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Published On: Wed, Jul 19th, 2023

Tesla Files Lawsuit Against Louisiana, Challenging State Laws that Ban Direct Automobile Sales

Tesla has recently filed a lawsuit against the State of Louisiana, seeking the ability to sell directly to consumers in the state. Direct sales are banned under current Louisiana law, which prompted the legal action by the automobile company. According to Tesla, Louisiana officials have violated state and federal antitrust laws by barring direct sales. While this is not the first time Tesla has sued to challenge a state’s laws, this suit does have some unique aspects.

Details of the lawsuit described the state regulation as inefficient and restrictive of the freedom of Louisiana consumers. According to the Tesla lawsuit, the people of Louisiana should have the right and freedom to buy, lease, and service the car of their choice. But this freedom, the lawsuit points out, is being restricted by “protectionist, anti-competitive, and inefficient state regulation and laws.”

With this lawsuit, Tesla aims to defend its own legal rights and protect the rights of consumers to buy, lease, and service Tesla’s critically acclaimed vehicles within Louisiana. The lawsuit claimed that the same automotive industry that pushed for adopting this anti-consumer policy is behind the enforcement of these restrictions. This has led Louisiana to shut out the more efficient, consumer-friendly direct sales model, which puts consumers first.

The Louisiana Automobile Dealers Association and the Louisiana Motor Vehicle Commission are two parties in the lawsuit. A request for a response from the MVC was not immediately acknowledged, but Will Green, the president of LADA, sent an email. In the email, Green claimed that after reviewing things, the allegations seemed baseless and inaccurately stated the history of Tesla’s business in Louisiana.

Tesla S model electric car

Tesla and State Franchise Laws

Despite vehement opposition from state dealership organizations, Tesla has so far been able to operate outside of state franchise restrictions in the states where it does business. It has achieved this through modifications to state law, lawsuits challenging existing laws, and complex transactions. In Louisiana, Tesla has chosen to file a lawsuit challenging the state’s restrictive law on several bases.

“State franchise laws were implemented many years ago to prevent local franchisees and dealers from losing their businesses, but these laws haven’t kept up with the times and definitely restrict growth and competition,” says attorney Jonathan Barber of Franchise.Law. To maintain the status quo, state dealership organizations have invested a lot of money and time into strengthening their lobbying efforts.

It is unclear whether Tesla’s past success in other states will aid the automobile manufacturer in Louisiana. However, dealers also have to accept that changes in their industry and consumer buying habits necessitate updated franchise and dealership laws.

Most people may probably agree that Tesla’s sales approach, which involves direct sales to customers, is preferable to having a third-party dealership network. Almost every other carmaker has a network of independent dealers, even though they are obviously inferior, mostly due to state franchise regulations.

Besides, purchasing through the dealership costs more than buying directly from car manufacturers. The business is a goldmine to dealers who profit from increasing the prices, especially the prices of in-demand cars. The buyers are always on the losing side.

Conclusion

While Tesla awaits a significant outcome from the case, this is not the first time the automobile company has pursued legal action for similar reasons. Back in 2016, Tesla also sued Michigan for banning direct sales. That case was settled in 2020, allowing Tesla to sell directly to customers in the state. The Austin-based automaker hopes to replicate the same success with the lawsuit against Louisiana.

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