Michigan passes bill to ban Tesla!

[Kipernicus]

complete with an army of sales brochures, laptops and mobile broadband

What would you need laptops for when you can reserve on the 17" screen?

 

[Vger]

What would you need laptops for when you can reserve on the 17" screen?

It strikes me this could be considered a form of asexual reproduction (I am a biologist by education). :wink:

 

[physicsfita]

In any case, if Tesla opens a store in Windsor, this should make it relatively easy for Detroit area residents to view and test drive the car.

Not as easy as you may think, unfortunately. Pre-9/11, you could cross the border with just a regular driver's license and a birth certificate. Post-9/11, that was changed to either a passport, a passport card, or an enhanced driver's license. Although Michiganders are more likely to have one of these documents than a typical American, the percentage is still not that high. These travel restrictions killed my all-time favorite dim sum place in Windsor. :crying:

A better location would be Toledo, OH, but Tesla already has all the locations Ohio law permits.

 

[AudubonB]

There's more to that section ...



The question is whether the last clause (bolded) applies to the providing of information portion. Lack of commas makes it less clear but I would argue that the intent is to restrict that communication.

Sometimes it actually helps an internet discussion to be a grammar nazi. As follows:

The text:
Sell any new motor vehicle directly to a retail customer other than through franchised dealers, unless the retail customer is a nonprofit organization or a federal, state, or local government or agency. This subdivision does not prohibit a manufacturer from providing information to a consumer for the purpose of marketing or facilitating the sale of new motor vehicles or from establishing a program to sell or offer to sell new motor vehicles through franchised new motor vehicle dealers that sell and service new motor vehicles produced by the manufacturer.

Discussion: The parallel construction formed via the emboldened prepositions makes it clear that the intent of the statute is to demonstrate that it is permitted for a manufacturer to do BOTH the first AND the second items. Whaddyaknow? A clearly worded statute. Not always the case.

 

[green1]

Sometimes it actually helps an internet discussion to be a grammar nazi. As follows:

The text:
Sell any new motor vehicle directly to a retail customer other than through franchised dealers, unless the retail customer is a nonprofit organization or a federal, state, or local government or agency. This subdivision does not prohibit a manufacturer from providing information to a consumer for the purpose of marketing or facilitating the sale of new motor vehicles or from establishing a program to sell or offer to sell new motor vehicles through franchised new motor vehicle dealers that sell and service new motor vehicles produced by the manufacturer.

Discussion: The parallel construction formed via the emboldened prepositions makes it clear that the intent of the statute is to demonstrate that it is permitted for a manufacturer to do BOTH the first AND the second items. Whaddyaknow? A clearly worded statute. Not always the case.

Yet the last bit makes it clear that those actions must be through a franchise. so In this case, GM can advertise it's vehicles, which people can then buy at a franchised dealer, but Tesla can not advertise it's vehicles, because that would not be through a franchised dealer.

 

[jaanton]

This whole issue is a great example of why the Articles of Confederation failed. States in economic war against other states. IMO Michigan has declared its isolation from the trade of the other states. This is one of the major points of the adoption of the U.S. Constitution. Maybe most people here understand this, but I don't hear it mentioned much. Now state to state economic posturing is about taxes and tax breaks, i.e. we will not be as bad as some other place. But in the 1780's states put up substantial barriers to trade on a regular basis. Michigan has put into law, you can't do business here unless you give our guys a cut. That seems like it can not stand.

America’s First Failure at Government: The Articles of Confederation | US History Scene

 

[Robert.Boston]

In MA, Tesla was able to follow the letter of the law by setting up a separate corporation, Tesla Motors Massachusetts. Its officers just happened to be Elon Musk, etc. The town's legal counsel gave a formal opinion that the town should assume that two different corporations are in fact different.

By contrast in Michigan, the law would clearly not allow such an action:

​A manufacturer shall not ... Directly or indirectly own, operate, or control a new motor vehicle dealer, including, but not limited to, a new motor vehicle dealer engaged primarily in performing warranty repair services on motor vehicles pursuant to the manufacturer's warranty, or a used motor vehicle dealer.

