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Transportation Businesses

FTC Approves Tesla's Direct Sales Model 328

Posted by samzenpus from the sell-how-you-want dept.
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?"
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FTC Approves Tesla's Direct Sales Model More

FTC Approves Tesla's Direct Sales Model

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  • FTA commented, not approved (Score:5, Informative)

    by Noah Haders ( 3621429 ) on Friday April 25, 2014 @02:19AM (#46838951)
    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: (Score:3, Interesting)

      by flyneye ( 84093 )

      To be clear, once the FTC would approve this, it would knock over the first domino to this in ANY state. Last time I looked, the Fed is Constitutionally required to regulate trade between the states. This isnt going to be a matter of states rights and wont be their decision.

      • Re:FTA commented, not approved (Score:4, Insightful)

        by Talderas ( 1212466 ) on Friday April 25, 2014 @06:30AM (#46839625)

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

      • Last time I looked, the Fed is Constitutionally required to regulate trade between the states. This isnt going to be a matter of states rights and wont be their decision.

        There is no such requirement. They are just granted the power to do so.

        Furthermore this is about trade/sales within the state. None of these laws prevent you from buying a Tesla in another state and then taking it back to and registering it in your home state. 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/

        • Re:FTA commented, not approved (Score:4, Informative)

          by whoever57 ( 658626 ) on Friday April 25, 2014 @09:58AM (#46840961) Journal

          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 (Score:4, Insightful)

        by Tokolosh ( 1256448 ) on Friday April 25, 2014 @11:55AM (#46842193)

        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? (Score:4, Interesting)

    by AK Marc ( 707885 ) on Friday April 25, 2014 @02:23AM (#46838969)
    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.

    • I'm from Seattle, you insensitive clod!

    • Re:What does it mean? (Score:5, Interesting)

      by EmperorArthur ( 1113223 ) on Friday April 25, 2014 @02:55AM (#46839023)

      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.

      • 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.

        It doesn't matter if it applies to Alcohol. The constitution gives the federal government the right to regulate commerce, and the 21st amendment is how it chose to handle alcohol. That is the federal government regulating interstate commerce of alcohol!

    • Re:What does it mean? (Score:5, Interesting)

      by mosb1000 ( 710161 ) <mosb1000@mac.com> on Friday April 25, 2014 @03:20AM (#46839077)

      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? (Score:4, Insightful)

        by rolfwind ( 528248 ) on Friday April 25, 2014 @04:08AM (#46839227)

        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? (Score:5, Insightful)

          by ElBeano ( 570883 ) on Friday April 25, 2014 @04:17AM (#46839239)
          Where are Teslas made? How is prohibiting direct sales NOT interfering in interstate commerce in states where they are attempting sales?

          • How? By not prohibiting the sale itself, only who is making the sale. Tesla can sell all the cars they want, as long as they use local dealers to do so. Therefore interstate commerce is not prohibited. Still a dumb law, but I don't see anything here that makes it unconstitutional or federal.

            Controlled substances can only be sold through pharmacies by licensed pharmacists. And new cars can only be sold through local car dealerships. Now why only local car dealerships should be allowed to sell cars, or

            • Tesla can sell all the cars they want, as long as they use local dealers to do so. Therefore interstate commerce is not prohibited.

              True but like many laws whose time has come and gone the market has changed and there is no reasonable argument that can be made against Telsa selling direct if they want to do so. I think this might simply be one of those cases where the law no longer was appropriate but no one had a sufficient economic interest to want to bother challenging it. Tesla does and they have a good case.

              Controlled substances can only be sold through pharmacies by licensed pharmacists.

              That is because there is a compelling public safety concern regarding the distribution of drugs. Middlemen are useful in ba

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

            Because saying "you have to sell that this way" isn't the same as saying "you can't sell that here," or "you have to pay a special tax if you want to transport goods through our state."

            Otherwise, California would not be able to, say, restrict the sale of certain firearms that are legal in other states.

