F Ford Motor Company

Tesla Motors Inc. filed an application for a dealership license in Michigan, setting up a potential legal fight over the state's ban on selling cars directly to consumers.

The Palo Alto. Calif., electric-car maker filed the application in November for permission to open a dealership and service center in Michigan, home to longtime car makers such as General Motors Co. and Ford Motor Co.

Michigan's Secretary of State, the state agency that handles dealership licenses, has been reviewing the application and recently received more documents from Tesla, said Fred Woodhams, an agency spokesman. He said it would take a month or more to decide on the application.

Michigan about a year ago passed a stiffer law prohibiting car makers from selling directly to customers in the state without an independent dealer intermediary. Tesla has railed against such dealer-franchise laws, calling them anticompetitive. Tesla owns its own dealerships and allows customers to order vehicles online directly from the company, something that other manufacturers are prohibited from doing.

A denial from Michigan could prompt Tesla to pursue additional legal avenues to fight the law.

"Tesla is committed to being able to serve its customers in Michigan and is working with the legislature to accomplish that. The existing law in Michigan is very harmful to consumers," a Tesla spokeswoman said. "Tesla will take all appropriate steps to fix this broken situation."

The Federal Trade Commission on Jan. 19 sponsored a day-long series of panel discussions about automotive retailing with much ​of the focus on Tesla and Elio Motors, another company aiming to sell cars directly to customers. Elio is working on a three-wheeled, single-occupant car it claims will get 84 miles a gallon.

Daniel Goldberg, a Boston lawyer with Morgan Lewis & Bockius LLP, sat on one panel at the FTC event, which also featured many economists. Mr. Goldberg said dealer-franchise laws that prohibit direct sales could potentially be challenged as unconstitutional. ​Tesla previously has argued that such laws run afoul of ​Congress's constitutional power to regulate interstate commerce.

Tesla several years ago said it would consider a federal lawsuit to resolve the issue if it couldn't come to an arrangement with individual states. It has fought battles in nearly every state in the U.S. with ​associations that represent car dealers. These associations have supported legislation that aims to prevent Tesla from selling vehicles directly to consumers. They also have fought to keep on the books existing laws that prevent Tesla from running its own dealerships.

In some cases, lawmakers have come to a compromise with Tesla where they have banned all other companies from selling directly, but have allowed Tesla to have a limited number of manufacturer-owned dealerships.

Michigan, along with Texas, is among a small group of states that have a flat prohibition on any direct sales. The laws were created to prevent car makers from building their own stores that would ​then ​compete with independent ​dealerships. Such competition could potentially undercut independent dealerships' prices and undermine investments made in their stores, according to lawyers and economists who have scrutinized dealer-franchise laws.

Write to Mike Ramsey at michael.ramsey@wsj.com

(END) Dow Jones Newswires

February 01, 2016 17:55 ET (22:55 GMT)

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