 

[evme]

I don't think the commerce clause can do anything here. Tesla can still sell cars over the internet. The restrictions are within the state.

Sometimes it actually helps an internet discussion to be a grammar nazi. As follows:

The text:
Sell any new motor vehicle directly to a retail customer other than through franchised dealers, unless the retail customer is a nonprofit organization or a federal, state, or local government or agency. This subdivision does not prohibit a manufacturer from providing information to a consumer for the purpose of marketing or facilitating the sale of new motor vehicles or from establishing a program to sell or offer to sell new motor vehicles through franchised new motor vehicle dealers that sell and service new motor vehicles produced by the manufacturer.

Discussion: The parallel construction formed via the emboldened prepositions makes it clear that the intent of the statute is to demonstrate that it is permitted for a manufacturer to do BOTH the first AND the second items. Whaddyaknow? A clearly worded statute. Not always the case.

The problem is not the location of the from but the cut off point.


The text:
Sell any new motor vehicle directly to a retail customer other than through franchised dealers, unless the retail customer is a nonprofit organization or a federal, state, or local government or agency. This subdivision does not prohibit a manufacturer from providing information to a consumer for the purpose of marketing or facilitating the sale of new motor vehicles or from establishing a program to sell or offer to sell new motor vehicles through franchised new motor vehicle dealers that sell and service new motor vehicles produced by the manufacturer.


The question comes down to the through statement.

 

[Robert.Boston]

If anyone feels like tracking down some cases, here's a nice quote from a Sixth Circuit opinion Craigmiles et al. v Giles et al. 312 F.3d 220; 2002 U.S. App. LEXIS 24637; 2002 FED App. 0417P (6th Cir.); 2002-2 Trade Cas. (CCH) P73,893. Note that Michigan is in the Sixth Circuit.

Courts have repeatedly recognized that protecting a discrete interest group from economic competition is not a
legitimate governmental purpose. [**10] See City of Philadelphia v. New Jersey, 437 U.S. 617, 624, 57 L. Ed. 2d
475, 98 S. Ct. 2531 (1978) ("Thus, where simple economic protectionism is effected by state legislation, a virtually
per se rule of invalidity has been erected."). See also H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 537-38, 93
L. Ed. 865, 69 S. Ct. 657 (1949); Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 411, 74 L.
Ed. 2d 569, 103 S. Ct. 697 (1983) (distinguishing between legitimate state purposes and "providing a benefit to special
interests").

 

[AlMc]

If anyone feels like tracking down some cases, here's a nice quote from a Sixth Circuit opinion Craigmiles et al. v Giles et al. 312 F.3d 220; 2002 U.S. App. LEXIS 24637; 2002 FED App. 0417P (6th Cir.); 2002-2 Trade Cas. (CCH) P73,893. Note that Michigan is in the Sixth Circuit.

MichiganModels sent me this case and asked me to google it. Very interesting. It is a case involving selling caskets in Tennessee.

 

[TexasEV]

I guess you haven't been following the 20 page thread on this so you had to start your own?

 

[ecarfan]

Teslas in Michigan ?!?!?!?!?

I'm sure Kevin didn't see the earlier thread. Not unusual in a large, busy forum to start a duplicate thread without realizing it. The mods can handle it.

 

[CliffG]

I don't think the commerce clause can do anything here. Tesla can still sell cars over the internet. The restrictions are within the state.

IANAL, so can anyone explain why neither the Sherman Antitrust Act nor the Racketeer Influenced and Corrupt Organizations Act (RICO Act) would be the relevant law(s) to deal with these situations? I'm not asking why the DOJ or other authorities are unwilling to go up against the deep pockets of the dealership organizations or the other vested interests, just why those approaches aren't being discussed. In my naive understanding, it seems to me that the dealer associations are a) definitely acting to harm or remove competition, and b) are involved in one (or more!) rackets.

