Tesla Motors is suing the State of Michigan in federal court over its law banning the direct sales of vehicles to consumers.
In the filing, Tesla stated its purpose was to “vindicate its rights under the United States Constitution to sell and service its critically-acclaimed, all-electric vehicles.” The law, which the automaker calls the “Anti-Tesla amendment” in the suit, was cited in the rejection of the electric-vehicle maker’s application for a state dealership license earlier this month.
Michigan Gov. Rick Snyder signed legislation in 2014 that closed a potential loophole in the state’s existing franchise law, effectively banning Tesla’s direct-to-consumer sales model.
The automaker is demanding a jury trial and has named Snyder, state Attorney General Bill Schuette and Michigan Secretary of State Ruth Johnson in the suit. A spokesman for the Michigan Department of State said in an emailed statement that the agency followed state law in the rejection of Tesla’s application.
“For the last two years, Tesla has pursued legislation in Michigan that is fair to everyone and that would benefit Michigan consumers,” a Tesla spokeswoman said in a statement. “Giving auto dealers a monopoly on car sales benefits them, but harms consumers.”
The statement added: "Unfortunately, the local auto dealers and local manufacturers have made clear that they oppose any law that would allow Tesla to operate in Michigan. Given their position, the leadership of the Michigan Legislature recently informed Tesla that it will not even hold a hearing to debate the issue. As one leading legislator told Tesla: The local auto dealers do not want you here. The local manufacturers do not want you here. So you’re not going to be here."
Michigan is the most populous state to ban Tesla stores, galleries and service stations. The automaker has been unable to obtain a dealership license from Texas, Connecticut and Utah, however it operates galleries and service centers in those states. Last week, Tesla was granted a license to sell its vehicles in Arizona after a judge ruled it had been wrongfully denied a license in May.
Court rulings
Daniel Crane, a University of Michigan law professor who has closely followed the Tesla case in the state, said the company's constitutional challenge was a last resort.
"After the disastrous and corrupt debacle in the Legislature in 2014, Tesla tried its hardest to reach a compromise in the Legislature or before administrative agencies," he wrote in an email to Automotive News today. "Once they reached a roadblock with the denial of their request for a dealer license and in opposition to reform in the Legislature, the only remaining route was a constitutional challenge.
"The constitutional case is challenging, but has some strong support in federal case law," he wrote. "The 6th U.S. Circuit Court of Appeals, which has jurisdiction over Michigan, has ruled that economic legislation that serves merely to protect special interests against competition is unconstitutional. A variety of neutral parties, including the U.S. Federal Trade Commission and a coalition of over 70 economists and law professors have already described direct distribution restrictions like Michigan's in exactly those terms."
"I look forward to seeing how the State of Michigan will try to defend this ban in court. It has no good arguments."
The suit against Michigan, filed in U.S. District Court in Michigan’s Western District, was reported earlier by Electrek.com.
Tesla suing Michigan over direct sales by Fred Lamert on Scribd
