Michigan Bill HB 5606 to prohibit Tesla sales [TSLA] in Great Lake State


DETROIT, October 18, 2014 — Michigan Governor Rick Snyder has until next Tuesday, October 21, to sign Michigan Bill HB 5606 into law. The bill, which prohibits automakers from selling cars directly, would effectively ban electric car company Tesla from selling automobiles in the state.

Tesla is a unique car company known for its stylish, ground-breaking electric vehicles. The company recently wowed the automobile world, unveiling the Model D and a bevy of new features.

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The company also does not distribute vehicles through dealerships, and instead sells its cars directly to the public. It is currently the only car company that sells its product directly to consumers.

The Governor is faced with a difficult decision over the bill. On the one hand, Michigan is home to U.S. auto makers and has a long history with the car industry. The powerful National Automobile Dealers Association (NADA) backs the law. NADA spokesman Charles Cyrill released a statement noting, “States are fully within their rights to protect consumers by choosing the way cars are sold and serviced,” he went on to note, “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.”

Tesla opposes the bill. Elon Musk, a beloved rock-star among Tesla aficionados, has fought similar legislation in Georgia, Missouri, New Jersey, New York, Ohio and Pennsylvania. Those states ultimately worked with Tesla to come up with a compromise acceptable to both sides.

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Tesla’s web site includes a post calling the bill “harmful to consumers.” The post further states,

Not content with enshrining their ability to charge consumers dubious fees, on the last day of the legislative session, the dealers managed to make a last-minute change to the bill in an attempt to cement their broader retail monopoly. Using a procedure that prevented legislators and the public at large from knowing what was happening or allowing debate, Senator Joe Hune added new language in an attempt to lock Tesla out of the State. Unsurprisingly, Senator Hune counts the Michigan Automobile Dealers Association as one of his top financial contributors, and his wife’s firm lobbies for the dealers.

By striking a single, but critical, word from MCLA 445.1574(14)(1)(i), the law governing franchise relations in Michigan, the dealers seek to force Tesla, a company that has never had a franchise dealership, into a body of law solely intended to govern the relationship between a manufacturer and its associated dealers. In so doing, they create an effective prohibition against Tesla opening a store in Michigan.

This amendment goes even further. It also seeks to prevent Tesla from operating a gallery in Michigan that simply provides information without conducting sales. We could even be barred from telling people about our car.

This anti-competitive behavior mirrors similar tactics in New Jersey and Missouri, where dealers have resorted to backroom political maneuvers to shore up their monopolies. The dark-of-night tactics highlight the dealers’ concerns that their arguments don’t stand up well to public scrutiny.

READ ALSO: Tesla [TSLA] intros the Model S “D” with AWD performance and auto pilot

Indeed, no consumer unaffiliated with dealers would ever want this. Officials at the Federal Trade Commission have spoken out about the potentially harmful consequences of the dealers’ anti-competitive behavior, saying “competition ultimately provides the best protections for consumers.” Leading economists have also weighed in, saying dealer monopolies come “at the expense of consumers and innovative technologies.” And in September, in considering a similar body of law, the Massachusetts Supreme Court handed down a ruling that made it clear that such laws were not intended to exclude a manufacturer without franchise dealerships from selling to consumers directly.

While the car dealers’ anti-consumer bill has made it through the legislature, it has yet to be signed into law. The bill is now on Governor Rick Snyder’s desk. We are calling on concerned consumers to contact the Governor and urge him to veto this legislation and return the issue to the legislature for a full and open debate in 2015.

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Currently, Tesla does not sell cars in Michigan, but does report 50 registered Tesla owners in the state. The nearest Tesla outlet is located in Columbus, Ohio.

According to Detroit insiders, car companies are not responsible for the legislation, and have stayed out of the fight. “U.S. car makers are still trying to figure out Tesla, to see where this wave is going to go, and to understand if there are potential partnerships. Frankly, they don’t want to alienate Musk,” says one former GM executive who asked not to be identified, “but the dealers? Yea, they are worried.”

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Lisa M. Ruth
Lisa M. Ruth is Editor-in-Chief of CDN. In addition to her editing and leadership duties, she also writes on international events, intelligence, and other topics. She has worked with CDN as a journalist since 2009. Lisa is also President of CTC International Group, Inc., a research and analysis firm in South Florida, providing actionable intelligence to decisionmakers. She started her career at the CIA, where she won several distinguished awards for her service. She holds an MA in international relations from the University of Virginia, and a BA in international relations from George Mason University. She also serves as Chairman of the Board of Horses Healing Hearts, and is involved with several other charitable organizations, including Habitat for Humanity, The Boys and Girls Clubs of America, and AYSO.