 

[Canuck]

“States are fully within their rights to protect consumers by choosing the way cars are sold and serviced,” Charles Cyrill, an NADA spokesman, told Bloomberg News. “Fierce competition between local dealers in any given market drives down prices both in and across brands. While if a factory owned all of its stores, it could set prices and buyers would lose virtually all bargaining power.”
Michigan to Tesla: Dealers only - Fortune

This is the stated purpose of the legislation and the reason behind why the government passed the bill. Really, we all know that the reason the bill passed was because of the strong auto dealer lobby and its campaign contributions but those facts don't fly in court. In court, it will be a given that the government can protect consumers but the grounds for that protection must be based on sound facts.

Here's how dealers currently price vehicles:

"A car dealer orders vehicles from the manufacturer for inventory and pays interest (called flooring or floorplanning). Dealer holdbacks are a system of payments made by the manufacturers to their dealers.[SUP][2][/SUP] The holdback payments assist the dealer's ability to stock their inventory of vehicles and improves the profitability of dealers. Typically the holdback amount is around 1% to 3% of the vehicles' manufactures suggested retail price (MSRP).[SUP][3][/SUP] Hold-back is usually not a negotiable part of the price a consumer would pay for the vehicle, but dealers will "give up" the dealer holdback to get rid of a car that has been sitting in its inventory for a long time or if the additional sale will bring them up to the manufacturer's additional incentive payments for reaching unit bonus targets.[SUP][4][/SUP] The holdback was originally designed to help offset the cost the new car dealer has for paying interest on the money that is borrowed to keep the car in inventory, but is in effect lowering the dealer's gross profit, and thus the sales commissions paid to employees.[SUP][5][/SUP] The holdback allows dealerships to promote at or near invoice-price sales and still achieve comfortable profits on such transactions.[SUP][5]"
[/SUP]
What this means is that the manufacturer has all the control when it comes to price, and the dealer can only negotiate away its profit. Given these facts, the "Fierce competition between local dealers in any given market [CANNOT POSSIBLY!] drive down prices both in and across brands". This is because that "fierce competition" relates solely to the dealer's profit but does not have any effect at all on the manufacturer's price to the dealer. This system is entirely different from retail systems designed to drive down manufacturer's costs, with the Wal-mart system being the best example of that approach - which is extremely rare in the retail market.

I see car dealers as akin to real estate agents. Before the internet they held the information consumer's needed (MLS for real estate agents) and actual manufacturer's prices for car dealers. That's no longer the case...

"With the advent of the Internet, the process of selling cars has undergone a considerable change. More than 70% of car purchases in the United States start with research on the Internet. This empowers the buyers with the knowledge of features of comparable cars and the prices and discounts offered by different dealers within the same geographic area. This helps the buyers during price negotiations and puts further pressure on the profit margin of the dealer.[SUP][6]"[/SUP]

 

[TexasEV]

I agree with the dealers' position--up to a point. When a dealer has been given a franchise to sell, say, Fords, there are a lot of shenanigans that Ford could play if it could open a company-owned store down the road. Once an OEM has gone down the franchised dealer route, there are good reasons why it needs to continue that business model.

The relationship between manufacturer and franchised dealer should be a matter of contract between the parties, such as whether or not it is exclusive within a certain geographic area. There is no reason for a state to legislate it other than to tip the scale in favor of the local dealers.

Lots of other industries have products sold both by the manufacturer and through other retailers (Apple is the example cited frequently). It should be a matter of choice by both the manufacturer and dealer regardless of what non-addictive product is being sold.

 

[30seconds]

I don't think the commerce clause can do anything here. Tesla can still sell cars over the internet. The restrictions are within the state.




The problem is not the location of the from but the cut off point.


The text:
Sell any new motor vehicle directly to a retail customer other than through franchised dealers, unless the retail customer is a nonprofit organization or a federal, state, or local government or agency. This subdivision does not prohibit a manufacturer from providing information to a consumer for the purpose of marketing or facilitating the sale of new motor vehicles or from establishing a program to sell or offer to sell new motor vehicles through franchised new motor vehicle dealers that sell and service new motor vehicles produced by the manufacturer.


The question comes down to the through statement.

So does GM does only "providing information to a consumer for the purpose of marketing or facilitating the sale of new motor vehicles through franchised new motor vehicle dealers that sell and service new motor vehicles produced by the manufacture?" Otherwise they would be in violation of that reading. For instance if GM or Ford does any direct providing information to a consumer in the state of Michigan, such as direct participation at an event such as, lets say, the Detroit Motor Show, it should be a problem.

