SACRAMENTO, Calif. — The California Department of Motor Vehicles confirmed today that it is looking into Tesla Motors’ referral program, almost a month after the state dealer association called on the agency to investigate the carmaker for alleged violations of California’s ban on “bird-dogging.”

In an email issued to F&I and Showroom, the state agency said it is “currently looking into this matter,” but offered no other details.

Tesla launched the referral program on July 29, promising to give new buyers a $1,000 discount on a new car, service or accessory if they were referred by a current owner, who would also receive a $1,000 discount on his or her next vehicle or service visit. The program, which Tesla has since modified, runs through the end of October.

“While many other licensed dealers would like to offer similar referral fees for existing customers, California law flatly prohibits the practice announced by Tesla based on several statutes,” Brian Mass, president of the California New Car Dealers Association (CNCDA), wrote in a letter to the DMV, dated Aug. 26. “A dealer that chooses to disregard the myriad laws and use unlicensed customers to sell cars on its behalf is risking being accused of committing a criminal misdemeanor, which can lead to fines and administrative action up to an including revocation of a dealer’s license.”

Under the California Vehicle Code, Maas added, Tesla customers would be acting as illegal salespeople when they accept the “bird-dog” fee of $1,000. “So not only is Tesla putting itself at risk, but it is also putting its vehicle owners at risk …,” Maas wrote, in part.

Tesla’s referral program faced similar opposition in Virginia, where the Virginia Motor Vehicle Board contacted the automaker within 10 days of its launch. In response, Tesla altered the program in the state by directing the whole $2,000 incentive to the vehicle buyer.

“If Tesla is compensating current owners $1,000 for selling a Model S to their friends, they are out of compliance,” said Virginia Motor Vehicle Board Executive Director Bruce Gould. “If a Ford dealer was giving out dinner coupons to customers for referring their friends, we’d say the same thing.”

But in other states, Tesla has expanded the program. In a letter Tesla CEO Elon Musk sent to Model S owners, the executive announced the company was removing a limit and adding an extra bonus.

“As you know, the Model S referral program was designed as an experiment, and so far it seems to be working,” Musk wrote, in part. “So we’ve decided to remove the 10-referral limit. From now until the end of the program, you can refer as many friends as you’d like. Your link will continue to work until October 31st. What’s more, we’ve added an additional reward: the customer who makes the most referrals by the end of October will be invited to swap their current Model S for a fully loaded Ludicrous P90D Model S, for free.”

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Gregory Arroyo

Gregory Arroyo

Editorial Director

Gregory Arroyo is the former editorial director of Bobit Business Media's Dealer Group.

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