Cars can't be sold online, judge says

Thursday, July 27th 2000, 12:00 am
By: News On 6

Ford had contested Texas law prohibiting sales to consumers

A federal judge in Austin has upheld a state law that prohibits manufacturers from selling cars directly to consumers.
In a ruling last week, U.S. District Judge Sam Sparks dismissed Ford Motor Co.'s arguments as "an attempt to avoid the Texas Motor Vehicle Commission Code."

Ford filed suit two years ago after proposing to sell late-model vehicles over the Internet in Houston and other cities.

Pete Olsen, a spokesman for Ford, said the company has not decided how or if it will respond.

"We have just gotten the ruling ourselves," Mr. Olsen said Wednesday. "We're still reviewing it, and that's really all we can say at this time."

The suit was the latest development in a long-running clash between Ford and the Motor Vehicle Division of the Texas Department of Transportation. The division licenses new-car dealers in the state and administers rules that affect the relationship between dealers and automakers.

About two years ago, Ford began advertising late-model vehicles on a Web site available to consumers in Houston and several other test-market cities. Consumers could reserve cars on the Web site for a test drive and Ford would then have the vehicles transferred to a participating dealer in the Houston area.

Although the dealers had voluntarily agreed to participate in the Web site, the sales scheme was highly controversial with many Ford dealers because of the automaker's involvement in the sales process.

Ford decided which cars to put on the Web site, set their prices, accepted refundable deposits from consumers and held the titles to the vehicles, according to the lawsuit.

In November 1999, Texas' Motor Vehicle Division filed a complaint against Ford, alleging that its attempts to sell cars and trucks directly or indirectly over the Internet violated state law. That complaint is still pending.

Ford responded with the federal lawsuit, contending that the state was interfering with interstate commerce. The company argued that the Internet was a tool for interstate commerce much like phone lines or e-mail – an argument that Judge Sparks rejected.

"The plaintiff [Ford] has mounted a substantive attack on Texas' decision to prohibit manufacturers from selling vehicles to consumers and attempted to cloak that attack in a constitutional challenge," he said in his ruling.