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Tesla Sues Michigan Over Sales Ban (usatoday.com)
An anonymous reader quotes a report from USA Today: Electric automaker Tesla Motors filed a lawsuit Thursday against Michigan state officials, escalating its multi-year battle to sell vehicles directly to consumers. Tesla's action comes less than a week after Michigan Secretary of State Ruth Johnson effectively rejected the automaker's application for dealership and service facilities by asking for proof that Tesla is a franchised dealer. Tesla, unlike other automakers, sells its cars directly to consumers through company-owned stores in other states. "Tesla Motors brings this lawsuit to vindicate its rights under the United States constitution to sell and service its critically-acclaimed, all-electric vehicles at Tesla owned facilities in the State of Michigan," the automaker said in its complaint in federal court. The California automaker named Johnson, Michigan Gov. Rick Snyder and Attorney General Bill Schuette as defendants. Tesla submitted an application for a dealership license in fall 2015 with a plan to open a retail gallery in Grand Rapids, Mich. In a Sept. 7 hearing, a panel of administrative law examiners heard arguments. Last Thursday, they rejected the license for Tesla. "The license was denied because state law explicitly requires a dealer to have a bona fide contract with an auto manufacturer to sell its vehicles," Johnson said in a statement. Tesla wants to sell its high-end battery-powered cars directly to consumers without a franchised dealer, much like Apple sells its products. The automaker's lawsuit asks a federal judge to declare that the state violated the due process and equal protection clauses of the Fourteenth Amendment and the constitution's commerce clause. Snyder signed a law in October, 2014, that prohibited Tesla from selling cars directly to consumers by requiring all automakers to sell through a network of franchised dealers.
I for one believe in the rights Tesla is fighting to uphold.
Car dealerships will lose in Federal court because it's harder to bribe the Feds.
Car dealerships are generally the most consistent donors to local politicians, and thus are pretty much insulated from adverse laws at the local and state level. They haven't been as active at the Federal level, but if Tesla wins expect that to change...a lot.
Dealers are slow to pick up on the negative effects of self-driving cars, but once they do they'll also start their Federal lobbying campaign.
It's funny, I clicked through thinking nobody could be stupid enough to defend the laws written by auto dealers to prop up auto dealers' businesses.
It's clear GP doesn't know the real history behind auto dealers and franchise laws. In case others don't -- car dealers came into existence a LONG time ago (early 1900s), back when a number of factors existed that no longer apply now. There were no highways back then; manufacturers needed somebody local to coordinate distribution. Communication was more difficult in case there would be problems with a direct sale. And there were only a few major auto manufacturers, so there was concern about monopolistic behavior (whereas individual dealerships could both inform manufacturers of local market costs and potentially compete with each other to ensure low prices). Today, distribution and communication are easy, there are quite a few domestic and foreign manufacturers competing, and one can see list prices for cars on the internet instantly from across the country, so the value of local competition is greatly diminished.
But perhaps the greatest reason for dealerships back in the early days was maintenance. Cars were relatively new machines and needed very frequent maintenance compared to today. Few independent mechanics had the expertise in the early days, so manufacturers needed people throughout their sales area to provide service. Nowadays, many cars can run for years only needing a periodic oil change, and dealer shops are largely known for being overpriced (often many times the cost independent shops) and often no more competent than the average independent shop.
This explains why dealerships existed. Why they were granted special legal status often had to do with wars with manufacturers, e.g., during the Great Depression when manufacturers continued churning out cars and effectively forced dealers to take inventory they didn't want.... basically under threat that the manufacturer could "cut them out" if they really wanted to sell cars more directly. So dealers banded together and got laws passed to protect themselves from abuses by manufacturers.
That's really why we have a lot of these laws -- they weren't meant to protect consumers. They were dealerships trying to protect themselves against manufacturers back in the day. Nowadays, there's little justification for dealers anymore, so they're just trying to protect their own businesses from going extinct.
Oh, and GP's worried about price-fixing from manufacturers? Seriously? In a day when you can instantly see the price of a car anywhere in the country? If you allowed the possibility of direct sales, most manufacturers probably wouldn't want to destroy their dealer network, since there are all sorts of kickback schemes going on there, the value of maintenance contracts, etc., plus local presence creates more publicity.
Anyhow, the thing is -- monopolistic concerns mostly become an issue if there are few choices. There are lots of car manufacturers, lots of models, and even lots of used cars. Consumers have a LOT of choices. If manufacturers suddenly start jacking up prices, fewer consumers will buy. Maybe they'll switch models or even brands entirely. That's how the market works. I can't possibly see how propping up the car dealership franchises will lead to lower retail prices these days. They were a necessary part of distribution back in the day, but nowadays they're just a middleman who adds a LOT of overhead to the whole transaction and tries to sell you service you don't want (since that's where they can actually make more money).
Haha, what? You're whining about a manufacturer selling their product for whatever price they want to sell it at? Tesla "fixing the price" on their own products that they make and sell themselves, that's funny. How does a single company "fix" the price? They don't "fix" the price, they set the price, that's the price, anyone can buy it at that price. You might as well whine about McDonald's "fixing" the price on a Big Mac because they cost the same anywhere you buy them.
A good example, 80% are franchises and 20% centrally owned but you'd never know the difference. The franchising agreement controls pretty much everything, so would a dealership contract. Some people still hasn't figured out what car dealerships was all about. In the before time, before the Internet and all that the car manufacturer would need a retail store, effectively a dealership since nobody would order a car by mail order or over the phone. But instead of that belonging to a big car company that took all the profits back to their corporate HQ, laws were passed to make that a local business that would keep it part of the local economy. It's a bit of a protectionist racket, but the local customers may have wanted it. Today though you don't need a retail store, because you can do it online. The car manufacturers want to cut out the middle man, the middle men want to stay. It's become a protection racket for e-tail vs retail instead of local vs big business.
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