Elon Musk’s Tesla Inc. received support from the U.S. Justice Department in October concerning one of its appeals court arguments challenging Louisiana’s practice of barring direct car sales to customers.
The electric car company sued the Louisiana Automobile Dealers Association, members of the Louisiana Motor Vehicle Commission and multiple dealerships in the Eastern District of Louisiana to fight a subpoena issued by the commission. The commission was trying to determine if Tesla was in violation of the state law that commissioners argue bans direct-to-consumer warranty-repair services, according to the Justice Department brief filed with the U.S. Fifth District Court of Appeals.
The department’s Oct. 19 brief contends that in dismissing Tesla’s complaint with prejudice in June, the federal district court erred in suggesting that the defendants must have “an anticompetitive purpose” to demonstrate a violation of Section 1 of the federal Sherman Act.
“Proof of an anticompetitive purpose is not an element of a Section 1 violation, and adding such a requirement would improperly circumscribe the scope of Section 1,” the brief authored by Justice Department attorneys states. “We take no position on any other issues, including the proper disposition of this appeal.”
In other words, Tesla does not need to demonstrate an intention on the part of commissioners in order to prove that the commission has taken part in an effort to restrain trade, according to the Justice Department.
“Anticompetitive purpose is not required to satisfy either primary element of a Section 1 claim: (1) concerted action (a contract, combination, conspiracy or other form of agreement) that (2) is unreasonable (i.e., anticompetitive),” the Justice Department brief states. “Rather, it can suffice to show that an agreement has an anticompetitive effect.”
A spokeswoman for the Louisiana Automobile Dealers Association (LADA) told the Louisiana Record in an email that LADA would continue to actively defend itself in court, though it is refraining from commenting on specifics of the case.
“Louisiana's auto dealers play a crucial role in delivering exceptional value to consumers through their expertise in new and used cars, as well as their commitment to providing quality services,” spokeswoman Katherine Carver said. “We look forward to continuing to serve the state as tax-paying business owners and employers, and providing great value to our customers and the communities we serve.”
Tesla, however, brands Louisiana's ban on direct-to-customer auto sales as anticompetitive and an impediment to innovation.
“Here, a group of should-be competing car dealers face a perceived existential threat to their businesses: Tesla and other electric carmakers do not sell, lease or provide warranty service to their vehicles through franchise dealers,” Tesla’s Oct. 12 brief filed with the Fifth Circuit states. “By declining to use commission-driven middlemen, Tesla eliminates dealer mark-ups, add-ons and other unnecessary fees – saving its customers hundreds (sometimes thousands) of dollars per vehicle.”
The defendants have engaged in a harassment campaign designed to drive Tesla out of the Louisiana market, according to the brief. Tesla is the victim of “an illegal antitrust conspiracy” carried out by a “cartel” of dealers serving on the commission, the company’s attorneys argued.
“The object of that conspiracy was and still is to limit competition from Tesla’s innovative business model,” the brief says.