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Tesla Motors Sued By Car Dealers 510

Posted by Soulskill
from the not-playing-by-industry-rules dept.
An anonymous reader writes "Car dealers in New York and Massachusetts have filed a lawsuit that seeks to block Tesla from selling its pricey electric vehicles in those states. The dealers say they are defending state franchise laws, which require manufacturers to sell cars through dealers they do not own. Robert O'Koniewski of the Massachusetts State Automobile Dealers Association says, 'Those dealers are investing millions of dollars in their franchises to make sure they comply with their franchise agreements with the manufacturers. Tesla is choosing to ignore the law and then is choosing to play outside that system.'"
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Tesla Motors Sued By Car Dealers

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  • by LeAzzholeChef (2576267) on Saturday November 10, 2012 @11:38AM (#41942925) Journal
    They cant sue under the franchise laws. Because the law is under combustible motors. It never included electric driven vehicles. Therefore this case should be thrown out of court on grounds of greed and control.
    • by fustakrakich (1673220) on Saturday November 10, 2012 @11:44AM (#41942969) Journal

      I don't think I would buy a car from Combustible Motors [gtspirit.com], but to each his own

    • by Nerdfest (867930) on Saturday November 10, 2012 @11:46AM (#41943001)

      Out of curiosity, what was the original intention of the law? It seems a bit pointless.

      • by MickyTheIdiot (1032226) on Saturday November 10, 2012 @11:49AM (#41943021) Homepage Journal

        "To Help My Corporate Buddies."

        When there is only one explaination is possible it has to be true.

        • by Lakitu (136170) on Saturday November 10, 2012 @01:18PM (#41943781)

          are you serious? It's the complete opposite.

          If manufacturers could sell through dealerships they owned, they would own every dealership. The franchise law is supposed to enable locals to own local, small business dealerships and still have an "in" with the major manufacturers. Without it, the major manufacturers would all just be the 800-lb gorillas they are, leveraging their giant corporate size for the benefits of more control.

          It'd be nice if you could spend a moment to actually consider why it might be before complaining, since your argument about political quid pro quo with corporations is actually working against itself here.

          • by Anonymous Coward on Saturday November 10, 2012 @01:55PM (#41944111)

            I really wouldn't have a problem with that. The byzantine system of distributors, dealers, invoice pricing, dealer kickbacks, rebates, dishonest service requirements and everything else that makes car sales so opaque is not something worth defending. Does it really make a dimes worth of difference to me if the local dealership is owned by a guy on the city council (aka, local small businessman) or the corporation?

            I live in a small town and see nothing but the bad side of local ownership. One of the local dealer is so bad that they have refused to do warranted service on cars not purchased locally and had a horrible reputation. Eventually they were threatened by corporate with losing the franchise and improved a little. Eventually the old coot that owned the place retired and passed it on to someone slightly less insane.

            IMO the local ownership creates far more negative local influence than corporate ownership would have.

          • It benefits some corporations at the expense of other corporations and consumers. That's not quite "the complete opposite".

          • by iCEBaLM (34905) <icebalm@NOSPaM.icebalm.com> on Saturday November 10, 2012 @03:42PM (#41944941)

            If manufacturers could sell through dealerships they owned, they would own every dealership.

            Would they?

            Apple has their own stores, but they aren't the only place to buy Apple products.

            And who cares if they were? What's wrong with companies selling their own products retail if they want?

          • If manufacturers could sell through dealerships they owned, they would own every dealership.

            You mean like Apple does in the electronic gadgets industry? Yet, somehow, other brands still seem be quite successful at selling their products.

            So, why should the car sales industry work differently from the electronic gadgets industry?

      • by Lunix Nutcase (1092239) on Saturday November 10, 2012 @11:57AM (#41943087)

        Probably to prevent the auto manufacturers from driving the independent dealers out of business and being the only source of buying vehicles.

        • by Twinbee (767046)
          Oh so to avoid the middleman to increase efficiency you mean? I wish more companies would do that.
    • Well, franchise laws should be thrown out all together... along with Liqueur distribution laws, and all the other nonsense left over from the 50s that was designed to keep out competition.
    • by jythie (914043) on Saturday November 10, 2012 @12:26PM (#41943321)
      I really, really hope they loose due to that element. I utterly loath these car dealers, and their 'but we invested money! we should have the law protect us!' argument just doesn't do it for me....

