Tesla Takes Massachusetts, is a Federal Ruling Coming?

Tesla Motors is making headlines for a September 15^th Supreme Court victory in Massachusetts. The electric car manufacturer challenged their direct sales ban in the bay state. This isn’t the first time Tesla went up against state dealers associations. However, for the Tesla team, turning a state ban into hundreds of new sales opportunities is a big deal.

The lawsuit that Tesla won was against the Massachusetts State Automobile Dealers Association. The allegation on the part of the MSADA was that Tesla was getting around state dealership laws by operating one of their stores without a license. In the end, the court found that Tesla has never had a franchise relationship and is thus not a party to franchisee laws in that state.

Justice Margot Botsford (who ruled in the case) spoke about the Supreme Court Ruling. She said that the state franchise 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.” Referring to the dealers association that pushed for Tesla’s state ban she said, “the type of competitive injury they describe between unaffiliated entities is not within the statute’s area of concern.” It appears that Tesla Motors is being put into a different category than other auto manufacturers in that state.

Jim Appleton, who represents the New Jersey Coalition of Automotive Retailers, doesn’t feel that this ruling is very meaningful. He said that the ruling “was strictly a procedural decision, not a substantive decision.” There were certainly no quotes from dealer group representatives who see this as a huge setback. The closest was MSADA spokesperson Robert O’Koniewski, who said simply, “We’re disappointed.”

Tesla, on the other hand, couldn’t be happier. Todd Maron, Deputy General Counsel at Tesla said, “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.” It appears Tesla sees this ruling as a momentum builder. However, they may have more support down the road from the federal government. In April, the FTC spoke out in favor of Tesla’s direct-to-consumer sales model. In the April 24, blog posting the FTC wrote, “American consumers and businesses benefit from a dynamic and diverse economy where new technologies and business models can and have disrupted stable and stagnant industries. Consumers can benefit from change that also challenges longstanding competitors.”

Will this ruling be a case of Tesla winning one battle and ultimately losing the war? Is it possible that an eventual federal ruling will override state franchise laws? After all, the government helping Tesla Motors isn’t exactly a new thing. The answer to what’s around the bend for Tesla is up to you.