Pub. 12 2013-2014 Issue 2

N e w J e r s e y C o a l i t i o n O f A u t o m o t i v e R e t a i l e r s 5 new jersey auto retailer w w w . n j c a r . o r g President’s MESSAGE | BY JAMES B. APPLETON The Top Five Things You Didn’t Know About The New Jersey Franchise Practices Act New Jersey new car and truck dealers individually invest millions, tens ofmillions of dollars, to own and operate a new car or truck dealership. Collectively, Statewide, their investment is in the billions. That investment is governed by the terms of a franchise agreement, which is written by the manufacturer and so it clearly favors THEIR interests. In an effort to level the playing field and protect a dealer’s investment, New Jersey has enacted the Franchise Practices Act. That law extends and supplements the terms and conditions found in the manufac- turer’s franchise agreement and protects the dealer’s investment and the public interest in an extensive networkof independentlyowned and operated new car and truck dealerships. The law governs virtually every aspect of the factory-dealer relationship and ensures that manufacturers treat their dealers fairly when it comes to the allocation of vehicles, war- ranty and sales incentives, establishing new facilities, relocating or building out existing facilities, termination andmuch,muchmore. The law was first enacted in 1971 and, since then, it has been amended several times. The most recent set of amendments, signed into lawtwoyears agobyGovernorChrisChristie, was amassive re-write andupgrade thatmade New Jersey’s law one of the strongest (if not THE strongest) franchise law in the country. But, recently, NJ CAR has been talking to many dealerswho seemsurprisedor unaware about many of the key protections they enjoy under the law. So, here we go…the top five things you didn’t know about the New Jersey Franchise Practices Act. • The first, most common thing dealers in NewJerseydon’t knowabout their rights un- der the law is that our statute prohibits price discrimination or two-tier pricing through any means, whether it’s stair-step incentive programs or facility upgrades. • Number two…facilities. Our statute prohib- its site control and permits dualing, unless a dealer voluntarily agrees to limit use of the facilityANDreceives separate and valuable consideration for their agreement to do so. • Number three…our statute prohibits a manufacturer from forcing a dealer to relo- cate or make facility modifications, unless it is financially justified, which means the dealer can realize a return on their invest- ment within ten years. • Four…and this is a big onewe have seen a lot of lately…our law bars franchisors and their captive finance companies from imposing unreasonable working capital, equity, and other financial requirements on franchisees. These limits are defined under the law as your prior year’s requirement or an increase of no more than five percent. • Five…our statute prohibits the use of unrea- sonable formulas or calculations to assess dealer performance or to take adverse action against a dealer who fails tomeet unreason- able sales performance or other criteria. New Jersey dealers enjoy strong protections under the law. But, it is important to remem- ber two things: first, the law only protects dealers if they know their rights under the law andassert themwhenmanufactures disregard them, and secondly, the law wasn’t enacted to protect dealers. The statute was enacted to protect the consumer and public interest in an extensive network of independently owned and operated new car dealerships that com- pete for business, offer easy access towarranty service, and handle safety recall work, when needed. These statutory protections allow dealers to make the investment in a strong dealer network that promotes competition and highway safety.