Utah Supreme Court ruling bars direct sales of Teslas through a subsidiary

Enlarge / A Tesla showroom in California where direct sales are legal. (credit: Patrick Fallon/Bloomberg via Getty Images)

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.

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