On December 6, 2018, the Connecticut Superior Court affirmed an earlier administrative law judge’s ruling that Tesla’s “Gallery” locations were operating in violation of Connecticut law’s prohibition on a manufacturer selling direct to a retail customer. BSM Shareholder, Jason Allen, represented the Connecticut Auto Retailers Association in the appeal as well as the underlying administrative action. The Superior Court found that Tesla’s Gallery operations met the definition of carrying on the business of a motor vehicle dealer in selling vehicles to retail customers even though the final transaction paperwork was performed by the customer off-site.
The Connecticut Superior Court’s ruling has a positive impact well beyond Connecticut’s boundaries. This decision sets precedent for all states which prohibit, or are considering a prohibition on, a manufacturer from selling direct to retail customers. In those states, one can be assured that a manufacturer cannot skirt the prohibition by establishing a location which looks and acts like an independent dealership except for execution of the final vehicle purchase paperwork. The Court’s decision also assists other states in better defining what it means to sell or offer to sell vehicles and who is required to operate with a dealer license. Finally, and most importantly, this decision will serve to strengthen the motor vehicle laws across the country in anticipation of larger and more aggressive vehicle manufacturers looking to sell their products direct to consumers in the United States.