Highest Mass. Court Hands Tesla a Victory
|   Sunday, September 21, 2014
It has taken two years, but it looks like Tesla Motors has won the right to sell directly to consumers from its boutique store in Natick, Mass.

The Massachusetts Supreme Judicial Court threw out a suit aiming to shutdown Tesla's factory-direct store located at Natick Mall, a huge upscale shopping mall that features stores such as Macy's, Nordstroms and others. The dealers had complained that the factory-direct electric vehicle sales store violated the state's franchising law.


However, Chief Justice Margot Botsford, writing for the court, told the dealers the franchise law was aimed at protecting dealers from unfair practices by the manufacturer with which they were associated. It was not meant to allow dealers to block sales from manufacturers with which they were not affiliated.

The dealers had contended that the Tesla model violated the state's franchising law and that it should be shut down. The dealers believe that the franchise law bans factory-direct-to-customer sales as the store was not a franchised outlet. A factory-own boutique store, dealers believed that this sales model, a standard retail relationship between the customer and manufacturer, was banned outright by the franchising law that was re-written and approved 12 years ago.

Chief Justice Botsford, writing for the court, said the dealerships and state dealer organization that brought the suit lacked standing before the court to bring the suit under existing state laws. According to Automotive News, Chief Justice Botsford wrote that the law was "intended and understood only to prohibit manufacturers" from practicing unfair trade practices against its franchised dealers. In other words, manufacturers could not open a direct-sales store in an area where it already had franchised dealers.

"Contrary to the plaintiffs' assertion," the type of competitive injury they claim to have suffered from the "unaffiliated establishment (Tesla) is not within the state's area of concern," the ruling noted.

The Mass. State Auto Dealers Assn. (MSADA), the primary dealer lobbying and advocacy group for the state, accused Tesla of operating a showroom in Natick without a license and in violation of a law prohibiting a manufacturer from running a dealership in the state.

"We obviously thought we were in the right, otherwise we wouldn't have appealed" the initial ruling, said Robert O'Koniewski, executive vice president of the MSADA. The dealer group had accused Tesla of operating a showroom in Natick, Mass without a license an din violation of a law prohibiting a manufacturer from owning a dealership.

Disappointed by the ruling, he told Automotive News, that the dealers had spent a time and effort amending the state franchise law in 2001 and 2002 to block factory stores in Massachusetts.

"The court said it was not addressed properly and the requirement on standing still requires and affiliation with that manufacturer," O'Koniewski said. "As an association, we need to down down and reassess what we feel the statute says and what the court says and come up with a gameplan."

New legislation is one possibility, however, O'Koniewski recognizes, the road ahead won't be easy. He noted that you need to have approval by the legislature and the governor's signature.
Tesla spokesmen welcomed the ruling. Todd Maron, Tesla's deputy general counsel, called the ruling a great decision, noting that the Massachusetts law is similar to laws in other states. "We have battles in New Jersey and other states" with similar laws "and we hope and expect the same interpretation would carry over" to them.

In March, the New Jersey Motor Vehicle Commission effectively revoked Tesla's license to operate two stores. The General Assembly, though, in June passed legislation that would, if enacted, would allow sales.

Tesla cannot sell directly in Arizona, Maryland and Texas. They are also being pressed by dealers in other states as well. Tesla did gain the ability to sell in Nevada as part of the $1.3 billion package the state approved to bring automakers massive battery manufacturing plant to that state.

In an unusual move, three Federal Trade Commission officials expressed their opposition to laws barring direct sales, saying such laws could harm consumers.
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