Ford Challenges Texas On E-Commerce Ruling

Online used-car sales are at issue

Ford Motor Co. is battling the state of Texas over the way its used cars are sold on the Internet.

In an administrative hearing last month, the Dearborn, Mich.-based company challenged a Texas Motor Vehicle Board decision that it says improperly restricts e-commerce.

The state claims that the automaker's Internet sales initiative amounts to selling directly to consumers, violating a Texas law that bars manufacturers from being auto dealers.

Ford's used-car e-commerce programs operate in several cities, including Boston, New York and San Francisco. Customers in those areas can visit for a listing of preowned vehicles and prices. Purchasers put down a $300 electronic deposit and then complete the transaction at a local dealership.

Threatened With Fines

Ford quit selling its preowned cars via the Internet in the Houston area in November, after the state threatened participating dealers with $10,000 in fines. But the car company maintains that having to do so was unjustified.

The Web site acts as a "virtual inventory" for dealers, said Ford spokesman Peter Olsen. After a customer puts down a deposit, the vehicle and title are transferred to the dealer, who makes the sale, he said.

"We sell through our dealers," said Olsen. "We don't sell direct."

The sales aren't predetermined because a customer can decide not to buy a car after driving it, Olsen explained.

Carol Kent, director of enforcement at the Texas Motor Vehicle Board, said the Internet component obscures the real issue. Ford would be barred from doing the same type of transaction in any other medium, such as a catalog, according to Kent.

"You can't sell something you don't own," said Kent. "And the dealer doesn't own the car" when it's listed on the Web site.

High Stakes

But for Ford, the fight has significance beyond any lost sales, said Jonathan Gaw, an analyst at International Data Corp. in Mountain View, Calif. According to Gaw, the Internet arrangement improves Ford's branding.

"They are trying to make sure Ford customers remain Ford customers," he said.

A ruling in the case will likely be made by fall, said Kent.


Copyright © 2000 IDG Communications, Inc.

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