FTC To N.J., Missouri Lawmakers: Proposals Limiting Direct Car Sales Hurt Consumers

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After lawmakers in New Jersey and Missouri both recently proposed regulations that would prohibit car companies like Tesla Motors from selling vehicles directly to consumers instead of through independent dealers, the Federal Trade Commission is weighing in with comments for legislators in those states, urging them to consider abandoning existing laws and change things up a bit. .

The agency already laid out why it thinks Tesla should be allowed to sell directly to consumers, but today’s missive outlining the subject of its comments to New Jersey and Missouri lays out exactly how each state’s proposed law would harm consumers.

Staff from the FTC’s Office of Policy Planning, Bureau of Competition, and Bureau of Economics note in the comments that current laws in both jurisdictions “operate as a special protection for [independent motor vehicle dealers] – a protection that is likely harming both competition and consumers.”

It’s not like the FTC wants to pick on N.J. or Missouri, of course — any state law that would mandate a single method of “distributing automobiles to consumers” is one that the staff would oppose.

Specifically in Missouri, the FTC feels that the proposed amendments to current law — which the staff says already dampens innovation in manufacturers’ ability to sell to customers in what could be a more cost-effective and responsive manner — would only serve to “amplify the adverse effects of the current prohibition” and “discourage innovation.”

And while in New Jersey the legislative proposals currently on the table simply provide a strict set of exceptions to the laws banning direct sales and could possibly increase competition, the bills don’t go far enough.

“New Jersey’s consumers would more fully benefit from a complete repeal of the prohibition on direct sales by all manufacturers, rather than any limited, selective set of exceptions,” the staff comment states, noting that “current New Jersey law . . . is very likely anticompetitive and harmful to consumers.”

The FTC notes that of course, all of these proposals bring Tesla’s efforts to mind. But it’s not just about that one company — it’s about the bigger picture of giving consumers more choice about how they spend their money, and who they buy products from.

“FTC staff offer no opinion on whether automobile distribution through independent dealerships is superior or inferior to direct distribution by manufacturers,” the comments note. “Consumers are the ones best situated to choose for themselves both the cars they want to buy and how they want to buy them.”

FTC Staff: Missouri and New Jersey Should Repeal Their Prohibitions on Direct-to-Consumer Auto Sales by Manufacturers [FTC.gov]

by Mary Beth Quirk via Consumerist