            • Effectively, they can't sell it. Their business model is afflicted by conflict of interest in that way, or by onerous requirements. It's like if you said they could only sell by direct line to God to relay prayer for a Tesla.

              • Effectively, they can't sell it.

                Why? Is there some law against Tesla opening dealerships?

                No, really, I don't understand why that's such an impossible business model for them to adopt. Is it a logistics issue? Lack of funding? Ego problem? Help me out here.

                • Because allowing a state to say "you're allowed to sell it, as long as you sell it this way" is effectively the same as allowing a state to say "you're not allowed to sell it", because then the state can say "you're allowed to sell it, as long as you sell it on the 29th of February, in the cellar, with the lights off, with no stairs to the cellar, with all produce hidden in a locked filing cabinet, stuck in a disused lavatory, with a sign on the door saying 'Beware of the Leopard'".

        • The clause states that the United States Congress shall have power "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." That doesn't sound like they're just talking about goods passing through states that aren't a party to the trade to me. To me it sounds like they're definitely saying the feds have the authority to make rules about how car made in California can be sold sold in New Jersey.

          • No, that doesn't make sense. Because you are saying that New Jersey cannot regulate sales of cars in their own state because of where they are made.

            Or did the longstanding rules (much older than NJ rules) in several of these states become unconstitutional because they apply to Tesla where before they only applied to Detroit/Japan/etc?

            • Re: (Score:2)

              by swb ( 14022 )

              I think it's just extremely broad and could mean anything and I think the courts have generally sided with the Feds when they decided to invoke the commerce clause.

            • Re: (Score:2)

              by ElBeano ( 570883 )

              No, that doesn't make sense. Because you are saying that New Jersey cannot regulate sales of cars in their own state because of where they are made.

              Or did the longstanding rules (much older than NJ rules) in several of these states become unconstitutional because they apply to Tesla where before they only applied to Detroit/Japan/etc?

              Is there any sale more basic than a direct sale? How can banning such a sale, for vehicles made in another state, not be interfering with interstate commerce? Were Teslas actually made in NJ, the laws prohibiting direct sales would not be interfering. So, you are correct that the state of manufacture is relevant, but for opposite the reason your suggesting. As to cars made in another country? This is irrelevant to the matter at hand.

            • No, that doesn't make sense. Because you are saying that New Jersey cannot regulate sales of cars in their own state because of where they are made.

              New Jersey should NOT have the right to restrict a citizen from purchasing a product made in another state (or even within New Jersey) in order to protect an unnecessary middleman in the transaction. That is what is happening here. The laws are not in place to protect citizens, they are in place to protect dealers and their frankly obsolete business model.

              • No, that doesn't make sense. Because you are saying that New Jersey cannot regulate sales of cars in their own state because of where they are made.

                New Jersey should NOT have the right to restrict a citizen from purchasing a product made in another state (or even within New Jersey) in order to protect an unnecessary middleman in the transaction. That is what is happening here. The laws are not in place to protect citizens, they are in place to protect dealers and their frankly obsolete business model.

                By that logic, California shouldn't have the right to restrict a citizen from purchasing a firearm made in another state.

                I'd bet dollars against pesos that at least some of the people arguing for Tesla's "right" to direct sales in other states would also argue against the firearms manufacturers "right" to direct sales in CA.

                • That depends on if firearms are contraband in California or if you're simply not allowed to purchase out-of-state firearms.

                  • That depends on if firearms are contraband in California or if you're simply not allowed to purchase out-of-state firearms.

                    Oh, you can buy out-of-state firearms in CA, but you have to buy them from a registered dealer - all private sales of firearms are illegal in CA.

                    Which parallels this situation quite well.

            • Or did the longstanding rules (much older than NJ rules) in several of these states become unconstitutional because they apply to Tesla where before they only applied to Detroit/Japan/etc?

              Just because it's longstanding doesn't mean it's constitutional or right. See the Pledge for example. Unconstitutional since 1954, but it remains because various courts keep finding ways to drop the cases on technicalities rather than actually making a decision on the issue.

