Daily Management Review

FTC urges Michigan to revoke Tesla ban


Pressure mounts on Michigan to allow Tesla its presence in the state.

Federal Trade Commission in the US has strongly demanded the state legislature of Michigan to consider revoking the ban on electric car maker Tesla Motors.
The letter sent to Michigan state senator by the FTC members has urged the state to stop the ban on direct selling by certain automakers to the consumers. The FTC has alleged that this practice is a form of protectionism aimed at the dealers in the state and will likely harm both the manufacturers and consumers.
Even as more pressure is falling on the state to change its norms, the Federal government cannot dictate the policies for the state. The governor of the state signed a bill last October banning automakers from selling vehicles directly to customers in Michigan. The bill was approved by both houses and was backed by Michigan's new-car dealership lobby. The state is well renowned to be the birth state of automakers including General Motors, Ford and Fiat-Chrysler in the US. The bill was passed to plug a loophole in the law which Tesla used to its advantage by directly opening showrooms without adding dealers. So the bill is considered as a weapon in the hands of the senate for curbing the growing omnipresence of Tesla and other electric car makers who are looking at a slimmer approach to marketing and distribution of their cars.
According to Gov. Snyder, the law "clarifies and strengthens" an existing long-standing law that prohibited direct sales of new cars in Michigan. The FTC meanwhile has also said the Senate bill does not go far enough and would "largely perpetuate the current law's protectionism for independent franchised dealers, to the detriment of Michigan car buyers."
"Michigan's consumers would more fully benefit from a complete repeal of the prohibition on direct sales by all automakers," said the commission, which voted 5-0 in favor of the comments.
At least three other states have specifically passed laws to prohibit Tesla sales: West Virginia, Texas and Arizona. Auto dealers have long insisted protections are needed for franchise dealers who have invested millions in store fronts; they worry dealers could be undercut if automakers sell directly to consumers. State laws were passed in the wake of questionable tactics by some automakers more than a half-century ago.
The FTC noted in the letter that barring direct sales by manufacturers is an "anomaly" in the U.S. economy. The nation's 17,000 new-car dealers are among the most politically powerful business owners in many states, making regular donations to politicians and emphasizing the economic impact of new car sales. Auto dealers employ 1.22 million in the United States and often are major contributors to charitable causes in local communities.
As of October, 50 Teslas were registered in Michigan despite the absence of dealers, according to research firm IHS Automotive. Last week, Tesla announced its acquisition of a Michigan-based auto supplier and tool-and-die manufacturer to speed production of its cars.