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Tesla is ready to bring direct sales challenge to federal court with the help of monks


According to a new report from the Wall Street Journal (paywall), Tesla’s legal team has been preparing for a challenge of direct sales law before the federal court instead of the state by state battles that the company has been fighting for years now.

Due to its business model of selling directly to consumers without a third-party dealership, Tesla is currently not allowed or under restrictions to sell its cars in several states including Arizona, Michigan, Texas, Connecticut, Utah and West Virginia.

According to the WSJ report, Tesla’s legal team led by General Counsel Todd Maron has been studying a 2013 federal appeals court ruling in New Orleans that made it legal for a monastery in Louisiana to sell monk-made coffins directly to customers without having to go through a funeral home or having a funeral director’s license.

Tesla is drawing similarities with its own business model as an automaker selling cars directly to customers without going through dealerships.

Todd Maron on direct sales:

“It is widely accepted that laws that have a protectionist motivation or effect are not proper. Tesla is committed to not being foreclosed from operating in the states it desires to operate in, and all options are on the table.”

The WSJ cites the Federal Trade Commission and Institute for Justice attorney Greg Reed agreeing with Tesla. Reed said:

“There is no legitimate competitive interest in having consumers purchase cars through an independent dealership,”

The only organisations taking a stand against repealing the prohibition of selling cars directly from the manufacturers to consumers are the dealership lobbying groups and a select few established manufacturer like GM. At the unveiling of the Chevy Bolt, GM CEO Mary Barra even taunted Tesla by saying:

“Unlike some EV customers, Bolt EV customers never have to worry about driving to another state to buy, service or support their vehicles.”

GM later backed the effort in Indiana to introduce new legislation to ban direct car sales and consequently make more difficult for Tesla customers in the state to buy or service their vehicles.

It’s not clear how, when or even if Tesla will be able to bring the case before a federal court, but in the meantime, the company is already entrenched in state direct sales challenges in Utah, Connecticut, Michigan and Indiana.

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  1. Matt3o12 - 7 years ago

    Can anyone explain to me what the pro arguments for banning direct sales are? I find it hilarious that the sales are banned in a free market. IMO, every company should be able to decide who they want to do business with as long as the product is legal and the company does not discriminate customers based on the color of their skin, religion, … I could understand why China would be such sales (they are not a free market after all) but in America? How do politicians justify such bills? They clearly don’t protect the customer.

    • Dafty Punk - 7 years ago

      It’s left over from when cars first were getting established. The manufacturers at the time needed service to be done by independent mechanics as they didn’t have the capitol to expand rapidly while also providing sales and service. Also it added a buffer for the manufacturer to have inventory and whatnot handled by dealers, so the dealer would go out of business if they couldn’t sell the cars, but the manufacturer could still sell the cars to other dealers who were fairing better.

      Anyway, years go by and the auto makers get big, at that point no mom-and-pop dealer/service shop wanted the big automakers to come in and essentially set up shop doing the same thing they were, so laws were written to protect the mom and pop dealers.

      Unfortunately these laws came after the franchise system was established, and now can’t easily be changed for new automakers (Tesla) who have no franchise system in place.

  2. Teslafan - 7 years ago

    What does the “Commerce Clause” in the Constitution say about Tesla’s rights to sell in any state of the Union?


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