Dealers in Massachusetts and New York are suing to shut down Tesla Motors stores they say run afoul of franchise laws and consumer protection measures in their states.
The Massachusetts State Automobile Dealers Association and some of its dealers filed a complaint Tuesday in Norfolk County Superior Court seeking to shut down Tesla's store in the Natick Mall in suburban Boston. A request for a temporary restraining order was rejected, but a hearing on whether to issue a preliminary injunction is scheduled for Oct. 25.
In New York, the Greater New York Automobile Dealers Association and one of its dealer members sued Tesla and the state Department of Motor Vehicles on Tuesday in the New York State Supreme Court.
Tesla spokeswoman Shanna Hendriks said today that Tesla is aware of the Massachusetts action and continues to comply with municipal and state laws. She said she was not aware of the New York lawsuit.
The California electric-vehicle maker, which models its retail approach on the Apple store experience, operates 18 U.S. retail locations in 11 states and the District of Columbia. Company officials have said they are working within the limits of state and local laws at all locations.
According to the National Automobile Dealers Association, 48 states prohibit or restrict factory ownership of dealerships. In some places, such as Massachusetts, Tesla has said its locations operate only as showrooms and staffers direct shoppers to its Web site to make a purchase.
Dealer association executives reject that defense, saying the stores still engage in sales activities even if purchases are directed online.
"They claim they're operating under the guise of a nonsales showroom, and we call that out as an outright scam," Robert O'Koniewski, executive vice president of the Massachusetts association.
O'Koniewski says Tesla's Massachusetts store, which opened Sept. 28, violates the state's licensing, consumer protection and franchise laws. Massachusetts prohibits factory ownership of dealerships. Furthermore, O'Koniewski says Tesla's model could inconvenience consumers needing service work and leave them unprotected by the state's lemon law.
In New York, the dealer association representing New York City metro dealers says both Tesla and the Department of Motor Vehicles violated state law by seeking, in Tesla's case, and granting, in the department's case, a dealership license for a Tesla store in Westchester, N.Y. That license was granted June 21. The association made a similar challenge to Tesla's Manhattan store, which opened in 2009, but it was thrown out for being filed after a statute of limitations had expired.
Mark Schienberg, president of the New York association, said manufacturer-owned stores present unfair competition to franchised dealers who typically can't spend as much on facilities and advertising.
"We are looking down the road -- what happens with China, what happens with India, with other manufacturers that come into the market," Schienberg said. "We're concerned about the precedent this sets by Tesla coming in." c