WA bill to allow direct sales appears dead (again)

[timesinks]

I'm not a WA legislative wonk, but looking at the legislative calendar, bills are required to be passed out of committee and read into the record of their house of origin by February 15th to be able to proceed in the 2021 session. That day came shortly after the February 10th hearing and no committee vote has been recorded. I'm fairly confident that means it's dead for at least another year.

Since this is the 2nd year in a row such an attempt has silently died without making it out of committee, I think Rivian may need to change tactics to get direct sales authorization. Personally, I'd love to see a ballot initiative. And maybe one that isn't quite so kind to the entrenched franchise dealers... but that's just me.

Sponsored

 

[Gshenderson]

I am a legislative wonk, and this is a pretty common tactic for quietly killing bills without having to go on record with what could be an unpopular vote. Simply fail to act by the legislative deadline for bills to come out of committee and it effectively dies.

 

[timesinks]

I am a legislative wonk, and this is a pretty common tactic for quietly killing bills without having to go on record with what could be an unpopular vote. Simply fail to act by the legislative deadline for bills to come out of committee and it effectively dies.

Sigh, yeah. I'm fairly confident it's dead, but I've seen a fair bit of chatter from hopeful people because the vote hadn't occurred. I posted this to rain on their collective parades and call attention to the fact that the vote isn't going to happen. And to seek commiseration.

 

[ATL_Canes]

Not to hijack, but I’m trying to figure out what this means for folks in states that restrict the D2C model. I’m in GA and we’re dealing with the same restrictions. Do I need to go to a neighboring state to pickup my vehicle? Or does it mean Rivian can’t operate stores in the state, but they can deliver the vehicle? Or can they operate the stores, but you can’t place an order from the brick and mortar location?

I’ve tried to find clear answers, but can’t really. And it’s probably a range of answers that varies state by state, but just trying to understand what this means from a practical stand point.

 

[DucRider]

The method is going to vary State- by- State.
Prior to the Tesla exemption for direct sales in WA, they were able to slide under the table by online ordering and home delivery.
I'll have to re-read, but when the bill granted their exemption, IIRC it closed some of the loopholes that would have allowed manufacturers like Rivian to follow that model. I don't believe they can operate a showroom or service center in WA under the current regulations.

 

[SANZC02]

I am not a lawyer but seems to me that the states that Allow Tesla as the only manufacturer for direct sales are opening themselves up to serious litigation. To let these die on the table without even bringing it up for debate/vote seems to be reckless on their part that could increase their liability.

[Anti-competitive practices are business or government practices that unlawfully prevent or reduce competition in a market]

Seems pretty clear cut to me that these laws, especially for states where there is a Tesla exception, would never hold up on an appeal.

Would be nice if someone on this forum is a lawyer with this in their background that could comment on it.

 

[Gshenderson]

The method is going to vary State- by- State.
Prior to the Tesla exemption for direct sales in WA, they were able to slide under the table by online ordering and home delivery.
I'll have to re-read, but when the bill granted their exemption, IIRC it closed some of the loopholes that would have allowed manufacturers like Rivian to follow that model. I don't believe they can operate a showroom or service center in WA under the current regulations.

In NC, it didn’t even require home delivery. They had a small “sales center” (I’m sure they couldn’t call it that) where you could test drive a car, look at color samples and talk to a Tesla rep. If you liked what you learned, they pointed you to a computer where you could place your order. You then could pick the car up at that same location.

But yeah, it’s going to be state specific as to what loopholes exist in the law. I’d suggest you look into how Tesla operates in the state and then also check into whether there are any specific exceptions in statute for Tesla. If not, you can reasonably assume Rivian could do something similar.

 

[timesinks]

But yeah, it’s going to be state specific as to what loopholes exist in the law. I’d suggest you look into how Tesla operates in the state and then also check into whether there are any specific exceptions in statute for Tesla. If not, you can reasonably assume Rivian could do something similar.

I believe Tesla began operating in WA under a loophole that didn't specifically ban subsidiaries from operating. Tesla is allowed to continue operating, but the loophole has been closed to any future manufacturers.

