Using the State to Stifle Competition

How do you know a company has a good idea? Currently established companies in that market initiate lawsuits:

Friday’s news is less flattering: A judge in New York will take up a lawsuit against the company about how Tesla sells its cars.


This isn’t a typical sale for Tesla Motors, but according to car dealers in Massachusetts, if it had happened there, it would have been illegal.

The issue is that Tesla sold the car through its own store, instead of through a local dealership.

Robert O’Koniewski, the executive vice president of the Massachusetts State Automobile Dealers Association, is suing Tesla for opening a store in a local mall.

In Massachusetts, franchise law 93B prohibits a manufacturer from owning a dealership, O’Koniewski says. An auto dealer association in New York is also suing Tesla.

Tesla, the company that produces one of the few electric cars that doesn’t suck, has managed to get its foot in the door of the automobile market. Needless to say currently established automotive companies and their partners are moving quickly to stop Tesla through the most commonly used method, the state’s gun. This shouldn’t be surprising considering the failures experienced by the currently established automotive companies in the field of electric cars. If a company can’t competed against a new competitor they can always bleed the them dry through the court system.

This is one of the problems with the legal system in the United States. Due to the complexity of the system specialized knowledge is required in order to prosecute somebody or defend yourself. Specialized knowledge, as a general rule, is expensive and therefore being involved in a lawsuit can quickly bleed and individual or small company dry. Larger established companies on the other hand usually have enough reserve capital to continue a lawsuit for however long is necessary to bankrupt their new competitors. I won’t be surprised if Tesla continues to face new lawsuits from individuals and companies involved with established automobile manufactures.