      There are times and places where regulation is useful, but this type of protectionism that forces companies and consumers to go through some cartel of private businesses simply because they got a special law just.. it doesn't do the population any good.
      • by fatphil (181876)
        If they invested their money in the right lobbyists, then I'm sure their argument will do just fine...
  • Translation: (Score:5, Insightful)

    by Local ID10T (790134) <ID10T.L.USER@gmail.com> on Saturday November 10, 2012 @11:39AM (#41942933) Homepage

    "Stop them! They are competing unfairly, by selling a product that will one day make ours obsolete!

    We have engineered a law to protect ourselves from competition, and since we choose not to sell their product, we can use this law to keep them from selling their product either!"

    • Re:Translation: (Score:5, Insightful)

      by Ostracus (1354233) on Saturday November 10, 2012 @11:43AM (#41942963) Journal

      Is it? I thought it was," we have to obey these government imposed laws, you should too".

      • Re:Translation: (Score:4, Insightful)

        by MickyTheIdiot (1032226) on Saturday November 10, 2012 @11:45AM (#41942991) Homepage Journal

        wow. Now THAT'S naive.

        • by Ostracus (1354233)

          For that my new business model is patenting making snarky comments, and making a fortune off of people like you.

      • Re:Translation: (Score:5, Insightful)

        by ShanghaiBill (739463) on Saturday November 10, 2012 @11:54AM (#41943061)

        Is it? I thought it was," we have to obey these government imposed laws, you should too".

        Except these laws were not "imposed" on the car dealers. The car dealers lobbied and bribed to get these laws passed. They are anti-consumer and anti-free-market. They are a result of sleazy special-interest politics.

        • Re:Translation: (Score:5, Insightful)

          by Anonymous Coward on Saturday November 10, 2012 @12:24PM (#41943311)

          Except these laws were not "imposed" on the car dealers. The car dealers lobbied and bribed to get these laws passed. They are anti-consumer and anti-free-market. They are a result of sleazy special-interest politics.

          Think it through. You get discounts off MSRP because the franchisee dealers compete with each other. If the manufacturer is also the only dealer, you will see the same price at every dealer; full MSRP. This law is pro-consumer, not anti.

          • Re:Translation: (Score:5, Insightful)

            by Anonymous Coward on Saturday November 10, 2012 @12:38PM (#41943417)

            Except that consumers actually prefer no-haggle pricing. Many people, including me, find the dealership experience unpleasant. With manufacturers competing with each other vs dealers, it's more likely that each manufacturer will try to give you the best price, or at least appear to do so. With dealers, you just expect to have your wallet pillaged.

            • by Solandri (704621)
              He's got a point though. The dealers act like a union. By aggregating the purchasing power of multiple car buyers, they can negotiate for better pricing from the big corporate manufacturer than if everyone bought from them as individuals.

              What's getting you upset is that the dealer-union, instead of passing on the same better price to everyone, plays a negotiating game and rewards those who are better at it with a better price. It's like haggling in moira [google.com]. A lot of players hated having to haggle in th
          • Re:Translation: (Score:5, Insightful)

            by bmo (77928) on Saturday November 10, 2012 @12:41PM (#41943451)

            Bullshit.

            The manufacturer could sell the car direct to the customer. They could sell it for the same price as the dealer pays them.

            The dealer is just a middle-man skimming off the top. The dealer offers service too, but independent certified garages could too. This is anti-consumer and anti-independent repair.

            --
            BMO

            • As far as independent garages go, why would they need to be certified?

              Oh, right, otherwise they don't have access to the manufacturer's diagnostic codes and meanings!

              One of the good things that came out of this election cycle in Massachusetts is that voters voted Yes for the "Right to Repair" ballot. This essentially forces car manufacturers to provide "proprietary" diagnostics information to independent garages.

          • by khallow (566160)

            If the manufacturer is also the only dealer, you will see the same price at every dealer; full MSRP.

            Not at all! Just pass a law requiring the MSRP to be higher than what the manufacturer sells the car for. Another non-problem solved with the power of stupidity!

            This law is pro-consumer, not anti.

            If only that were true. But as we see, its consequences are to force a costly middleman into every transaction.

