Capitalism v. Cronyism: Why Can’t You Buy a Tesla in Utah? [POLICYbrief]
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Capitalism v. Cronyism: Why Can’t You Buy a Tesla in Utah? [POLICYbrief]


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.

100 Comments

  • Mid West

    +TFS Great Break down but really don't see that big of a challenge as long as Tesla is in Utah to service then hop across state line & buy a Tesla. A. People fly & Drive thousands of miles per year so what's so bad about 1 road trip? B. Buying a Tesla isn't inexpensive so there again should have the funds for the trip. C. Neighboring states get the revenue (Good for them).

  • Wirmish

    "Dealerships create jobs."
    Ok. But Tesla also creates jobs and need to open Tesla 'Dealership' in Utah to sell and service their cars. So they have to creates jobs there. What's the difference then?

  • Matthew Luck

    What Tesla should do is open up a dealership franchise but also allow private dealerships to purchase Teslas at factory prices from the manufacturer.

  • 2 creation stories

    Tesla cars are government-subsidized garbage you can't get anymore cronycapitalist then that. Tesla would not last 6 months if it wasn't heavenly subsidized half the cost by government I mean our tax dollars. I sure didn't get any Tesla stock shares or dividends in my tax returns the hype you heard about Teslas a good car and good for the environment is Media propaganda.

  • dustinb42

    The presumption everyone has is that Manufacturers selling direct will drastically reduce the prices the consumers pay – this is false. Studies on the subject found that the price of an average car would only change by about $500. Keep in mind that car dealers make up 20% of all municiple taxes, employ over a million people in the US, and produce over a trillion dollars in revenue. While I'm almost always on the bandwagon for reduced regulation, this has very little benefit. Removing franchise dealers also turns the auto industry into an oligopoly – granting the manufacturers' outlets vastly more pricing power. A cost change of as little as $500 would instantly be negated. Want a Toyota? Great – you can buy one at any of the Toyota owned stores – there's no competition and the prices aren't negotiable – now the MSRP is the selling price, because you (the buyer) don't have any leverage.

  • Steve Cunningham

    One thing conveniently missing from this video and the comments. Tesla only exists because of government subsidies. The price of their cars are subsidized by the government via a tax credit.

    I refuse to take a side on either side of this debate. Both sides are big government pig trough parties.

    When your enemies fight each other, let them.

  • Cameron

    Car dealerships are almost as bad as insurance companies… There's a reason we want them gone, and our governments are just so arrogant.

  • Moola Moose

    The real reason is Larry H. Miller can't get his hands on Teslas, so the Supreme Court was lobbied to eliminate the competition. Simple as that. If you aren't a Larry H. Miller dealership in Salt Lake City, you're fucked.

    Basically the same thing with most businesses here, if you aren't mormon owned, be prepared for failure. It's amazing what this place will do to your small business in just a few years if you're even that lucky.

  • LLG47

    Cronyism is also however, federally funding subsidies for people to buy electric vehicles due to political pressure, instead of letting the free market progress.

  • Etheoma

    Well if you want more choice not less then Tesla is also limiting your choice by not also going through dealerships but I suppose you could ague that there is a difference between a company limiting your choice vs the government.

  • Radnally

    Protectionism and regulatory capture is alive and well in our "capitalist system". Mostly under the guise of "it's for your own good". Govt. by and for the corporate structure. Thank you US Supreme Court for giving us Citizens United.

  • Sean Hartnett

    Honestly if you told me about such a stupid law, I would go to another state just to give the state a middle finger. I will drive to Colorado then.

  • JustSomeGuy

    This is incorrect. You do not have to cross state lines, you just order it online from the dealership. They have computer terminals there and help you through the ordering process.

  • John Armstrong

    In the end, Utah will just loose the sales tax if people go out of state to buy.
    …Also the background music in this video is annoying.

  • UB3RFR3NZY

    I don't understand America. Either disband the fucking union and let each state function as an independent country or have a federal government and take away the power given to the shitty individual states. All they do with their power is create retarded laws because they have nothing better to do.

    My point is, why the fuck are they even allowed to make laws in the first place?

  • failtolawl

    republicans hate capitalism more than democrats do. Dems may regulate greed but at least they don't destroy the basic principle of capitalism – competition.

  • SalveMonesvol

    Why would anybody want to "protect" an improductive job? I'm sure that electric light left many candle manufacturers out of business, and the internet did the same for many postmen. Who cares?