          • Yes, but has Congress passed any laws regulating this? That clause does NOT give the FTC any authority whatsoever, in as much as that clause gives authority to the federal government, it gives that authority to Congress. Until Congress passes a law on the subject, the FTC has no authority to make a rule.

            • You're wrong, actually. Congressional and/or constitutional law created the conditions warranting enforcement of some trade behavior. The Executive branch then executes the law by issuing an Executive Order to establish the FTC. The FTC is now the official executive arm of the Federal Government's rule over interstate commerce; until Congress passes a law to narrow the authority of the FTC, the FTC has every authority to make any rule falling under the purview of its charter.

              • Except that this is NOT under the FTC's current charter. Just because it is called the Federal Trade Commission does not mean that it has been given carte blanche to regulate all trade anymore than the Federal Communication Commission has authority to regulate all communication. Both of their charters are broad enough for either of them to issue regulations related to laws passed by Congress which were not part of their original charter (although in most cases, Congress has actually designated that role to

        • Consider healthcare coverage (I'm sorry, but it is an easily accessible example) - by law health insurance can not be sold across state lines yet the federal government has in the last few years exerted tremendous regulatory control over this market.

          Somehow it was argued that the individual that chooses not to buy health insurance coverage has as great, if not greater, impact on the healthcare market as the individual that actually participates in the healthcare market...

          • Consider healthcare coverage (I'm sorry, but it is an easily accessible example) - by law health insurance can not be sold across state lines yet the federal government has in the last few years exerted tremendous regulatory control over this market.

            Somehow it was argued that the individual that chooses not to buy health insurance coverage has as great, if not greater, impact on the healthcare market as the individual that actually participates in the healthcare market...

            You think that's an unreasonable application of the Commerce Clause? Go read the Wiki page for Wickard v Filburn. [wikipedia.org]

            It'll blow your friggin' mind.

      • The constitution gives Congress authority to set policy in this. Unless Congress has passed a law on this, the FTC has no authority on the subject. I am not familiar with all of the laws authorizing the FTC, but, considering that the laws requiring car sales through dealerships have been around for a long time, it is unlikely that Congress has passed any laws overriding those state laws.

        • The creation of the FTC is the law Congress passed in order to deal with these issues.

          So yes, the FTC DOES in fact have the authority, because Congress gave it to them back in 1914.
          =Smidge=

          • Most people don't understand what the executive branch does. Hell, most people think a company would run better if you removed all VPs and C-level employees. The Brendan Eich thing brought up a lot of people jawing about how a CEO's primary responsibility is to be the public face of the company--apparently they never head about marketing and PR.
          • Really? I looked into the information regarding the law passed in 1914. It says nothing about automobiles or dealers. It doesn't even say anything about the FTC having authority to regulate distribution in that manner. What it does do is give the FTC the authority and responsibility to enforce federal laws regarding interstate commerce. Just because Congress passed a law creating an administrative agency named the Federal Trade Commission does not mean that they gave it the power to regulate interstate comm
    • That is because, while such laws are bad policy, they are not unconstitutional.

      • Re: (Score:2)

        by AK Marc ( 707885 )
        So the states are allowed to legislate interstate commerce, and the feds can't?
        • I did not say that Congress cannot pass a law on this. I said that these laws are not unconstitutional. If Congress passed a law on this subject, it would almost certainly supersede the state laws. However, as far as I am aware, Congress has passed no such law, which means the FTC has no authority to regulate this. The Constitution does give any authority to the FTC. The FTC only has whatever authority Congress has delegated to it and, as I said, at this point I am unaware of any law passed by Congress givi

  • Thank God (Score:4, Interesting)

    by Jim Sadler ( 3430529 ) on Friday April 25, 2014 @03:46AM (#46839161)
    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 (Score:5, Informative)

      by NoZart ( 961808 ) on Friday April 25, 2014 @04:36AM (#46839285)

      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....

