Tesla has secured a significant legal victory in its ongoing battle against Louisiana’s ban on direct vehicle sales. The 5th U.S. Circuit Court of Appeals in New Orleans ruled in favour of Tesla on Monday, allowing the company to continue challenging the state’s prohibition on direct sales to consumers.
The legal dispute between Tesla and the state of Louisiana began in August 2022 when Tesla filed a lawsuit against several key entities, including members of the Louisiana Motor Vehicle Commission, individual dealership owners, and the Louisiana Automobile Dealers Association. The lawsuit centered on Tesla’s argument that Louisiana’s ban on direct sales, which has been in place since 2017, unfairly targeted the company and sought to drive it out of the state.
Tesla claimed that this ban not only restricted their ability to sell vehicles directly to consumers but also impeded their ability to lease and service vehicles for Louisiana residents.
A federal court in Louisiana dismissed Tesla’s lawsuit in mid-2023. However, the case has been revived thanks to a ruling by the appeals court, Reuters reports. In a 2-1 decision, the court reversed thee dismissal of Tesla’s constitutional due process claim and vacated the dismissal of its antitrust claim. The court, however, upheld the dismissal of Tesla’s equal protection claim.
Circuit Judge Jerry Smith, who wrote the majority opinion, noted that Tesla had sufficiently demonstrated “plausible actual bias” by the defendants. This conclusion was supported by evidence, including emails from the Motor Vehicle Commission’s executive director, which appeared to show a concerted effort to address complaints from Tesla’s competitors—largely composed of traditional dealerships threatened by Tesla’s disruptive sales model.
However, the ruling was not without its dissent. Circuit Judge Dana Douglas argued that Tesla’s challenge represented an attempt to bypass the legislative process. She maintained that while Tesla might disagree with the state law, it could not use the court to alter the composition of a regulatory commission simply because the law did not favor its business model.
Tesla’s victory in this case is a part of a larger ongoing legal battle to challenge similar bans across the United States. The company has faced resistance from state governments and dealership associations in multiple states, arguing that the direct sales model benefits consumers by offering lower prices and a more streamlined purchasing process. In some states, Tesla has successfully overturned similar bans, and in others has worked around state laws by opening Service Centers on tribal lands.
The ruling by the 5th U.S. Circuit Court of Appeals does not end the legal battle but rather sends the case back to the lower court for further proceedings. As Tesla continues to fight for the right to sell its vehicles directly, this case could set an important precedent for the future of car sales in the US.