  • Twelve Wing Productions

    I think the end run around this will be the used car market. Tesla's are simply not going to wear out like other vehicles do. Tesla as a company will also have the manufacturing might to deal with the battery and motors. When a Tesla model S gets traded in on a newer model, Tesla has the ability to very cheaply refurbish the battery replacing any dead cells/banks. They then simply transport that car to Utah.
    Problem solved. Sell them right on the lot.. as used cars.

  • x250f23x

    Can you buy a new home from a manufacture? Why don't we have home dealers? This just the middle man (car dealership owners) trying to hold ground.

  • PhotoGeorge

    And with this ATTITUDE is exactly WHY the Millennials have No Problem buying their products direct from China and Taiwan and Vietnam etc. through Amazon or some other online company (Because it's "Cheaper"). They have no IDEA what it means to SUPPORT American Companies and Local Businesses and yet they live and take advantage of this Great Country every, single day. Bunch of Spoiled, Arrogant, Ungrateful Instagram Airheads who only think about the Best Deal so they can BRAG to their buds about how they bought it (or stole it) and the Dealer or Distributor LOST money on the transaction.

  • Blake Pitcher

    This is hilariously stupid, what's stopping Tesla from putting out a television advertisement openly declaring the high court's verdict? Yes an advertisement, a great way to get people to want something is to tell them they can't have it, for everyone in Utah owning a Tesla now makes a statement, a giant middle finger at their apparently corrupt state government. It's so stupid I can't help but wonder if it's actually Tesla doing backroom deals to ensure their cars cannot be sold in Utah, because that would be ingenious, I mean how hard is it to cross state lines?

  • Deceneu

    While I agree that dealerships are bad I don`t agree that protecting them is against capitalist philosophy. After all in a capitalist society every business man will strive to form a monopoly on the good it sells trough any means at his disposal (including politics and laws). It`s just good business.

  • T D

    Capitalism always leads to "cronyism", it's inevitable and written into it. A more successful company will simply begin to eat up smaller competition, until monopolies, duopolies and/or cartels form. In a similar vein, when the capitalist class gets rich enough, they will buy out the government, either on their own or as a group.

  • B T

    The free market wouldn't tolerate Teslas in the first place. Only an anomalous few people actually want them and are being supported wholly on tax payer footed big government subsidies.

  • Ben P.

    "car dealerships provide valuable jobs"
    "to buy a tesla you have to buy out of state" or any other competition to car dealerships.
    so they are providing valuable jobs huh, how are those provided when your target customer is buying out of state? fucking geniuses over there.

  • hbarudi

    If they go so far to protect the dealers, why can't tesla open up stores inside the dealers? If the dealers can expand, tesla can place a tesla store within a dealer and be able to sell their cars.

  • nong333

    Ok, this is just stupid. These regulations are complete BS. Any consumer in their right mind would tell you that direct-buying is always preferred, especially for such high value items like cars. When you buy direct, you are essentially buying from the most trustworthy source possible at the lowest agreeable price. Dealerships are just an added obstacle that adds both costs and ambiguity in the product that the consumer has to deal with while also limiting the consumer's choices. All car manufacturers should be allowed to sell directly to consumers.

  • Dwight Wilbanks

    I support Utah's right to be a bunch of dumbasses. Everyone needs to do more focusing on their own state and less care about what a bunch of idiots somewhere else do.

    If the people of Utah want to support and re-elect candidates that claim to be conservative, but, are far from being conservative. that is their business.

    If you're one of the unfortunate people stuck in Utah, that are not a dumbass, be grateful that there is no law preventing you from moving somewhere normal.

  • flitsies

    Ok I get it you can't buy a Tesla in Utah or Texas right.

    But here's the thing Tesla are guilty of their own protectionism.

    If you drive a Nissan Leaf you can charge it anywhere there's electricity except at Tesla chargers.

    If you drive a Tesla you can charge it anywhere including Tesla chargers.

    See the difference.

    Tesla has excluded all other vehicles from it's chargers, all other vehicles full stop, there are no provisions for none Tesla vehicles to use Tesla chargers.

    So it is hypocritical of Tesla to mount a challenge to sell their vehicles in Utah when they won't even allow other vehicles the ability to use their chargers.

    Protectionism in a sneaky way.

    You can charge a Tesla at any other charge point you want including home charging on a 13 Amp fuse, but you can't charge your Leaf on a Tesla charger on a 13 Amp fuse or even a 7 kw charger or even a Renault Zoe or even a Twizzy, you just can't do it because Tesla refuse to allow other vehicles to use their chargers.

