Today, in Utah, if you're interested in buying
a Tesla, you can go see one in person, go
down to their storefront in Salt Lake City
and there will be a Tesla on display, and
you will even be able to take a test ride,
but you can't ask about the price and you
certainly can't buy one.
If you want to make that step and purchase
a Tesla, you've got to cross state lines.
The regulatory framework for how cars are
sold varies from state to state.
Unfortunately, in few states is that regulatory
framework ever simple.
In Utah, there's a licensing act and a franchise
act.
These two different regulations work together
to limit who can sell new cars in Utah.
Unfortunately, Tesla ran afoul of both of
them.
Utah's licensing and franchise acts work together
to protect existing car dealerships from competition
and, in particular, competition posed by manufacturers
hoping to sell direct to consumers.
Tesla wanted to sell direct to consumer, and
it attempted to jump through a series of regulatory
hoops in order to do so but, repeatedly, it
was denied the opportunity.
In order to sell new Tesla vehicles in Utah,
Tesla created a wholly-owned subsidiary, Tesla
UT, and applied for a license to sell new
cars.
Utah state denied Tesla UT that license because
it said it had not entered into a franchise
agreement with a car manufacturer.
Tesla UT then entered into a dealership agreement
with Tesla, the manufacturer, and reapplied
for a license to sell new cars.
At that point, Tesla UT was told it can't
sell new cars and it can't get a new car sales
license because Tesla, the company, had an
ownership stake in Tesla UT.
And when the case finally was presented before
the Utah Supreme Court, the Utah Supreme Court
did what so many courts do across the country.
The Utah Supreme Court when it issued its
opinion in April, upholding the regulation
preventing Tesla from selling direct to consumer
through its wholly-owned subsidiary, actually
said that it's not our job to question unwise
regulations.
It's not even our job to question if there's
only a loose connection between the regulation
and purported good that Utah is trying to
further by prohibiting Tesla from selling
direct to consumers.
The Utah Supreme Court said its job is merely
to conceive of a possible basis upon which
the regulation can be upheld, and that's exactly
what the court did.
States defend their franchise and dealership
laws on two grounds.
First, they say that requiring consumers to
purchase their vehicles through a franchise
or dealership protects the consumer from the
manufacturer, but states also say that dealerships
are an important part of the local economy
and provide valuable jobs.
The best way to protect a consumer is by empowering
the consumer with more choice, not less.
Now, this country was founded on the premise
that individuals in a free market should be
free to compete and through that competition
provide better services and better products
and, through that competition, spur innovation
that not only improves the consumer's experience
but improves the economy at large.
