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In blog post, FTC officials call for end to 'anti-Tesla' franchise laws

May 9, 2014
Three top officials from the Federal Trade Commission have publicly criticized dealer-franchise laws that have served as a roadblock for Tesla Motors’ direct-sales model in many states.
 
In a rare statement directly questioning existing laws, the trio argued in an unofficial capacity in an April 24 blog post that current "bad policy" restricts customers from shopping in new ways. They point to smartphone-based Taxi hailing and Internet shopping as two examples of innovations that have begun to transform markets and better serve consumers.
 
But Forrest McConnell III, chairman of the National Automobile Dealers Association, said the franchised dealer network is the most efficient and cost effective way to sell and service vehicles, providing a network of independently owned retailers who compete fiercely against one another with regard to pricing and financing benefits consumers. 
 
McConnell added that franchised dealerships, which primarily are small- and medium-sized family businesses, are 
 
driving new-vehicle sales in a way that manufacturers could never duplicate;
saving automakers money because dealers handle service and marketing costs at the regional and local level; and
saving consumers money because of the franchise model’s inherent inter- and intra-brand competitiveness.
 
In addition, said McConnell, franchised dealerships create hundreds of thousands of jobs, billions of dollars in tax revenues, and support thousands of local communities in which they operate.
 
Dealerships also benefit consumers in the event of safety recalls, he said, stating that an extensive network of franchised new-car and new-truck dealers can respond to recalls faster and more efficiently than a single manufacturer or factory-owned store. 
 
If manufacturers sold directly to customers, McConnell said there would be "zero" competition in pricing, parts and services; and that customers would be stuck paying full sticker price because there would be no "same brand dealership" to compete for the sale to the customer.
 
The post was authored by the FTC’s director of the Office of Policy Planning, Andy Gavil; the director of the Bureau of Competition, Debbie Feinstein; and the director of the Bureau of Economics, Marty Gaynor.
 
 

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