California Dealers Challenge Legality Of Tesla Referral Program



Tesla Model S

Tesla Model S

This is surely not the first time that the Tesla Referral Program has been attacked, but now it’s coming out of California on a more official level.

We’ve heard many arguments against the Tesla Referral Program in the past, partly because OEM automakers don’t/can’t run such programs (although it’s not entirely uncommon to see dealerships offer special giveaways, or really any company encourage you to “Tell A Friend” or “Share”). The other issue that’s been cited lately is that some people have a wider audience with which to provide their referral code (i.e. YouTubers, Bloggers, etc.). CEO Elon Musk has addressed this concern.

Tesla Model 3

Model 3

The California New Car Dealers Association (CNCDA) claims (to no one’s surprise) that Tesla is including owners as the “middle man” or “an unlicensed salesperson” by encouraging them to get others to buy the vehicles. The recent complaint comes after Tesla has recently run six separate, incentive-based referral programs over a short time period.

The CNCDA filed an official complaint with the California Department of Motor Vehicles (DMV). This is the third complaint the dealers’ association has sent over the course of a few years. The CNCDA says that Tesla is “bird-dogging” by encouraging owners to sell their cars. California law says that it’s illegal to offer discounts, commissions, or rebates to unlicensed salespeople, with the reason for the incentives being specifically that the person must sell, or aid in the sale of a product. CNCDA president, Brian Maas, complained:

“Tesla continues to widely publicize its now years-long strategy to sell cars using current customers as the middlemen.”

In 2015, the dealer group filed a complaint about Tesla offering $1,000 off the purchase of a vehicle for the owner and the new purchaser. The same type of complaints came out of Virginia and Tesla ended up changing the incentive to give the full $2,000 to the new buyer, and no cash to the referrer.

This new complaint states that the electric automaker has run six new programs in a short time, in an attempt to not get caught for the illegal practice. Incentives in the recent programs — free Supercharging, $1,000 vehicle discounts, pre-qualification to purchase the upcoming Tesla Roadster 2.0 for 10-percent off — allow owners to up the number of perks they receive based on how many referrals they round up.

As you can see, there’s a lot of gray area here. Tesla owners are not acting as official salespeople in any way, shape, or form. No one can tell a person that they can’t tout their vehicle and try to convince friends and family to follow suit. If the company wants to offer a thank you gift, so be it. However, the “aiding in the sale of” part is a bit sketchy.

Telsa does not own any franchised dealerships. The way that the company sells its cars is completely different from OEM automakers. Tesla doesn’t advertise in the traditional sense, but this is really the automaker’s form of advertising. It will be interesting to see how this one plays out.

Source: Automotive News

Categories: Tesla

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34 Comments on "California Dealers Challenge Legality Of Tesla Referral Program"

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Laws: Definition: Mans Attempt to control other men, the way THEY see fit! Some are good! Some are Not!

As if anyone was never Referring people to Tesla’s website Before Tesla Decided to Thank them for their Referral!

In some ways, kind of a Flat Version of Multi Level Marketing! Just 1 Level here: The Company, and You (With a Tracking code)!

“California law says that it’s illegal to offer discounts, commissions, or rebates to unlicensed salespeople, with the reason for the incentives being specifically that the person must sell, or aid in the sale of a product.”
1) “unlicensed salespeople” — Nope.
2) “Must Sell” — Nope.

Prediction: Case Thrown Out.

People HATE car sales people, they are pushy, obnoxious and lie. Do away with those people, the world would be better off.

Robots? Car dispensers?

Test drive then buy on line, have them deliver it.

The more they try to prevent people from going direct to the manufacturer and cutting out the wonderful experience you get in their dealerships (let’s face it, this is what it is really about), the more it will push people into a Tesla store.

It’s human nature.

How hard is it for Tesla to obey simple laws? I mean they got slapped on the wrist 2 years ago (, and now they are flaunting the law again.

What is the purpose of the law restricting a paid referral program as it seems it’s solely in place to protect financial interests of the incumbents? Is there any legitimate reason to have this law at all?

i dont see any

Perhaps this does violate the law, I am not sure. But it is an idiotic or poorly written law if that is the case.

My dealer offers similar incentives to me if I refer a friend or family member. It is a smaller amount but it is still very similar. I’ve never taken advantage of it, but what could possibly be wrong with it?

Like the dealer protection laws here in Texas, this sounds like a stupid law that is meant only to protect auto dealers’ profits or salespeoples incomes. It was probably written decades ago after a few bad dealers abused such a system. It is not for the protection of consumers.

It seems the US is full of franchise laws and distributor laws (see also alcohol) that seem out of date but it’s still the law. You don’t get to pick/choose. You can lobby to change the law. The other interesting part here not mentioned is that there is an IRS consideration here. Are these dollar amounts and methods sufficient to raise the eyebrows of the IRS in prohibited types of transactions that are effectively unreported income?

If people start getting referred in Bitcoin, the IRS will know for sure.

No, last time I checked in Cali you can sell stuff and if under $3000/year it’s not mandatory to report it….ie grage sales and such.

(⌐■_■) Trollnonymous

Stealerships are a bunch of hypocrite jackoffs.

