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?"

Comments

FTA commented, not approved

[Noah Haders]

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.

Re:FTA commented, not approved

[Talderas]

The Fed isn't required to do anything. They're only given permission to do so.

Re:FTA commented, not approved

[i kan reed]

But states are explicitly denied the power for that regulation, by the de facto interpretation of the 10th amendment.

Re:FTA commented, not approved

[whoever57]

This is about how the cars can be sold within a given state. So yes it does have a State's rights aspect and is in the State's rights to pass such laws as they see fit until such a time as it is contested and ruled on by the state's supreme court and/or SCOTUS

You know that the SCOTUS has already ruled that wheat grown by a farmer for his own consumption can be regulated by the Feds and that weed grown by an individual in his garden for his own consumption can be regulated by the Feds, right? Also, think about the last time you went to a pharmacy to fill a prescription -- the laws governing what requires a prescription are federal laws.

The SCOTUS has gutted the interstate commerce clause, allowing it be applied to almost anything.

Re:FTA commented, not approved

[ColdSam]

Adjusting their position every 70 years? This kind of flip-flopping would not have been tolerated in the George W. Bush administration.

Re:FTA commented, not approved

[Tokolosh]

No state prevents you from buying a Tesla from out of state, because that is the prerogative of the federal government, as you say.

However, a state CAN regulate commerce within its borders, as they do with car dealerships.

However, it is my contention that laws and regulations should be enacted and enforced from the bottom up - neighborhood, city, county, state, federal level. BUT, rights and freedoms, which are inherent, should be protected by everyone, top-down if needed. This means that the federal government is entitled to step in if a local school board decides to exclude black student.

So I assert the human right to conduct business/speech with whoever I want, wherever I want, wherever I want - and that includes directly with Tesla in a different state.

What does it mean?

[AK Marc]

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.

Re:What does it mean?

[EmperorArthur]

Per the US constitution the Federal Government has the power to regulate interstate commerce. If they said that laws preventing direct marketing of interstate goods were unenforceable because it falls within the Fed's purview then many more laws would probably be affected. If they don't then it looks like the FTC is favoring Tesla. The only thing it wouldn't apply to is Alcohol, because the 21st amendment specifically gave the states the right to stop it from coming in.

Re:What does it mean?

[mosb1000]

Think of it as a warning shot. They're letting state legislatures know that they don't approve of these bans, so the local governments will have a chance to decide now whether they will back down or fight. Any court battle with the feds would be un-winnable, since the constitution clearly gives the feds the authority to set policy in this matter. By changing their rules now, the can avoid new federal rules and maintain some level of control over car sales in their state.

Re:What does it mean?

[rolfwind]

From an amateur understanding, interstate commerce as originally meant in the constitution meant that states couldn't stop traffic, i.e. Virginia couldn't stop commerce traffic intended for Maryland from North Carolina by instituting a tax or some such aimed soley at these merchants. Exactly how it sound, interstate commerce, between states.

Now, interstate commerce has been twisted in past decades to mean some really weird shit, which is how the feds control drugs that can be grown in one state and will never necessarily leave it....

But I don't see how a state saying how things must be sold in itself is interfering in interstate commerce. That's solely intrastate commerce. It's not a law targeted at soley out of state manufacturers by design (even if that ends up being the case) and it applicable to all makers.

Let be clear that I don't support the law, but this reading of the constition is strange and what allows the Feds to overstep all bounds.

Re:What does it mean?

[ElBeano]

Where are Teslas made? How is prohibiting direct sales NOT interfering in interstate commerce in states where they are attempting sales?

Socks with sandals is a bad policy?

[cbhacking]

I'm from Seattle, you insensitive clod!

Thank God

[JimSadler]

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.

Re:Thank God

[NoZart]

Sadly, a big part of the population is very change-averse, because routine/conditioning is easier than adapting to new situations. Maybe this is evolutionary, because short term it's more "energy efficient".

Just look at the whole start-button thing with windows 8. While nearly everyone STILL argues around this little change and how bad it is because the old Startmenu is just the way how things were done for 20 years (which really is the only real argument, as all others are straw men), it really is an improvement in several ways IF one takes the time to adapt to work with it. Yet, even intellectually competent people bash it because it's just CHANGE.

And as this change-averseness (?) is not restricted to the "lower classes" but runs through the whole population, the stupid people will groan at the effort they have to make (and due to mass, loudly) and the intelligent ones will make the decisions to keep things the way they are....

Re:Thank God

[Blymie]

But they are developing their electric own cars. All car manufacturers are.

The lobbying is a tool they are using, the laws, to hold back Telsa until they have a suitably competitive product to sell.

Once that happens, it won't matter is a Telsa can sell direct ... the big boys can crush them with advertising and normal market pressure.

Re:Thank God

[rezme]

I'd disagree with the comparison to Windows 8. If you must use the start button debate as a point of reference, a more apt analogy would be if Tesla were to change the pedal style accelerator (the standard interface to "go" in a car ever since cars started being built) with a trigger mounted to the steering wheel. Changing the guts under the hood in Windows wouldn't be a complaint for most people (barring major issues in how the OS performed as a result) but changing the interface that has been the standard for 20 years on a desktop computer is idiocy. It's not change for improvement's sake (as with Tesla's advancing powerplant technology) but rather change for the sake of change alone, without any appreciable improvement in efficiency in the operation of the product. Metro works fine for touch based devices, but not all desktop/laptops are touch, and to be frank touch interfaces are far less efficient than a mouse in a desktop environment. Who wants to sit at their desk with their hands on the keyboard and, when needing to interact with the GUI, have to reach up and touch the monitor rather than moving their hand over a few inches to move the mouse.

Re:Thank God

[MichaelSmith]

Did I just read a computer analogy in an article about cars?

Re:Thank God

[Smallpond]

The manufacturers are pretending to develop electric cars. They have an interest in preserving the status quo. When GM first developed an electric concept car, they named it the "Impact". It's hard to imagine a scarier name for a small, light-weight car. They cancelled the EV-1 despite the customers who loved it.

Re:or

[Sique]

You could actually read the blog post referenced in TFA, then you would know about the background. At first, car manufacturers were relying on local dealers to reach consumers, as 100 years ago, there were not much alternatives. But the manufacturer as the sole source of the product, the dealer was selling had much leverage in pressuring the car dealers to act in ways that benefitted the manufacturer but not the dealer (e.g. pressuring him to list certain cars for specified prices, unlist others, offer certain services etc.pp.), by threatening e.g. to open another car dealership in the vincinity, giving better conditions to dealers that agreed to the conditions etc.pp.

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.

Re:Will not matter.

[davidhoude]

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.

Re:or

[bhagwad]

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.

Re:or

[bhagwad]

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...

Consumer change aversion != scheming by lobby

[140Mandak262Jamuna]

Please do not conflate these two issues. On one hand consumers, or a section of consumers are change averse. On the other hand established interests are lobbying to preserve their stranglehold on the market by putting road blocks to competition. These two are not the same.

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.

Re:Will not matter.

[drinkypoo]

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.

Re: Will not matter.

[kenh]

"this is a product designed for the 0.0001%"

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...

What this means

[Attila Dimedici]

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.