          • Re:Translation: (Score:5, Insightful)

            by Jeremi (14640) on Saturday November 10, 2012 @01:38PM (#41943953) Homepage

            If the manufacturer is also the only dealer, you will see the same price at every dealer; full MSRP.

            ... and then the manufacturers would have to compete against each other on price, and the MSRPs would drop. I don't see a problem there. It's not like there is currently a lot of benefit to the consumer in having every car labelled with an irrelevant MSRP price that only suckers actually pay. Wouldn't it be nicer if the MSRP was actually a reasonable price, and you could just go in and buy a car at that price without haggling for hours? That's how most consumer purchases work, and it makes buying a lot less stressful.

      • Re:Translation: (Score:5, Insightful)

        by Shavano (2541114) on Saturday November 10, 2012 @12:50PM (#41943541)

        Nope. Those laws were made for the protection of the franchise contracts, so the manufacturers couldn't make a franchise agreement with a dealer and then establish another franchise within the franchisee's territory or go into direct competition with their franchisees. In the case of a company store opening in an area where there are no dealers for the brand. It's essentially protecting the value of the franchise contract from being undercut by the manufacturer. But if there is no franchise contract covering the territory... who is hurt? Dealers for OTHER BRANDS? Who the hell cares? Those dealers have no contract with Tesla and no interest to protect.

        It sounds like New York and Massachusetts are trying to apply the law outside its scope.

        • by Jeremi (14640)

          It sounds like New York and Massachusetts are trying to apply the law outside its scope.

          Note that it's not New York and Massachusetts who are suing Tesla, it's the car dealership associations.

        • by hjf (703092)

          Slashdotters are just short-sighted employees (with a guaranteed paycheck at the end of the month), that only care about the smaller price. They don't run a retail business and they don't know what the "game" really is. They only see a store owner as a "greedy middleman". And they think it's ok (simply because it's not illegal) to walk into a store and get advise and try a product, only to run home and buy it on amazon. (OH but they do CRY when they are outsourced by someone in india who gets paid less!)

          I h

          • Sorry, but if the comic book distributor model is the more economically viable, then your firm should go out of businesses. Nothing personal at all, its just the economic reality of it and you state it yourself. The publishers do not want to be bothered selling small numbers of copies to stores like yours as it inflates their costs and reduces their margins, thus they sell to the distributor/wholesaler. If that does not leave enough additional margin for a further downstream seller (and I'm not talking

      • people jaywalk to get around it.
    • Yep... The entire article I was thinking "Now where have I heard that before?" I am looking forward to watching this unfold.
    • Re:Translation: (Score:5, Insightful)

      by fafaforza (248976) on Saturday November 10, 2012 @11:52AM (#41943051)

      You really think this is a petrol engine versus electric thing?

      You don't think this is a "I want to make money as a middleman, and don't want this 'direct to customer' sales model to take off" thing, instead?

      • by Ostracus (1354233)

        Even if it did, I don't see the death of the dealership, especially when you're talking about something the size and price of an automobile. As far as cars being shipped from maker to future owner? Already happens. I've had cars from overseas shipped to the US.

        • by timeOday (582209)
          I don't think there's any question there must still be dealerships; only whether they are independently owned, or owned by the manufacturer.

          The two models seem to compete OK with restaurants, so I'm curious what the history of the law is. (Maybe because there are so few auto manufacturers?)

          • by AaronW (33736)

            Except Tesla doesn't have dealerships that sell cars. To buy a Tesla you order it at their web site where you order exactly what features you want then they custom build it for you. They have the show rooms, but the show rooms don't do sales.

            As a consumer I really like it. When I bought my Prius I could not get the one I wanted (I got my 3rd choice in color) because I was limited to what the dealer received. 90% of the cars they got were white and I didn't want white. I ended up having to wait 5 months unti

      • Re:Translation: (Score:4, Insightful)

        by hjf (703092) on Saturday November 10, 2012 @02:40PM (#41944487) Homepage

        Oversimplify much?
        You think you just sit around and wait for people, to just BUY a car? Just take your share and go on your merry way?
        You have to SELL. Selling is a job. We storeowners are not "middlemen". We wake up every day, go to work, pay taxes, have debts. We WORK.

