Alongside executing its plan to bring the Tesla Model X electric SUV to market this fall, the ‘affordable’ next-generation Tesla Model ≡ to market some time in 2017 and of course, revolutionise the world of energy storage thanks to its new Tesla Energy products and massive Tesla Gigafactory, Californian firm Tesla Motors has been embroiled in a seemingly neverending battle with state legislators over its mall-based Tesla Stores.
Instead of selling its cars to customers through franchised auto dealers like the rest of the auto industry, Tesla prefers to sell its cars to customers direct through its wholly owned and operated Tesla Stores. That’s something which has upset auto dealer associations so much that many states have passed prohibitive measures designed to try and force Tesla to sell through third-party franchised dealers — or not sell in state.
In the case of Michigan’s auto dealer laws, the FTC says those laws are “likely harming” both “competition and consumers.”
In recent months, Tesla’s ongoing battle with state legislature after state legislature has started to turn a corner, helped in part by the efforts of both its legal team and its many thousands of eager and vocal fans from states as far apart as New Jersey and Mississippi to Colorado and Florida. Sometimes, those battles have been won by the writing of brand-new legislation. Sometimes, those battles have been won by court rulings. Sometimes, even a little compromise has made things palatable for both sides.
Not so in the state of Michigan, where Tesla lost it attempts to gain legal permission to operate Tesla stores there fell flat last fall. Home to Motor City and America’s Big Three automakers, state legislators wouldn’t budge when it came to granting Tesla dealer licenses.
But now the Federal Trade Commission — the U.S. governmental agency tasked with protecting the interests of American consumers — has stepped into the fray, calling Michigan’s franchise laws for auto dealers nothing less than “protectionism” for the established status quo of the auto industry.
While the FTC has no power to force states to change their law, it is required to stand up for the right of consumers. In the case of Michigan’s auto dealer laws, it says those laws are “likely harming” both “competition and consumers.”
In conclusion, it stated that “Michigan’s consumers would more fully benefit from a complete repeal of the prohibition on direct sales by all automakers.”
In its ideal world, all automakers — including the largest, most powerful ones — would be able to sell cars direct to consumers.
When dealer franchise laws were first written, they were a direct response to powerful automakers unfairly undercutting independent ‘mom and pop’ auto stores and showrooms, whose very livelihoods were threatened by greedy automakers keen to cut out the middleman.
But since those auto dealer franchise laws were first penned, the majority of auto dealers in the U.S. have themselves become powerful national or even multinational chains worth millions or even billions of dollars. Now, many are as guilty of price fixing now as automakers were when the laws were originally written.
That, argues the FTC, is why ending dealer franchise law is in the best interests of customers, sales people and the industry.
In addition to allowing customers choice over where they buy their car, doing so would also give automakers the ability to explore new sales methods not around when the original franchise laws were written, including Internet-based sales.
Given that there’s little you can’t buy on line, we’ve got to agree that ending franchise laws would help the auto industry catch up where the rest of the world’s commerce has been for a very long time.
Don’t you agree? Leave your thoughts in the comments below.
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