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Mass. High Court To Hear Arguments In Tesla Case

The Massachusetts State Auto Dealers Association wants to block the way California electric-car maker Tesla sells its automobiles. (Al Behrman/AP)

The Massachusetts State Auto Dealers Association wants to block the way California electric-car maker Tesla sells its automobiles. (Al Behrman/AP)

BOSTON — The Massachusetts Supreme Judicial Court heard arguments Tuesday in a case that will decide whether the Massachusetts State Auto Dealers Association can challenge the way the California electric-car maker Tesla sells its automobiles directly to consumers, bypassing the traditional middle man — the franchise.

The SJC will decide whether Massachusetts auto dealers have the legal standing to block Tesla from selling its electric cars without franchises.

An Uphill Battle?

The auto dealers association claims Tesla is breaking the law, specifically Chapter 93B of the franchise law.

The dealers say manufacturers cannot own and operate stores. And in 2012 they tried to block a Tesla shop from selling cars in the Natick Mall. But a judge ruled that the auto dealers had no standing to bring the case because Tesla isn’t like Chevy or Honda — it doesn’t operate any existing franchises that are members of the auto dealers association.

The dealers association appealed, and the SJC picked up the case.

Now, the high court will decide whether the state dealers association can challenge the way Tesla sells cars.

“Every competitor would love to put their rival out of business,” said John Kwoka, professor of economics at Northeastern University. “And to allow the dealers association or the individual dealer standing would be tantamount to doing that.”

Kwoka filed an unsolicited amicus brief in favor of Tesla because he says allowing a dealer to veto the distribution method of an entirely different company is dangerous; it hurts competition.

But regardless of what the SJC decides, Seth Berkowitz, the president of the car review site Edmunds.com, says the fight will likely linger.

“Even if Tesla wins this battle in the Massachusetts Supreme Court, it’s still quite possible that there would be legislative action to stop them,” Berkowitz said.

This last legislative session, two competing bills were introduced: one to protect the existing Tesla sales model and another to prevent the business model. Neither has advanced into law.

“Tesla is fighting a battle that it cannot win as dealer-franchise laws have been around for a hundred years,” Berkowitz said. “And even if they prevail in this little skirmish in Massachusetts … they will ultimately not be successful selling cars directly.”

That’s because Berkowitz says fighting individual franchise laws state-by-state is proving an expensive tactic for Tesla.

So far, Tesla has lost the battle for its new business model in five states: Arizona, Texas, Virginia, Maryland and New Jersey.

Berkowitz said the larger issue is a fight over the future of the franchise model. He said, for now, Tesla is trying to find friendly states where it can do business unfettered, and Massachusetts may prove to be one of those safe havens.

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  • http://neilblanchard.blogspot.com/ Neil Blanchard

    This legal suit is as cynical as can be. They want to drag Tesla down, instead of actually competing with them. Why don’t they make better cars, and adopt a better business model, and take Tesla on in the real world? What are they so afraid of, I wonder?

  • Gary

    It’s BS… can you imagine if Apple was sued for opening Apple stores by Microsoft or Dell? If I was a lawyer defending Tesla on this, I’d be going out of my mind … this is such a clear cut case, its embarrassing easy to win this. Imagine: Car dealers suing a car company because of they way they want to sell their cars to consumers. As a lawyer on this case, i would bring up every Web site that Ford, GM, KIA, etc. all have that allow you to “build your own” buy it and head to the dealer to pay for it. Yeah, like thats dramatically different than what Tesla is trying to do!? PLEASE.

    If this gets blocked by the SJC, its a sad day in this state, and this country.

  • Robert Fahey

    It was only 15 years ago when Ford and GM attempted to run their own dealerships, so dealer fears of a direct-sale contagion are not all that far-fetched:
    http://teslamondo.com/2014/04/30/when-ford-gm-tried-to-ditch-dealers/

  • emma852

    My Uncle Aaron just got an awesome 12 month
    old Audi A5 Convertible only from working part time off a home computer… find
    out here C­a­s­h­D­u­t­i­e­s­.­ℂ­o­m

  • BetelgeuseOrion

    This will probably turn out like Apple Vs Samsung, Apple only wanting to sue others because their product has become stagnant, Samsung comes in and steam rolls apple in sales even though their products have been banned.

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