Q&A with Senator Mike Kehoe on Auto Dealers

As part of our ongoing series of interviews with Missouri lawmakers, The Missouri Times recently sat down with Sen. Mike Kehoe of Jefferson City, who championed the transportation sales tax on the Aug. 5 ballot and who crafted the controversial franchise amendment near the end of the legislative session.

The Missouri Times: Let’s jump right into the Tesla issue. What was the intent of the franchise bill/amendment?

Kehoe: The vehicle franchise law amendment that was put on House Bill 1124 was simply to clarify existing law and three decades of practice. Since 1984, when an entirely different legislature enacted the Missouri Franchise Law, direct auto sales from manufacturers to consumers have been prohibited. It wasn’t until Tesla received a license to sell direct in 2013 that this issue arose. The language in HB1124 was added to ensure that the existing law continued to be enforced consistently for the more than 400 auto dealers in Missouri, just as it has been for over 30 years.

TMT: What steps did you take to insert it into the bill?

Kehoe: The language that was inserted into the bill was language that the Department of Revenue recommended in order to provide clarification. As with any change to a bill, I worked with the bill handler. The bill handler decided to create a Senate Substitute, as is commonly done in order to prevent a series of amendments and excessive time on the floor. The franchise clarification was included when the substitute was offered.

TMT: When did you decide to insert it?

Kehoe: I have been in the car business since my early teens, and in that entire time the Missouri Franchise Law has been in place. Every dealer I know follows this law, as does every manufacturer. It is just a fabric of the playing field. Ever since Tesla applied for the license to sell direct I have been keeping an eye on this issue, as this request would put them on a playing field that no other dealer is on. It wasn’t until late April that I received a response from the Department of Revenue suggesting they believed that the existing law was unclear that I began working to find a solution to ensure that existing law would continue to be applied consistently. HB1124 supported the language and had the trajectory toward passage; therefore I approached the sponsor about adding it there.

TMT: What are the advantages to the bill/amendment?

Kehoe: The advantage is that current law continues to be enforced, as it has been, for over 30 years. This is really an issue of fairness. It makes no sense that all manufacturers are prohibited from certain practices while one is allowed to do so. Additionally, the franchise law was designed as a consumer protection. If people are able to start purchasing cars directly from a manufacturer, who is to say that a Chinese company can’t open a kiosk in the mall where we can buy cars? If we do, what’s the recourse for recalls or product issues if something goes wrong? The dealer system was created to ensure we have local advocates for consumers who have a vested interest in customer satisfaction. Additionally, despite the rhetoric, the current law improves market competition, which means better prices for car consumers.

TMT: When did Tesla reach out to you?

Kehoe: I didn’t hear from Tesla until after the language was added to HB1124.

TMT: Questions have surrounded this bill/amendment since last week, but one had claimed you misled them. Did you?

Kehoe: No, I did not. It wasn’t until late April that we received an explanation from the Department of Revenue as to why they were issued a license. Once we received their explanation, with which I don’t agree, we began working on a legislative solution to ensure that the current law was applied fairly to everyone, including Tesla. Again, I feel very strongly that the law is clear and that Tesla is operating outside of not only 30 years of trade practice, but also 30 years of Missouri law.

TMT: Do you feel there is a compromise possible?

Kehoe: I believe this issue will be resolved, but unfortunately, it will likely take some time to get it done. I have been talking with legislators and stakeholders looking at options and we are going to take an “all of the above” approach to getting this done. It’s about fairness. To disadvantage 400+ current dealers, who are operating under the requirements of the law by granting special privileges to one company is a dangerous precedent for businesses and consumers.

TMT: If not settled this year do you anticipate this issue coming up next session?

Kehoe: In other states, litigation against Tesla has been a necessary step in the process to resolve this issue and it may be here as well. We’ll continue to work on it in months ahead and hope to have it solved as quickly as possible.

TMT: Changing gears for a moment, you’ve been working on the transportation issue for some time. How validating was it to see the transportation bill passed?

Kehoe: I hate that Missouri’s transportation infrastructure is at a place where we had to pass HJR68. Unfortunately, it is. I am very pleased that Missourians will have the opportunity to decide how they want to fund transportation infrastructure in Missouri.

TMT: What is the one thing you would like our readers to take away from this session?

Kehoe: I think it was a great session for Missourians. Allowing them to receive their first income tax reduction in nearly 100 years while giving them an opportunity to address the road funding crisis is important. Protecting life, protecting our individual liberties, ensuring that students are not destined to languish in failing schools, and helping Missouri employers are all things that we can be proud of. Senator Dempsey, Senator Richard, and Senator Schaefer all deserve credit for their leadership.