Any dissenters around here? We're going through this stuff now in Georgia. I like the ideal of trying different market approaches than your competitors, and I generally think businesses should; but I did read a counter point[0] that at least made me think.
If a large number of individuals or businesses are heavily invested in the-way-things-are, is it ever dangerous to rapidly change the market rules that we've built up- usually for the purposes of consumer protection or fostering businesses that benefit the larger community?
Somewhat of a dissent: A law that protects dealers from being screwed over by manufacturers and distributors is a good thing, but the court said that the law protects dealers for car maker G from being harmed by the actions of G, not the actions of car maker T. But if car maker T can act in ways that harm dealers for other car maker G, then some protection is probably needed.
I would expect that the standing issue would be different if dealer for G could show harm by the actions of maker T.
What's this thing about protecting others from harm? Isn't harming your opponent what competition is all about? Not directly harming them, of course, but simply by being better than them, which is the case here.
There's a specific legal definition of "harm" that applies. Someone with experience in litigating that kind of thing could explain it, but like most things legal, it isn't what the dictionary says.
How do you expect maker T harming dealer G? Other than making a better product and outselling G? Maker t can't force maker G to change its relationship with dealer G or undercut G. I would expect that if maker T is harming dealer G other than by normal market forces, then they are probably already doing something illegal and no further protection is actually needed.
That a good question, and apparently the court used something like that line of reasoning in this case: that a car dealer could only be harmed (in the legal sense) by the car maker they sell for.
"If a large number of individuals or businesses are heavily invested in the-way-things-are, is it ever dangerous to rapidly change the market rules that we've built up- usually for the purposes of consumer protection or fostering businesses that benefit the larger community?"
Drastic and radical changes that happen quickly are probably quite a shock to a lot of business/industries/people. However, we must take care in what "regulation" or "consumer protection" as you call it, we add lest we actually make the subsequent change more drastic and actually harmful(more so than the harm we're trying to prevent by putting the regulation in place).
We're only in this situation because of regulation designed to protect already-invested businesses. At the time it was probably argued that having them fail would be a "dangerous and rapid change", or something to that effect. And the regulation sort of propped up or let the businesses get even more heavily invested into their ideas with no fear of alternative markets etc.
We could argue that if those regulations never got in place, those relatively smallish businesses would have failed at the time. The then owners would have adjusted, started over, or re-tooled their business to fit in.
In the article, he points out that Tesla's been given a lot of taxpayer money plus a lot of incentives for buyers to make their product more attractive. And now they now get to skirt around the market rules that other companies have been stuck with and had to build infrastructure and procedures to deal with more effectively.
Maybe Tesla's handouts should be pared back as they grow and are allowed to bypass the old rules.
Besides the Gigafactory, can you point out taxpayer money they were "given"? They had a DOE energy loan that was paid back much earlier than required, with interest. That is not a gift.
Also, their vehicles receive the same incentives as other EVs produced by other manufactures. Perhaps other manufacturers should make more EVs (or EVs people will buy) if they would like to capture the benefit of those government incentives.
Yes, it is a gift. The loan was priced way below market, considering the level of risk and other conditions attached. The difference between the interest rate Tesla paid, and the market interest rate for the same amount of money, is a subsidy (or 'gift', if you prefer) from the taxpayer to Tesla.
A subsidy is not a gift. It is an incentive to take a specific action, no different than the mortgage income tax deduction, credit on your taxes for children, or deductions for charitable contributions.
If you have any thought that the US is an efficient pure free market, I am sorry to inform you that is not the case.
'can you point out taxpayer money they were "given"'
My point is that the subsidised interest rate _is_ taxpayer money they were given. They were given the difference between the market interest and the interest they actually paid.
I'm _not_ arguing either that (i) 'the US is an efficient pure market' or (ii) that this specific subsidy was a good or bad thing.
> Tesla's been given a lot of taxpayer money plus a lot of incentives for buyers to make their product more attractive.
One could argue that by not taxing the externality of their business (CO2 emissions), auto manufacturer's that make traditional gas guzzlers have been given far more government assistance than Tesla. The incentives that you speak of are intended to produce a positive benefit to society (less pollution) rather than as a handout to help Tesla.
I'd only dissent so far as I'm unconvinced that the Court wouldn't have reached a different opinion if, say, some newly independent spinoff brand of GM was muscling in on its parent company's dealers by trying to sell directly to consumers. That is, I am suspicious it helped that Tesla had the green halo it does.
If the law is producing bad outcomes, the legislature should face pressure to change the law. We shouldn't rely on the Court to stretch as far as it can to get the "right" result.
But JackC's summary of the opinion makes a reasonable case that the standing issue was properly decided.
