FTC slams Michigan law aimed at Tesla direct sales ban

The Detroit Free Press

The FTC, in an 11-page letter, says a Michigan law passed last fall aimed at blocking Tesla from setting up stores to sell cars restricts competition and reduces consumer choice.

Tesla-dealership
(Photo: Johannes Eisele, AFP-Getty Images)
The Federal Trade Commission on Monday slammed a law signed by Gov. Rick Snyder last fall that is aimed at discouraging Tesla Motors from selling its electric cars directly through company stores.

The law strengthened existing Michigan law that already banned direct sales of new vehicles in the state. While it did not name Tesla, it was adopted just as luxury electric automaker Tesla was working to expand its network of company-owned retail stores.

"States should allow consumers to choose not only the cars they buy, but also how they buy them," three senior FTC staff members said in an 11-page letter and a summary posted on the agency's website on Monday.


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The letter notes that Tesla has faced both legislation and litigation as it has attempted to set up company-owned stores.

"A fundamental principle of competition is that consumers – not regulation – should determine what they buy and how they buy it," the the FTC said. "Consumers may benefit from the ability to buy cars directly from manufacturers – whether they are shopping for luxury cars or economy vehicles. The same competition principles should apply in either case."

The FTC's letter was a response to a request from State Sen. Darwin Booher, R-Evart, who asked the agency to comment on a proposed bill that would create an exception to the law that bans the direct sale of cars to consumers by manufacturers.

The FTC has limited power. It is only able to advise states about what is in the best interest of consumers and cannot force Michigan to change its laws.

Booher has introduced a bill that would create a new category of vehicles called "autocycles," and would allow manufactures to sell those directly to consumers.

Autocycles, as defined by the bill, are three-wheel motor vehicles and enclosed motorcycles.

The FTC said Booher's bill doesn't go far enough.

"The narrow scope of the bill would largely perpetuate the current law's protectionism for independent franchised dealers, to the detriment of Michigan car buyers," the FTC said in its letter.