Rivian is suing Ohio’s Department of Motor Vehicles over the state’s ban on car companies bypassing dealerships to sell cars directly to consumers. In the federal lawsuit, the electric vehicle company calls the ban “irrational in the extreme,” arguing that it decreases competition and reduces consumer choice. Rivian also notes that Tesla is allowed to sell its vehicles directly to customers in Ohio, which presents an unfair playing field for other EV makers.
“Ohio’s prohibition is pure economic protectionism for the benefit of Ohio’s existing auto dealers, putting their profits ahead of consumers,” Rivian says in the complaint, which was filed Monday in the District Court for the Southern District of Ohio.
“Ohio’s prohibition is pure economic protectionism for the benefit of Ohio’s existing auto dealers, putting their profits ahead of consumers.”
The decades-old dealership model evolved in the early 1900s, when companies like Ford and GM used to sell directly to consumers. But as the automobile industry took off, there were increasing concerns about monopolistic practices, and state franchise laws arose. Since then, car dealers have an iron grip on sales in many states, though some companies like Tesla have found workarounds.
Dealers have made direct-to-consumer sales as difficult as possible, filing lawsuits and lobbying heavily through their trade group, the National Automobile Dealers Association (NADA). Over a dozen states have outright bans on direct-to-consumer vehicle sales, while some states — like Ohio — have adopted partial bans. Based on a deal reached between Tesla and Ohio’s dealership association, the company was allowed to sell its vehicles after agreeing to open three brick-and-mortar stores in the state, even as Ohio continues to exclude other direct-sale companies.
Rivian’s lawsuit accuses the state of carving out deals for Tesla while excluding other similar companies. The lawsuit reads:
Ohio’s prohibition also just makes no sense. Ohio allows manufacturers like Rivian to perform warranty service and other repairs on vehicles in Ohio, to rent vehicles to consumers in Ohio, and even to sell new vehicles to Ohioans from out-of-state dealerships which can be delivered to Rivian service centers in Ohio. Nonsensically, the thing that Rivian cannot do is actually complete the sale of Rivian vehicles in Ohio. This imposes an extraordinary burden on Ohio consumers and Rivian for no legitimate reason.
This is the first time that Rivian has sued a state over its direct-sales ban. The company was sued by Illinois’ dealer association for violating its ban, but that suit was eventually dismissed.
“Rivian believes that consumers should be able to choose the vehicles they purchase,” Mike Callahan, chief administrative officer, said in a statement. “Consumer choice is a bedrock principle of America’s economy. Ohio’s archaic prohibition against the direct-sales of vehicles is unconstitutional, irrational, and harms Ohioans by reducing competition and choice and driving up costs and inconvenience.”
