Tesla Sales Banned in New Jersey... hopefully not for long!

[pbleic]

the 10th amendment:
The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

anyone looking towards federal intervention should consider this. the only way the feds could get involved if a case can be made that the state laws inhibit interstate commerce, and that would be a long battle

Exactly right. But the commerce clause issue is very relevant. This article in the Boston Globe is a must read: The fight for direct car sales - Opinion - The Boston Globe

Quote: But the thinking of many is that, if the court battles go onward and upward, the US Supreme Court will likely rule the entire auto franchise system unconstitutional; under the Interstate Commerce Clause, it would be seen as a restraint on trade. If so, the winners would not only be Tesla but all of us. Imagine how great it would be to buy your next car on Amazon — and even better, never have to deal with a car salesman again.

 

[Jaxcoffee]

Sounds like an opportunity for some creative thinking. How about TMC (bad example, we probably own more than 1% of TSLA collectively) or someone from TMC apply for a Tesla dealer license/franchise and run it at similar cost to other Tesla stores (i.e., not setting higher prices, not keeping large inventories, etc.). In the end, even if Tesla doesn't own the franchise themselves, Tesla essentially carries out its direct sales model and the consumer doesn't have to jump though a bunch of hoops to take delivery or have service/repair work done. The downside is, you may not get paid very much, but I'm sure some of you would love to manage/"own" your own Tesla store

I think it would be awesome to just kick around those kind of ideas. Seems that there could be something developed that would work. I know I would love to be involved in promoting and educating people more about Tesla. Sales become a natural outcome when you approach it that way.

 

[lloyds]

How does this affect those who have ordered the car already?

 

[electrictorque]

How does this affect those who have ordered the car already?

just how the car is delivered. it should be delivered by a 3rd party company.

and it should not affect new online orders. just can't order at the store.

add comments here:

Motor Vehicle Commission passes "anti-Tesla" rule | NJ.com

 

[pbleic]

pbleic, I don't take on face value either Tesla or the Christie administration. here, as before, you describe the Governor's office's characterization of the situation as "telling the story" (the earlier post I made which you described as having a "tone" was where I pointed out that TM described this ruling today as a change to the law, in contrast to contentions that it was simply enforcing the existing law). That's not a matter of tone, that's a matter of seeing this as an open issue rather than assuming Tesla's contentions are not relevant.

I read both arguments and the statute itself and came to a conclusion. Others may come to a different conclusion. Unfortunately, NJ has the governmental advantage.

 

[aznt1217]

From what I understood, you can't order at the store and the "salespeople" at Tesla are restricted to say certain things, they can only answer questions in a specific way and you have to buy the car from home online or on your mobile phone or something, right? The other part is delivery from a 3rd party company. Which... is right across the river? So technically people will still not have to pay sales tax, it's just a extra hassle for delivery, correct?

 

[AlMc]

From what I understood, you can't order at the store and the "salespeople" at Tesla are restricted to say certain things, they can only answer questions in a specific way and you have to buy the car from home online or on your mobile phone or something, right? The other part is delivery from a 3rd party company. Which... is right across the river? So technically people will still not have to pay sales tax, it's just a extra hassle for delivery, correct?

This is how I believe the law reads/system works. You place your order online. You are buying the car 'in' a state that does not have those franchise laws. You are not taxed by that state and the 'tax' you pay (really a fee) is when you register it in NJ. Same as if you bought a car in Maryland but were to register it in NJ. You pay for a temp tag/registration and NO Maryland tax, then take the car and register it in NJ. If NJ tries to do otherwise that would be a violation of interstate commerce laws.

 

[pharma5]

Where no franchise has been granted, how can one be a franchisor?

To my knowledge the corporate person, Tesla, has not granted rights in its trade name, trademarks, service marks, or other characteristics to any real or corporate person in NJ. If correct, the rules for franchisors should not apply, the exec branch has overstepped, and the judiciary needs to correct it. Get thee to court!

