The U.S. economy has seen its share of disruptive technologies derailed (at least in time-to-market) by archaic legal regimes. Look to Uber’s taxi-hailing service and Airbnb’s apartment rental innovations as recent examples. Most times it’s a case of old assumptions about consumer protection and competition having lost validity with changed circumstances. Other times it’s simple protectionism by legacy incumbents, as in the legal assault on Aereo’s IPTV streaming service for alleged copyright infringement. In the case of electric auto developer Telsa Motors, however, it’s something a little different.

The problem for Tesla’s well-reviewed vehicles — Consumer Reports gave the new Tesla S its highest car rating ever — is not technical, as the California start-up boasts impressive lithium battery innovations and is aggressively building its own chain of recharging stations. Instead the constraint is a plethora of state laws (48 in all) that prohibit or limit automobile manufacturers from selling direct to consumers or owning auto dealerships. These statutes, which date to the 1950s, are matched by a federal law known as the “Automobile Dealers’ Day In Court Act.” That legislation is an anomaly which allows dealers (franchisees) to sue in their home federal district court and recover legal fees if a manufacturer fails to “act in good faith in performing or complying with any of the terms or provisions of the franchise, or in terminating, canceling or not renewing the franchise with said dealer.” (These sorts of lawsuits would otherwise require a minimum of $75,000 at stake, would be governed by state law and would not have the threat of fee-shifting.)

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