Can The FTC Persuade Michigan & Other States To Open Their Doors To Tesla?

May 13, 2015

Tesla Motors recently won major victories in Maryland and New Jersey, with both states passing laws that allow the automaker to skirt franchise laws and sell its battery-electric vehicles directly to consumers. Now, Tesla and its fans are turning their attention to the west -- specifically, the Midwest, to Michigan, the hub of America's domestic auto industry.

It was there last fall that Governor Rick Snyder signed a sweeping new law, prohibiting Tesla from doing business in the state. One professor went so far as to call it "corrupt politics at its worst".

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This weekend, Tesla supporters in Michigan will rally in support of their favorite automaker. To bolster their cause, the Federal Trade Commission has published an opinion piece from policy officials Marina Lao, Debbie Feinstein, and Francine Lafontaine calling for states like Michigan to end their bans on direct-to-consumer sales.

The piece isn't surprising. In fact, it can easily be seen as a follow-up to a similar article published last month. That one was a soft-sell, this one is much more aggressive. It gives Snyder and others a lesson in America's domestic economic policy and points up ways in which franchise laws run at counter purposes:

"Blanket prohibitions on direct manufacturer sales to consumers are an anomaly within the larger economy. Most manufacturers and suppliers in other industries make decisions about how to design their distribution systems based on their own business considerations, responding to consumer demand. Many manufacturers choose some combination of direct sales and sales through independent retailers. Typically, no government intervention is needed to augment or alter these competitive dynamics—the market polices inefficient, unresponsive, or otherwise inadequate distribution practices on its own. If the government does intervene, it should adopt restrictions that are clearly linked to specific policy objectives that the legislature believes warrant deviation from the beneficial pressures of competition, and should be no broader than necessary to achieve those objectives."

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Basically, Lao, Feinstein, and Lafontaine are making the same argument that many in Snyder's own Republican party have made with regard to other systems of regulation. However, while many GOP officials seem happy to deregulate banks and oil companies, they're keen to protect regulations around auto franchises. (Check the map above, and you'll note that most of the states where Tesla is prohibited from doing businesses are conventionally viewed as "red".)

The trio make their case at an opportune moment: legislators in Michigan are considering a bill that could allow direct sales of "autocycles", like the kind of enclosed three-wheeled vehicles soon to be manufactured by Elio Motors in Shreveport, Louisiana. The bill wouldn't permit Tesla to follow suit, but it could be a starting point for discussions. The only question is how far Snyder -- who's no longer a contender in the U.S. presidential race -- is willing to compromise.

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