Amid bans, Tesla’s direct sales are embraced by FTC officials
As several states side with auto dealerships and ban direct-to-consumer car sales, three top FTC officials call the laws “protectionist” and “bad policy.”
A handful of top Federal Trade Commission officials have sided with Tesla over whether the car company should be able to sell its vehicles directly to consumers.
Three officials announced Thursday that they oppose laws in states such as Arizona, Maryland, New Jersey, Texas, and Virginia that ban carmakers from bypassing auto dealers and selling straight to customers.
"Many state and local regulators have eliminated the direct purchasing option for consumers, by taking steps to protect existing middlemen from new competition," Andy Gavil, Debbie Feinstein, and Marty Gaynor wrote in a statement. "We believe this is bad policy for a number of reasons."
Such a move is unusual for FTC officials, the three employees said that these views are their own and not necessarily those of any FTC commissioners.
The beneficial reasons the officials give for allowing direct car sales include bringing new technologies to the market, stopping "protectionist" state laws, and increasing competition. They also say that with the advent of the Internet, the way people shop is different, therefore people should be able to buy cars in new ways too.
Most auto dealerships say that having middlemen is best for consumers because it creates competitive pricing and still allows for long-term service.
Over the past few months, Tesla has come up against new regulations in various states that ban the company from selling its Model S all-electric luxury sedan in their territory. In New Jersey, the ban went into effect on April 1. Despite not being able to sell its cars in New Jersey, Tesla still maintains a service center there for its Model S drivers.
"Regulators should differentiate between regulations that truly protect consumers and those that protect the regulated," the officials wrote. "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."
Tesla has applauded the position of the three FTC officials. A company spokesperson told CNET that the bans on direct-to-consumer sales aren't good for the industry.
"We agree wholeheartedly with the FTC's conclusion that restricting Tesla's direct sales model is 'bad policy,'" the spokesperson said.
Updated April 25 at 8:50 a.m. PT with comment from Tesla spokesperson.