that can be made against Telsa selling direct if they want to do so. I think this might simply be one of those cases where the law no longer was appropriate but no one had a sufficient economic interest to want to bother challenging it. Tesla does and they have a good case.
Controlled substances can only be sold through pharmacies by licensed pharmacists.
That is because there is a compelling public safety concern regarding the distribution of drugs. Middlemen are useful in basically two cases: 1) for connecting buyers with sellers when they would otherwise be unable to meet efficiently and 2) for controlling distribution of a product where there is a significant public safety or public economic concern. Both apply to the sale of pharmaceuticals. Dealing with drug manufacturers directly would be both difficult for consumers as well as introduce some pretty serious public safety issues.
And new cars can only be sold through local car dealerships.
Car dealers sometimes are helpful in connecting buyers to sellers but most car manufacturers are big enough that they are not really necessary for new vehicles unless the car manufacturer doesn't care to be bothered. Car dealers certainly serve no compelling public safety or public economic interest. Originally car dealers were necessary for car manufacturers to reach the public because many years ago they lacked the resources to run their own distribution network. Now they frankly are something of an anachronism that is no longer really needed but they've managed to get some laws passed protecting their little financial nest and won't give it up without a fight.
There's not a lot of new laws being passed that prohibit this distribution model. Rather, most states long ago prohibited the direct distribution model because automakers had a tendency to use dealerships to create a market in a region, then drop into the market with a factory-owned distributor killing the local dealership. This was deemed to be an unfair business practice, and states were happy to provide protectionist laws favoring the local guys over the Detroit manufacturers.
Tesla is newly getting hoisted by those laws, but generally speaking the laws themselves are pretty much old laws. IOW, these laws are not new laws being passed by anti-Tesla, anti-green, pro-pollution, what have you today. Until the legislatures change the laws, they will need to continue to be enforced. After all, those laws are just trying to make sure the business practices are "fair".
This is not about Tesla or electric cars. This is 100% about the protectionist laws in place in most states requiring cars to be sold through independent dealerships with layers of legal assistance against the power of the manufacturers to arbitrarily make changes that would negatively impact dealers. These were sought out because the evil corporate giants at Ford and GM kept sticking it to the little guys. So the solution was: government control!
Back in the day, cars were sold directly by the manufacturers. At some point though, between 1900 and 1920 the realized that selling through dealerships had a lot of benefits. "The irony in all this is that G.M. and Ford adopted the dealer system because they thought it would make their lives easier. A dealer who owned his own business would work harder than a mere employee, the thinking went, and would not require a lot of outside monitoring."
"...historically, the automakers were not good partners. In 1920, for instance, the U.S. economy went into a deep recession. But Henry Ford kept his factories running at full tilt, and forced thousands of Ford dealers around the country to buy new cars that they had little chance of selling. The dealers knew that if they said no they’d never see a Model T again, so they ate the inventory. A decade later, when the Great Depression hit, Ford and G.M. used the same strategy to help keep the production lines going. They turned their dealers into a cushion against hard times.
In the long term, this was a disastrous tactic, because it inspired mistrustful dealers to look to the government for help. (The first franchise law was passed in 1937.) Dealers recognized that much about their businesses was always going to be out of their control—automakers not only decide what cars get made but also dictate sales strategies and incentive plans. So they decided to protect what they could, using laws to insulate themselves from competition and from the risk of being dropped by the manufacturer. And that’s what has made life so hard for the automakers today. ...in the late nineties, both G.M. and Ford tried to start buying up dealerships. But, at this point, the system is self-protecting; dealers revolted, state regulators started nosing about, and the automakers gave up. They made a devil’s bargain some eighty years ago, and now they’re stuck with it.
[http://www.newyorker.com/archive/2006/09/04/060904ta_talk_surowiecki]