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Tesla slips the noose of regulatory capture in Missouri


A regulated industry sometimes is able to use a regulatory agency to restrict competition. In Missouri, licenses for dealers of new cars have been issued only to applicants which hold franchises granted by manufacturers, with the franchisees each maintaining a place of business within the state. The value of a dealership is strengthened if a manufacturer cannot open a competing dealership.

Under Tesla’s business model, purchasers buy directly from the manufacturer, not from a separate dealership. Tesla granted itself a franchise and was thus both franchisee and franchisor, sparing customers the cost of supporting a separate dealership.

The Missouri Automobile Dealers Association (MADA) sued the Missouri Department of Revenue and Tesla Motors, claiming that issuing the license to Tesla created “a non-level playing field.” The Cole County Circuit Court determined that MADA had a right to challenge the issuance of the license to Tesla and agreed with MADA that the issuance of the license to Tesla was unlawful.

The Missouri Court of Appeals reversed the Circuit Court, holding that MADA (as well as another car dealer and a motor vehicle manufacturer) had no right to challenge the issuance of the license to Tesla, lacking standing. The appellate court examined the motor vehicle licensing statutes and found that the statutes permitted an applicant to challenge the refusal of the Department of Revenue to issue a license, but said nothing about the right of a dealer to challenge the issuance of a license to a potential competitor. Moreover, a court could not order the Department of Revenue to revoke the license, because the Department’s power to do so depended upon the existence of specified acts or events that were deemed by the Department’s director to be a “clear and present danger to the public welfare.” The director had not made such a discretionary finding.

The appellate court characterized the MADA challenge as that of “competitors seeking to avoid competition and not as vindicators of the a larger public interest.” Thus Missouri follows several other states that have allowed Tesla’s business model to disrupt old ways of doing business.

Uber and Lyft, Airbnb and HomeAway, and Zillow are similarly changing the economy, taking advantage of internet and smartphone technology to be responsive to consumer preferences. Lobbyists will have plenty to do.

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About Harry Styron

I'm a lawyer who lives in Branson, Missouri, whose professional interests involve real estate, construction and local government.

2 responses »

  1. Shirley Kidwell

    The recent appointments to the Clean Water Commission and the Air Conservation Commissions are far better examples of regulatory capture. See
    http://www.stltoday.com/news/local/govt-and-politics/greitens-stacks-clean-water-commission-with-farm-friendly-allies/article_b29f7487-bcc0-5e5a-a06f-a51d1713d773.html

    in addition to Ashley McCarty, the exec director of the AgriReady program for Missouri Famers Care

    Coday: president of the Wright County Farm Bureau

    Kleiboeker: served as the executive director of the Missouri Beef Industry Council.

    Thomas is the chief of staff for Sen. Brian Munzlinger, in agriculture from the University of Missouri and is secretary of the Missouri Republican Party State Committee.

    lawyer J. Benton Hurst, of Kansas City, whose father is Missouri Farm Bureau President Blake Hurst.

    Reece: from the wastewater treatment works side

    Air Conservation Commission appointment yesterday: Gov. Eric R. Greitens today appointed Kevin Rosenbohm as a member of the Air Conservation Commission.

    Rosenbohm is the Co-Owner of Graham Seed Cleaning Company, and the Co-Owner of Rosenbohm Farms. He previously served on the commission in 2006. Rosenbohm holds a bachelor’s degree in farm operations from Northwest Missouri State University.

    In other words, Farm Bureau now runs Missouri DNR in its totality. They have killed the State Water Plan, and will likely continue to destroy any semblance of real water protection.
    Under the current permitting rules and procedures (since 2013) CAFOs can now build anywhere in Missouri and request an operating permit after the building is operational, as long as they do not put more than the number of animals required for a Class II permit.

    Reply

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