(Put another way, it's not just any manufacturer that is a franchisor, but only those that grant franchises. If one grants a franchise, one cannot also go direct and thereby undercut what had been granted).

Source:http://law.onecle.com/new-jersey/56-trade-names-trade-marks-and-unfair-trade-practices/10-3.html

Bold Italics added:

56:10-3. Definitions.

3. As used in this act:

a. "Franchise" means a written arrangement for a definite or indefinite period, in which a person grants to another person a license to use a trade name, trade mark, service mark, or related characteristics, and in which there is a community of interest in the marketing of goods or services at wholesale, retail, by lease, agreement, or otherwise.

b. "Person" means a natural person, corporation, partnership, trust, or other entity and, in case of an entity, it shall include any other entity which has a majority interest in such entity or effectively controls such other entity as well as the individual officers, directors, and other persons in active control of the activities of each such entity.

c. "Franchisor" means a person who grants a franchise to another person.

d. "Franchisee" means a person to whom a franchise is offered or granted.

 

[Norbert]

Actually, the law doesn't assume that a motor vehicle manufacturor is a franchisor, it DEFINES them as such in the language quoted.

No, it doesn't define the term "motor vehicle manufacturer". It defines the term "motor vehicle franchisor", and it does so as if it were already established that only franchisors manufacture cars. However if that were already established explicitly, somewhere else, then that part would better have been quoted by the committee. So I'd expect it is never established.

The term "motor vehicle franchisor" is also defined in 56:10-13, there more clearly using "franchisor" instead of "person":

56:10-13. Definitions
1. For the purposes of this act:

"Motor vehicle franchisor" means a franchisor engaged in the business of manufacturing or assembling new motor vehicles, who will, under normal business conditions during the year, manufacture or assemble at least 10 new motor vehicles, and his motor vehicle distributors;

"Motor vehicle franchisee" means every franchisee actively engaged in the business of buying, selling or exchanging new motor vehicles and who has an established place of business;

"Motor vehicle franchise" means a franchise for the marketing of new motor vehicles;

"New motor vehicle" means only a newly manufactured motor vehicle, and includes all vehicles propelled otherwise than by muscular power, and motorcycles, trailers and tractors, excepting: (1) those vehicles as run only upon rails or tracks and motorized bicycles, and buses, including school buses; and (2) those motor vehicles not designed or used primarily for the transportation of persons or property and only incidentally operated or moved over a highway.

L.1977,c.84,s.1; amended 1991,c.459,s.1.

(Bold emphasis is mine.)

Here it is phrased more clearly that the term "Motor vehicle franchisor" is meant as a specific kind of "franchisor", as the term also literally suggests, by common sense.

However, Tesla is not a specific kind of a "franchisor".

 

[772]

just how the car is delivered. it should be delivered by a 3rd party company.

and it should not affect new online orders. just can't order at the store.

add comments here:

Motor Vehicle Commission passes "anti-Tesla" rule | NJ.com

From this page: Advocacy | Texas | Tesla Motors

It also suggests that service is affected, in particular any warranty repairs. That may be Texas specific, or not.

 

[pharma5]

However, Tesla is not a specific kind of a "franchisor".

I concur.

Franchise requires a license to certain IP rights related to the source of goods. In that case, it's not surprising that the owner/licensor of the marks could undermine a licensee of the marks (and thereby appear to be a more "true" or "better" source of the goods denoted by the marks).

But if there's no license to that IP, there is no franchise, and Tesla is thus not a franchisor. (There's no franchisee to undercut!)

 

[SteveG3]

good points pharma and Norbert.

in the meantime, gibberish continues in the media. on the "Kudlow Report," they show footage of all the Tesla supporters who showed up today for Tesla on next to no notice. as video pans the packed room the reporter, describes "a lot of dealers speaking out against the Tesla business model..." no joke.

