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A group of Tesla owners are unhappy with the company. They say it monopolizes the repair of its vehicles and its parts supplies, which prevents them from getting their cars fixed by independent repair facilities. On June 18, 2024, US District Court Judge Trina Thompson in San Francisco ruled the class action suit filed by those plaintiffs could proceed. The owners claim that Tesla coerced them into paying high prices and suffering long waits in order to have their vehicles fixed. Part of their case is that they dared not attempt to have their cars repaired elsewhere for fear that doing so would void their warranties, according to a Reuters report.
The case is Lambrix vs. Tesla and you can read the full complaint here. Attorneys for the plaintiff, Virginia Lambrix, allege in their complaint:
1. This antitrust class action, brought pursuant to Sections 1 and 2 of the Sherman Act, 15U.S.C. §§ 1 and 2, and the Magnuson-Moss Warranty Act, 15 U.S.C .§ 2302, seeks relief for all personswho, like Plaintiff, have been forced to pay supracompetitive prices and suffer exorbitant wait times tomaintain and repair their Tesla vehicles as a result of Tesla’s monopolization, attempted monopolization,exclusionary conduct, and restraint of the markets for compatible replacement parts (“Tesla-CompatibleParts”) and maintenance and repair services (“Tesla Repair Services”) for Tesla vehicles.
2. Historically, consumers of traditional vehicles with internal combustion engines (“ICEVehicles”) have had multiple options for maintaining and repairing their motor vehicles after purchase—they could perform the work themselves, bring their vehicle to a dealership, or bring them to anindependent repair shop. Moreover, when having that maintenance or repair, the consumer would havethe choice of using original equipment manufacturer (“OEM”) or aftermarket replacement parts.
3. Tesla owners, by comparison, effectively have only one option: schedule service at Tesla(or within the limited network of Tesla-approved service centers), where their Tesla will be maintainedor repaired using only Tesla OEM parts.
4. This is because Tesla, which has market power in the United States electric vehicle market(“EV market”), leverages that power to monopolize and restrain the markets for Tesla Repair Service andTesla-Compatible Parts. Tesla does this by, among other things:(a) Designing its vehicle warranties and related policies to discourage Tesla owners fromobtaining parts or services anywhere other than Tesla;(b) Designing its vehicles so that maintenance and repairs require access to diagnostic andtelematic information accessible only through remote management tools exclusively accessedby Tesla; and(c) Limiting access to its manuals, diagnostic tools, vehicle telematic data, and original equipmentmanufacturer (“OEM”) replacement parts.
5. Tesla then further leverages its market power in Tesla Repair Service market to maintainits monopoly in the Tesla-Compatible Parts market, and vice versa.
6. As a result of this anticompetitive course of conduct, Tesla has prevented independentproviders from entering the Tesla Repair Services market, prevented its OEM parts manufacturers fromproducing Tesla-Compatible Parts for anyone other than Tesla, and prevented market entry by non-OEM,Tesla-Compatible Parts manufacturers.
7. This, in turn, has caused Tesla owners to suffer lengthy delays in repairing or maintainingtheir EVs, only to pay supracompetitive prices for those parts and repairs once they are finally provided.
8. Tesla’s unlawful monopoly of the Tesla Repair Services and Tesla-Compatible Partsmarkets should be enjoined and dismantled, Tesla should be ordered to make its repair manuals anddiagnostic tools available to individuals and independent repair shops at a reasonable cost, and Plaintiffand the proposed Class should be reimbursed by Tesla for the amounts they overpaid for Tesla RepairServices and Tesla Compatible Parts. Accordingly, Plaintiff, on behalf of herself and all others similarlysituated, seeks declaratory and injunctive relief, treble damages, costs, and attorneys’ fees.