        And unlike you, we actually have risks. You? You're clearly an employee. you have an assured check at the end of the month. Me? If I don't sell, I have to touch the "rainy day fund". Something you only do when you're fired.

        Following your logic, you have no argument to get mad when the company you work for replaces you for an indian working for a fraction of your salary. Do you?

        • Re:Translation: (Score:5, Interesting)

          by radish (98371) on Saturday November 10, 2012 @04:34PM (#41945313) Homepage

          I'm a consumer. I buy things not because of salespeople but despite them. Buying a car is one of the least pleasant things I ever have to do, and that's entirely because of the salespeople and the dealer model. I would almost certainly buy more new cars (thus boosting the economy and helping to employ more people who actually, you know, make things) if I didn't have to go to a dealer to do it. Just let me browse & compare online, with accurate prices, and pick what I want for delivery. You know, like I do for EVERY OTHER DAMN PRODUCT I BUY. The dealer adds precisely zero value, in fact the dealer removes value, and does so at a high cost to me. Shut em all down.

        • by tibit (1762298)

          It's a made up, unnecessary job. It was only needed when it was hard to get information. These days, I can look at any car I want online, often it means a 3D walkthrough is available as well. There are reviews available as well. I don't need someone to sell anything to me. I want, perhaps and occasionally, a showroom to go to and see a car. Not BUY a car, just see it and feel it. This can be provided by the manufacturer, or a third party -- I'd gladly pay for the privilege, say $10 per entrance to a showroo

  • by ezakimak (160186) on Saturday November 10, 2012 @11:44AM (#41942965)

    The car dealer franchise laws began in California w/Reagan helping a buddy's business. Soon Bush did similar in TX, then lobbyists picked up the ball and rolled it to the other states.
    I can think of no other industry where it's in fact *illegal* for a manufacturer to sell their own product directly to consumers.
    It makes it so that it is no longer a free market. Who knows what options and colors people actually want--dealers order speculatively what they think they can sell, then sell them--people wind up choosing between the existing inventory, usually none having exactly what they want. You'd think on big ticket purchases people would be more picky about getting exactly what they want--but we wind up with millions of same-colored cars on the road anyways.

    Strike down these laws and it should be possible to actually order a vehicle that you customized on a manufacturer's "build-your-own" website--rather than it directing you to a bunch of local dealers that have their heads up their asses and don't actually have one in stock like you just spent 20 minutes configuring.

    Furthermore, right now, if you want to place a custom order, you *have* to do it through a dealer--who is now an unwelcome middleman that *hasn't* made a sale yet thinks they still deserve MSRP markup for merely printing out the paperwork even though you beat a path to their door with no other option.

    I truly hope Tesla wins.

    • by MickyTheIdiot (1032226) on Saturday November 10, 2012 @11:47AM (#41943007) Homepage Journal

      Again.. these people are *not* free marketers. They are opportunists. They are fine with the free market as long as it benifts them. When they are on the losing end they're absolutely fine with the government intervening in every possible way.

    • by fafaforza (248976) on Saturday November 10, 2012 @11:56AM (#41943079)

      Do you know if they have a similar system in Europe? I believe you can order direct from Audi and actually go over to their factory to pick the car up.

      And yea, the dealer only option sucks, as when, for example, you're looking to buy a V8 VW Tuareg, mainly for its compact size and towing capacity, you have to buy one with *all* the options, because that's the only thing that was imported. Very anti-consumer.

      • by c_sd_m (995261)
        Insist that they order a car to your specs. You'll have to wait but I know people who regularly do it with Audis and VWs. I almost did for my last car but they found one 10 hours away that was almost exactly what I wanted so I opted not to wait the 6-8 weeks. At least in Canada, I haven't found a VW or Audi dealer who won't place a factory order with fewer options than anything on their lot.
        • by Pulzar (81031) on Saturday November 10, 2012 @01:23PM (#41943835)

          I haven't found a VW or Audi dealer who won't place a factory order with fewer options than anything on their lot

          I've had a completely different experience with VW. The dealer said that he could order the car with options I wanted, but would not consider anything less than MSRP. That's for a car that they were selling for anywhere between $3000 and $4000 off of MSRP for the ones on the lot.

          In practice, it was equal to a refusal to order it. I ended up getting a Nissan...