In other words what is the difference between Tesla being able to attend / set up shop at the Detroit Motor Show and setting up an information only store at a Mall in Detroit?

 

[Red Sage]

So, from a sales standpoint ,the governor is right. The intent of the law was to forbid direct sales my manufacturers and they added language to tighten a potential loophole.

No. The Governor is incorrect. The purpose and intent of the law was to prevent automobile manufacturers from undercutting, abandoning, or placing unreasonable demands upon their 'independent franchised dealerships' by selling direct in the same areas. the NEW version of the law forbids direct sales by ALL automobile manufacturers, even if they do NOT have 'independent franchised dealerships'.

The real question is whether they can advertise a vehicle that's sold direct. So, should Tesla not show up to NAIAS and make it a big story or should they go to NAIAS and court a lawsuit to bring the issue even more publicity? Both have merit

Tesla Motors can go to NAIAS if their intent is to: 1) 'provide information' to consumers for 'marketing' or 'facilitating' the sale of new cars; and 2) offer cars for purchase and sales by 'independent franchised dealerships'. If they are NOT offering cars to dealerships, then they cannot display the cars, though. Tesla Motors could get around this, I suppose... If they required a minimum commitment of say... 250,000 cars over three years to become a franchise holder... It is an offer that would be refused, but it is still an offer.

Isn't it a pain in the neck to buy a Tesla in Texas b/c you have to purchase in another state and then get double taxed when registered in Texas?

Most seem to report that even with the issues with taxes and whatnot, the experience is still the best they have ever had. Worst part is that current law in Texas says your electric car cannot qualify for the state EV tax rebate unless it is sold through an 'independent franchised dealership'.

That's a great list of videos to help showcase this issue. (the guy talking to O'Reilly... what a buffoon...)

Yeah. He was an absolute buffoon. I mean, every argument he raised could be countered... by Bill O'Reilly. There's a sign that you have absolutely not a leg to stand on. A shame though that Bill didn't call him on the fact that Nissan got six times as much money, and Ford got twelve times as much money, on the same program, and haven't paid back a dime. Nor was it brought up that the program was open to ANYONE in the automobile industry that was willing to make an attempt toward building reduced or zero emissions vehicles. One point I bring up is that with 5.9 billion dollars 'for free' Ford came up with the Focus Electric... With 2.9 billion dollars 'for free' Nissan came up with the Leaf. How much you wanna bet both those loans will be quietly 'forgiven' just before they come due? Yeah.

This is hard to believe. No servicing? So third party servicing is allowed - like, when you see "Olde Englishe Jaguar, bring your old Jag here for service" - but Tesla can't service cars?

The law says that Tesla just... can't own a location to service cars, can't set up a location to service cars, can't have an interest in a location to service cars, and can't authorize anyone else to do so -- even under warranty. It's pretty bad. If Tesla had offices in Michigan, they could set up to repair cars that belonged to the company itself, but not any owned or operated by consumers in the public at large.

I wonder where the UAW stands on this. Since the UAW is strong in MI were they with GM in supporting the bill? Do they look at the Fremont facility and think it should be unionized and are therefore OK with Tesla being hamstrung in MI?

The UAW has been trying to get back into the Fremont facility since Toyota closed NUMMI, and it was announced that Tesla Motors was buying the joint. I believe Tesla even gave the UAW an office at Fremont, so as to be as transparent as possible, and not seem to be actively barring the adoption of a union. But the UAW has not been able to convince anyone at Fremont that they need to unionize, though they have tried, constantly, since 2010.

I would argue that this section has been misinterpreted by the people who have claimed Tesla can't open a gallery, attend auto shows, or otherwise advertise their cars. At the very least, it is ambiguous enough to be challenged.

Yup.

Along those lines, I wonder if the law will be interpreted to allow Tesla to provide "ranger" service to Michigan owners.

Tesla Motors cannot do the Ranger Service in Michigan under this law. A person would have to use the roadside assistance program, run by an independent source, instead.

