Slashdot Mirror
Court: Car Dealers Can't Stop Tesla From Selling In Massachusetts
curtwoodward writes: Many states have laws that prevent car manufacturers from operating their own dealerships, a throwback to the days when Detroit tried to undercut its franchise dealers by opening company-owned shops. But dealers have taken those laws to the extreme as they battle new competition from Tesla, which is selling its cars direct to the public. In some states, dealers have succeeded in limiting Tesla's direct-sales model. But not in Massachusetts (PDF): the state's Supreme Court says the dealers don't have any right to sue Tesla for unfair competition, since they're not Tesla dealers. No harm, no foul.
I love the courts logic.
Dealer Franchise Laws were prevented to promote the Franchise model.
If a car company sells franchises in the State, it can't then open Company Stores and undercut their Franchises.
But if the Car Company has no franchises, there is no one being hurt.
Car Dealerships can't sue because they don't like a new Car Company's Sales Model.
Reality is the Franchise owners were licking their chops thinking of all the money they would make selling Teslas in their dealerships. They got butt hurt when they found out Tesla wasn't going to sell them Franchises.
If they were offering Tesla what they wanted or needed maybe tesla wouldn't see a need to bypass them.
Tesla for example likes to have their dealerships in normal store fronts where they have ONE car in the middle of the store and a lot of information. They sort of look and feel like apple stores. Very minimalistic, hip, modern. If the dealerships were willing to do that then maybe Tesla wouldn't have needed to do this.
Tesla points out that new car companies in the US tend to fail and they blame the dealership system for this because they say they're invested in existing auto companies and brands.
For Tesla to be comfortable the existing dealerships would have to be willing to commit themselves to Tesla in the same way that Tesla's company run dealerships are committed to Tesla.
And even then... Tesla doesn't have to deal with the dealerships. That whole model of sales is obviously going to come under challenge from all the other car companies now that will all ask "why do we have to deal with you when Tesla can do what they want?"
Maybe Toyota or Ford will want to have their own stores. And the dealerships are going to have to justify themselves to those organizations.
I've decided to stop wasting my time responding to AC trolls/sockpuppets... so if you want a response from me... login.
Each state is going to have differently worded laws in this area. The Mass one sounds like the first case where it was worded to prohibit company owned outlets of specific manufacturers to protect only dealers of the same brand.
Then why is it still illegal for Tesla to sell in at least 3 states where the decision by a court has been different?
File under 'M' for 'Manic ranting'
Tesla points out that new car companies in the US tend to fail and they blame the dealership system for this because they say they're invested in existing auto companies and brands.
I blame the dealerships too. The last time I went shopping for a car, I told the salesman I was looking to replace my Chevy Malibu, and wanted something small to midize that was good in the snow. Despite the bevy of options on the lot, he walked me over to a Challenger SRT ... a rear-wheel drive boat that most likely isn't even particularly good in the rain. Looking around, though, the dealer had invested in a lot of special edition models of sports cars (2 Mustang Roushes, a GT500, the Challenger, etc) and that was what he needed to sell that day. If I was the guy making midsize sedans, I wouldn't want that guy involved in selling my cars either.
"Because Science" is one step from "Because old book". Try "Because of my experiment testing my falsifiable assertion".
More like just State Supreme Court. SCOTUS stands for (S)upreme (C)ourt (O)f (T)he (U)nited (S)tates.
They would have to cancel all their franchises first. The State Supreme Court ruling said they couldn't sue Tesla because Tesla were not franchised Tesla dealerships. So if Ford or Toyota had franchised dealerships- they would have to get rid of them first in order to sell direct.
Tesla could open franchised dealerships and sell in the states they are restricted in. But my guess is that margins are paper thin and they do not think the markup necessary for franchised dealerships would be attractive enough to sell the cars.
Dealers are their own worst enemies.
Recently a co-worker of mine went shopping for a car and the local dealer treated her like shit. (She made the mistake of knowing what she wanted, and what she was willing to pay.) At one point the sales slime flat told her "Can I talk to your husband? I don't think you understand buying cars" - This did not fly well with the single, divorced professional woman who's been buying cars longer than that young prick has been alive.
The above scenario would not fly at a chain owned by a national or international auto outlet. One phone call to a news station and the media would be all over said auto maker for how they treat their female customers. On the other hand, people sort of expect local dealers to be corrupt, sleazy middle men. And they are. They're nothing but entrenched middlemen hiding behind old laws and inherently corrupt local politics. (Car dealers are infamous for greasing the palms of mayors, county clerks, governors, etc)
... if Ford or Toyota had franchised dealerships- they would have to get rid of them first in order to sell direct.
Why then is it that there are no manufacturers who sell directly to customers? Or, put it another way, why do all manufactures have dealerships?
actually, Supreme Judicial Court is the highest court, the highest "appeals" court in Massachusetts; whereas Trial Court is the ordinary court in Massachusetts and General Court is the legislature; and wherease, Supreme Court of New York is the ordinary trial court, and Court of Appeals is the highest NY State appellate court.
