October 2016 SDADA Column

Virtually every dealer, manager or salesperson I know has been put in the position of having to
explain to a customer that one vehicle, with the same MSRP as the identical vehicle sitting next to it, costs $4,000-5,000 more than the other one. Or they have sold vehicles at a significant loss at the beginning of the month in an effort to hit an objective that will allow them to perhaps(!) break even on vehicles they sell at the end of the month.

Manufacturers do not understand the disruption, confusion and malaise they cause with such ridiculous incentive(?) programs. They do permanent damage to their brand, customer-dealer relations and dealer-manufacturer relations.

The NADA Board of Directors had an extended discussion about this topic at our most recent meeting. The frustration, anger and distrust came quickly to the surface as we talked. There was a wide variety of ideas to deal with it but there was not any consensus. Of course, our anti-trust attorney kept the discussion on track and us out of trouble!

The topic is on the agenda for the next board meeting but I'm not confident that NADA is in a great position to really do anything significant (other than have the discussion with the manufacturers) about this issue.

Like most states, South Dakota has a law on the books that specifically deals with this topic (my emphasis added):

32-6B-57.   Sale by franchisor to franchisee at lower price than that charged to other franchisee prohibited--Exceptions--Violation as misdemeanor--Damages. It shall be unlawful for a franchisor to offer to sell or to sell any new vehicle to any franchisee at a lower actual price therefore than the actual price charged to any other franchisee for the same model vehicle similarly equipped or to utilize any device including, but not limited to, sales promotion plans or programs which result in such lesser actual price; provided, however, the provisions of this section shall not apply to sales to a franchisee for resale to any unit of government, federal, state, or local. Provided, further, the provisions of this section shall not apply to sales to a franchisee of any vehicle ultimately sold, donated, or used by said franchisee in a driver's education program. Provided, further, that the provisions of this section shall not apply so long as the franchisor offers to sell or sells new vehicles to all franchisees at the same price. Each and every person who violates this section shall be guilty of a Class 1 misdemeanor, and each and every person violating this section shall be liable thereby for all damages caused by such violation.

What has been done in enforcement of this law? Why do we have a law if we don't enforce it? Who's job is it to enforce this law?

These are all questions that have been discussed at many SDADA board meetings. Usually the discussion has been tempered by concern about retribution by the manufacturer in some other area - warranty, advertising, incentives, etc. This is of particular concern to those dealers who are closer to the borders of our state and would be disaffected if dealers in other states would gain a competitive advantage.

What if a block of states would decide to enforce their laws? Could we affect change with manufacturers working together?

I don't know the answer to these questions but I do know that this issue is not going away any time soon. We will have to address it or deal with it.