Yet the last bit makes it clear that those actions must be through a franchise. so In this case, GM can advertise it's vehicles, which people can then buy at a franchised dealer, but Tesla can not advertise it's vehicles, because that would not be through a franchised dealer.

Precisely.

IANAL, so can anyone explain why neither the Sherman Antitrust Act nor the Racketeer Influenced and Corrupt Organizations Act (RICO Act) would be the relevant law(s) to deal with these situations? I'm not asking why the DOJ or other authorities are unwilling to go up against the deep pockets of the dealership organizations or the other vested interests, just why those approaches aren't being discussed. In my naive understanding, it seems to me that the dealer associations are a) definitely acting to harm or remove competition, and b) are involved in one (or more!) rackets.

I am not a lawyer... But I get the impression that the Federal Trade Commission is not allowed to act on their own (as do the FBI, ATF, or DEA). They must receive consumer complaints about a business, or a request for assistance from a business. I do not know if a complaint can be made to the FTC about a legislative process. If Tesla Motors were to sue the state, the governor, the legislature, the sponsor of the bill, the person that modified the bill, and the dealer association, then they could call the FTC to testify. The Department of Justice is ham-stringed by political concerns themselves, what with so many claiming that any Presidential request for a cup of coffee or a sandwich without pickles amounts to monarchical behavior. If Tesla Makes the move, then they will have backup, but the Federal government will not lead the charge on their behalf.

- - - Updated - - -

This is how it all falls as I read through it...

(i) Sell any new motor vehicle
directly to a retail customer
other than through [its] franchised dealers,
unless the retail customer
is a nonprofit organization
or a federal, state, or local government or agency.
This subdivision does not prohibit
a manufacturer from providing information to a consumer
for the purpose of marketing or
facilitating the sale of new motor vehicles
or from establishing a program
to sell or offer to sell
new motor vehicles
through franchised new motor vehicle dealers
that sell and service new motor vehicles
produced by the manufacturer.
​

 

[Doug_G]

Since the bill has actually passed, I have revised the thread title.

 

[Chichio]

Another article, It's a done deal. Michigan just became the next state that needs a legalize it movement: http://recode.net/2014/10/21/michigan-becomes-fifth-state-to-thwart-direct-tesla-sales/

 

[evme]

IANAL, so can anyone explain why neither the Sherman Antitrust Act nor the Racketeer Influenced and Corrupt Organizations Act (RICO Act) would be the relevant law(s) to deal with these situations? I'm not asking why the DOJ or other authorities are unwilling to go up against the deep pockets of the dealership organizations or the other vested interests, just why those approaches aren't being discussed. In my naive understanding, it seems to me that the dealer associations are a) definitely acting to harm or remove competition, and b) are involved in one (or more!) rackets.

Because the power granted to those acts are justified by interstate commerce. So you need to first prove how this has any relevance to interstate commerce. Now that is not to say that it can't happen, but you would need favorable judges to rule in such a way. Because under a strict interpretation it won't hold.

So does GM does only "providing information to a consumer for the purpose of marketing or facilitating the sale of new motor vehicles through franchised new motor vehicle dealers that sell and service new motor vehicles produced by the manufacture?" Otherwise they would be in violation of that reading. For instance if GM or Ford does any direct providing information to a consumer in the state of Michigan, such as direct participation at an event such as, lets say, the Detroit Motor Show, it should be a problem.

In other words what is the difference between Tesla being able to attend / set up shop at the Detroit Motor Show and setting up an information only store at a Mall in Detroit?

You can read it in a way that GM and Ford would be banned too, but it would be a weak argument. The reason is since GM and Ford can only sell through franchises, one would easily argue that any advertising they do by default would be for the purpose of facilitating sales of new motor vehicles through franchises.


Now Tesla may have options open, for example. Tesla can bring the Model 3 to the auto show, claiming it to be a concept car. Since the car is not for sale and is only a concept at that point. It would slide by the law.

I am also not sure about Michigan used car laws. If they are less restrictive, then Tesla may be able to open up a gallery or attend the show with a used car promoting their CPO. Which would inadvertently promote their new car. Since the difference between a new car and a used car is pretty much a piece of paper.