
Tesla prevails in top Massachusetts court over direct sales - hariis
http://www.reuters.com/article/2014/09/15/us-tesla-motors-massachusetts-lawsuit-idUSKBN0HA29620140915
======
badkungfu
Any dissenters around here? We're going through this stuff now in Georgia. I
like the ideal of trying different market approaches than your competitors,
and I generally think businesses should; but I did read a counter point[0]
that at least made me think.

If a large number of individuals or businesses are heavily invested in the-
way-things-are, is it ever dangerous to _rapidly_ change the market rules that
we've built up- usually for the purposes of consumer protection or fostering
businesses that benefit the larger community?

\--

[0] [http://www.peachpundit.com/2014/09/05/tesla-uber-internet-
sa...](http://www.peachpundit.com/2014/09/05/tesla-uber-internet-sales-taxes-
quit-being-so-easily-duped/)

~~~
cratermoon
Somewhat of a dissent: A law that protects dealers from being screwed over by
manufacturers and distributors is a good thing, but the court said that the
law protects dealers for car maker G from being harmed by the actions of G,
not the actions of car maker T. But if car maker T _can_ act in ways that harm
dealers for other car maker G, then some protection is probably needed.

I would expect that the standing issue would be different if dealer for G
could show harm by the actions of maker T.

This article gives more info about the decision:
[http://www.reuters.com/article/2014/09/15/us-tesla-motors-
ma...](http://www.reuters.com/article/2014/09/15/us-tesla-motors-
massachusetts-lawsuit-idUSKBN0HA29620140915)

~~~
thisjepisje
What's this thing about protecting others from harm? Isn't harming your
opponent what competition is all about? Not directly harming them, of course,
but simply by being better than them, which is the case here.

~~~
cratermoon
There's a specific legal definition of "harm" that applies. Someone with
experience in litigating that kind of thing could explain it, but like most
things legal, it isn't what the dictionary says.

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apercu
I support the Tesla case for reasons other than that they advocate for
electric vehicles.

I really hate buying cars. I don't like the games that are played during the
process.

I've walked away from several car deals, and felt kinda sh*tty about 3 that i
didn't walk away from.

That is (as much as any other reason) why many people will support a change to
the status quo.

~~~
sliverstorm
_felt kinda sh_ tty about 3 that i didn't walk away from.*

They say that's the hallmark of a fair deal; both parties walk away feeling
mildly dissatisfied.

~~~
djrogers
I doubt any car dealership ever feels mildly dissatisfied after selling a
car...

~~~
apercu
Agreed, it's the hallmark of a fair deal as suggested by a saying i've heard
people repeat. But I never bought again from those dealers for the reason that
I felt I got a little hosed but was worn down by the process or simply needed
to move quickly on a vehicle.

------
JackC
Text of the decision: [http://www.mass.gov/courts/docs/sjc/reporter-of-
decisions/ne...](http://www.mass.gov/courts/docs/sjc/reporter-of-
decisions/new-opinions/11545.pdf)

\---

Edit: having read the decision, I thought it might be fun to explain what the
Court did here. Reading statutes is a lot like reading code. Reading cases is
like ... not running the code, because we can't do that, but more like having
it explained by a particularly skillful coder with decades of experience. It's
fascinating if you're into that stuff.

So to start with, we have this statute in Massachusetts that says it is
unlawful for a car manufacturer "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 ... by the manufacturer[.]"

Sounds pretty clear cut, right? Tesla can't run a dealership in Massachusetts
that sells Teslas -- there's no helpful exception left out of that quote. But
the Court didn't come out that way.

If you really want the reading-unfamiliar-code experience, go read the
surrounding parts of the statute[1] and see how you think the Court understood
that section. It's under subsection (10).

...

So, it turns out the Court looked to the legislative history, which is the
closest we have to comments -- statements of legislators and the Governor
explaining why they were voting for (or not vetoing) the statute. (As a side
note, Massachusetts has terrible legislative history, because not much was
recorded of the debates, many decisions are made behind closed doors by the
Democratic super-majority, and unlike Congress, we rarely explain why a
statute is being passed in the text itself -- but there seems to be some
history in this case.) The Court concluded that the statute is intended to
protect dealers from their _own_ manufacturers. The Court finds: "the purpose
of c.93B historically was to protect motor vehicle dealers from a host of
unfair acts and practices historically directed at them by their own brand
manufacturers and distributors." Or, quoting an earlier case, it's about
"preserving a sound competitive market free of the domination of
oligopolists[.]"