This terminology all varies by state (and/or by commonwealth or provident plantation)
I believe it's reasonable that if a company is too large relative to the market, then restrictions on dealership ownership & control make sense to prevent collusion and killing seller competition.
However, for a smaller car company, such rules work against it, protecting the big boys from competition, which was allegedly the reason for the dealer restrictions to begin with.
Thus, cross-sector collusion rules should be tuned to mostly apply to companies with a large market share of car manufacturing. Maybe a way can be made to make the restrictions incrementally higher per market share percentage rather than have blunt cut-off points, which is one of the criticisms of ObamaCare in relation to employee count and work-hours.
Table-ized A.I.
Historical reasons. Manufacturers could book a sale when they shiped a car to a dealership. Want to keep your dealership franchise? You'll accept X cars per month. You figure out how to sell them. So now manufacturers have stable 'sales' figures to make investors happy.
After some time, laws were passed against these abuses. But the same laws protected dealership franchises, so they persist.
Have gnu, will travel.
The big car manufacturers have been trying to use the dealership laws to prevent a competitor from bring a product to market, dealerships have been trying to use the laws to force Tesla to cut them in on their sales. This court ruling bloodies both of their noses for their foolishness, now if only more courts follow in this ones footsteps. I wonder how these laws even came into being in a society that claims to embrace free market mentality in the first place. I realize that Ford once tried to bypass the franchise model, but if they were able to provide their product to customers cheaper then what was the issue? Replace "car manufacturer" with any number of other products (corn, light bulb, TV, desk) in these laws and it becomes quite clear how foolish the whole thing is.
I think part of that is also from a "morality hurdle" mentality. Many religious people don't want the alcohol market to be efficient in order to squelch consumption. It may not merely be old-fashioned protectionism of mom-and-pop stores.
Table-ized A.I.
19 footnotes for a 24 page opinion, including one so long that spills over from one page onto the next. Ouch! Detracts from what is otherwise a great read, including delving into papers from the file of the acting governor at the time that the legislation at issue was passed.
I see you can learn something from this example.
The original post indicates he didn't go in uninformed. A classic negotiation tactic is to let the other side go first. Asking a salesman to show you something is a good opening move for an expensive purchase even if you know exactly why you are there and what you want to buy. When the salesperson went immediately to the product of the day, that gave away that they were acting in bad faith.
A number of other states modified their laws. Most of them started with wording stating that companies could not compete with their own franchises, but the franchises in a number of states had the wording changed so that all car companies have to sell through franchises rather than branches.
A good dealer can integrate a variety of aftermarket add-ons, have alternative financing and insurance packages on-site, provide extra customer services such as roadside assistance and no-hassle inspections and initial tuneups. Not much of a reason, but it's what they give for their existence.
I do not want to buy my expensive Tesla from a smelly "genius" walking around with a corporate-logo polo shirt snug around the belly that hangs over his belt, which sports an iPhone holster. I'd rather just order the damn thing on-line and have USPS deliver it to my front door.
You are welcome on my lawn.
Tesla doesn't have dealerships, which is part of the problem though. They have stores... like stores which sell soap or drugs like aspirin. That is also the point of the ruling as they are trying to tell these mega-dealerships who own the rights to every automobile brand that they simply can't add Tesla to their list.
The reason why Tesla doesn't want these dealers to have their cars is primarily because they are afraid that these dealers will throw a couple of Tesla cars in the corner of their showroom and be pushing the other brands instead. Elon Musk has explicitly stated this as his primary objection, and why he felt it was necessary to go outside of the dealership model.
You are the one who made the first mistake.
If you do that kind of research by looking stuff up on-line, reading Consumer Reports, and digging up information about the automobiles before you show up to the dealer.... what is the point of the dealer in the first place?
I agree with you so far as that is the best way to avoid getting screwed over by incompetent salesmen, but you can intelligently use sales reps to get more information about their products. This is not strictly about the automobile industry either, and I've done that with electronics, software, and even groceries.
The point of the dealership is to have a local representative who can help with compliance with local regulations. A hundred years ago, selling stuff was a whole lot more complicated in terms of trying to keep track of things each state wanted or didn't want, not to mention often even different laws for each city even in the same state. Communication was also a bit slower as well... and more importantly the system simply worked for almost everybody.
The problem is that once you have the franchisee in place, getting rid of them is nearly impossible, even if the situation has changed. This is why several historic systems still stick around years, decades, or even centuries after they are obsolete. Some places in Europe still use Roman aqueducts for their water supply... because they still work. There may be more efficient ways to get the same thing to happen now, but why change if it still sort of works?
You are right about historical reasons but I believe wrong about the ones you have supplied. I believe the primary reasons are more likely to do with distance and communication.
