SC ban on automakers selling directly to consumers could be targeted by DOJ.
Paywalled, If someone can figure out a way around it. I'm sure there will be more articles written about this soon.
The U.S. Justice Department wants to kill state laws that stifle competition and has targeted franchise laws like the one in South Carolina that prohibit vehicle manufacturers from selling directly
www.postandcourier.com
The U.S. Department of Justice wants to kill state laws that stifle competition and has targeted franchise laws like the one in South Carolina that prohibit vehicle manufacturers from selling directly to consumers.
The federal effort could open a new battle in a long-running South Carolina war between traditional vehicle dealers, who sell their inventories under contracts with major manufacturers, and electric car makers, who claim they can offer lower prices by selling directly to consumers.
Direct vehicle sales to consumers are illegal in South Carolina,
one of 17 states with laws still on the books that ban vehicle manufacturers from operating their own sales or factory repair centers. Fierce lobbying by the S.C. Auto Dealers Association, which represents 270 local dealers,
blocked a proposal this year that would have changed the law, and an influential state senator who has been a key supporter of dealerships said it has little chance of resurrection.
The DOJ's anti-trust division intends to step in as its new Anticompetitive Regulations Task Force began studying state laws that it says serve special interests at consumer expense. President Donald Trump in April ordered agencies to reduce anti-competitive laws that create monopolies and make it harder for new companies to break into markets.
Roger Alford, principal deputy assistant attorney general, said in a recent Senate hearing that the task force received more than 400 public comments identifying what could be considered monopolistic laws, including recurring complaints about state vehicle sales laws that “stifle the free market.” He said DOJ will work with the Federal Trade Commission to revise these and other laws.
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Alford said the department will work within state legislatures and with attorneys general to bring changes, but, if necessary, it will seek congressional action to preempt state laws.
It is uncertain how the new federal focus will fare in South Carolina, where the Legislature in February soundly defeated a proposal to change the franchise law. Solicitor General Robert Cook concluded in an advisory opinion on Feb. 7 that it would be illegal for manufacturers "to sell new cars to South Carolina consumers or to repair cars."
Sen. Larry Grooms, the longtime chairman of the Senate Transportation Committee who supports the dealers, said he was unaware of the DOJ effort but does not believe federal preemption would be successful.
"I don't see how, knowing the makeup of Congress right now, almost evenly divided with a slight edge for Republicans on both sides of the houses, you'd be able to preempt laws in 17 states," he said.
Grooms said his "door is always open" to ideas for new legislation. "I'm always willing to listen, but I can't imagine the Justice Department being able to give compelling reasons why the General Assembly of South Carolina should advance legislation to undo our franchise laws."
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Electric vehicle makers such as Scout Motors Inc., which is investing $2 billion in a new manufacturing facility in Blythewood, contend that direct sales shave thousands of dollars off of consumer prices that would go to dealerships under the state law.
Blair Anderson, Scout’s vice president for government and regulatory affairs, said in a statement, "We’ve seen in open states that direct sales work for consumers, workers, and even dealers. But when states block choice and protect entrenched interests at the expense of the American consumer and the American worker, it’s time for someone to step in."
Proposed changes to the state’s franchise law have brought intense industry lobbying on both sides, pitting established electric car makers like Tesla, Rivian and Scout against the influential
S.C. Auto Dealers Association.
Thousands of South Carolina residents are now buying new electric vehicles over the Internet, but they have to accept delivery in a state that allows direct sales. South Carolina law also forbids manufacturers from opening factory authorized service centers, which has forced owners to travel to repair centers in North Carolina, Georgia and other inconvenient locations.
In recent months, Elon Musk’s popular Tesla began directing South Carolina customers to an under-the-radar
service location outside Columbia, which has no outside signage and can only do “light repairs,” according to an employee. After great fanfare early last year about its intention to open a
regional parts distribution center in Fountain Inn, Tesla quietly opened the warehouse late last year with a few employees and has no signs identifying the company. Tesla did not respond to questions.
Rivian, a Michigan-based manufacturer whose electric trucks are popular among outdoor enthusiasts, late last year began scheduling South Carolina customers using its app to a
new service location near Spartanburg that does have company signage. It also has revealed on its web site that it will soon open a service location in Ladson, news that has been enthusiastically received on social media by Rivian owners. Rivian did not respond to questions.
The state motor vehicle agency would not comment on specific locations that have opened in possible violation of the law. A spokesman said the agency will refer any reports of unauthorized repair shops to the State Law Enforcement Division for further investigation.
Some of the state franchise laws forbidding direct vehicle sales to consumers have been in place for decades, despite strong criticism from outside experts. Some states have lifted restrictions in response to growing consumer demand for electric vehicles. Others have amended their laws to grant exemptions to certain popular manufacturers.
In shareholder reports, Tesla and Rivian have cited state laws blocking direct sales as an impediment to future growth.
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