Agreed, it's the hallmark of a fair deal as suggested by a saying i've heard people repeat. But I never bought again from those dealers for the reason that I felt I got a little hosed but was worn down by the process or simply needed to move quickly on a vehicle.
Edit: having read the decision, I thought it might be fun to explain what the Court did here. Reading statutes is a lot like reading code. Reading cases is like ... not running the code, because we can't do that, but more like having it explained by a particularly skillful coder with decades of experience. It's fascinating if you're into that stuff.
So to start with, we have this statute in Massachusetts that says it is unlawful for a car manufacturer "to own or operate, either directly or indirectly through any subsidiary, parent company or firm, a motor vehicle dealership located in the commonwealth of the same line make as any of the vehicles manufactured ... by the manufacturer[.]"
Sounds pretty clear cut, right? Tesla can't run a dealership in Massachusetts that sells Teslas -- there's no helpful exception left out of that quote. But the Court didn't come out that way.
If you really want the reading-unfamiliar-code experience, go read the surrounding parts of the statute[1] and see how you think the Court understood that section. It's under subsection (10).
...
So, it turns out the Court looked to the legislative history, which is the closest we have to comments -- statements of legislators and the Governor explaining why they were voting for (or not vetoing) the statute. (As a side note, Massachusetts has terrible legislative history, because not much was recorded of the debates, many decisions are made behind closed doors by the Democratic super-majority, and unlike Congress, we rarely explain why a statute is being passed in the text itself -- but there seems to be some history in this case.) The Court concluded that the statute is intended to protect dealers from their own manufacturers. The Court finds: "the purpose of c.93B historically was to protect motor vehicle dealers from a host of unfair acts and practices historically directed at them by their own brand manufacturers and distributors." Or, quoting an earlier case, it's about "preserving a sound competitive market free of the domination of oligopolists[.]"
That matters because intent matters -- the Court isn't a computer, and if at all possible it tries to do what the Legislature actually wanted.
So then the Court looks back at the statute, and lo and behold, subsection 10 is only one of 12 subsections! (We knew there had to be at least 10.) And every single one of them (besides #10) is obviously designed to regulate relationships between dealers and their own manufacturers. So the Court says, "It would be anomalous to find, within this detailed list of rights and protections that are conferred on dealers vis-à-vis their manufacturers and distributors, a lone provision giving dealers protection against competition from an unaffiliated manufacturer." Instead, they conclude that the Legislature -- which was trying to promote competition -- must have intended subsection 10, like the others, to be a right of dealers against their own manufacturers.
And that's why this is ultimately dismissed on the basis of "standing." Cases (almost always) have to be filed by someone with a legally protected interest at stake. If the statute is designed to protect Tesla dealers (if any), then only Tesla dealers can file a case. That means, for now, no one can.
(It's an interesting side effect that this essentially means there can be no third-party Tesla dealers in Massachusetts as long as Tesla is selling directly. It's an open question whether that's a good thing.)
I actually find the first part of the decision's discussion on standing fairly persuasive:
"Motor vehicle dealership" is a term defined in c. 93B as: "any person who, in the ordinary course of its business, is engaged in the business of selling new motor vehicles to consumers or other end users pursuant to a franchise agreement and who has obtained a class 1 license pursuant to the provisions of [G. L. c. 140, §§ 58 & 59]"
Because neither Tesla nor Tesla MA is engaged in the business of selling new Tesla motor vehicles in Massachusetts "pursuant to a franchise agreement," there appears to be a question whether Tesla's business model involves the operation of a "motor
vehicle dealership" ... and therefore whether, by its literal terms, the proscription of
§ 4 (c) (10) applies to the defendants at all.
I suppose that if Ford set up "showrooms" in the Natick Mall and tried to claim they weren't "franchises", the Court would consider reading the definition more broadly, but I'd rather any Court read statutes as being as minimally intrusive as possible: No franchise agreement? No problem.
> I suppose that if Ford set up "showrooms" in the Natick Mall and tried to claim they weren't "franchises", the Court would consider reading the definition more broadly, but I'd rather any Court read statutes as being as minimally intrusive as possible: No franchise agreement? No problem.
Can Ford not put vehicles in public areas with associated literature (paper marketing, iPad kiosks, etc), and take orders from that mobile device or via a customer's phone?
The order takes place where the servers are (the same as when you buy a Model S on teslamotors.com), and you would be prohibiting the corporation's freedom of speech (finally! a use for Citizens United that sucks less) by preventing them from putting a vehicle out in public (if they have approval of whomever owns/controls the underlying space).
If Ford has franchise dealerships in MA then they may not do this, if they don't have dealerships then they may.
