The state-by-state fight continues. The latest round in Tesla vs. Auto Dealers ends with the Californian electric car maker coming out on top in Massachusetts, with a judge of the state’s highest court ruling that Tesla’s direct-to-consumer approach was legal and that the existing law preventing auto makers from owning dealerships was intended to protect dealers from competition from their supplier – the same brand of car that is sold by the dealers – not from other brands.
“Contrary to the plaintiff’s assertion, however, the type of competitive injury they describe between unaffiliated entities is not within the statute’s area of concern,” Justice Margot Botsford wrote in the unanimous decision.
In other words, if Tesla had a dealers network and then tried to go direct, they might have run into trouble with the existing law. But GM and Ford dealers can’t use the law to block sales from a totally unrelated manufacturer.
Hopefully this precent sets an example for other states – even if not legally binding, the principle is pretty much the same everywhere. Even the Federal Trade Commission (FTC) has been siding with Tesla, saying that it should be able to sell directly:
We have consistently urged legislators and regulators to consider the potential harmful consequences this can have for competition and consumers. How manufacturers choose to supply their products and services to consumers is just as much a function of competition as what they sell—and competition ultimately provides the best protections for consumers and the best chances for new businesses to develop and succeed. Our point has not been that new methods of sale are necessarily superior to the traditional methods—just that the determination should be made through the competitive process. […]
Regulators should differentiate between regulations that truly protect consumers and those that protect the regulated. We hope lawmakers will recognize efforts by auto dealers and others to bar new sources of competition for what they are—expressions of a lack of confidence in the competitive process that can only make consumers worse off.
I think it’s pretty clear that auto dealers don’t have anyone’s customers’ best interest in mind. If Tesla can’t sell directly, it doesn’t help anyone except the people who own car dealerships because it reduces competition from a scary foe.