THE BLOG
06/05/2013 02:55 pm ET Updated Aug 05, 2013

The Anti-Tesla Campaign: Where Is That Old-Tyme Free Market Fervor

Tesla, the fabulously innovative electric car company, is engaged in something like hand-to-hand combat with state automobile dealers associations across the country. The conflict is over how new cars can be sold.

Tesla would like to try some new ways of selling, depending more on electronic sales and less on bricks and mortar locations. The established dealers like things the way they are and have opposed Tesla in Massachusetts, Minnesota, Colorado, and New York, among other states.

North Carolina is the latest battleground.

The question in North Carolina is: should Tesla be allowed to sell cars over the Internet directly to buyers in the state? At the request of the old school car dealers, the North Carolina legislature is considering a piece of special interest legislation that would say, no, sales can only be made from fixed B&M locations in North Carolina.

If adopted, this enthronement of the past could cost consumers thousands of dollars and reduce both consumer choice and consumer access to promising, environmentally-friendly technology.

There is deep irony in this campaign by the car dealers. They are trying to do to Tesla what the horse collar manufacturers tried to do to the horseless carriage a hundred years ago.

We should be pleased that there was no enduring profit-protecting legislation then, and we will benefit from the same attitude today.

Innovation often prompts fanatically selfish responses from those who control the status quo. The free market can, after all, be a scary thing to those who sit comfortably in their profits.

There is a second stark irony in the present effort to stifle Tesla. Consumers who have purchased a car in the last ten years will ask, "Make Internet sales illegal? Aren't millions of cars already sold over the Internet? Don't most car dealers have 'an Internet specialist' on staff? And what about eBay Motors?"

Yes, all of that is true, and more. People buy cars out of state every day. Consider the huge multi-state markets in NY-NJ-CT and VA-MD-DC, for example.

The relevant legal rule is refreshingly clear: it is not illegal to buy a car out of state. Nor a book. Nor any other common consumer good.

So, where is the evil in Internet sales by Tesla?

The dealers and their lobbyist hint at vague, unspeakable harms to consumers who are lured into the dark science of Internet sales.

The head of the Carolinas Independent Automobile Dealers Association asks, in ominous tones, "Under what regulation would we make sure they're doing the things they're supposed to do?"

The answer is quite easy. There are at least 15 distinct sets of consumer protection laws that will apply to a Tesla transaction. These range from state and federal prohibitions on deceptive trade practices, to rules on warranties, to a wide array of required disclosures, such as those relating to body damage, speedometer tampering, and an array of other issues.

There simply is no credible consumer protection issue here.

There is, though, overwhelming evidence that direct Internet sales can be extremely efficient, and beneficial.

Note that under the cartel model of selling proposed by the North Carolina car dealers, there never would have been a Dell computer company and perhaps no Apple technology.

The car dealers badgering Tesla want no sales by manufacturers. That is, no direct sales by manufacturers to consumers, and no deals consummated totally on the Internet.

But consumers saved millions because of Dell, for example. And when market conditions dictated, Dell moved from solely online sales to local displays and sales.

While consumers sometimes had complaints, just as they do in non-Internet sales, Dell didn't disappear into the shadows, and the company was, and is, fully subject to all laws intended to protect consumers.

If we strip away the theatrics about consumers being more easily ripped off over the Internet than in a dealer's showroom, there is not much left to be said in favor of the proposed legislation.

The question before the North Carolina legislature, then, is actually quite straightforward. Should innovation, competition and consumer choice thrive, or is protecting the profits of special interests a higher priority?