Tesla Motors Inc (NASDAQ:TSLA) has been under fire by auto dealers in multiple states, but not so fast, says the Federal Trade Commission. In fact, regulators at the agency say it’s actually a bad policy to keep Tesla from selling its cars directly to consumers.
FTC points to shopping methods
Regulators note that over time, consumers received more and more choices when it comes to where to shop for things. They started shopping locally in stores, but then mail order catalogs came along, followed by the Internet. People also used to hail cabs from the street, but now they can use their smartphones to get a cab or locate transportation.
Baupost's investment process involves "never-ending" gleaning of facts to help support investment ideas Seth Klarman writes in his end-of-year letter to investors. In the letter, a copy of which ValueWalk has been able to review, the value investor describes the Baupost Group's process to identify ideas and answer the most critical questions about its potential Read More
Writing on the FTC blog, Andy Gavil, Debbie Feinstein and Marty Gaynor note that state and local regulators have been protecting auto dealerships from Tesla Motors Inc (NASDAQ:TSLA)’s direct to consumer sales policy. They believe, however, that this is “bad policy,” and they list a few reasons.
Tesla as a disruptor
The regulators note that both consumers and businesses have benefited from an economy where both technologies and business models are able to disrupt industries. They, like others, see Tesla Motors Inc (NASDAQ:TSLA) as a potential disruptor. When this happens, anyone who feels threatened, like auto dealers, reacts by pushing lawmakers for protection.
They note that Tesla Motors Inc (NASDAQ:TSLA) sold just 22,000 of the 15 million cars sold in the U.S. last year, which they say is hardly a serious threat to already established dealers. The FTC regulators also note that back when the auto industry was just getting started, laws were passed to protect dealers from manufacturers as a way to even out the balance of power. They say that by trying to keep Tesla from selling its vehicles directly to consumers, the laws made to protect dealers are becoming protectionist rather than protecting.
Auto dealers’ complaint not relevant to Tesla
They also note that auto dealers have said that they need protection to keep from being abused. However, they don’t think this applies to Tesla Motors Inc (NASDAQ:TSLA) because it never had any independent dealers and apparently doesn’t even want any.
They also said that the way manufacturers choose to sell their products and services is “just as much a function of competition as what they sell” and that competition “ultimately provides the best protections for consumers and the best chances for new businesses to develop and succeed.”