Pub. 12 2013-2014 Issue 3

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 F A L L 2 0 1 3 16 new jersey auto retailer How Thirty-Four Words May Make A Difference BY ALAN E. DAVIS, ESQ. AND CHRISTOPHER J. LEDOUX, ESQ. M any New Jersey automobile dealers have suffered at the hands of a longstanding factory practice, namely the use of two-tiered pricing or, more often than not, unlawful price discrimination. Most, if not all, manufacturers engage in this practice in one way or another. Manufacturers often offer better rebates, allowances or discounts to dealers as incentives to encourage particular dealer action, such as: (1) building bigger and better facilities; (2) selling more vehicles; (3) participating in an “image program”; or (4) utilizing more (or particular) advertising. Many dealers, whether because of the size of their property, zoning limitations or some other restrictions, are unable to meet the requirements of the stair-step incentive programs, meaning that manufacturers charge them a higher price for vehicles. A federal statute, the Robinson-Patman Act of 1936 (15 U.S.C. §13(a) and (d)), pro- hibits just this sort of price discrimination by manufacturers. The Robinson-Patman Act states that a manufacturer may not offer products or commodities for sale to its customers [read “dealers”] or distributors unless such offers are “available on propor- tionally equal terms to all other customers competing in the distribution of such products or commodities.” Moreover, the Robinson-Patman Act specifically prohibits discrimination in price between different purchasers of like grade and quality products where the effect of that discrimination would be to substantially lessen competition or tend to create a monopoly. The Robinson-Patman Act, unfortunately, has by and large proven to be an ineffectual tool for automobile dealers seeking to combat these discriminatory practices, as federal courts have routinely and consistently refused to certify class actions where dealers seek to band together within a single litigation. The effect of these rulings means that an aggrieved dealer would be forced to file suit under this federal statute on his/her own, and without similarly affected dealers helping to establish the price discrimination (to say nothing of sharing in the significant legal bills and costs that such litigation requires). In other words, federal court decisions make it both expensive and impractical for an automobile dealer to seek redress under the Robinson-Patman Act. What many New Jersey dealers may not be familiar with, however, is a provision tucked away within the New Jersey Franchise Practices Act that prohibits the same type of price discrimination outlawed by the Robinson-Patman Act. In fact, with the benefit of NJ CAR’s