New Jersey bans Teslas direct auto sale model - CNBC

silver lining, this crazy gauntlet Tesla has to move through will make the Tesla story more legendary, and early cars more collectible

 

[MarkW]

"56:10-27. Sales through franchises only
It shall be a violation of this act for any motor vehicle franchisor, directly or indirectly, through any officer, agent, employee, broker or any shareholder of the franchisor,
except a shareholder of 1% or less of the outstanding shares of any class of securities of a franchisor which is a publicly traded corporation,
or other person, to offer to sell or sell motor vehicles, to a consumer, other than an employee of the franchisor, except through a motor vehicle franchisee.
L. 1985, c. 361, s. 2, eff. Nov. 12, 1985.

Why does 56:10-27 include that strange exemption? - "except a shareholder of 1% or less of the outstanding shares" - does that mean someone owning between 1 share and 0.99% of $TSLA can sell a new Model S in NJ without a franchise?

 

[pharma5]

Why does 56:10-27 include this strange exemption? - "except a shareholder of 1% or less of the outstanding shares" - does that mean someone owning between 1 share and 0.99% of $TSLA can sell a new Model S in NJ without a franchise?

I believe that is just a common restriction on how shareholder is defined... needs to be a significant shareholder.

But again, only applies if TSLA were a franchisor. (So far, I think they're not, and none of this applies).

 

[772]

Why does 56:10-27 include this strange exemption? - "except a shareholder of 1% or less of the outstanding shares" - does that mean someone owning between 1 share and 0.99% of $TSLA can sell a new Model S in NJ without a franchise?

I think it just means that employees and major shareholders of the manufacturer aren't allowed to sell the cars directly to consumers (unless the consumer is also an employee). A non-employee minor shareholder would be allowed to do so.

 

[aznt1217]

If that's the case, I'm going on record. If Elon and Co. wants to use me as a "middleman" I'm open to it. I'd let them operate and I wouldn't even take a cent.

 

[Norbert]

Also, in 56:10-4, which relates to the whole of 56:10 (the "Franchise Practices Act"), it says:

56:10-4. Application of act

4. This act applies only:

a. to a franchise (1) the performance of which contemplates or requires the franchisee to establish or maintain a place of business within the State of New Jersey, (2) where gross sales of products or services between the franchisor and franchisee covered by such franchise shall have exceeded $35,000.00 for the 12 months next preceding the institution of suit pursuant to this act, and (3) where more than 20% of the franchisee's gross sales are intended to be or are derived from such franchise; or

b. to a franchise for the sale of new motor vehicles as defined in R.S.39:10-2, the performance of which contemplates or requires the franchisee to establish or maintain a place of business within the State of New Jersey.

L.1971,c.356,s.4; amended 1993,c.189,s.1.

(bold emphasis is mine)

Here it says explicitly that 56:10 overall applies only to franchises, in the first place. (The definition referred to, in 39:10-2, is completely unrelated to this question.)

I'm getting the impression that law was changed based on a misnomer in the definition in 56:10-26: the accidental use of the word "person" instead of "franchisor".

 

[Norbert]

If correct, the rules for franchisors should not apply, the exec branch has overstepped, and the judiciary needs to correct it. Get thee to court!

+1. Exactly. Not sure if it is the right place and time for Tesla, but in theory that seems what should happen. Depending on an actual lawyer's analysis (which I am not).

 

[pbleic]

Good points Norbert and pharma5. Seems like Tesla has the basis for a court battle. Maybe even an injunction against this rule change going into effect.

 

[brianman]

in the meantime, gibberish continues in the media. on the "Kudlow Report," they show footage of all the Tesla supporters who showed up today for Tesla on next to no notice. as video pans the packed room the reporter, describes "a lot of dealers speaking out against the Tesla business model..." no joke.

Lesson for the future:
Buy a white t-shirt and make your message absolutely clear in permanent marker.