Automobile Dealers Fight “To [allegedly] Protect the Public” from Tesla Motors

First, no intelligent person believes that automobile dealers are fighting to stop Tesla from selling cars because they care about us consumers. While it is disgusting that automobile dealerships and various dealer associations have asserted “protection of the public” as a primary reason why Tesla should not be allowed to sell directly to customers, at least this type of action is expected by such entities. Simply, dealers and their lobbies are expected to be disgusting, slimy, and self-serving. What would be truly disturbing is if legislators and other politicos who should at least pretend to have consumer and U.S. economic best interest at heart, begin supporting ridiculous arguments and taking positions damaging to the market. Such arguments would be disrespectful to consumers, and waste judicial resources leading to outrageous litigation against essentially the essence of the already stymied American automotive consumer market: competition that begets progress.

This may be obvious, but in case it is not here goes. Behind the litigations popping up in particular states attempting to force Tesla into an atrocity of a retail scheme, is the age-old impetus of entrenched entities to stuff their pockets full of even more money while rationing progress. We’ve seen this before. Remember the record industry that so fervently put all their efforts into attempting to stop innovation instead of being innovative? Well now it's the automobile dealer's turn. They are scared to death that someone may realize that they are quickly becoming irrelevant, especially for an intelligent purchaser of high-line automobiles.

It is simply not logical that Tesla selling cars in a novel way, negatively affects consumers, and erodes competition. It likely results in the opposite.

Tesla's Display at Roosevelt Field Mall in NY

Tesla's Display at Roosevelt Field Mall in NY

The fact is, eventually the automobile dealership will go the way of the big box retail store, becoming a gallery in which the consumer peruses goods with his smart phone and orders, hassle free, an item (in this case a vehicle) to be delivered at her home or picked up at her convenience. This will ultimately be beneficial to the consumer. It is a huge difference from current “spot” sales in which a vehicle purchaser is encouraged to buy a car immediately in order to receive “the best deal”, and essentially become locked into whatever inventory dealers have on-hand or that the dealer can quickly procure from the next closest dealership. In such a sales model you have a sales person attempting to convince you that forest green is the best color for the car you wanted in steel gray metallic, that you should get the navigation, pin striping, window etching, spoiler and chrome door handles, that is already on a gaudy prefabbed “dealer special.” 

Tesla recognizes that a showroom will become little more than a gallery eventually, embraces the idea especially since it is beneficial to Tesla and the consumer to do so, and is providing a superior buying experience right now.

As with the Model S itself, they are well ahead of the game. They provide a gallery where a potential purchaser can see and touch the Model S, and then if they so desire, purchase their preferred configuration of that vehicle online. At Tesla's Roosevelt Field mall gallery in New York, I was able to sit in a Model S, fiddle with the huge touch screen, and generally get a good feel for the build quality of the vehicle with no one attempting to run my credit, or do a spot sale. I know what you’re thinking; “I could really use someone to protect me from this sort of unconscionable evil.”

We can get some insight into the ugly that is about to come in North Carolina and elsewhere, by looking at the Massachusetts dealer association’s (MSADA) suit against Tesla, for essentially letting people check out their vehicles in a popular mall as I did, and purchase Tesla apparel.

A little while back, the MSADA, a few Massachusetts dealers[i], and one man[ii] claimed that Tesla was operating a dealership in violation of Massachusetts law[iii], and as crusaders for the good of the public they could not sit idly by and watch this injustice. The 'public' being their bank accounts. MSADA’s prayer for relief was most interesting. There was no mention for instance of Tesla’s vehicle being unsafe, or any logical argument that an unsophisticated consumer is unwittingly exposed to financial detriment by purchasing a Tesla.

The plaintiffs [prayed] the court grant such relief as follows: To enter a Temporary Restraining Order against Tesla Motors, Inc., and Tesla Motors MA, Inc., restraining them, their employees, agents, affiliates, attorneys, all those in active concert with them and all persons with actual notice of this order from: (1) operating an automobile dealership without a Class 1 dealer license and other required permits issued to an independent Tesla dealership (and not Tesla MA), (2) Tesla Motors Inc., owning directly or indirectly any Tesla dealership in Massachusetts, (3) using the Natick Mall Showroom as anything other than an unstaffed display of a locked automobile, (4) opening or using an automobile dealership showroom without a complete service facility in the same local jurisdiction, (4) entering any transaction with a Massachusetts consumer which does not conform to Massachusetts law or use the required form of motor vehicle purchase and sales contract and (5) accepting any reservation deposit from a Massachusetts customer under its present reservation system. Massachusetts State Automobile Dealers Association, Inc. v. Tesla Motors, 2012 WL 8006605 (2012) (emphasis added).

The court quickly found that MSADA and the man, had no right to be heard by the court, since neither was a manufacturer, distributor or motor vehicle dealer. Additionally, the court said that the dealers also had no right to bring a suit against Tesla because they were not affiliated with Tesla. The court further explained that the purpose of the MA law was to keep automobile manufacturers from asserting power over and potentially oppressing affiliated dealerships[iv]. In other words, how could Tesla unfairly harm a Chevrolet dealer over whom they exerted no control? How could Tesla unfairly harm another brand by simply selling their Model S?  The court also honed in on the idea of MSADA and company’s suit, to supposedly “protect the public”, and succinctly pointed out that automobile dealerships and the public interest are “frequently at odds” since the public interest benefits from competition.[v] Fittingly, the court said that the laws in Massachusetts were not intended to provide all dealers with a “right to seek protection from potential competition.”[vi] As such, The Court denied the MSADA’s motion for a preliminary injunction and temporary restraining order (TRO).

