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Michigan thwarts Tesla’s sales-model once again

On Behalf of | Jan 6, 2017 | Business Law |

For now, consumers in Michigan who are interested in buying a Tesla can look, but they can’t buy—at least not directly within the state.

Once again, Michigan’s courts have stated that the regulations governing auto sales isn’t unconstitutional or unfairly targeted toward Tesla—even though the law that prevents automakers from selling their cars except through a state-licensed dealership is popularly known as the “anti-Tesla bill.”

The actual bill did exist prior to Tesla’s date of incorporation but it was quietly amended in 2014 to take out any ambiguities that might have allowed an interpretation favorable to Tesla’s direct-to-market sales model.

Michigan isn’t the only state that’s thwarted Tesla’s attempts to let the consumer, not legislation, determine what they buy and how they go about buying it. One of the benefits of a direct-to-consumer marketing plan is that it cuts out any middleman, which also ends up reducing the price of the vehicle or other item being sold.

Most industries enjoy the ability to choose how they’ll take their product to market. Some may choose to sell directly to consumers and some may choose to let a retailer market the product for them—many choose a mixture of the two. The automotive industry is unusual in that it typically operates through dealerships—and Tesla claims that the 2014 changes in the law were enacted in a discriminatory fashion to “reward the dealers’ generous lobbying efforts,” giving them a monopoly over car sales in the state.

Ultimately, this is an issue that should concern not only business professionals who are considering entering the automotive industry but any industry. If the laws can be quietly tweaked to give a monopoly to one set of retailers, it could potentially do the same in other industries.

The issue should also concern consumers in Michigan and other states that have blocked Tesla from selling directly to consumers—the end-line consumer loses out in the form of a less competitive market and higher prices when the laws regulating business don’t serve a legitimate public purpose.

Anyone thinking of starting a new business should consider talking to an attorney while still in the planning stage to make sure that their business model and marketing plans are in compliance with state regulations.

Source: Green Car Reports, “Michigan says Tesla sales ban not unconstitutional, responding to lawsuit,” Stephen Edelstein, Dec. 21, 2016


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