Tesla has been testing franchise laws across the nation, and in building its company store in the Natick Mall, 30 minutes west of Boston, and operating a service facility in Watertown, auto dealers claimed that it was in violation of existing franchise laws that prevented manufacturers from selling cars directly to consumers in the Commonwealth of Massachusetts. Today, the Appeals Court decided that the plaintiffs did not have standing under existing statutes to sue Tesla.
At issue is Chapter 93B of the Massachusetts General Laws, entitled “Regulation of Business Practices Between Motor Vehicle Manufacturers, Distributors and Dealers.” Under these franchise laws, the Massachusetts State Automobile Dealers Association claimed that Tesla — as a manufacturer of electric vehicles — was prevented from doing business in the state without a franchised dealer network.
The Superior Court decider that the MSADA doesn’t have standing to sue Tesla for violation of Chapter 93B, because Tesla never had an existing franchise relationship. “The purpose of [Chapter] 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,” reads the decision.
The decision makes clear that Chapter 93B protects dealers from competing with manufacturers for sales, with whom they are already affiliated. It does not protect dealers from manufacturers who don’t have affiliate franchises.
“Under § 4 (3) (k), a manufacturer was precluded…from owning and operating ‘a motor vehicle dealership within the relevant market area of a motor vehicle dealer of the same line make.’ Dealers — suggests the decision — were thus protected from having to compete with their affiliated manufacturers for sales within a defined geographical area,” the decision reads.
Interestingly, the decision suggests that the language in the proposed § 4 (c) (10) that precluded a manufacturer from owning or operating a motor vehicle dealership back in 2002 was “intended and understood to apply only to manufacturers owning or operating dealerships in competition with their affiliated, own brand dealers.” Two papers prepared by the Massachusetts State Auto Dealers Asssociation summarized the key provisions of 2002 House Doc. No. 4997 and expressed the association’s support for it. The association wrote in its 2002 paper that ‘House 4997 would create a statewide ban on factory ownership of dealerships to prevent manufacturers from directly competing with their own dealers by indirectly owning or operating dealerships in Massachusetts.'”
In conclusion, the decision states “With a proper understanding of the language, history, and purpose of the statute in mind, we hold that G. L. c. 93B, § 15, does not confer standing on a motor vehicle dealer to maintain an action for violation of G. L. c. 93B, § 4 (c) (10), against a manufacturer with which the dealer is not affiliated.”