Just google all the referral programs that are available. Even the manufacturers have had incentives to buy….

Trolling AGAIN! Or a paid shill for CNCDA?

i would like to question the legality of california dealers

Be sure to “Lawyer Up” before you commence with your said “question”. The California New Car Dealers Association is playing for keeps on this one.

The NADA Legal Eagles are sharpening their talons for the upcoming Tesla Trout fishing festival. I’m hoping Tesla can get some fairly reasonable legislation passed in Sacramento, to help level the “Paying Field”!

Tesla is violating the law as much as Airbnb, Uber, Lyft are violating the law. Quite simply, stupid laws need repealing and deserve to be violated. Almost all laws related to commerce are stupid laws.

CA repealed the stupid law “government owns you, so you cannot put marijuana in your body”, it should repeal even more stupid law of what car incentives can be offered.

Companies like Uber and Airbnb are violating laws that we have enacted to protect the safety of consumers.

And yes, I agree: if we are going to turn a blind eye to companies whose entire business model is based on evading regulations, we might as well just do away with the regulations and allow the big corporations to “outcompete” Uber and Airbnb in a race-to-the-bottom.

“Companies like Uber and Airbnb are violating laws that we have enacted to protect the safety of consumers.”

I’m pretty sure the majority of those laws were created to protect the interests of the cab companies. I’ve rarely felt safe in a cab, but have never felt unsafe in an Uber.

I’m not sure how requiring background checks protects the interests of the cab companies.

In any case, ask any cab company whether they are in favor of converting their employees to independent contractors and stripping away the labor laws that apply to them, and I’m sure they will be all in favor of it. Uber’s business strategy isn’t exactly rocket science.

It’s not just simple background checks. Whatever barrier they put up is to stifle competition for the detriment of the consumer. We don’t need to be coddled like 5 year old kids and forced (by regulations) to pay far higher than necessary.

As for cab companies being for simpler rules, they would’ve pushed for simpler rules if they wanted. But we know they never did, instead pushed for more regulations and complexity. The fact is, they absolutely do not want simpler, because that will cause more competition. That means they won’t be able to screw over the consumers (as much).

I think the whole thing is rather funny and ridiculous, though many people might find that CA is not nearly so liberal as they think, when it comes legal questions.

You have to go friend someone on FB, so they can refer you as a friend. I think a couple of tubers are like 40% of the way to a Roadster from their referrals.

So it’s not really a level playing field, unless you are another Tuber with thousands of subscriptions. Not that I care, but they do have a point in that regard.

But when you consider the smarmy, rip-off reputation of the car dealerships, it’s ironic that they are complaining about unfair practices, something with which they are completely familiar.

..and how will it turn out? Well I don’t think they will go so far as VA did, scotching any benefit for the finder of the prospect. Which is how I think of it. A finders fee.

I am hoping for a slap on the wrist and a finger wag at Tesla, but it depends on the depth and breadth of political power of the CADA. Purely on the merits I think Tesla is breaking the law, but I don’t think the decision will be on the merits entirely, and the real question will be on the remedy, the court prescribes. This could take a while too.

When I Leased my NIssan Leaf last year (10/17) from one of the nine “Stealerships” of the Sage Automotive Group, here in Los Angeles, I found out they were under FTC investigation. Little did I know, that 6 months months later, they would be paying a little fine ($3,600,000), for their “deceptive and unfair sales and finance practices”. It’s the wheels of justice, helping actual customers get their money back, from the 9 Sage Automotive Group Stealerships. Fortunately I didn’t fall for (Glendale Nissan) and their multiple Lease signing switcheroo, claw back deceptive “TACTICS”.

Funny, Tesla never pays any fine for its bait and switch program. Does it pay the FTC regulators to avoid the bigger fines?

That link tells the story of a disgruntled customer who blames Tesla for his own lack of diligence. Also the last comment seems to indicate a likely resolution. Nice try, FAIL.

Mot to beat a dead horse but there is good reason for auto-dealers to be worried, especially when there are futurists out there who see very bleak prospects, for them, ahead.

The auto “stealership” business model isn’t dead yet, but Tesla is certainly forcing dealership businesses to confront their own mortality!

That’s why the State ADAs are so virulently opposed to Tesla’s sales. It’s not the competition; it’s that Tesla’s success signals the impending end of the independent auto dealer.

Guess a few will survive for the niche markets but yes, they are going the way of the high street travel agent.

While this article doesn’t provide a definition of the term being used, the characterizing of auto-making companies with dealerships as being differentiated from Tesla by being something referred to as an “OEM automaker” seems problematic.
Maybe the draft came back from the editor ohne eigen marken?

Let’s compromise. No more referral program if dealers can no longer charge more than invoice price, no more adders at the financing desk and no more clueless sales people.

Let’s not compromise, but instead demand freedom to prevail in all cases.

Companies have the right to spend their money how they want, and consumers have the right to purchase what they want.

If consumers want knowledgable salesmen, then they need to demand it with their dollars.

The playing field is level between consumer and supplier because the consumer is motivated to spend as little as possible, and the supplier is motivated to sell for as much as possible.

Freedom needs protection, not The California New Car Dealers Association.