Ford battles Texas over Internet sales

Ford Motor Co. is fighting the state of Texas to defend the way its used cars are sold over the Internet.

The nation's No. 2 automaker is in the midst of an administrative hearing in which it is challenging a Texas law that it says improperly restricts e-commerce sales.

Dearborn, Mich.-based Ford shut down its Houston operation for Internet sales of its preowned cars last November after the state threatened participating dealers with $10,000 fines.

The Texas Division of Motor Vehicles claimed Ford violated a state law prohibiting manufacturers from acting as dealers and selling autos directly to consumers.

Ford has established e-commerce programs in several cities, including Boston, New York and San Francisco, aimed at boosting sales of its preowned vehicles. Customers in those areas can log on to and see a list of vehicles and prices. Customers who want to buy a vehicle must put down an electronic deposit and then complete the sale at a local dealer.

"The state of Texas has determined that since it is a fixed price, it is a direct sale," said Ford spokesman Peter Olsen.

Ford owns the used vehicles while they are listed on the Web site, which acts as a "virtual inventory" warehouse for dealers, Olsen said. When a customer puts down a deposit, the vehicle and title are transferred to the dealer, who then completes the sale, he said.

Although prices are fixed, the sales aren't predetermined, said Olsen, because a customer can decide not to buy a car after seeing it and driving it. Ford then returns the deposit, he said.

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

The preowned Internet program had been in operation for 15 months before the state took action against it, he said.

The administrative hearing in Austin is expected to last until the middle of next week, according to the Division of Motor Vehicles.

Texas officials weren't immediately available for comment.

Copyright © 2000 IDG Communications, Inc.

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