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Tesla triumphs in top court over direct sales

2014-09-16 10:35

DIRECT TO THE PUBLIC: Tesla is battling dealers for the right to sell its cars, such as its Model S (pictured here), directly to consumers. Image: Tesla

BOSTON, Massachusetts - Vehicle dealers are sparring with battery-car company Tesla Motors because it wants to sell direct to customers.

Massachusetts' highest court threw out a lawsuit on September 15 2014 seeking to block Tesla from selling its luxury electric cars directly to consumers in the state, enabling it to bypass traditional dealerships.

The state's Supreme Judicial Court unanimously concluded that the Massachusetts State Automobile Dealers Association and two dealers "lacked standing to block direct Tesla sales" under a state law designed to protect franchise owners from abuses by automakers.


Justice Margot Botsford wrote that the law was aimed at protecting dealers from unfair practices of manufacturers and distributors "with which they are associated, generally in a franchise relationship," rather than unaffiliated manufacturers.

The law "was intended and understood only to prohibit manufacturer-owned dealerships when, unlike Tesla, the manufacturer already had an affiliated dealer or dealers in Massachusetts," she wrote.

Botsford said: "Contrary to the plaintiffs' assertion, the type of competitive injury they describe between unaffiliated entities is not within the statute's area of concern."

The trade group had accused Tesla of operating a showroom in Natick, Massachusetts without a license and in violation of a law prohibiting a manufacturer from owning a dealership.

"We're disappointed," said Robert O'Koniewski, a spokesman for the group, adding that the group would review what steps to take with state legislators to address "the standing gap."


Todd Maron, deputy general counsel at Tesla, welcomed the court's decision.

Maron said: "It's a great decision. The statute is very similar to statutes in other states. We have battles in New Jersey and other states with similar constructs, and we hope and expect the same interpretation would carry over to those venues."

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

Tesla also cannot conduct direct sales in Arizona, Maryland and Texas, the company said.

Earlier in September 2014, Nevada let Tesla make direct car sales to residents, as part of an arrangement to provide the equivalent of R14-billion worth of tax breaks for the automaker to build a giant battery factory.

In an unusual blog posting in April, three top US Federal Trade Commission officials expressed opposition to laws banning direct sales, saying they could harm consumers.

Read more on:    tesla  |  usa  |  courts  |  new models

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