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FTC comes to Tesla's defense, warns states not to shut down retail sales

FTC comes to Tesla's defense, warns states not to shut down retail sales

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Tesla's ongoing battle for the right to sell its electric cars directly to consumers is one that's currently being waged with individual US states. But that's not stopping the Federal Trade Commission from weighing in on the matter. In a decidedly pro-Tesla blog post, the FTC today cautioned states that shutting down the automaker's retail operation is "bad policy for a number of reasons." Tesla has found itself locked in a battle with state lawmakers in an attempt to preserve and expand its direct sales model. Texas, Arizona, Virginia, and New Jersey have banned the company from selling its popular Model S to consumers in those states. It's fared better elsewhere, including New York.

Tesla represents 'a real change to the way cars are sold'

"American consumers and businesses benefit from a dynamic and diverse economy where new technologies and business models can and have disrupted stable and stagnant industries," the FTC said. "When that occurs in an industry long subject to extensive regulation, existing businesses — like automobile dealers — often respond by urging legislators or regulators to restrict or even bar the new firms that threaten to shake up their market." Tesla poses no serious threat to traditional auto dealerships thanks to its still diminutive market share, but the company stands for something far more important in the commission's eyes. "What it could represent is a real change to the way cars are sold that might allow Tesla to expand in the future and prove attractive to other manufacturers, whether established or new ones that have yet to emerge, and consumers."

The generous number of state laws that protect the business model auto dealers have relied on for decades could have "harmful consequences" on competition and innovation. "Our point has not been that new methods of sale are necessarily superior to the traditional methods — just that the determination should be made through the competitive process," the FTC said. "Change is a critical dimension of that competitive process." The FTC admits that it can prove difficult for entrenched businesses to adapt, but warns that stubborn attitudes pose long-term risks for consumers. "Regulators should differentiate between regulations that truly protect consumers and those that protect the regulated." For now, all the FTC can do is watch and hope that states across the country wise up and make the right decisions.

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