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Utah Supreme Court Ruling Bars Direct Sales of Teslas Through a Subsidiary (arstechnica.com)

The Utah Supreme court has ruled on Monday that the state's regulators could prohibit an auto manufacturer from having ownership interest in a dealer. "In what the court called 'a narrow, legal decision,' it said that it wouldn't weigh in on whether allowing the state's Tax Commission to prohibit direct sales from Tesla's wholly owned subsidiary was the best policy for residents of Utah," reports Ars Technica. "Instead, the court said its job was simply to determine whether the commission could legally make that prohibition." From the report: Tesla created its subsidiary, Tesla UT, to be able to sell new cars in Utah, but the State Tax Commission ruled that the subsidiary needed a franchise agreement. Tesla UT entered into a partnership with its parent company, but the commission said Tesla couldn't have a financial interest in Tesla UT's franchise. According to the Salt Lake Tribune, "Attempts were made in 2015 and 2016 to change Utah law to accommodate Tesla, but the car dealers and other automakers rebuffed the efforts." A Tesla spokesperson told Ars, "The Utah ruling is disappointing for Tesla and all Utah consumers interested in consumer choice, free markets, and sustainable energy. We will pursue all options to ensure that Tesla can operate in Utah without restriction. In the meantime, we will continue to provide service and limited sales activities (through our used car license) at our location in South Salt Lake City."

23 of 202 comments (clear)

  1. Wheb you can't beat 'em by Ol+Olsoc · · Score: 5, Insightful
    Make them illegal.

    Thank God that the deep red state of Utah, is showing how the free market is supposed to operate.

    --
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    1. Re:Wheb you can't beat 'em by El+Cubano · · Score: 5, Insightful

      is showing how the free market is supposed to operate

      Well, the court decision in this case shows how a court should function: rule on the merits of the case and the letter of the law, not on what they think the legislature meant, or on how they would prefer to see things.

      That said, the law in this case is clearly anti-consumer, but that is a matter for the voters and their elected representatives.

    2. Re:Wheb you can't beat 'em by blindseer · · Score: 2

      Whenever someone goes to court not only is the person on trial but so is the law. We've seen laws get struck down before in the courts. The court could have ruled the law a violation of a greater freedom, a violation of government limits of authority, or something similar. We've seen courts do legal gymnastics for "the greater good" before, why not in this case?

      Perhaps calling a ruling in Tesla's favor some sort of "gymnastics" is a bit over the top. I don't know the law in any detail except what was in the linked articles. It seems to me that this could be ruled either way depending on how one interprets the law. The letter of the law is sometimes not enough, we'll need some information on the intent to decide some unusual cases like this.

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    3. Re:Wheb you can't beat 'em by ArmoredDragon · · Score: 5, Insightful

      I say that a court should look for JUSTICE and not the letter of the law. If a law is just 90% of the time, then a case should be dismissed 10% of the time. Because it is not just in that case. Strict interpretation is wrong.

      That's not how courts work, and it's certainly not how they should work. Anything else is altering the laws with complete disregard for the process that they were created to begin with, and you may as well not even have judges and just let legislators both write laws and interpret them. Furthermore, you'd end up with highly inconsistent rulings and your legal system more or less would fail to serve any useful purpose.

      Not that I agree with this particular law.

    4. Re:Wheb you can't beat 'em by newcastlejon · · Score: 2

      If you can't beat the filibuster, abolish the filibuster.

      I tried to present a bill, but couldn't get a word in edgeways.

      --
      If God forks the Universe every time you roll a die, he'd better have a damned good memory.
    5. Re:Wheb you can't beat 'em by mi · · Score: 3, Insightful

      the deep red state of Utah, is showing how the free market is supposed to operate.

      Government sucks everywhere — the less of it, the better. Free people ought to be able to sell stuff to each other at will. The list is long... Deep blue New Jersey, which first prohibited and then allowed sales of Tesla is not any better in this regard.

      It is not a right, if you need a permission (license, permit, approval) to exercise it.

      --
      In Soviet Washington the swamp drains you.
    6. Re:Wheb you can't beat 'em by Imrik · · Score: 5, Informative

      A court as a whole should seek justice, but a judge (or group of judges) should rule on the merits of the case and the letter of the law, not what they think the law should be.

      If the legislators write (or let lobbyists write) laws that are inadequate, it is on the legislature to fix them. At most, a judge might strike down such a law until it is fixed, but should not under any circumstances try fix it themselves.

    7. Re: Wheb you can't beat 'em by sg_oneill · · Score: 2

      Courts don't work that way. Laws regularly are either poorly written or have constitutional problems and that requires a judge to either fix the law or turf it out. If a law has ambiguity , a judge will need to work out how to resolve that ambiguity. If it clashes with other laws , a judge will need to decide which law is correct , if it requires a subjective standard , a judge will need to refit that abstraction into a practical test. And if it's unconstitutional , a judge needs to kick it to the curb. Despite what people say "black letter law" tends to be incompetent law

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    8. Re:Wheb you can't beat 'em by mwvdlee · · Score: 3, Interesting

      Some courts do work that way.
      In my country, the Netherlands, judges are supposed to rule on intent.
      In the US, judges are supposed to rule on the letter of the law.
      It may seem like a small distinction, but it affects how laws are written and is deeply ingrained in the large body of existing laws in both systems.
      Both these legal systems would crash to a halt if switching between intent and letter of law.