Citizen United was about political speech, not selling cars. There's a long history of the court taking differing approaches to commercial speech vs political speech. Ford most likely could open up stores to distribute political literature. They could even likely make a Ford movie. What they can't do is sell cars.
The court generally errs on the side of the people when it comes to political speech and on the side of the state when it comes to commercial speech. I don't see Ford having much of a case opening up dealerships under Citizens United.
Ford (and other manufacturers) do put on demo events in public areas where customers can test drive vehicles with no sales pressure and pick up marketing literature. But if you actually want to buy they'll point you to a local dealer, and may have some dealer reps on hand to help.
http://www.ford.com/newsevents/events/eventsdetail/?id=351
The other model that some legacy manufacturers are working on is to let customers go through the whole purchase process on their corporate web site and then just take delivery through the local dealer. The dealers are happy with this arrangement since they still get to profit on the sale and don't have to do any sales work.
If only computers were a bit more like courts..
(It would probably be terrible :D)
Thanks for the explanation though, perfectly clear and very interesting.
>It's an interesting side effect that this essentially means there can be no third-party Tesla dealers in Massachusetts as long as Tesla is selling directly.
The first thing I thought was "well, they've got a problem if someone else starts to sell Tesla's" but of course they've got full control over this.
So you need to be very careful in being happy about this:
All the court said was that the dealers have no private cause of action. That is, they can't sue to block tesla themselves.
I'm not so sure that's true. The conclusion is that the statute "was intended and understood only to prohibit manufacturer-owned dealerships when, unlike Tesla, the manufacturer already had an affiliated dealer or dealers in Massachusetts." I think there would have to be a third-party Tesla franchisee in Massachusetts before the AG could sue on their behalf.
That reasoning will be held to be not dicta on the standing issue of private dealers, but would probably be relitigated if the AG sued :)
This is because the legal conclusion (under the heading "Conclusion") is limited to the dealers and their private right of action, and thus, only the reasoning that applied to that is considered stare decisis.
BUt otherwise, you may end up right. Courts tend to be finicky about this stuff, depending on circumstances.
Between Tesla and Uber the auto industry is quickly reorganising, becoming more efficient and cutting out the middle man, aka dealerships and taxi companies.
It's only a matter of time before drivers are cut out of the equation as well with riders ordering a cab and getting picked up by a self driving Tesla.
Uber is the stepping stone to self driving cars. Their valuation will drop when investors realize that anyone can purchase a self-driving car with financing. There is an ocean of mobility demand out there, and its naive to think its going to be captured by Uber because someone installed the Uber app first.
> anyone can purchase a self-driving car with financing.
To assert this as obvious strikes me as a bit ridiculous. Let's think through one facet of what happens once services like Uber, Car2Go, Lyft, etc. have self-driving cars. Those living in urban areas would then have a very viable option to avoid ownership, maintenance, storage, parking, etc. for what's commonly cited as the second most costly (and massively depreciating) asset they own after a home. It would allow a practical shift for many people from car ownership to car sharing. The cultural transition won't happen overnight, especially in the US where car ownership is practically a rite of passage. Yet I suspect that the economics will eventually be so favorable that once the business and technology pieces are in place, the transition will happen for a large percentage of the population no matter what.
In this light, Uber is one of several companies positioned for a massive transition of transportation from a product-oriented business to a service-oriented one. We'll see how it all plays out.
You misunderstand me. Anyone, not just consumers, but businesses as well, could buy self-driving vehicles.
Uber is simply an app with supply/demand machine learning, an army of drivers who are becoming more irate by how they're being treated, and community managers. What would it cost to reproduce Uber's app and backend? $500K? $1 million?
What happens if cities simply say, "You're out Uber" and buy their own self-driving cars for their citizens? Is Uber going to build their own roads?
Ah, understood. Fair point and one which I also touched on in mentioning other competitors for this space. I think this is especially true for Car2Go, which isn't conventionally seen as an Uber competitor, but which is perhaps better positioned to take advantage of self-driving vehicles because they already maintain fleets of custom vehicles and all that goes with that. I could definitely see some urban transit systems deciding to incorporate self-driving vehicles of varying capacities. That's an interesting angle.
So I well agree that Uber's technology, for which there are already multiple equivalents, isn't important. The contest will be entirely about business models and execution. IMO, that can be a lot harder to predict, at least without considerably more depth than I currently have on the players in this market.
I don't think cities are going to be buying self-driving cars like this. What happens when citizens want to leave the city? Or the state? Or country? It makes more sense for a corporation to provide this service.
By and large, people seem to love Uber. If they fall out of favor, I think it would be more natural for competitors to put pressure on them to improve (or supplant them), not city governments.