      • "Just look at the whole start-button thing with windows 8. " - you could change your comment to "Just look at Windows".

      • Consumer change aversion != scheming by lobby (Score:5, Insightful)

        by 140Mandak262Jamuna ( 970587 ) on Friday April 25, 2014 @06:26AM (#46839611) Journal
        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: (Score:2)

          by NoZart ( 961808 )

          I get your point. I just think putting up roadblocks for competition (in this particular context) is just another way to achieve the same thing: to keep things the way that they are. "established interests", "preserving hold" are words that (for me) sound exactly like something that is averse to change.

          But maybe it's just me not being a native speaker ;)

      • Re:Thank God (Score:5, Insightful)

        by rezme ( 1677208 ) on Friday April 25, 2014 @06:26AM (#46839613)
        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.
        • Clutch-brake-gas was only standardized fairly recently. Some cars had five pedals for a gear shift and required a complicated dance to change over.

      • Re:Thank God (Score:5, Funny)

        by MichaelSmith ( 789609 ) on Friday April 25, 2014 @06:55AM (#46839719) Homepage Journal

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

      • OK, I'll give you credit that your basic premise is good; but, I take exception to the Windows 8 example. They made it easier to use in some cases, and harder in others. In my application, it often takes an extra step to reach what I want, without creating a bunch of extra tiles and desktop icons. Yeah, it's only one swipe or a mouse click more, but that's going in the wrong direction.

    • Re:Thank God (Score:4, Insightful)

      by Blymie ( 231220 ) on Friday April 25, 2014 @04:40AM (#46839299)

      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 (Score:5, Interesting)

        by Smallpond ( 221300 ) on Friday April 25, 2014 @07:19AM (#46839841) Homepage Journal

        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.

        • 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.

          How about the new Chevy Captiva? [autotrader.com] Sounds like a vehicle designed for snatch-and-grabs.

          Stick a "KDNP-U" license plate on that bad boy, you're good to go.

  • It's symbolic, as has been shown with many other petitions that the president has ignored, but here goes:

    https://petitions.whitehouse.g... [whitehouse.gov]

  • Now the only real question is how long will it be before Tesla prevails in all states?

    I will admit to being just a casual observer of the trials and tribulations Tesla is going through with their direct sales model, but has Tesla actually won ANY of cases where state laws prohibit direct sales of cars?

  • I think the problem with the current situation is inconsistent laws. I understand why dealership laws exist. I even support a state's right to prevent direct selling of vehicles. But the Interstate Commerce Clause absolutely prevents states from barring the an out of state sale and the transport of the otherwise perfectly legal product back in state as if should.

    I think that the missing law is one which prevents states from taxing purchases made in other states. Such Nevada, Texas, Arizona and Virginia

    • So you're arguing that you should be able to use the "I bought it in another state" loophole to avoid sales taxes? Then why would anyone buy anything in their home state? You're arguing that we should all drive over the nearest border and pick up what we want tax free. Or order 100% of our goods from internet providers out of state, to avoid all sales taxes. If you do that, you eliminate a tax revenue stream. Lawmakers know this, and they write the law to prevent it.

  • There is a legitimate question (Score:3)

    by Applehu Akbar ( 2968043 ) on Friday April 25, 2014 @08:12AM (#46840129)

    I'm firmly on the side of allowing Tesla to try out an unconventional sales model, but what does happen, exactly, when your Tesla needs service? Are you supposed to handle in-warranty service using the standard electronics model - request an RMA, mail your car in to Moonachie, NJ, and then wait several weeks? Conventional dealerships are used by many buyers as a trusted service base, and this is especially going to be true for the early adopters who are buying Teslas now.

    And since it will be years before regular garage mechanics will be able to work on Teslas, how does the company intend to handle road service and after-warranty service?

  • What this means (Score:4, Insightful)

    by Attila Dimedici ( 1036002 ) on Friday April 25, 2014 @09:18AM (#46840633)
    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.

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