That matters because intent matters -- the Court isn't a computer, and if at
all possible it tries to do what the Legislature actually wanted.

So then the Court looks back at the statute, and lo and behold, subsection 10
is only one of 12 subsections! (We knew there had to be at least 10.) And
every single one of them (besides #10) is obviously designed to regulate
relationships between dealers and their own manufacturers. So the Court says,
"It would be anomalous to find, within this detailed list of rights and
protections that are conferred on dealers vis-à-vis their manufacturers and
distributors, a lone provision giving dealers protection against competition
from an unaffiliated manufacturer." Instead, they conclude that the
Legislature -- which was trying to promote competition -- must have intended
subsection 10, like the others, to be a right of dealers against their own
manufacturers.

And that's why this is ultimately dismissed on the basis of "standing." Cases
(almost always) have to be filed by someone with a legally protected interest
at stake. If the statute is designed to protect Tesla dealers (if any), then
only Tesla dealers can file a case. That means, for now, no one can.

(It's an interesting side effect that this essentially means there can be no
third-party Tesla dealers in Massachusetts as long as Tesla is selling
directly. It's an open question whether that's a good thing.)

[1]
[https://malegislature.gov/Laws/GeneralLaws/PartI/TitleXV/Cha...](https://malegislature.gov/Laws/GeneralLaws/PartI/TitleXV/Chapter93B/Section4)

~~~
twoodfin
I actually find the first part of the decision's discussion on standing fairly
persuasive:

 _" Motor vehicle dealership" is a term defined in c. 93B as: "any person who,
in the ordinary course of its business, is engaged in the business of selling
new motor vehicles to consumers or other end users pursuant to a franchise
agreement and who has obtained a class 1 license pursuant to the provisions of
[G. L. c. 140, §§ 58 & 59]"_

 _Because neither Tesla nor Tesla MA is engaged in the business of selling new
Tesla motor vehicles in Massachusetts "pursuant to a franchise agreement,"
there appears to be a question whether Tesla's business model involves the
operation of a "motor vehicle dealership" ... and therefore whether, by its
literal terms, the proscription of § 4 (c) (10) applies to the defendants at
all._

I suppose that if Ford set up "showrooms" in the Natick Mall and tried to
claim they weren't "franchises", the Court would consider reading the
definition more broadly, but I'd rather any Court read statutes as being as
minimally intrusive as possible: No franchise agreement? No problem.

~~~
toomuchtodo
> I suppose that if Ford set up "showrooms" in the Natick Mall and tried to
> claim they weren't "franchises", the Court would consider reading the
> definition more broadly, but I'd rather any Court read statutes as being as
> minimally intrusive as possible: No franchise agreement? No problem.

Can Ford not put vehicles in public areas with associated literature (paper
marketing, iPad kiosks, etc), and take orders from that mobile device or via a
customer's phone?

The order takes place where the servers are (the same as when you buy a Model
S on teslamotors.com), and you would be prohibiting the corporation's freedom
of speech (finally! a use for Citizens United that sucks less) by preventing
them from putting a vehicle out in public (if they have approval of whomever
owns/controls the underlying space).

~~~
fleitz
If Ford has franchise dealerships in MA then they may not do this, if they
don't have dealerships then they may.

Citizen United was about political speech, not selling cars. There's a long
history of the court taking differing approaches to commercial speech vs
political speech. Ford most likely could open up stores to distribute
political literature. They could even likely make a Ford movie. What they
can't do is sell cars.

The court generally errs on the side of the people when it comes to political
speech and on the side of the state when it comes to commercial speech. I
don't see Ford having much of a case opening up dealerships under Citizens
United.

------
DannyBee
So you need to be very careful in being happy about this: All the court said
was that the dealers have no private cause of action. That is, they can't sue
to block tesla themselves.

The state AG/etc could still do it.