    • lol... these laws cover almost every product out there. Try and sell alcohol "Direct" to the consumer and you'll find out about them really quick. There is only one, count them ONE liqueur distributor for the entire Chigago metropolitan area... and the laws are such that it costs a fortune to apply for a distribution license and you are guaranteed not to get it.
      • by nedlohs (1335013) on Saturday November 10, 2012 @12:36PM (#41943391)

        Picking a heavily restricted special case product that was so special the constitution got changed twice due to entirely to it and applying it to "almost every product" does not a reasonable argument make.

        I can buy pumpkins from a local farmer who grew them. I can buy a computer made by Dell from Dell. I can buy ink for my printer directly from the manufacturer. I can pay a local carpenter to build me a table directly. I can buy a house from the builder.

    • by westlake (615356)

      I can think of no other industry where it's in fact *illegal* for a manufacturer to sell their own product directly to consumers.

      The motion picture industry was vertically integrated until 1948. MGM and Lowe's at the top. Paramount and Warner Brothers lower down. If you wanted decent exposure for your independent production you had to cut a deal with the majors.

  • by Culture20 (968837) on Saturday November 10, 2012 @11:49AM (#41943023)
    Tesla motors sells suped-up golf carts, not cars. No need for franchises.
  • by Anonymous Coward on Saturday November 10, 2012 @11:51AM (#41943037)

    http://www.teslamotors.com/blog/tesla-approach-distributing-and-servicing-cars

    Elon Musk made a blog post about all this legal turmoil last month. Worth a read.

    • by dutchd00d (823703)

      Elon Musk made a blog post about all this legal turmoil last month. Worth a read.

      From that post:

      Existing franchise dealers have a fundamental conflict of interest between selling gasoline cars, which constitute the vast majority of their business, and selling the new technology of electric cars. It is impossible for them to explain the advantages of going electric without simultaneously undermining their traditional business. This would leave the electric car without a fair opportunity to make its case to an unfamiliar public.

      Which, IMHO, is bunk. Every car they are selling is different from every other, that's just product differentiation. Saying they can't sell electric cars without undermining their gasoline cars is like saying they can't sell white cars without undermining their red cars. I suspect this is Tesla Motors trying to keep the entire supply chain under control (and thereby not allowing third parties to add a little margin on top of the sales price).

      • I suspect this is Tesla Motors trying to keep the entire supply chain under control (and thereby not allowing third parties to add a little margin on top of the sales price).

        No shit. The question is, what's wrong with that? If you buy a car from them, you're free to resell it, as you own it.

        The real problem with EVs from the perspective of the dealers of gasoline vehicles is that they are sold under an entirely different model. A gasoline vehicle is intended to produce a certain amount of service revenue. An EV is intended to minimize service. We had a bailout because people weren't buying American cars because they were shit. By all accounts they are somewhat better now, which has severely impinged on service revenues. Dealers get the service money and massively pad parts prices in most cases, and the automaker also pads the part prices, which is their prerogative (though sleazy) since they signed the contract for Delphi or Hitachi or JECS or Bosch or whoever to make sixty hojillion fuel injectors or whatever. If you make an EV designed to produce service revenue you can only do it in ways that will make the car unsafe (suspension defects) or ways that will make it look like shit and be immediately detectable even on a good test drive (interior flaws.) So basically, the problem with EVs from the standpoint of the major manufacturers is that they cannot intentionally make some of them pieces of shit in order to differentiate their other products which are made as well as they can make them, and which are still crappy compared to the imported competition. All you have to know about that is that the six-figure Ford GT had typical shitty Ford interior.

  • Simple Work Around (Score:5, Informative)

    by Anonymous Coward on Saturday November 10, 2012 @11:53AM (#41943057)

    The Tesla "Dealers" are show rooms and advertisements only, you cant test drive, you cant get the keys, They may not even be owned by Tesla at all in some states to get around Franchise laws. BMW does the same thing, as do a lot of non-US car builders. They advertise a trip to some place where the car is built and you then buy the car in Europe.

    In this case they advertise the car in a mall or other location, and then provide you internet access to the Tesla plant to place an order. The show room makes no money and sells no car.

    Ford cant do this because its contracts with dealers would require Ford to pay the dealer if it somehow sold a car in that state. Tesla has no such contract with its advertisers.

