Tesla Could Be Poised For Big Win: FTC To Hear Pros & Cons Of Franchise Laws

[rick]

I live in a state that bans service and sales centers (wisconsin--thanks scott walker--he also threw away high speed trains). One of the consequences is that I have to buy ranger service and pick up my next Tesla in another state. This costs me a significant amount of time and money. Not appreciated. Thankfully Tesla service has been impressive. rf

 

[Ed Hart]

I felt compelled to add my voice to the FTC invitation to comment. For what it is worth, this is what I submitted:

"The automobile dealer franchise laws are an anomaly in retail. The result today is that auto dealers have become "independent extensions" of auto manufacturers, enjoying unique legal protections within the distribution channels not always to the advantage of consumers, whose wellbeing is the FTC's chartered concern. To this consumer, America's car dealers have taken their privilege and political muscle even further, to an unwarranted ability to block the distribution plans of another manufacturer, only because that manufacturer's products use the same public highways.
I do not ask that the FTC rule against the existing auto dealer franchise laws; manufacturer and dealer are "settled" on those laws. I ask that the FTC find the means to prevent dealers, associations, manufacturers, plus state and local governments from blocking new business models by other manufacturers."

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But....if there is "restraint of trade" taking place (there surely is in this case), I believe the FTC has the ability to act.

It says in the article itself:
"The FTC is a federal agency, not a legislative body, so there's little direct action it could take to upend the longstanding state franchise model."

Unless a federal law is passed (which is not what FTC does), I don't think the situation will change significantly. It'll still be a state-by-state battle.

 

[stopcrazypp]

But....if there is "restraint of trade" taking place (there surely is in this case), I believe the FTC has the ability to act.

I'm not a lawyer, but this only seems to be related to contracts to not trade (mainly creating a monopoly through private contract). However, laws restraining trade are allowed (state laws creating a monopoly are allowed and there are plenty of examples of this, for example in telecom and power industries).
https://en.wikipedia.org/wiki/Restraint_of_trade

The only place where the federal government has power is if this interferes with interstate trade, but not allowing Tesla stores in a certain state does not really fit under that.

 

[Vince Cobelo]

Eh...it is the same issue over and over. Innovators displace and eventually get displaced themselves. Best example is Walmart displaces grocery and other local stores. Big uproar and in many cases Walmart is blocked from building stores. Walmart is being displaced by Amazon. Walmart has to use their ability to adapt and innovate to counter the Amazon business model.

But in the case of these dealers they will eventually lose. Unlike Walmart they are not using their strengths to adapt and innovate. Instead they are trying to block innovation and progress. Eventually that spells doom. Smart dealers will find a way to embrace the evolving direct to consumer model and provide showrooms and services. Eventually the government even has to recognize as Ed Hart said so eloquently it is not in the best interest of the consumer which the FTC is chartered to protect. If dealers cannot provide incremental value to the supply chain they will be displaced. Frankly I'm surprised it hasn't already happened.

 

[TNEVol]

There are special exemptions where state action will not be a restraint of trade. In the past there were many of these but most have been overturned. Utilities are a classic example of it being in the public interest to have a monoply (maybe no longer). Liquor and cigarette regulation are similar uses of the states authority to regulate in the health and morals? areas. However former state action areas such as milk pricing, optometric services and many others have been set aside. It sort of comes down to is there a legitimate state interest in facilitating a restraint of trade.

 

[Vince Cobelo]

Restraint of trade and legal monopoly is typically reserved for large infrastructure industries like utilities. But to protect independent businesses with nothing but a building is just lobbying by the big manufacturers so that it effectively creates a barrier of entry for new companies. As I understand it Toyota was a big investor initially helping Tesla by giving them a mothballed production facility. I wonder what would happen if Toyota were to encourage their dealerships in states like Michigan and New Jersey to showroom Tesla vehicles. Why not? Would they alienate the local population because they themselves are unwilling to accept change? Which is why states like Michigan and New Jersey are failing so miserably.

 

[SW2Fiddler]

The main and most important part is that our so called impartial texas lawmakers deliberately crafted an incentive that required purchase through an auto dealer.

Wait, who called them that? When?
Granted I could have missed it but you'd think the laughter would have been deafening.

 

[Chris TX]

I submitted my comment as #89. When I testified before the House Committee in Austin, it was a different scenario and I think Tesla's legal team could have done a better job at rallying and preparing things for local owners to speak.

