Customers and analysts appreciated Tesla Motors’ $1,000 referral program announced a few weeks ago for being the first modern incentive introduced by the electric car maker. However, this program is seen as a competitive move by at least two of the state dealer bodies.

Tesla Motors Inc Referral Program Now Opposed By CA Dealers

CA dealers using 1968 law

Under the referral program, the new buyer gets a discount of $1,000 on the purchase of a Tesla car, and the referrer also gets a credit of $1,000 for service or a future purchase of a Tesla vehicle. In Virginia, regulators blocked the program, terming it “bird dogging.” Bird dogging refers to a practice under which a financial reward is granted to people who do not have a license for selling vehicles but have helped in its sale. Since Virginia is an important market, Tesla altered the program with the full $2,000 going to the buyer.

Now California seems to have the same problem with the program. California’s New Car Dealers Association is asking for a ban on the referral program, citing a state law prohibiting this practice. According to a report in Automotive News, the association sent a letter to the state Department of Motor Vehicles, requesting that they crack down on Tesla’s referral program.

The law being cited by the dealers is the 1968 California Motor Vehicle Sales and Finance Act, which says: “It shall be unlawful for any person to act as a vehicle salesperson without having first procured a license or temporary permit.”

Tesla may again tweak its program to meet CA laws

Similar to the Virginia case, Tesla is saying that the state franchise laws should not be applied to the incentive program. The California dealers sent the letter on Aug. 26, and decisions regarding the proceeding with the case rest on the director of the DMV.

The program might be tweaked in California as well, but it is not necessary for Tesla owners to stop referring potential buyers if they do not benefit from the program. The referral program from Tesla is not going to harm any actual consumers or dealers as the company does not have an independent dealer network, but still it would need to tweak its program in other states as well if the legal hurdles don’t get cleared.