Atkins said in his ruling that relevant state laws contemplate vehicle sales outside of the franchise model.
“It is evident that franchisees are not the sole contemplated form of dealer,” the judge said in regard to the Illinois Motor Vehicle Franchise Act. “This is further supported by various provisions referencing dealers with a ‘franchise or selling agreement,’ apparently contemplating other types of arrangements.”
While the use of franchised dealers has become the dominant sales model for new vehicles, Atkins said, it is not mandatory under state law.
“The automobile industry may have largely adopted the ‘Established Franchise System’ over many decades, and Illinois law may have even been updated to reflect and better regulate that reality, but that does not mean it ever required such as system,” the judge said.
In another recent direct-sales case, Tesla filed a lawsuit in August 2022 challenging Louisiana’s refusal to allow the company to sell vehicles directly to consumers, calling the state’s move protectionist and anti-competitive, Reuters reported. Tesla claimed Louisiana officials have violated state and federal antitrust laws by barring direct sales since 2017.
In Illinois, Tesla reached an agreement with the state and the dealers association in 2019 that allowed the continued operation of dealerships the automaker had established in previous years but limited them to 13, according to the ruling by Atkins.
That agreement with Tesla was a tacit acknowledgment that direct sales are legal, the judge added.
“Plaintiff IADA’s argument that a manufacturer per se cannot be a dealer consistent with Illinois law, and that allowing such business would be unfair and harmful to consumers, is somewhat less persuasive in light of its own agreement to an order allowing exactly such an entity 13 dealers licenses,” Atkins said in a footnote to his December ruling.
