Inside the upcoming FTC ruling on Tesla Motors

On January 19th, the Federal Trade Commission is poised to rule on whether Tesla Motors and other carmakers would be allowed to sell their cars directly to consumers. 

Jeff Chiu/AP/File
A Tesla vehicle is parked at a charging station outside of the Tesla factory in Fremont, Calif. Tesla has so far been prevented from selling its cars directly to consumers, but an upcoming FTC ruling may loosen that restriction.

Tesla Motors has had trouble making inroads in some states due to stringent franchise laws and the powerful dealer lobbies that keep those laws in place. But change could be looming around the corner -- change effected not by individual states, but by the Federal Trade Commission.

On Tuesday, January 19, the FTC will hold a series of panel discussions on topics related to the auto industry. Those topics include:

  • The pros and cons of state regulations related to dealership placement and closure; 
  • The benefits and drawbacks associated with state oversight of warranty repairs and,
  • The future of the auto industry and how regulations may need to change to encourage competition and innovation. 

But perhaps the most interesting discussion will take place at 2:15pm, and it'll focus on the topic of direct distribution from automakers to consumers:

"Some states restrict the ability of car makers to sell their vehicles directly to the ultimate consumer, mandating the use of independent, franchised dealers. Several new entrants into automobile manufacturing have sought to bypass or overturn these restrictions and deal directly with the public. Are restrictions on direct distribution in this industry in the public interest? This panel will include experts on both sides of this contentious issue."

Among the six panelists in that session: 

  • Todd Maron, General Counsel, Tesla Motors
  • Joel Sheltrown, Vice President of Government Affairs, Elio Motors

Dealers shouldn't be entirely worried, though. There will be some balance to the talks. Reps from New Jersey Coalition of Automotive Retailers, American Automobile Association, and even NADA's Peter Welch will be on hand to offer their opinions, too. 

Should be interesting, no?

Can't make it? You can check out a live webcast, which kicks off at 9am EST. (There'll be a link on the FTC website the day of the event.)

Interested parties are also encouraged to submit comments, either online or by mailing them to Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex B), Washington, DC 20580. (Snail-mailers should to write "Auto Distribution Workshop, Project No. P131202" on their submissions.)


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. 

That said, the very fact that the FTC is hosting this kind of an event signals that it sees the potential for trouble on the horizon -- and frankly, we do, too.

The auto industry is poised for significant changes in the coming decades, including electrification, autonomous driving, car-sharing, and many more upheavals that we can't even conceive just yet. The way that cars are manufactured, sold, serviced, and scrapped will evolve, too. Laws governing the auto industry will need to adapt to those shifts.

For the past century, the U.S. has remained the world's auto industry leader, but that could change due to massive emerging markets like China and India. The auto industry of the future needs to encourage innovation while also being adaptable, making room for smaller companies like Tesla and new entrants like Google and Apple. That dynamic kind of mix keeps every player on its toes.

The discussions on the 19th will likely be the first of many held at the federal and state level. We'd be a little surprised if state franchise laws were completely overturned -- at least in the near future -- but don't be shocked if the feds help open up the market to more competition down the road.

This article first appeared at The Car Connection.

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