    So if nothing else Utah could use this as their reason for banning the sale of Tesla cars in their state because Tesla are doing what Utah are doing but using tech to pretend it can't be done when it can.

  • Tom Umland

    So this decision by the Utah SC is an application of the "rational basis" test, i.e. that government can make up any law it wants, as long as it has some reasonable explanation for doing so? When will a "rational basis" test be developed which supports both individuals and businesses regarding the basic rights supposedly enshrined in the US Constitution ( by not mentioning rights so much as SPECIFICALLY limiting government) and devolved upon the states in the 14th Amendment? Tesla decidedly has a rational basis for selling cars directly to consumers, if it sees a potential for increased profit. The real rational basis supported by the UT SC is only a desire by dealerships and their suppliers to limit competition, the remainder of the basis is camouflage for biased and prejudiced fluff. The same general basis was employed by the city of New London in KELO. After "winning" in SCOTUS, New London then did nothing with the takings despite stepping upon the rights of the citizenry in the case and with other citizens prior to it. This should not be allowed to stand.

  • Mac Tek

    Tesla doesn't negotiate price, so it doesn't really matter. You could buy the car online just as well as in person at a showroom.

  • Carnutzjoe

    The dealerships know their days are numbered. They just want to slow things down as much as they can to keep going a little while longer. I’m a little surprised other carmakers haven’t opened direct sales stores yet, in states where they can to bypass dealers and increase their margins.

  • PrivateEyeYiYi

    Direct to consumer is fine, but are the manuals and after market parts available to fix an out of warranty Tesla by yourself, or by an independent mechanic? Tesla seems to want to control everything about its cars, including limiting maintenance to Tesla.

  • Eriamjh 1138

    I can ask about the price. No law prevents that. They may not be able to answer it, but I’ll be damned if I can’t ask it.

  • Shaheer ziya

    Here's where I disagree, providing more choices doesn't simply equate to empowering the consumer. I think that the paradox of choice by Barry Schwartz excellently displays this.

  • Shaheer ziya

    Here's where I disagree, providing more choices doesn't simply equate to empowering the consumer. I think that the paradox of choice by Barry Schwartz excellently displays this.

  • Ben Chesterman

    base Tesla model S is $124,000aud in Australia , you will save fuck all from buying from Manufacture . Aren't you taxed on cars in America

  • Sathyajith Shankar

    Imagine having status supreme Courts in your pockets. Is there anyway to get this case into Scotus to prempt the Utah Supreme Court's ruling?

  • guringai

    Tesla is the embodiment of innovation.
    It's sad and counterproductive that there are such stupid laws getting between the products of innovation and people wanting better cars.
    Innovative people will always find a way around the nonsense.

  • LORDE 2729

    what did u expect from a slave state? their history tells it all . they work for the established elites who are predominantly white and super rich. most of em where probably slave owners where they made most of their money. smh

  • Dude Noone

    Well i guess just place your order over the phone, to the dealer across state line, from a phone where you test drove it, and then you just happen to pick up your car at the place you test drove it the next day or so.

  • wild smooth

    You can say the same about buying a home or TV. Cut out the middle man and you get things cheaper, but you also slash the workforce.

  • speedrrracer

    We've been dealing with far worse in California for decades, it's called the "Roster of Handguns Certified for Sale".

  • evolution rhythm

    I.e. Crony capitalism is a economic system where the more immoral "entrepreneurs" attempt to rig the economy ( bias in their favour) using the political/media system . E.g. Given the opportunity croanies will dismantle civil liberties like being payed a fair wage for a days work or lobby goverments from introducing policies such as paying people a living wage ( which isn't the case in many " modern" countries).
    Their not called cronies for nothing. It's a shame that the psychologies of certain people whom are very driven to achieve their own wealth quite often believe that they are more superior to others.e.g. They self delude that having more wealth some how makes them better people,and bias capitalistism self enforces this view as wealthy people have it, in general, far more easier with less social obsticles ( as they have influence regarding what obstacles are in place), than the poor ( whom they objectify as less derserving of even basic human rights).
    That's why having laws that mitigate the drive to monopolize any particular socioeconomic area are a common good. Of course if the system is rigged then these laws will be missing. The gap between the mega wealthy and the poor is a symptom of a rigged system as no human is a billion dollars more worthy than another ( though narsicist will know otherwise). Economic systems that include Individual people and/or individual corporations with more than their fair share of influence /power will always be open to corruption due to the forms of human nature these systems breed.Thus we need ( for a sustainable culture) to not play by the " their" rules. And change laws so that people with low moral values are not rewarded for their " it's only bussiness" mantra.

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