Not to be kept down in the fight “to protect the public” MSADA appealed the denial. The reconsideration was denied. The court stated that the prior decision was correct, that MSADA and company cannot just sue anyone they see fit, and that MSADA and company knew that the laws in Massachusetts were really meant for dealerships to protect themselves against their affiliated manufacturers.[vii]

No one believes that automobile dealers are trying to stop Tesla from selling cars because they mean to “protect the public.” If you believe them, you shouldn’t. Auto dealers, like manufacturers of gas powered vehicles, and the oil industry (though maybe not so much immediately for big oil) are scared beyond their wits of cars that do not run on gas, and sell themselves. They should be.

This may all seem so logical, but keep in mind this is what occurred in Massachusetts (there was also similar ‘victory’ for Tesla in NY). There is no telling the power dealerships and dealer associations wield in North Carolina, and the other places where more ridiculous happenings surrounding Tesla sales are sure to come.

[i] Massachusetts State Automobile Dealers Association, Inc. v. Tesla Motors, 2012 WL 8006605 (2012). The plaintiffs, Massachusetts State Automobile Dealers Association, Inc. (“MSADA”), Connolly Buick Co., Inc. d/b/a Herb Connolly Chevrolet (“Connolly”), Jake Kaplan's, Inc. d/b/a Fisker Norwood (“Fisker”), and James G. Boyle (“Boyle”) (collectively, the “Plaintiffs”) brought this action against defendants Tesla Motors MA, Inc. (“Tesla MA”) and Tesla Motors, Inc. (“Tesla”) (collectively, the “Defendants”) concerning Tesla MA's operation of an automobile Gallery (the “Gallery”) in Natick, which the Plaintiffs claim violates G. L. c. 93B. The matter is before this Court on the Plaintiffs' motion for a temporary restraining order and preliminary injunction, seeking to enjoin the Defendants from continuing to operate the Gallery and selling motor vehicles to Massachusetts consumers.

[ii] Id. [Boyle] is an individual domiciled in Rye, New Hampshire with businesses in both Massachusetts and New Hampshire. Boyle wasted time and money and was damaged thereby in considering a Tesla S when presented with the Tesla Agreement.

[iii] Massachusetts State Automobile Dealers Association, Inc. v. Tesla Motors, 2012 WL 7985777 (2012). Specifically, § 15(a) states in relevant part that “[a]ny manufacturer, distributor or motor vehicle dealer who suffers any loss of money or property, real or personal, as a result of the use or employment by a manufacturer, distributor or motor vehicle dealer of an unfair method of competition or an unfair or deceptive act or practice as defined by this chapter, any act prohibited or declared unlawful by this chapter, or any rule or regulation adopted under this chapter, may bring an action in the superior court... for damages and equitable relief, including injunction relief....” (emphasis added).

[iv] Id. (citing Beard Motors, 395 Mass. at 432-433). “General Laws c. 93B was enacted in recognition of the potentially oppressive power of automobile manufacturers and distributors in relation to their affiliated dealers.” Id. at 432. “[i]t is clear from a reading of G. L. c. 93B as a whole that the intention of the Legislature was to protect motor vehicle franchisees and dealers from the type of injury to which they had been susceptible by virtue of the inequality of their bargaining power and that of their affiliated manufacturers and distributors” Id. at 433 (emphasis added). Accordingly, a motor vehicle dealer did not have standing under § 12A to maintain a lawsuit against an unaffiliated distributor because the alleged harm suffered by the motor vehicle dealer was not within the “area of legislative concern” of c. 93B. Id.

[v] Id. (citing Wagner & Wagner Auto Sales, 547 F.3d at 42). “the second [purpose of c. 93B] ‘is to regulate competition in the retail automobile industry for the benefit of the public at large.”; Id The Court in American Honda also noted that “existing dealers interests and the public's interests are frequently at odds. Public interest will favor increased competition in most circumstances, where the existing dealers' interests may be opposite.”

[vi] Id. The Supreme Judicial Court expressly recognized that “the standing requirement [of G. L. c. 93B, § 4(3)(1)] reflects a legislative determination that only dealers of the same line and make, and in certain proximity to the prospective new dealership ... may challenge and potentially prevent new competition. Chapter 93B was not intended to provide all dealers with a statutory right to seek protection from potential competition.” Id. at 436 (emphasis added). Thus there is nothing in American Honda to suggest that the legislative purpose to protect the public expands standing under § 15(a) to allow any unaffiliated motor vehicle dealer to sue any manufacturer.

[vii] Massachusetts State Automobile Dealers Association, Inc. v. Tesla Motors MA, Inc., 2012 WL 7985774. (citing Beard, 395 Mass. at 433). “It is clear from a reading of G. L. c. 93B as a whole that the intention of the Legislature was to protect motor vehicle franchisees and dealers from the type of injury to which they had been susceptible by virtue of the inequality of their bargaining power and that of their affiliated manufacturers and distributors.”; Id. The Legislature was aware of subsequent decisions adopting the Beard court's interpretation of the purpose of Chapter 93B. Id. As the Plaintiffs concede, after Beard, it appeared that there was an affiliation requirement for dealers to have standing to maintain a lawsuit for violation of Chapter 93B.