 

[Chris TX]

Bump. We need to get this message out!

 

[stopcrazypp]

There are special exemptions where state action will not be a restraint of trade. In the past there were many of these but most have been overturned. Utilities are a classic example of it being in the public interest to have a monoply (maybe no longer). Liquor and cigarette regulation are similar uses of the states authority to regulate in the health and morals? areas. However former state action areas such as milk pricing, optometric services and many others have been set aside. It sort of comes down to is there a legitimate state interest in facilitating a restraint of trade.

I looked up your optometry example, and that FTC rule was overturned in the courts because it went beyond FTC authority.
https://www.washingtonpost.com/pb/a...ity&nid=menu_nav_accessibilityforscreenreader

 

[cpa]

There are special exemptions where state action will not be a restraint of trade. In the past there were many of these but most have been overturned. Utilities are a classic example of it being in the public interest to have a monoply (maybe no longer). Liquor and cigarette regulation are similar uses of the states authority to regulate in the health and morals? areas. However former state action areas such as milk pricing, optometric services and many others have been set aside. It sort of comes down to is there a legitimate state interest in facilitating a restraint of trade.

Yep in California from Repeal until the early 80s (if I recall correctly) all alcoholic beverages (>.5% ABV) were subject to fair trade sales prices. The wholesaler and the retailer (I was not privy to the manufacturer's rules) of such products had an absolute minimum price that the merchandise could be sold. Moreover, quantity discounts were restricted as well. We had to subscribe to a massive book that was published once per month to be able to look up the minimum price of any distilled spirits beverage. I believe this was litigated (by then I was no longer working at a liquor store) and the restrictions were determined either to be unconstitutional or in violation of anti-competitive laws.

Of course, in the days after Repeal, it was commonly accepted that the government had a "legitimate state interest in facilitating a restraint of trade" of alcohol.

 

[TNEVol]

I looked up your optometry example, and that FTC rule was overturned in the courts because it went beyond FTC authority.
https://www.washingtonpost.com/pb/a...ity&nid=menu_nav_accessibilityforscreenreader

Actually I should have clarified that it had to do with state laws regarding advertising by optometists. AOA v FTC remanded by the Court of Appeals. While I am listed as one of the Counsel for the States arguing for the state restrictions and even though in a way we won by the remand, we eventually lost the greater issue of the States ability to restrict honest advertising by optometrists. Just an aside 36 years later, the optometric regulation was in fact all about restraining competition and preventing competition such as Lenscrafters which we now accept as a normal practice. We are likely in a similar situation with car dealers where they have little evidence to support State action. However I think the utilities have a much stronger position which will support their monopoly for much longer. Just my old mans observations. I may live to see one of these.

 

[Chris TX]

FYI, this is going on now. Webcast link inside: Auto Regulation Workshop

I think this is going well for Tesla, but let's see if anything gets done.

 

[beegee]

Comment added! Here is the link again for those who wish to comment:
FTC to Host Public Workshop Examining the U.S. Auto Distribution System Workshop Will Explore Competition, State Regulations, and Emerging Trends in the Industry, Project No. P131202

 

[Electroman]

I see that it is a multi hour video with key notes and presentations. is there a site that gives a summary of how this all panned out as the day progressed?

 

[valuationmatters]

I am heavily short Tesla. But I do think it's unfair they cannot sell directly to an end customer in certain states. That is just plan anti-competitive. Car makers should have the freedom to sell direct, or use dealerships, or both. My short position is simply based on the stock price.

 

[TSLAopt]

I am heavily short Tesla. But I do think it's unfair they cannot sell directly to an end customer in certain states. That is just plan anti-competitive. Car makers should have the freedom to sell direct, or use dealerships, or both. My short position is simply based on the stock price.

Goodluck! You could be short anything in this market and make a killing (especially oil companies)

 

[PeterK]

I see that it is a multi hour video with key notes and presentations. is there a site that gives a summary of how this all panned out as the day progressed?

Yes, would be nice to see. I posted a comment last night as well.

 

[brucet999]

I live in a state that bans service and sales centers (wisconsin--thanks scott walker--he also threw away high speed trains).

Did I miss news that Scott Walker had vetoed a law to allow manufacturer-direct auto sales?

 

[chickensevil]

For what it's worth, autoblog posted some coverage of it. Tesla GC got in a really great statement slamming GMs actions.
This is why Tesla is so insistent on selling direct to customers

Tesla, GM now sniping at each other over EVs, dealer laws