~~~
JackC
I'm not so sure that's true. The conclusion is that the statute "was intended
and understood only to prohibit manufacturer-owned dealerships when, unlike
Tesla, the manufacturer already had an affiliated dealer or dealers in
Massachusetts." I think there would have to be a third-party Tesla franchisee
in Massachusetts before the AG could sue on their behalf.

~~~
DannyBee
That reasoning will be held to be not dicta on the standing issue of private
dealers, but would probably be relitigated if the AG sued :)

This is because the _legal conclusion_ (under the heading "Conclusion") is
limited to the dealers and their private right of action, and thus, only the
reasoning that applied to that is considered stare decisis.

BUt otherwise, you may end up right. Courts tend to be finicky about this
stuff, depending on circumstances.

------
startupfounder
Between Tesla and Uber the auto industry is quickly reorganising, becoming
more efficient and cutting out the middle man, aka dealerships and taxi
companies.

It's only a matter of time before drivers are cut out of the equation as well
with riders ordering a cab and getting picked up by a self driving Tesla.

~~~
bostonpete
I think Uber is great, but I don't think it's cutting out a middleman. It's
just replacing one middleman with another, albeit a more efficient one.

~~~
toomuchtodo
Uber is the stepping stone to self driving cars. Their valuation will drop
when investors realize that anyone can purchase a self-driving car with
financing. There is an ocean of mobility demand out there, and its naive to
think its going to be captured by Uber because someone installed the Uber app
first.

~~~
saidajigumi
> anyone can purchase a self-driving car with financing.

To assert this as obvious strikes me as a bit ridiculous. Let's think through
one facet of what happens once services like Uber, Car2Go, Lyft, etc. have
self-driving cars. Those living in urban areas would then have a very viable
option to avoid ownership, maintenance, storage, parking, etc. for what's
commonly cited as the second most costly (and _massively_ depreciating) asset
they own after a home. It would allow a practical shift for many people from
car ownership to car sharing. The cultural transition won't happen overnight,
especially in the US where car ownership is practically a rite of passage. Yet
I suspect that the economics will eventually be so favorable that once the
business and technology pieces are in place, the transition will happen for a
large percentage of the population no matter what.

In this light, Uber is one of several companies positioned for a massive
transition of transportation from a product-oriented business to a service-
oriented one. We'll see how it all plays out.

~~~
toomuchtodo
You misunderstand me. Anyone, not just consumers, but businesses as well,
could buy self-driving vehicles.

Uber is simply an app with supply/demand machine learning, an army of drivers
who are becoming more irate by how they're being treated, and community
managers. What would it cost to reproduce Uber's app and backend? $500K? $1
million?

What happens if cities simply say, "You're out Uber" and buy their own self-
driving cars for their citizens? Is Uber going to build their own roads?

~~~
bostonpete
I don't think cities are going to be buying self-driving cars like this. What
happens when citizens want to leave the city? Or the state? Or country? It
makes more sense for a corporation to provide this service.

By and large, people seem to love Uber. If they fall out of favor, I think it
would be more natural for competitors to put pressure on them to improve (or
supplant them), not city governments.

~~~
toomuchtodo
> What happens when citizens want to leave the city? Or the state? Or country?

They use the public transit available to them where they move to? Why would
self-driving vehicles not be like the postal service, a business but also an
essential service?

Just because I left Chicago doesn't mean I get to take the Metra and the CTA
with me.

------
squozzer
To me the last paragraph seems a bit funny - "In an unusual blog posting in
April, three top U.S. Federal Trade Commission officials expressed opposition
to laws banning direct sales, saying they could harm consumers."

Maybe the FTC should investigate the way current dealer sales operate if they
care about protecting consumers.

------
clairity
nice! i'd read somewhere that the dealership model was actually a key aspect
to universal car ownership in the US (wish i could find the link).
manufacturers apparently had to lobby state legislatures to allow them to set
up auto franchises and had to entice franchisees to set up dealerships (this
is where all the complicated kickbacks apparently came into play).

now the franchisees are understandably lobbying for the opposite to keep
manufacturers out. i'm sympathetic to dealers as small business owners but i'm
no fan of (most) car salesmen. will be interesting to see if this means
dealerships become more competitive (better customer service?) or get pushed
out. i've also heard that most dealerships make their money on service, but at
least with teslas, that's not a big business (and it's more IT than auto
mechanic).

------
coreymgilmore
This is great to hear. The decision lacks any limits on the number of
dealerships in MA, unlike similar decisions in NJ and PA (from what I could
see, correct me if I am wrong). I hope more states in the future take this
route of allowing sales without any limitations.