    In the end, all sales are done out of California, cars are built there, and shipped to the person, the show room has no additional involvement in the process.

  • by timothy (36799) Works for Slashdot on Saturday November 10, 2012 @11:58AM (#41943097) Homepage Journal

    Whatever you do, please don't attribute this to actual "capitalism" or "the free market." When people talk about deregulation as a horror, realize this is the kind of horror that the deregulators seek to undo -- complacent vendors with a cozy layer of protection against new entrants.

    Also, consider how much like these state franchise laws resemble gerrymandering district agreements -- both rely on passing in secret -- or at least in relative obscurity, in a process that regular folks rationally stay away from -- agreements to use the force of law to keep things tidy, stable, and predictable (and profitable, for those who've done the manipulating), rather than dynamic, risky, interesting, innovative, and other nice adjectives.

    The laws that give special privileges to state-sanctioned franchise owners are bad, even if they have some small silver linings, whether the franchise is for transportation, banking, legal services, auto sales, gambling, or Dixie cups. Not that their history in the auto industry isn't interesting -- this podcast is enlightening on that topic: http://www.econtalk.org/archives/2009/06/munger_on_franc.html [econtalk.org]

  • by kelemvor4 (1980226) on Saturday November 10, 2012 @12:07PM (#41943173)
    The state of NY isn't going to be happy if they have to lose out on all that tax revenue because consumers have to go to jersey or some other state to buy cars. Maybe that isn't the case right now, but as time progresses I think combustion engine cars will become less and less desirable.
  • by Bodero (136806) on Saturday November 10, 2012 @12:22PM (#41943291)

    Under the law, these dealers are absolutely right. Chrysler was forced to sell a company owned Chrysler Dodge Jeep Ram store in LA for this exact reason.

    If Tesla doesn't like it, then lobby to change the laws. You can't just ignore them.

  • by Shavano (2541114) on Saturday November 10, 2012 @12:43PM (#41943477)
    Where is the section of the law that says that a new manufacturer with no existing franchisees in the service area can't open factory stores that would compete with other makes?
  • New car dealerships (Score:4, Interesting)

    by EmperorOfCanada (1332175) on Saturday November 10, 2012 @12:48PM (#41943525)
    What tesla should do is to give out non exclusive franchises for $0.01 online. Anyone can get one: corner stores, private people, my cat, just saturate the market. Then when you want to buy a car you would buy it online through some "local" dealership. Technically bob down the street would sell it to you but Tesla would handle the transaction for Bob and then pass bob his $0.02 commission.

    There are few organizations that I detest more than car dealerships.

    A better end run of the law would be to go federal and try to slip in an online sales rule that overrides any local laws. That would be a 21st century way to go. I don't care where Amazon's HQ is and I certainly don't want a stupid local law getting between me and Amazon.
  • Historical problem (Score:5, Informative)

    by Animats (122034) on Saturday November 10, 2012 @12:50PM (#41943539) Homepage

    Auto dealer franchise laws reflect a long history of auto manufacturers screwing dealers. Auto dealers were traditionally small businesses with one supplier, which put them firmly under the thumb of the manufacturer. Many dealers still are, although some are big mufti-manufacturer chains.

    After looking at the New York [onecle.com] and Massachusetts laws, it's not clear that they prohibit a manufacturer from selling entirely through their own stores. What the laws clearly prohibit is a manufacturer competing with its own dealers. If a manufacturer doesn't have any independent dealers, the law probably doesn't apply. The dealers are trying to stretch the law by arguing that the manufacturer is unfairly competing with their dealership, but that may not work.

    California prohibits a manufacturer from opening a company store within 10 miles of a dealer, so Tesla has no problem there.

  • by Ritz_Just_Ritz (883997) on Saturday November 10, 2012 @05:11PM (#41945603)

    Personally, I'd be tickled if GM/Ford/Chrysler/Tesla/whoever could open their own dealer network. That would rid us of the thousands of smarmy dealerships (many with horrid BBB records) that prey on folks who just want to buy and maintain a car. Then consumer complaints could be handled more centrally and dealt with at the source. In theory, this would be financially better for the consumer since you'd be removing an extra profit center between the manufacturer and the consumer.

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