Pub. 13 2014-2015 Issue 1

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 15 new jersey auto retailer W W W . N J C A R . O R G after another to exert control over a dealer’s independent busi- ness. Examples abound but include site control agreements, facilities requirements, exclusive facility use requirements, working capital requirements, incentive programs designed to compel dealers to operate their dealerships in ways dictated by the manufacturer, warranty and incentive audits, inventory requirements, imposition of conditions (such as relocation or fa- cility modification) on approval of a dealership sale and others. Likewise, manufacturers have developed formulas and calcu- lations, many of which are statistically f lawed or lacking in common sense, to measure dealership performance in a host of areas. These formulas are regularly used to pressure dealers, to create a case to reject a proposed purchaser of a dealership based on his or her “performance” at other dealerships and even, sometimes, to create the “good cause” for termination. In response to these manufacturer programs and requirements, formulas and calculations, the Franchise Practices Act has been amended periodically to prohibit the most unreasonable and oppressive practices. As a result, since the Franchise Practices Act was first enacted, the franchising landscape has dramatically changed. Many of the most unfair and oppres- sive practices have been prohibited or dealers have been given defenses they can use. Certainly, in terms of terminations and dealership sales, the pre-Franchises Practice Act days are gone. However, even after all the amendments, the Franchise Prac- tices Act still has not fully achieved its purpose of leveling the playing field and equalizing the bargaining power between manufacturers and dealers. A significant reason for this is that many manufacturers simply ignore the restrictions on their activities in the Franchise Practices Act and, in essence, dare their dealers to do something about it. Manufacturers feel free to act this way because they know that the worst that can happen if a dealer does try to enforce his or her rights is that a court will make the manufacturer do what it should have done in the first place. The Franchise Practices Act has few teeth in it to make voluntary compliance the better choice for manufacturers. Many of the most unfair and oppressive practices have been prohibited or dealers have been given defenses they can use. Certainly, in terms of terminations and dealership sales, the pre-Franchises Practice Act days are gone. In 2014, the Legislature has before it bills to again modify the Franchise Practices Act. Many of their provisions address the latest programs, requirements and practices that manufacturers use to control their “independent” dealers and punish those who do not obey. However, one provision will enable an in- jured dealer to secure up to treble damages if, after notice, a manufacturer refuses to comply with the law. If enacted, this provision is apt to give the teeth to the Franchise Practices Act that has been lacking up to now and, perhaps, actually achieve the level playing field that the Legislature has sought to create since its first enacted the Franchise Practices Act in 1971. Marvin J. Brauth is a shareholder with Wilentz, Goldman & Spitzer, Woodbridge, New Jersey. He has been representing automotive retailers for over 30 years in connection with issues affecting their dealerships. Mr. Brauth can be reached at 732-855-6084 or mbrauth@wilentz.com.