Tesla Motors Inc (TSLA) Sued By Auto Dealers In Ohio

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Tesla Motors Inc (NASDAQ:TSLA) continues to battle for the right to sell its vehicles directly to consumers. The automaker has been wrangling with dealerships in Ohio for some time, and now a trade group for dealers in the state is suing Tesla, saying that its sales model is in violation of state law there.

Tesla accused of violating Ohio laws

The Columbus Dispatch reports that along with Tesla Motors Inc (NASDAQ:TSLA), the plaintiffs named the Ohio Bureau of Motor Vehicles and also the Ohio Department of Public Safety. The suit was filed by the Ohio Automobile Dealers Association, the Midwestern Auto Group of Dublin, a number of dealerships run by the Germain family and the Ricart Automotive Group of Groveport.

The plaintiffs are attempting to get a court in Franklin County, Ohio to retract Tesla’s license for selling new vehicles.

Tesla faces “bullying”

Tesla Motors Inc (NASDAQ:TSLA) Associate General Counsel James Chen told The Columbus Dispatch, “This is the same kind of bullying from the dealers we’ve faced in other states. The dealers, when they’re defeated in the court of public opinion, in the media and in the legislature, they then go to the courts.”

Earlier this month, Ohio dealerships attempted to get an amendment passed in the Ohio General Assembly. That amendment failed. It would have made it illegal for Tesla to sell its vehicles directly to consumers in Ohio.

Is Tesla’s license legal in Ohio?

Chen noted that it seems “hypocritical” for auto dealers in Ohio to claim that Tesla Motors Inc (NASDAQ:TSLA)’s sales model is illegal while at the same time also attempting to get lawmakers to pass an amendment to make it illegal.

Auto dealers’ new tactic is just another way to push the automaker to use dealerships. It claims that Tesla’s license to sell new vehicles in Ohio was improperly approved because the automaker didn’t include a copy of the contract with the manufacturer regarding the vehicles to be sold. Auto dealerships claim that even though in this case the dealer and the manufacturer are the same company, it still must show a contract.

Does Tesla need a contract with itself?

So in other words, they want Tesla to make a contract with itself. Auto dealers also claim that the law requires an agreement between “two separate contracting parties,” and since Tesla isn’t two parties, its sales model is not legal. Chen says the argument twists around the law’s intent. At this point there haven’t been any hearings scheduled in the case. Court officials say this kind of case usually goes to a hearing within a month.

Tesla Motors Inc (NASDAQ:TSLA) has faced similar battles with auto dealerships in other states. The automaker has won some of those cases and lost a few others. It said it would take the fight to the federal level if it continues to see problems at the state level. A petition posted over the summer requested that the White House make a recommendation on the topic. The petition did get enough signatures to warrant an official White House response. However, it doesn’t look like the White House ever responded.

Shares of Tesla Motors Inc (NASDAQ:TSLA) declined 2% in premarket trading this morning.

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