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    9. Re:Wheb you can't beat 'em by jebrick · · Score: 2

      While I would oppose this law as written the Utah Supreme Court was correct. I am sure there is nothing in the Utah Constitution that makes this law wrong. The Legislators of most if not all States have made laws based on corporate interests. They do it for short term gain. This benefits the independent car dealerships, which I am sure have a strong lobby. The franchise protection laws are there to force independence from the companies. Cutting out the middle man for the States might not make cars cheaper to buy and that money would be heading out of state to the company.

      You want the law changed then take it up with your state legislators.

  2. Kudos by Anonymous Coward · · Score: 2, Insightful

    We can't have collusion between auto companies and dealers. The consumer would be totally shafted.

    Thanks for keeping businesses honest, Republicans.

    1. Re:Kudos by rahvin112 · · Score: 4, Insightful

      Dealers add a minimum of 3% to the cost of every vehicle at a minimum. How it works is that the Dealer will generally take the wholesale price and add anywhere from 5-10% to the cost depending on popularity and supply. Then you can negotiate that percentage down to a minimum of 3%. Generally the 3% (called dealer holdback) is non-negotiable. Even if you buy 1000 cars a month they will NOT negotiate that extra 3%, they will cut the 10% down to that 3% but no matter what you are paying 3% more than you would if you could purchase it direct.

      Dealer laws do NOT protect competition, they protect dealer profits and insert a middleman into a sales that 50 years ago was needed but today is no longer needed at all. What's ironic about the Tesla decision and the law behind it is that Utah was one of the trial states for Ford when Ford experimented with buying out all the dealers and selling cars at fixed prices direct. So not even 10 years ago it was legal in Utah for the manufacturer to sell direct as long as their name was Ford and they paid the dealers a shit ton of money to buy out their franchises.

      Make no mistake, this law is about the Larry Miller family preventing this, they own the Jazz a ton of real estate and are some of the wealthiest people in the Utah and they have a vested interest (they control more than 50% of all the dealers) in preventing manufacturer direct sales. This is crony capitalism at it's highest level.

  3. How much does a Utah legislator cost? by dltaylor · · Score: 4, Insightful

    If we know that maybe we could crowd-fund the purchase of enough to get any law we want passed.

    1. Re:How much does a Utah legislator cost? by littlewiggler · · Score: 5, Informative

      Utah is only ~65% LDS (Mormon), but holds more than 80% of the state legislature. Salt Lake City is close to 76% non LDS, but gerrymandering and just flat out population distributions make it so that outside of Salt Lake City and Park City any year with voter turn-out of more than 65% guarantees the Republican candidate wins.

      A typical Republican State House race, is around $7-$10k for actual 'needed' expenses in a race. Democratic candidates usually struggle to raise more than $4-$9k.

      State Senate is around $40k-$50k, but few Democratic candidates reach that amount.

      Most Utah House Republicans get between $20-$30k from 'fundraising' depending on their committee assignments. They usually have enough to fund their next re-election before they even start fundraising for the next cycle.

      Even if you are able to buy one, but there is the invisible guiding light from Temple Square about how and what bills will be brought to a vote and how they pass/fail. Add to the part-time nature of the legislature and lax conflict of interest laws there is also the inherent corruption for each elected representative to make sure the bills benefit themselves or their employers (both R's and D's)

      The big problem for Tesla is that the wealthiest family in Utah, the LH Miller family, owns most of the auto dealerships for all manufactures and are LDS. They also control most of the entertainment venues and professional sports teams.

      They lobby well and pretty much control what/how/when cars are sold. The Miller family shut down legislation proposing Sunday car sales a few years ago and have been successful in stopping legislation that would change the # of car dealers in a geographic area.

  4. Dealers are Leeches by number17 · · Score: 5, Insightful

    Here are the benefits of a dealer network as provided by the National Automobile Dealers Association:

    1) Better pricing when there are lots of dealers in your location. Bad pricing when there few. 2) Manufactures gain free distribution channel that they would otherwise have to pay for themselves.

    All I see is a non-efficient layer that extracts profits by jacking up prices.

  5. Devil's Advocate? by WhatsGoodman · · Score: 5, Insightful

    Does anyone actually believe, or at least legitimately understand the position, that auto manufacturers should not be able to sell directly to consumers? I'm genuinely curious. There are many cases of seemingly anti-consumer regulation where I can at least comprehend the logic of the other side (net neutrality being the first that comes to mind), but in this case I don't see anyone benefiting from this regulation other than entrenched dealership groups.

