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 17 new jersey auto retailer W W W . N J C A R . O R G active efforts and involvement, the New Jer- sey Legislature amended relevant provisions of the Franchise Practices Act in 2011, with one such amendment specifically outlaw- ing price discrimination. Because federal antitrust laws do not generally preempt state law, there is potential for aggrieved New Jersey dealers to seek redress for unlawful discriminatory pricing under the Franchise Practices Act that, practically speaking, has been unavailable or unattainable under the Robinson-Patman Act. N.J.S.A. 56:10-7.4 of the Franchise Practices Act provides a list of 19manufacturer actions that are prohibited. N.J.S.A. 56:10-7.4(h) is particularly relevant to the rampant issue of price discrimination, and makes clear that many of the stair-step incentive programs put into place by manufacturers, in fact, violate New Jersey law. N.J.S.A. 56:10-7.4(h) provides that it is a violation of State law for any motor vehicle manufacturer to fail or refuse to sell or offer to sell to allmotor vehicle franchisees in a line make every motor vehicle sold or offered for sale to any motor vehicle franchisee of the same line make, or to fail or refuse to sell or offer to sell such motor vehicles to all motor vehicle franchisees at the same price for a comparably equipped motor vehicle, on the same terms, with no differential in discount, allowance, credit or bonus, and on reasonable, good faith and non-discrim- inatory allocation and availability terms. The statutory language in bold above, which was added to the Franchise Practices Act in the 2011 amendments, on its face, prohibits price discrimination by manufacturers. The statute, however, is equally clear that certain exemptions apply to this prohibition. A manufacturer’s failure to deliver a motor vehicle to a dealer as discussed above is not a violationof the statute if the failure is not arbi- trary and is due to: (1) a lackofmanufacturing capacity; (2) a strike or labor difficulty; (3) a shortage of materials; (4) a freight embargo; or (5) other cause over which the franchisor has no control (such as, by way of example, a natural disaster). In sum, the Franchise Practices Act is a po- tential alternative means of redress for New Jerseymotor vehicle dealers who fall victim to price discrimination. Because a group of dealers is unlikely to obtain class action certification in a stair-step price discrimina- tion case under the Robinson-Patman Act, if various past federal court decisions – such as the Blue Oval class action suit in the past decade – are any indication, exploring potential claims under the Franchise Prac- tices Act may be a helpful endeavor. These claims, even if initiated in State court, will ultimately land in the federal courts, asman- ufacturers will almost always seek removal of these cases to the federal courts. Even with removal, however, the State Franchise Practices Act, with its simpler language and clearer intent, will be the applicable law, not the Robinson-Patman Act. If a dealer has been the victim of price dis- crimination, the dealer should promptly seek legal counsel experienced in the auto industry and antitrust law. As always, it is important for dealers to recognize that any such litigation, whether by a single dealer or a group seeking class certification, would be both expensive and time consuming. Moreover, dealers should understand that no court – whether State or federal – has ad- dressed or interpreted the 2011 amendatory language added to the Franchise Practices Act. Manufacturers will presumably re- spond to any attempt by dealers to certify a class under the Franchise Practices Act in much the same way as they would under the Robinson-Patman Act — by asserting that the dealers’ claims lack the required commonality and predominance required to be certified as a class action. Recognizing this reality, the clear prohibi- tions against price discrimination included in the recent amendments to the Franchise Practices Act raise an interesting option for an aggrieved dealer: initiating litigation under the recently added State provisions unilaterally. Indeed, nothing prevents an individual dealer from pursuing claims against a manufacturer for price discrimi- nation, whether pursuant to the federal Robinson-Patman Act or the New Jersey Franchise Practices Act. Until a court interprets the relevant 2011 amendments to the Franchise Practices Act, some uncertainty here is inevitable. Seeking to certify a class of similarly affected dealers may, in fact, still be the preferable route, par- ticularly whenweighing cost considerations. History, however, dictates that a group of dealers would probably need to show an extraordinarily high degree of commonality amongst their claims, particularly as to dam- ages, in order to proceed with a class action. The costs of a single dealer testing a signif- icant price discrimination situation under the New Jersey Franchise Practices Act, even if the manufacturer removed such an action to federal court, would be signifi- cant, but potentially not cost prohibitive in the right case. The amendments to the Franchise Practices Act could very well prove to be a new avenue of relief for New Jersey dealers damaged by improper price discrimination. Alan E. Davis, Esq. and Christopher Ledoux, Esq. are members of the Greenbaum, Rowe, Smith & Davis LLP Automotive Dealership and Franchise Law Practice Group. They can be reached at 732-549-5600. The amendments to the Franchise Practices Act could very well prove to be a new avenue of relief for New Jersey dealers damaged by improper price discrimination.