Federal Trade Commission officials have weighed in for a second time on the war between Tesla and the auto dealers. In an 11-page letter that is summarized in the Competition Matters blog, a trio of senior FTC staffers wrote that a recently-passed Michigan law, which strengthens the requirement that automakers sell only through third-party dealers, restricts competition and reduces consumer choice.
“States should allow consumers to choose not only the cars they buy, but also how they buy them,” wrote the three. “A fundamental principle of competition is that consumers – not regulation – should determine what they buy and how they buy it. Consumers may benefit from the ability to buy cars directly from manufacturers.”
The letter is a response to a request from State Senator Darwin Booher, who has introduced a bill that would carve out an exception to Michigan’s law for a company called Elio Motors, which plans to build a high-mileage, enclosed three-wheeled vehicle, and wants to sell it directly to customers.
The FTC officials said that Booher’s bill doesn’t go far enough. “The narrow scope of the bill would largely perpetuate the current law’s protectionism for independent franchised dealers, to the detriment of Michigan car buyers. Blanket prohibitions on direct manufacturer sales to consumers are an anomaly within the larger economy. Most manufacturers and suppliers in other industries make decisions about how to design their distribution systems based on their own business considerations, responding to consumer demand. Many manufacturers choose some combination of direct sales and sales through independent retailers. Typically, no government intervention is needed to augment or alter these competitive dynamics – the market polices inefficient, unresponsive, or otherwise inadequate distribution practices on its own…Absent some legitimate public purpose, 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.”
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