In a decision on Monday, the Utah Supreme Court decided (PDF) that the state?s regulators could prohibit an auto manufacturer from having ownership interest in a dealer.
In what the court called ?a narrow, legal decision,? it said that it wouldn't weigh in on whether allowing the state?s Tax Commission to prohibit direct sales from Tesla?s wholly owned subsidiary was the best policy for residents of Utah. Instead, the court said its job was simply to determine whether the commission could legally make that prohibition.
Tesla has faced resistance to its ?direct sales? business model in a variety of states, from Texas to Michigan to Connecticut. Dealership associations push back against this model because they say it gives Tesla an unfair advantage and robs the consumer of ?intra-brand competition,? where dealers compete to sell the same cars. Tesla contends that consumers are unfamiliar with electric vehicles and need a consistent, tailored retail experience to convince them that going electric is in their interest. The company has so far refused to move to a dealership model in any state.
Tesla created its subsidiary, Tesla UT, to be able to sell new cars in Utah, but the State Tax Commission ruled that the subsidiary needed a franchise agreement. Tesla UT entered into a partnership with its parent company, but the commission said Tesla couldn?t have a financial interest in Tesla UT?s franchise.
According to the Salt Lake Tribune, ?Attempts were made in 2015 and 2016 to change Utah law to accommodate Tesla, but the car dealers and other automakers rebuffed the efforts.?
A Tesla spokesperson told Ars, ?The Utah ruling is disappointing for Tesla and all Utah consumers interested in consumer choice, free markets, and sustainable energy. We will pursue all options to ensure that Tesla can operate in Utah without restriction. In the meantime, we will continue to provide service and limited sales activities (through our used car license) at our location in South Salt Lake City."
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