> What happens when citizens want to leave the city? Or the state? Or country?
They use the public transit available to them where they move to? Why would self-driving vehicles not be like the postal service, a business but also an essential service?
Just because I left Chicago doesn't mean I get to take the Metra and the CTA with me.
> Their valuation will drop when investors realize that anyone can purchase a self-driving car with financing.
While personal purchase of self-driving cars will be a thing, one big value proposition of self-driving cars is a drives down the relative cost of cars-for-hire compared to personally-owned-vehicles because you no longer need an operator in the vehicle whenever it is available for use (which means that the per-trip fee no longer needs to be enough to pay not only for the maintenance on the car and the operator's time on the trip, but also the operator's down time "on call" to be ready for the next trip.)
Uber might not win the space, but I think its naive to think that self-driving cars don't shift the balance more in favor of for-hire cars.
> Uber might not win the space, but I think its naive to think that self-driving cars don't shift the balance more in favor of for-hire cars.
I completely agree. For-hire self-driving vehicles are the future, I just don't believe Uber and Lyft are going to be the platform.
Off-topic: Whenever I see analysts argue that Tesla isn't making cars fast enough to compete with Big automakers, I chuckle. Elon doesn't have to replace every car, he just has to replace the door to door trips, which he can do with only ~10-15% of the current US vehicle fleet on the road. Self-driving Tesla vehicles for hire would further fund Tesla expansions (which provides additional capital for their Gigafactory to drive down battery storage costs, thereby enabling the wide-spread transition to intermittent renewables such as solar, wind, and tidal).
Zip cars had no operator overhead and had convenient downtown and other high demand locations where parking is expensive, but in the end they wound up not really impacting overall personal car ownership, and the company was absorbed by Avis. It's not clear that driverless cars represent a huge threat to auto sales to consumers. American homes are filled with personal possessions which they don't actually need to own. Like home entertainment systems which largely make shared venues like movie theaters less of a draw.
One reason to take a cab, or uber, or a train to the airport or downtown is the time and expense of parking. But if my car can just park itself at a low cost remote structure, go home, or say earn a few bucks taking a fare, and come back for me, then it's less of a hassle to drive to the city. I don't have to worry as much about being too tired to drive longer distances, I could just snooze or read a book. I'd probably be more likely to let my car drive me to LA overnight, and perhaps take fewer flights and consequently rent fewer cars. I could send my car to pick up food or packages or friends. Overall, it seems like my car is more useful to me, not less, if it can drive itself. If I can hire it out when I'm not using it, it might make it more affordable to own, as well. I doubt most people would rent out their own car with any regularity, unless they had to, any more than they want a bunch of strangers sitting on their furniture and messing with their stuff.
Or, less far off in the future, will the rise of paid ridesharing change how cars are designed? Perhaps they could be more businesslike in the back where the passenger sits, and more sparse in the front.
(I just realized I effectively described the car version of a mullet.)
Which is only tangentially related to Uber, unless you're confusing change now with "wouldn't it be nice if we can make self driving cars reliable sometime in the future".
How are taxi companies a middle man in the auto industry? Is uber suddenly using bicycles or some other non auto conveyance to transport people around? Even in the taxi industry, uber is not cutting out a middle man, they are becoming one.
To me the last paragraph seems a bit funny - "In an unusual blog posting in April, three top U.S. Federal Trade Commission officials expressed opposition to laws banning direct sales, saying they could harm consumers."
Maybe the FTC should investigate the way current dealer sales operate if they care about protecting consumers.
nice! i'd read somewhere that the dealership model was actually a key aspect to universal car ownership in the US (wish i could find the link). manufacturers apparently had to lobby state legislatures to allow them to set up auto franchises and had to entice franchisees to set up dealerships (this is where all the complicated kickbacks apparently came into play).
now the franchisees are understandably lobbying for the opposite to keep manufacturers out. i'm sympathetic to dealers as small business owners but i'm no fan of (most) car salesmen. will be interesting to see if this means dealerships become more competitive (better customer service?) or get pushed out. i've also heard that most dealerships make their money on service, but at least with teslas, that's not a big business (and it's more IT than auto mechanic).
This is great to hear. The decision lacks any limits on the number of dealerships in MA, unlike similar decisions in NJ and PA (from what I could see, correct me if I am wrong). I hope more states in the future take this route of allowing sales without any limitations.
If a large number of individuals or businesses are heavily invested in the-way-things-are, is it ever dangerous to rapidly change the market rules that we've built up- usually for the purposes of consumer protection or fostering businesses that benefit the larger community?
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[0] http://www.peachpundit.com/2014/09/05/tesla-uber-internet-sa...