FTC calls Michigan’s Tesla ban ‘protectionism’ for dealers

Tesla Motors has had varied success in its efforts to fight state laws making its direct online-sales model illegal.

The electric-car maker lost a round in Michigan last fall, but now a government agency has weighed in on Michigan’s revision to its franchise law.

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Let’s just say that the U.S. Federal Trade Commission doesn’t think much of Michigan’s revised law targeting Tesla.

As reported yesterday in The Detroit News, the FTC is urging Michigan to drop its ban on Tesla’s direct sales.

The agency called the revisions to the state franchise laws nothing less than “protectionism” for auto dealers that is “likely harming…competition and consumers.”

And, it added, “Michigan’s consumers would more fully benefit from a complete repeal of the prohibition on direct sales by all automakers.”

While the commission cannot directly affect state laws, it can advocate for the interests of consumers.

In this case, the comments came in relation to a request by lawmakers to allow Elio Motors limited authority for direct sales of what it’s calling its “autocycle,” a three-wheeled vehicle that is defined as an enclosed motorcycle.

This isn’t the first time the FTC has weighed in on state franchise laws that enshrine independent auto dealerships as the sole legal way that a citizen may buy a new car.

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Last April, it posted a commentary on its “Competition Matters” blog.

“In this case and others, many state and local regulators have eliminated the direct purchasing option for consumers, by taking steps to protect existing middlemen from new competition,” wrote Andy Gavil, Debbie Feinstein, and Marty Gaynor in “Who decides how consumers should shop?”

“We believe this is bad policy for a number of reasons.”

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The Michigan law in question, which governor Rick Snyder characterized as a “clarification” to existing franchise laws, was an eleventh-hour change that most legislators had no chance to read.

The bill was subsequently deemed “corrupt politics at its worst” by Daniel Crane, a law professor at the University of Michigan, in The Detroit News. The last-minute amendment, he said, represented “a real travesty.”

Even the CEO of the nation’s largest car-dealership chain, AutoNation, has suggested that the fight between state dealer associations and their lobbyists against Tesla Motors is counterproductive.

He too called it “unnecessary protectionism,” and noted that Tesla CEO Elon Musk had said in the past that the company might choose to franchise dealers in the future as it geared up to sell vastly greater numbers of electric cars.

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This story originally appeared on Green Car Reports. Copyright 2015