LANSING, Mich. -- By the removal of a personal pronoun from state law, a bill awaiting Gov. Rick Snyder's signature would make it harder for Tesla Motors Inc. to sell its electric vehicles directly to customers in Michigan.
Tesla already is barred from doing so, but it has been fighting similar bans in states across the country. On Sept. 15, the California-based company won a key ruling in its favor from the Massachusetts Supreme Court.
Seventeen days later, Republican lawmakers, at the behest of the Michigan Automobile Dealers Association, amended and shepherded through both houses a pending bill that would make it tougher for Tesla to challenge Michigan's law in court. Snyder has until tomorrow, Oct. 21, to decide whether to sign it.
Here's how it happened.
On Sept. 18, the state House of Representatives passed House Bill 5606, written to keep automakers from forcing dealers to charge different documentation fees to different customers.
But after lawmakers learned of the Massachusetts ruling, the word "its" was removed Oct. 1 on the Senate floor from a section stating that a manufacturer shall not "sell any new motor vehicle directly to a retail customer other than through its franchised dealers." Both houses passed the revised bill the next day.
The change was important because the word "its" in the existing language assumed the manufacturer has dealerships. In Massachusetts, the court ruled that the Massachusetts State Automobile Dealers Association did not have standing to bring a case against Tesla because state law only allowed dealers to sue a manufacturer they have a franchise relationship with. In other words, only a Tesla dealer could sue to stop Tesla, and Tesla does not have any dealerships.
By removing the "its," any automobile manufacturer is banned from selling new cars directly to customers, regardless of whether it has dealerships.
The sponsor of HB 5606, Republican Rep. Aric Nesbitt said the bill simply adds clarity to Michigan law surrounding the sale of vehicles and is not an attempt to single out any particular company.
But Daniel Crane, a University of Michigan law professor who specializes in antitrust laws and believes in direct distribution, said that argument is disingenuous.
"They want a law that applies to everyone, meaning Tesla," Crane said. "This is just protectionism."
Crane, who said he is not working for Tesla, wrote a letter to Gov. Rick Snyder last week urging him to veto the bill.
Dave Murray, Snyder's deputy press secretary, told Automotive News that the governor is still evaluating the bill.
'Basic fairness issue'
No public attention was brought to the changes, and the bill was passed nearly unanimously by both houses.
The spokespersons for the House and Senate Democrats said their caucuses were unaware of the effect the added language could have on Tesla.
Amber McCann, press secretary for Senate Majority Leader Randy Richardville said Republican members were aware the amendment was added to the bill, but was not sure if each member knew about the effect it could have on Tesla.
But she reiterated several times that the bill passed the Senate by a vote of 38-0.
"Every member of the Senate gets to see what they are voting on before they press the button," she said. "I would find it concerning that they say after the fact they voted "yes" on a bill they say they didn't read or understand."
One 'no' vote
Rep. Tom McMillin, R-Rochester Hills, who was the only member in the House or Senate to vote against the bill, said he opposed the bill's original intent and was not aware of the effect on Tesla, but he's opposed to that as well and believes Tesla should be able to sell directly to customers.
"Consumers are expecting more choice and more freedom," McMillin said. "If a company wants to try something different, we shouldn't be standing in their way as the government and prohibiting it. We should let the free market decide."
Diarmuid O'Connell, Tesla's vice president of business development, said in an interview with Automotive News that there's a "basic fairness issue here."
He said Tesla has been working in good faith with government agencies and lawmakers in Michigan to explore how the company could market, sell and service vehicles in the state.
By adding the amendment at the last minute, O'Connell said, dealers are acting against Tesla's "sincere efforts" to do business.
"The dealers saw an opportunity to sneak in changes that no one was paying attention to and tighten up their case," Crane said.
Tesla's only request, O'Connell said, is that the issue be debated in public and "in the light of the day."
Terry Burns, executive vice president of the dealers association, said the change was not an attempt to single out Tesla. It just makes clear that all manufacturers have to abide by state law.
Dealerships provide a great service to their communities, and to consumers, Burns said. When car companies go out of business, the dealers still service those vehicles. When there are recalls, dealerships are where customers go to have their vehicles inspected and fixed.
"We think the franchise system is fantastic. We have a good law that has been in place for a long time," he said. "If another vehicle manufacturer wants to come in and sell in the state, they have to follow the law in Michigan."
Vince Bond Jr. of Automotive News contributed to this report.