Repairs & Antitrust Laws
What is interesting about this complaint is that it alleges violations of federal and state antitrust statutes. That’s some creative thinking that could strike a blow for Tesla owners if successful. Judge Thompson found evidence of a repairs monopoly in Tesla’s alleged refusal to open enough authorized service centers, and its designing vehicles to require diagnostic and software updates that only it could provide. Evidence of a parts monopoly included restricting original equipment manufacturers from selling “to anyone other than Tesla,” and Tesla selling parts to consumers only on a limited basis, the judge said. She also found evidence that Tesla’s “tying” of various markets “coerces customers into undesired purchases.”
Tesla and its lawyers did not immediately respond to requests for comment on Tuesday. They contend that the complaint was based on an “illogical theory” that Tesla intentionally degraded repairs and parts, jeopardizing its far more profitable business of selling and leasing vehicles.
The complaint combined five lawsuits by vehicle owners who have paid for Tesla repairs and parts since March 2019. They said the company differed from its rivals by insisting on handling servicing and parts itself, rather than letting owners use independent shops and other parts from other companies. Tesla sells its vehicles directly to consumers, instead of through franchisees. In 2023, it reported $8.3 billion in revenue from its service operations, which was 9 percent of its total revenues of $96.8 billion. Revenue from vehicle sales totaled $78.5 billion that year.
Tesla & Right To Repair
Right to repair is a contentious issue for many consumers. Manufacturers often require their customers to use only approved (more expensive) parts and have them installed by approved (more expensive) service facilities. From the manufacturers’ point of view, their repair parts are fully tested to make certain they are durable, of high quality, and function correctly. Their service personnel are properly trained and have the right tools to do the job properly. Willy down at Repairs R Us may be a part timer who also milks cows in his spare time. As cars incorporate more and more electronics, it is critical to make sure the double throwdown clutch in your Belchfire 5000 doesn’t cause your turbo encabulator to run backwards at a critical moment.
My Model Y got a small bruise just behind the left front wheel in a parking lot earlier this year. The repair came to $1650, but the body shop advised that if the camera in the left front fender needed to be replaced, that would cost $1500 and then the car would have to be sent to the nearest service center (72 miles away) to have the camera properly calibrated at an additional charge of $3000 plus the cost of shipping the car down and back.
Is a fender camera worth $1500? I have no idea. Maybe. Could someone else calibrate it? It is an integral part of the vaunted Autopilot and Full Self Driving (Supervised) suites, so I might be hesitant to let Willy at Repairs R Us handle that process. As someone who changed my own oil since I got my first car and replaced every part on my beloved MGB at least once, I embrace the ethos of the shade tree mechanic whose toolbox is never far away. But cars are a lot more complex than they were last century, and wrenching on things on the weekend happens a lot less now that electronics are all you see when you pop the hood.
A few months ago, Zachary Shahan and I had a discussion about whether the company was opening enough new service centers to keep up with the number of new cars it was selling. A new one just opened close to where he lives, and he thought they were. But the nearest one for me is still 72 miles away and there is no indication the company plans on building one closer to me any time soon, so I am of the opposite opinion. I do recall reading recently that Tesla has stopped its bi-weekly mobile service calls in Newfoundland. Now Newfies have to take their cars to Halifax, Nova Scotia, which is a full day’s journey by ferry away. To me, that is like hanging out a sign in the beautiful port of St. John’s, Newfoundland, that says, “Please do not buy our cars. We don’t want your business.”
The Takeaway
I have no opinion about Tesla service. My Model Y is 2½ years old and has needed nothing but some windshield wiper fluid since the day my wife and I drove it home. Even the wipers are original. But I am generally aware that if I need service, it could be a major hassle to get an appointment and get the car repaired, especially if I have to stay a night or two at my own expense in West Palm Beach until repairs are complete.
Teslaphiles tend to think the decision not to have franchise dealers was a stroke of genius, but only if there is a robust service network to support owners. If you live close to one of the company’s service centers, you may not think there is a problem, but if you don’t, your ownership experience may be diminished by the lack of factory support for your all-electric chariot. It’s a conundrum, one that may be partially resolved by the pending class action suit in San Francisco.
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