 

[DucRider]

I am not a lawyer but seems to me that the states that Allow Tesla as the only manufacturer for direct sales are opening themselves up to serious litigation.

I believe Tesla began operating in WA under a loophole that didn't specifically ban subsidiaries from operating. Tesla is allowed to continue operating, but the loophole has been closed to any future manufacturers.

The WA exemption does not specify Tesla, but instead references any manufacturer that already held a dealer licence when the legislation passed (Jan 2014?).

 

[Mjhirsch78]

Ugh. To Portland I go when the glorious yellow truck finally gets built. That is frustrating.

 

[SANZC02]

The WA exemption does not specify Tesla, but instead references any manufacturer that already held a dealer licence when the legislation passed (Jan 2014?).

I’d love for a lawyer to pipe in and explain how that would hold up if challenged in court. I’m in SoCal so doesn’t impact me at all but does seem to present a major disadvantage to any other EV manufacturer trying to compete in that space.

It also would make it worse for consumers if they need to setup a license model for independant dealers. The EV cars would not provide the servicing dollars the ICE dealers get so would not be discounting the cars and would require an additional markup in order for them to profit.

 

[godfodder0901]

The WA exemption does not specify Tesla, but instead references any manufacturer that already held a dealer licence when the legislation passed (Jan 2014?).

True, and Tesla was erroneously granted said license.

 

[EyeOnRivian]

Would be nice if someone on this forum is a lawyer with this in their background that could comment on it.

@Hmp10 ?

 

[Hmp10]

@Hmp10 ?

This is way out of my field of law, but I suspect it would be hard for Rivian to challenge a grandfathered exclusion. Legislatures have a lot of leeway in passing and repealing laws, and I doubt Rivian would even have standing to challenge the grandfathering of an exclusion dating long before Rivian was ready to commence sales operations.

Rivian might have a path to challenge being blocked from sales in a particular state under the Commerce Clause of the Constitution, but that is a very narrow path that would take years to resolve in the courts, and the dealer restriction laws have held up so far. The legal issue would be whether states are impermissibly interfering with interstate commerce in not allowing the sales in their states of vehicles manufactured in another state. However, the laws don't technically block sales. They just require that sales be done through an in-state dealership. An analog might be insurance sales. Most states do not allow insurers to sell policies in a state where they have no state-licensed agents.

States have typically argued that ensuring car buyers have local access to resources for purchase, service, and complaint resolution of as significant a purchase as a vehicle is a legitimate legislative concern. The standards courts apply to legislative action is not whether the legislature chose the best path, or the fairest path, or the path the courts would have preferred, but whether there is any arguable rationale at all for the legislature's action. Even if a court suspects or knows the real motive for the law is something different and more nefarious, the law will stand if there is some colorable rationale to support it.

 

[Mjhirsch78]

This is way out of my field of law, but I suspect it would be hard for Rivian to challenge a grandfathered exclusion. Legislatures have a lot of leeway in passing and repealing laws, and I doubt Rivian would even have standing to challenge the grandfathering of an exclusion dating long before Rivian was ready to commence sales operations.

Rivian might have a path to challenge being blocked from sales in a particular state under the Commerce Clause of the Constitution, but that is a very narrow path that would take years to resolve in the courts, and the dealer restriction laws have held up so far. The legal issue would be whether states are impermissibly interfering with interstate commerce in not allowing the sales in their states of vehicles manufactured in another state. However, the laws don't technically block sales. They just require that sales be done through an in-state dealership. An analog might be insurance sales. Most states do not allow insurers to sell policies in a state where they have no state-licensed agents.

States have typically argued that ensuring car buyers have local access to resources for purchase, service, and complaint resolution of as significant a purchase as a vehicle is a legitimate legislative concern. The standards courts apply to legislative action is not whether the legislature chose the best path, or the fairest path, or the path the courts would have preferred, but whether there is any arguable rationale at all for the legislature's action. Even if a court suspects or knows the real motive for the law is something different and more nefarious, the law will stand if there is some colorable rationale to support it.

Thank you for the clear explanation of possibilities even if it isn’t your specific area of law.

Sponsored