Economy, Legislation

FTC staff submit comments on bills related to DTC auto sales

Hand with a Car keys. Transportation background.Members of the Federal Trade Commission’s staff recently submitted comments to Missouri state Rep. Michael Colona (D) and New Jersey state Rep. Paul Moriarty (D) on bills that affect the ability of auto manufacturers to sell cars directly to consumers.

In Missouri, H.B. 1124 would expand the current restrictions on direct-to-consumer (DTC) sales to also include sales by any manufacturer, regardless of whether it uses an independent dealer—the bill would require all new cars in Missouri to be sold through independent dealers.

FTC staff members said that the law limits businesses from adopting methods of sale that could be more cost-effective.

“While it protects the dealers, it is very likely harming both competition and consumers,” the staff letter said. “By expanding the scope of the existing prohibition to include manufacturers that do not currently use, or even desire to sell through independent dealers, H.B. 1124 would… discourage innovation and new forms of competition, especially from newer auto manufacturers who have no dealer network.”

In New Jersey, however, a handful of bills would allow some manufacturers to sell cars directly to consumers under certain circumstances.

FTC staff said that while all of the bills before the New Jersey legislature were “likely to promote competition and benefit consumers” compared to a ban on all DTC sales, the legislation did not go far enough.

“The narrow scope of the bills will largely perpetuate the current law’s protectionism for independent franchised dealers, to the detriment of New Jersey car buyers,” the staff members said. “FTC staff believe New Jersey’s consumers would more fully benefit from a complete repeal of the prohibition on direct sales by all manufacturers, rather than any limited, selective set of exceptions.”

Earlier this year, New Jersey’s Motor Vehicle Commission banned Tesla Motors from selling its electric vehicles directly to consumers.

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