Michigan’s Governor Rick Snyder has just signed House Bill 5606 effectively prohibiting Tesla from operating factory direct in state.

The bipartisan legislation was overwhelmingly approved 38-0 in the Senate, and 106-1 in the House of Representatives.

“This bill does not, as some have claimed, prevent auto manufacturers from selling automobiles directly to consumers at retail in Michigan – because this is already prohibited under Michigan law,” Snyder said in a letter to lawmakers that accompanies the signed bill.

Tesla however has said quite differently alleging very shady dealing and abuse of the spirit of the law.

The governor in turn says he thinks signing the bill to become Public Act 354 of 2014 was the right thing to do. He also is calling for “healthy, open discussion on potential changes to [the automotive sales] business model.”

While he does not mention Tesla by name in a video, the governor, whose tagline is “Reinventing Michigan Getting it Right. Getting it Done,” has been in the hot seat between constituencies.

At issue in the language of the law was one word, says the governor.

“Language in the bill states plainly that a manufacturer can only sell new vehicles to consumers through its own network of franchised dealers,” said the governor’s office. “HB 5606 deletes the word “its” from a sentence in existing law.”

Snyder’s appeal is very similar to what was said in New Jersey earlier this year – that the law was already on the books, and the legislation done at the behest of the Michigan state dealer lobby only tightened existing laws.

Tesla framed issues in its blog post. Governor Snyder issued a 1-minute video and press release defending the decision.

Rather than re-write all these, we’ll let the opposing viewpoints speak for themselves. Below are copied in whole the Tesla point of view and the point of view from Governor Snyder’s office with links to each. And no doubt this is not over.

Tesla’s Blog Post

October 16, 2014
A Raw Deal in Michigan
By The Tesla Motors Team

On October 1, the Michigan Automobile Dealers Association succeeded in passing a bill that is harmful to consumers. The bill, HB5606, was originally a single amendment to existing law designed to ensure that the car dealers can tack additional fees on to the purchase price for all vehicles (from any manufacturer) sold in Michigan. Such fees have a controversial history, are generally regarded with skepticism and have been the subject of consumer concern in other states.

Not content with enshrining their ability to charge consumers dubious fees, on the last day of the legislative session, the dealers managed to make a last-minute change to the bill in an attempt to cement their broader retail monopoly. Using a procedure that prevented legislators and the public at large from knowing what was happening or allowing debate, Senator Joe Hune added new language in an attempt to lock Tesla out of the State. Unsurprisingly, Senator Hune counts the Michigan Automobile Dealers Association as one of his top financial contributors, and his wife’s firm lobbies for the dealers.

By striking a single, but critical, word from MCLA 445.1574(14)(1)(i), the law governing franchise relations in Michigan, the dealers seek to force Tesla, a company that has never had a franchise dealership, into a body of law solely intended to govern the relationship between a manufacturer and its associated dealers. In so doing, they create an effective prohibition against Tesla opening a store in Michigan.

This amendment goes even further. It also seeks to prevent Tesla from operating a gallery in Michigan that simply provides information without conducting sales. We could even be barred from telling people about our car.

This anti-competitive behavior mirrors similar tactics in New Jersey and Missouri, where dealers have resorted to backroom political maneuvers to shore up their monopolies. The dark-of-night tactics highlight the dealers’ concerns that their arguments don’t stand up well to public scrutiny.

Indeed, no consumer unaffiliated with dealers would ever want this. Officials at the Federal Trade Commission have spoken out about the potentially harmful consequences of the dealers’ anti-competitive behavior, saying “competition ultimately provides the best protections for consumers.” Leading economists have also weighed in, saying dealer monopolies come “at the expense of consumers and innovative technologies.” And in September, in considering a similar body of law, the Massachusetts Supreme Court handed down a ruling that made it clear that such laws were not intended to exclude a manufacturer without franchise dealerships from selling to consumers directly.

While the car dealers’ anti-consumer bill has made it through the legislature, it has yet to be signed into law. The bill is now on Governor Rick Snyder’s desk. We are calling on concerned consumers to contact the Governor and urge him to veto this legislation and return the issue to the legislature for a full and open debate in 2015.

Please make your voice heard.

Other ways to contact Gov. Snyder:

Phone: 517-373-3400
Mail: P.O. Box 30013, Lansing, MI 48909
Twitter: @onetoughnerd

Governor’s Press Release

Gov. Rick Snyder signs bipartisan bill clarifying existing direct auto sales law

Tuesday, Oct. 21, 2014

LANSING, Mich. – Gov. Rick Snyder today signed bipartisan legislation that clarifies and strengthens an existing law about direct auto sales in Michigan.

House Bill 5606, sponsored by state Rep. Aric Nesbitt, also prohibits auto manufacturers from dictating fees franchised dealers can charge customers. The legislation allows individual auto dealers to make the business decision whether to charge the transaction fee.

The bill was approved by 38-0 in the state Senate, and 106-1 in the state House of Representatives.

Snyder said Tuesday there has been a misunderstanding about the legislation.

“This bill does not, as some have claimed, prevent auto manufacturers from selling automobiles directly to consumers at retail in Michigan – because this is already prohibited under Michigan law,” Snyder said in a letter to lawmakers that accompanies the signed bill.

Language in the bill states plainly that a manufacturer can only sell new vehicles to consumers through its own network of franchised dealers. HB 5606 deletes the word “its” from a sentence in existing law.

This change would merely allow manufacturers who do not have their own franchised dealers to sell through another manufacturer’s network of franchised dealers. They will be required, just as they are now, to sell through a franchised dealer, and not directly to consumers. HB 5606 does nothing to change this fact. At most, it clarifies the existing requirement in Michigan law.

Snyder requested Attorney General Bill Schuette analyze the effect of the bill, and the Attorney General’s Office also concluded that auto manufacturers could sell only through franchised dealers, as is the case in existing law.

Snyder said lawmakers can and should discuss the current business model soon to determine if it is best for the state’s consumers.

“We should always be willing to re-examine our business and regulatory practices with an eye toward improving the customer experience for our citizens and doing things in a more efficient and less costly fashion,” he said.

The bill is now Public Act 354 of 2014.

The governor also signed HB 5273, sponsored by state Rep. Nancy Jenkins which connects small businesses with funding opportunities by creating Michigan Investment Markets, which operate as intrastate broker-dealers. The law connects Michigan businesses and residents, allowing for stock in local businesses to be bought, sold and traded.

The legislation is an extension of the crowdfunding measure enacted in 2013, allowing companies to use crowdfunding to raise money for their business. It is now PA 355.

For more information, visit legislature.michigan.gov.

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