

Judge dismisses dealers' lawsuit against Tesla's retail stores - neuralnetwork
http://www.autoweek.com/article/20130104/CARNEWS/130109938

======
heimidal
From what I can discern (and I'm definitely not a lawyer), the judge is
basically saying that only dealerships that would be in direct competition _to
sell Teslas_ would have standing to sue. In other words, an existing Tesla
dealership could sue, but, say, a BMW dealership cannot.

Can anyone verify that's what is going on here? Thanks!

------
pyre

      | a factory cannot own a store, and a dealer can sue
      | for injunctive relief if they feel the public is being
      | harmed.
    

I wonder how they feel that the public is being harmed. Seems to me more like
they don't like the competition.

~~~
ok_craig
Can anyone inform us on why there is such a law as "a factory cannot own a
store" in the first place?

~~~
boredguy8
These laws were established in the 1930s when factories would establish
franchisees in (what was to them) low-value regions. As they grew more
valuable, they would move into the region with factory-owned dealerships &
start gouging franchisees. Since then, lobbying power has undoubtedly extended
dealership power further than what's generally beneficial. But the starting
point, it seems to me, made sense.

For a fairly balanced (but not up-to-date as far as the status of legal
challenges) starting point: [http://autos.yahoo.com/blogs/motoramic/tesla-
plans-short-cir...](http://autos.yahoo.com/blogs/motoramic/tesla-plans-short-
circuit-car-dealers-194619627.html)

~~~
MichaelApproved
_"But the starting point, it seems to me, made sense._ "

It doesn't make sense to me. This could be handled with contracts, not laws.
When signing a franchise with a factory, you stipulate that they can't enter
your market or otherwise infringe on your territory by doing ___________.

It's a perfectly fine contract clause that unnecessarily turned into a law.

~~~
Vivtek
The problem is that during the initial phase of expansion into a virgin
territory, it's in the franchisee's short-term interest to compete with other
franchisees by omitting that clause. This is to the longer-term detriment of
_all_ franchisees.

If you consider that it's in the interest of society to promote a broader
prosperity instead of repeated grassfires, then you pass this sort of law
regulating commerce. Otherwise, you just end up with a patchwork of factory
stores and bankrupt ex-franchisees, along with underserved regions of greater
poverty.

The problem with the legislative solution is that all that code is
undocumented, thus outliving its original purpose and unbalancing market
systems two generations down the road.

~~~
icebraining
Why is the longer-term detriment and bankruptcy of franchisees worse for the
broader prosperity of society? If the car manufacturers could undercut them if
it weren't for these laws, aren't they just extracting potential customer
surplus and transferring it to the franchisees?

And why would some regions be underserved? If they were profitable enough to
open a franchise before, what would change?

~~~
sophacles
If you consider that a cornerstone of economics that a economic risk is
rewarded when it turns out to have been a good idea, the actions of the
dealers undermine the principle. The factory pawns the risk off to a
franchisee, until it is shown that the risk is lower than they thought. Then
they deprive the risk takers of the reward, or even the ability to pay off the
financial burden of taking risk. It harms broader society by discouraging
entrepreneurial activity - it stagnates the generation of new business because
there is no chance of payoff to anyone who isn't an established player.

Essentially without the protections, the factories found a way to get the
reward without the risk.

~~~
icebraining
That's only true if dealerships are a pure commodity, with no first-mover
advantage or way for dealerships to differentiate themselves besides price.
I'm fairly ignorant about the issue, but I find that idea extremely unlikely.

~~~
rgbrenner
A franchisee pays the manufacturer a license fee. They get a discount from the
list price on the product, but that price is still higher than the
manufacturing cost.

So consider what you're suggesting...

A manufacturer has costs of X, and will sell the good in the market for X + M
(markup).

The franchisee will purchase the goods from the manufacturer and sell them for
X + M + L(license fees per unit) + DM(dealer markup).

So while the manufacturer receives M + L for profits (and could match the
dealer prices to receive as much as M + L + DM).. the franchisee receives only
DM.

So what you're suggesting is that with the dealers lower profit margin, they
could somehow provide better service than the manufacturer (that the
manufacturer will not be able to match or exceed).

That is tough. Probably even impossible. Service costs money.

------
biot

      "We [...] look forward to following through on our
       commitment to introduce consumers to electric vehicle
       technology in an open, friendly, no-pressure environment,"
       Elon Musk, Tesla co-founder and CEO, said in the statement.
    

Is it no pressure because they make so few that there's a lineup of people
waiting to pay full MSRP?

~~~
boredguy8
The way the stores are currently set up (or: at least the one in San Diego),
the employees can't sell you a car and they don't make any commission or
'referral bonus' or such. It's literally a car, a partial battery assembly
frame, and some logo-ized mugs & shirts. Hence there's literally 0 pressure
because nobody there can sell you a car. The gal I spoke with was very well
informed (even knew the OS that ran the car's dashboard!) but wasn't even
bringing up her own 'talking points' -- she gave me a cursory overview & then
answered all of my questions.

~~~
modeless
Don't keep us in suspense! What OS does the Tesla dashboard run?

~~~
UnoriginalGuy
Looks like it is Linux with custom bits thrown on top.

------
hayksaakian
What an absurd lawsuit.

~~~
dlgeek
I'm not so sure - looks like the law might very well be in their favor. (You
could argue about the merits of the law, but not the lawsuit).

[http://www.malegislature.gov/Laws/GeneralLaws/PartI/TitleXV/...](http://www.malegislature.gov/Laws/GeneralLaws/PartI/TitleXV/Chapter93B/Section4)
\- (c) It shall be deemed a violation of subsection (a) of section 3 for a
manufacturer, distributor or franchisor representative:

(10) to own or operate, either directly or indirectly through any subsidiary,
parent company or firm, a motor vehicle dealership located in the commonwealth
of the same line make as any of the vehicles manufactured, assembled or
distributed by the manufacturer or distributor.

(It goes on with a bunch of exceptions that I'm not qualified to evaluate)

WRT standing, Section 6 of the chapter, part E allows other dealerships to sue
to stop the establishment of franchises (which this arguably may be) and
section F specifically states that "the fact that a protesting dealer has
standing shall not be considered by the court in assessing the merits of the
protest;"

They may very well have a strong case.

~~~
sixQuarks
The wording doesn't make sense. It basically says no manufacturer can operate
a dealership that's located in the "commonwealth of the same line make" - what
the hell does that mean?

I interpret it as meaning no manufacturer can operate a dealership within the
same territory as an existing dealership that sells the manufacturer's make.

So if that's correct, then the judge did the right thing. Since Tesla doesn't
have any dealers to compete with.

~~~
sophacles
You are randomly highlighting and declaring nonsense. Well done non-sequitur
man. "in the commonwealth" is one prepositional phrase meaning "within the
boundaries of Massachusetts". "of the same line make" is a different
prepositional phrase meaning "make and model" (presumably either the legal
term or an older legal term meaning that).

It doesn't refer to existing or non-existing dealerships. It says the
manufacturer cannot own a dealership that sells that car. Furhter, it cannot
do so through a subsidiary or shell company. Even further, it prohibits
"distributors" and "assemblers" from using funky language and/or corporate
ownership games to get around the restriction.

------
jfb
Seek that rent, car dealers!

------
wildranter
Please release us all from all stupid regulations, and let remain the better,
faster, and stronger ones.

