Georgia Supreme Court Rules Constitutional Challenge To Direct-Sales Ban May Proceed

Americans for Prosperity Foundation celebrates a Georgia Supreme Court ruling in Lucid Group USA, Inc. v. State of Georgia allowing electric vehicle (EV) manufacturer Lucid’s lawsuit challenging Georgia’s direct-sales ban to continue as a win for economic liberty.

As AFPF argued in an amicus brief in support of Lucid, “[a] willing buyer of a lawful product (here, a would-be EV purchaser) should be able to purchase from a willing seller (an EV manufacturer) without going through a government-mandated middleman (here, a brick-and-mortar car dealership).” But a Georgia law prohibits EV manufacturers from selling cars directly to consumers in Georgia, except for one special carveout. Instead, EV manufacturers may only do so through franchised auto dealerships and cannot open their own retail locations to compete with the franchised dealerships. In this way, the law benefits franchised dealerships by shielding them from competition and protecting their bottom line. As AFPF argues in its brief, direct-sales bans like the Georgia law at issue in this case harm consumer welfare, increase prices through mandatory middlemen, reduce competition and innovation without providing any consumer protection benefit, and are examples of naked economic protectionism—an unlawful justification for government regulation.

Wishing to sell its EVs directly to Georgians without being forced to go through a government-mandated intermediary, Lucid brought a lawsuit challenging Georgia’s direct-sales ban under the Georgia state Constitution, which provides stronger protection of economic liberty than the minimum the federal Constitution as interpreted by the U.S. Supreme Court requires, including robust protection of the right to earn an honest living free from arbitrary and irrational government regulation. Lucid’s lawsuit argues that the direct-sales ban violates due process and equal protection because it is unrelated to any legitimate government interest in regulating, harms competition and consumer choice, and is unconstitutional economic protectionism.

The trial court improperly dismissed Lucid’s case, ruling that a provision of the Georgia Constitution that applies to state laws regulating the motor vehicle industry “in order to prevent frauds, unfair business practices, unfair methods of competition, impositions, and other abuses upon [Georgia] citizens” foreclosed Lucid’s due process and equal protection claims without analyzing whether the direct-sales ban furthered one of those enumerated purposes. The Georgia Supreme Court disagreed, ruling that it only applies to laws passed for the purpose of preventing those types of abuses. Now, Lucid will have the opportunity to make its case on the merits, showing that Georgia’s direct-sales ban does not “prevent frauds, unfair business practices, unfair methods of competition, impositions, and other abuses” or further any proper governmental interest but is instead unconstitutional economic protectionism and cronyism.

Read AFPF’s full brief here.