When you were a factory in the 40s and 50s pumping out cars you were focussed on the manufacturing aspects and your business was located in a single location - ie Detroit. The idea of trying to manage a network of stores across the country when communication was by post or expensive phone calls just simply didn't make sense. It was more cost effective to outsource that work, in exactly the same way it makes more sense to outsource things like accountancy, IT services and legal in many organisations.
Selling cars is a different business to making cars. And there is no guarantee that if you are good at making cars you will be good at selling them. The original idea was that these dealer were to be your customer interface, and ideally do a better job than you could.
The fact that manufacturers obviously decided that wasn't working at some point in the past and tried to open dealer owned stores is a sign that that system broke down.
Today, communication is almost instant, manufacturing processes and methodologies are more flexible than ever before and there is far more information available to your average consumer. A lot of what were "meant" to be the value adds of dealers are gone. Dealing directly with the customer allows you better control of your brand and if done well will increase profitability by removing a stage in the process.
But it can't work for every product. You still won't be buying your softdrinks direct from Coke or your shampoo from Unilever. Because in these situations the dealers (ie supermarkets) still make more sense.
so...SCOTCOM? Sounds like a nuclear missile satellite
I used Consumer Reports and other sites to find out what the dealer pays for the truck I bought. The dealer gets money back from the auto maker on every sale too. I was polite but firm in negotiating with the salesman, and the "Let me check with my manager" isn't just a line of BS. It is so the dealer doesn't take a loss from a sales person increasing their commission by making more sales.
This highlights one of the benefits of the dealer model, there are almost always a *lot* of dealers to choose from and try to get a better deal/experience/vehicle from.
I'm of the opinion that it highlights one of the disadvantages of the dealer model, you often have to go from one dealer to another, haggling and bullshitting, before finally settling on the car you want at a price you feel comfortable with. I'd rather have one place in town that sells what I want, with a clearly marked price, skip the haggling, and do a transaction. Maybe some people enjoy the car buying "experience" but I look at it like any other purchase. I want to do some research ahead of time, walk into the store, buy the product I came for, and leave. It's 2014, it's no longer reasonable to expect consumers to waste an entire weekend trying to buy a car.
Thanks to the War on Drugs, it's easier to buy meth than it is to buy cold medicine!
You ought to try N'Awlins, then. Drive-Through Daiquiri Shops FTW.
"I do not agree with what you say, but I will defend to the death your right to say it"
Agreed. If I want to comparison shop just about anything other than a car I can just do an online search by model number, see all the asking prices, and purchase one in 5 minutes. A car turns into a high-pressure negotiation on my day off. With anything else if it turns out to be defective I just return it and get my money back - not so with the car.
I can understand that it has to work this way with houses since they aren't mass-produced. The car sales model is a dinosaur, and half the tactics that are used should be illegal.
For those of you old enough to remember a time before Apple had their own stores, the Apple fan would go into most electronics stores and be lucky to find an Apple-related product. Finally, Apple basically told the Cramp-USA's of the world to take a hike and opened their own stores where people could go to get an untainted look at Macs, iPods, etc. The plan worked like a charm. IMHO, Tesla is looking at the market and the fact that many car dealers have multiple brands under the same corporate umbrella and they know they're not going to get the attention they need. Tesla wants a stage that they don't have to share with other cars or even fight for a share of the sales staff.
This seems to indicate that the same laws were good then & not good now. How?
Well, actually it's the Supreme Judicial Court, or SJC.
-- This and all my posts are in the public domain. I am a lawyer. I am not your lawyer, and this is not legal advice.
Apparently that is exactly what happened when Japanese cars first came onto the US market, until some very unsubtle bribes and buyouts changed things. Skills used when doing deals with organized crime such as the Yakuza were applied - that really say something about car dealerships doesn't it? The Japanese treated them as crooks and it worked.
Unfortunately, the last two times I bought a car it was following a collision, so I didn't really have the luxury of picking and choosing the time that I made the purchase.
I've been trying to buy a new car. It may just be the southern tier of NY, but finding a Subaru dealer that
a) knows even close as much about the car I want as what I know *from the Subaru web site* and the *Subaru Drive Magazine* is basically impossible.
b) Is willing to quote me a price (why can't I call, e-mail or even walk in and just list the car + options and GET A PRICE? This is as bad as the phone companies.). Granted, many have prices on what they have in stock...
c) Will actually order what I want.
I had one dealer order a car (that didn't have the Eyesight feature that I made clear was the *REASON* I wanted this car), and try and sell it to me. When I walked when it didn't have the Eyesight feature, they didn't understand why I didn't want the car. Hello? I came to you and listed specific features I wanted, you got a car without them (after I waited 2 months) and wonder why I didn't buy it?
I wish I could just order from Subaru like I do from Lenovo... Hell, I wish there was a pricewatch for cars and it was easier to get one delivered...
Opera, Proxomitron-Grypen,GPG 0x0A1C6EE3