Tesla squeezes victory in court, exposes collusion to keep direct sales out of Louisiana

Tesla has managed to win in US appeal court against the Louisiana Motor Vehicle Commission, which is preventing Tesla’s direct sale model in the state.

There are a few states in the US that have laws prohibiting direct sales of electric vehicles to the public without going through third-party dealerships.

These bans come from old laws that were meant to protect car dealers from their own automakers supplying the vehicles.

The idea is that automakers couldn’t open a company-owned store next to a third-party dealer after they have made the investment to sell and service their cars. It would be unfair competition.

Now, however, car dealerships, and the state vehicle commissions they control, are using those old laws to prevent automakers that never had deals with third-party franchise dealers, like Tesla, from selling their vehicles to the public, even though it’s fair competition. Tesla has been fighting those laws in many states with some success.

At times, Tesla is going through the legislative process to try to change the laws and other times, it can navigate the vehicle commission and request a dealership license directly.

In Louisiana, Tesla did the latter, but it was shut down by the Louisiana Motor Vehicle Commission.

In 2022, the automaker sued members of the Louisiana Motor Vehicle Commission, dealerships owned by individual commissioners, and the Louisiana Automobile Dealers Association for colluding in preventing them from obtaining a license in the state.

The case was dismissed last year, but Tesla brought it to a federal appeals court, which has sided with Tesla 2 to 1.

Tesla managed to prove bias and reportedly even produced emails from the commission’s executive director to Tesla competitors reassuring them that they are addressing their concerns over Tesla’s bid to sell directly to customers in the state (via Reuters):

Circuit Judge Jerry Smith wrote that Tesla sufficiently alleged that the defendants had “plausible actual bias,” citing emails from the commission’s executive director assuring Tesla rivals that their complaints would be addressed.

The dissenting judge, Dana Douglas, insisted that Tesla goes through the legislative process instead of the court:

“The issue is whether a company can change the composition of a state’s regulatory commission because it merely disagrees with state law that the commission must enforce. But Tesla cannot use this court as an end-run around the legislative process.”

Now, the case is going back to U.S. District Judge Sarah Vance in New Orleans, who dismissed it last year.

Electrek’s Take

Good news for Tesla. However, I think the dissenting judge has a point. Ultimately, it looks like Tesla might have to go back to the legislative process after the law was changed in 2017.

But at least, this case could expose the shenanigans that are going in the commission, which is undoubtedly abusing the law to prevent competition.

It could set the stage for another run at the legislation to fix the mistakes that allow this abuse of the law.