Tesla Brought Its Battle Against Dealers to Louisiana

Photo: AP (AP)

Probably the one thing reasonable people can agree about Tesla is that its sales model — direct sales to consumers — is superior to having a third-party dealership network, as almost every other automaker has, because dealerships suck major shit and pretty much only still exist because of state franchise laws. Of course, it also sounds like dealing directly with Tesla can also not be ideal, but that doesn’t mean that cutting out the middle man is a bad idea in general.

So far, Tesla has been able to work outside of state franchise laws in the states where it operates in the U.S. through a combination of changes to state law, lawsuits, and side agreements, against fierce opposition from state dealership associations. But it hasn’t done this in every state just yet, though it is trying now in Louisiana, where, on Friday, Tesla filed a lawsuit seeking the ability to do there what it has done elsewhere — sell directly. Under current Louisiana law, direct sales are banned.

From Reuters:

Tesla claimed Louisiana officials have violated state and federal antitrust laws by barring direct sales since 2017 and trying to restrict the leasing and servicing of its cars in Louisiana.

“Louisiana consumers’ freedom is being unduly restricted by protectionist, anti-competitive and inefficient state regulation,” according to the lawsuit, which was filed on Friday in the U.S. District Court in New Orleans.

Tesla accused Louisiana dealers, dealer association and some members of the Motor Vehicle Commission of entering an “unlawful conspiracy to bar Tesla from doing business in Louisiana.”

More from the lawsuit itself:

The people of Louisiana should have the freedom to buy, lease, and service the car of their choosing. Yet, Louisiana consumers’ freedom is being unduly restricted by protectionist, anticompetitive, and inefficient state regulation and laws being implemented and enforced by representatives of the same entrenched automotive industry that lobbied for the passage of this anti-consumer regulation in the first place. As a result, those representatives have effectively shut out of Louisiana the consumer-centric, free-market solution that is a more efficient, consumer friendly business model for today’s automotive consumer. Tesla Motors, Inc., Tesla Lease Trust, and Tesla Finance LLC (collectively, “Tesla”) bring this action to vindicate their rights under the U.S. Constitution and federal and state law, and to protect Louisianians’ ability to buy, lease, and service Tesla’s critically acclaimed, all-electric vehicles in the State of Louisiana.

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The irony of state franchise laws is that, decades and decades ago, they were enacted to keep dealerships open, for fear that a community might lose theirs, but all of that, of course, was decades before the internet, while the laws remained on the books and worked a little too well. State dealership associations have also spent the time since getting stronger and pouring lots of money into lobbying to ensure the status quo remains. Franchise laws also came about long before Americans developed a reflexive hate toward their local dealers, or at least the non-luxury dealers, as I keep hearing that Porsche and Land Rover owners, to take two examples, like their dealers well enough.

Whether any of that history will help Tesla prevail in Louisiana is anyone’s guess, but another problem for dealers is that if they thought they truly provided a valuable service to the community, they might say they don’t need state franchise laws to survive, anyway. They can beat Tesla at its own game, as it were. That’s not the argument any of them make, though, for reasons that are easy to guess.

Among others, named in the lawsuit are the Louisiana Automobile Dealers Association and the Louisiana Motor Vehicle Commission. The MVC did not immediately respond to a request for comment, but LADA’s president, Will Green, sent the following in an email:

We are still reviewing everything, but after a preliminary review, the factual allegations appear baseless and grossly misstate the specific history of the plaintiff’s doing business in Louisiana. In addition, the legal allegations appear to go against years of antitrust jurisprudence and constitutional law.

Louisiana dealerships benefit communities by employing nearly 35,000 folks in good paying careers spanning sales, service and management that average more than $70,000 in compensation. Out of state technology companies don’t care about Louisiana’s communities – local dealerships that have operated here for generations do.

You can read the full lawsuit below.