3 FTC Officials Side with Tesla

Apr 26, 2014 11:51 AM EDT | Jordan Ecarma

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As Tesla continues to battle dealerships in various states for its direct sales model, three Federal Trade Commission officials have stated that they are on Tesla's side.

Arguing in favor of the electric car startup in a blog post, the officials called the practice of banning Tesla from selling a "bad policy," CNNMoney reported.

Although their words won't affect official FTC policy, their arguments on Tesla's behalf could be influential. The officials wrote that rigid state laws banning Tesla's direct sales choke competition while hurting consumers.

"Regulators should differentiate between regulations that truly protect consumers and those that protect the regulated," they wrote. "We hope lawmakers will recognize efforts by auto dealers and others to bar new sources of competition for what they are--expressions of a lack of confidence in the competitive process that can only make consumers worse off."

One of their arguments may not help Tesla. The blog post noted that Tesla vehicles made up only 22,000 of the 15 million cars purchased in the U.S. last year; however, dealerships are more threatened by the idea of a direct sales model than Tesla's total sales. Opening the door for the Silicon Valley startup could potentially undermine the whole dealer infrastructure.

According to the National Automobile Dealers Association, consumers are actually helped when dealers compete for customers in local markets since the dealership model gives them more bargaining power.

"Buying a car isn't like buying a pair of shoes online," said Jonathan Collegio, vice president of public affairs for the NADA, as reported by CNNMoney. "Cars require licensing to operate, insurance and financing to take home, and contain hazardous materials, so states are fully within their rights to protect consumers by standardizing the way cars are sold."

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