    1. Re:Devil's Advocate? by Narcocide · · Score: 4, Insightful

      The amusing thing is that it was originally intended to prevent exactly this type of abuse. What happened that (apparently) nobody honest was able to both foresee and prevent was that the manufacturers would find a way to gain implicit control over what the dealerships do and say anyway.

    2. Re:Devil's Advocate? by utahjazz · · Score: 2

      Read this article: http://www.autonews.com/articl...

      TL;DR "Why is Tesla *SO* special they need an exemption from the law!?!?" Kinda hard to read without getting angry.

      Long ago, the argument was that car companies come and go, but dealerships are forever. So you buy a car from a dealership you will always have a place to service it even if the car company goes out of business. That argument sounds pretty silly nowadays. So now they go with "This is how it is, no exemptions for Tesla".

  6. Inter-state Commerce by Luthair · · Score: 4, Interesting

    I'm not an American, but couldn't this be considered interstate commerce which would be federally regulated?

    1. Re:Inter-state Commerce by Mr.CRC · · Score: 5, Funny

      Certainly not. The criteria for what constitutes "interstate commerce" are strict and narrow, and the federal .gov usually errs on the side of caution rather than venturing into uncertain legal territory. ;-)

  7. Tesla store to open up in Wendover, NV by AlanBDee · · Score: 2

    Wendover is about a 2 hour drive from Salt Lake City. Many of the Casio's supply a "fun bus" that ferry people from UT to enjoy all the other things that are illegal, too. I'm just sad that UT will, once again, miss out on taxes that they should be getting.

  8. Democracy??? by johnnys · · Score: 4, Insightful

    Quote: "Attempts were made in 2015 and 2016 to change Utah law to accommodate Tesla, but the car dealers and other automakers rebuffed the efforts."

    I know Utah is weird, but the "car dealers" and "automakers" have a veto over state government and the media reports this as though it's somehow normal? What part of "democracy" do Americans not understand?

    --
    Sometimes the "writing on the wall" is blood spatter...
  9. Re: When you can't beat 'em by khallow · · Score: 2
    It's remarkable how this keeps going on and on. If only you would think instead of running your mouth.

    I'll summarize my position for any readers still here. glitch! wrote:

    No. The legislature so often passes questionable bills, saying that the courts will judge their intent. The courts often say that the bills should have been more specific. I say that a court should look for JUSTICE and not the letter of the law. If a law is just 90% of the time, then a case should be dismissed 10% of the time. Because it is not just in that case. Strict interpretation is wrong.

    Sorry, right there, glitch! has said that courts should ignore "the letter of the law". Well, that's what law is. By definition it is something written down or otherwise recorded. Once you ignore the letter of the law, you ignore the law. At that point, he has elevated the power of the courts above the legislature completely. The legislature merely writes law. If the courts can then change the law, there is no serious role for the legislature, particularly as a counter to the courts.

    In response, I asked the obvious:

    Why have the other branches then? Just have the courts run everything. Justly, of course.

    Now we go to your ridiculous and dishonest loaded question.

    Why have courts if you do not demand that they do justice?

    My reply:

    Sounds like you already know some reasons why. My point is that a court with unchecked power is as just as a legislature or a head of state with unchecked power - which is not at all. These checks on the power of courts are to prevent injustice.

    I do the important thing that one does when answering a loaded question. I point out the flawed assumption and why it is flawed. Here, I do not support an unjust court and I pointed out how checks on the power of courts further the cause of justice. Thus, the question in addition to its other unsavory characteristics is irrelevant to my point.

    That's because you got hoisted on your own petard.

    Once again, your question was not worth answering, but you had to forge on with an annoying and erroneous tu quoque fallacy. You have yet to show why my question was supposedly loaded. It would have at least given me an opportunity to explain the error in your reasoning, should you have tried. But this is the best you mustered:

    Which, of course, reveals your assumption quite clearly, hence your selective quoting, as the loaded nature of your question becomes unavoidably apparent with their inclusion.

    You are asserting that because glitch! stated a duty of the courts to look for Justice, due to the failings of one branch (as explicitly stated, the legislature), a presumption on glitch!'s position as it were, that the others will be eliminated in favor of the courts.

    There's nothing to rebut there since that wasn't even a coherent statement much less a controversial or unjustified assumption of the question I asked. Oh well.

    That's when the verbal diarrhea started. You can insist with multiple paragraphs all sorts of false things, but those remain false. Similarly, writing more about dumb ideas and claims doesn't make those any smarter.

    Sorry, your characterization of the situation is falsely premised, as you are asserting two broken components, rather than what is the actual situation, which is having one force to counter another force. See above, where I point out your misapprehension. There is a reason why brakes do exist, and some vehicles even have steering control mechanisms to prevent slides and wipe-outs. So actually, even your analogy is flawed, since it is not quite as true as you think.

    You're not even wrong here. You're not talking about my point at all. It doesn't matter if there are automated systems involved. My point is