Pub. 16 2017-2018 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 7 new jersey auto retailer W W W . N J C A R . O R G President’s MESSAGE | BY JAMES B. APPLETON Brokering Creates Business, Legal & Legislative Headaches New Jersey new car dealers need to have a serious conversation about brokering. While brokering is not, specifi- cally, prohibited by New Jersey law, state motor vehicle regula- tions plainly state that “no person shall engage in the business of buying, selling or dealing in motor vehicles” unless they are licensed. Still, anybody who opens a newspaper or clicks on a pop-up ad, knows there are all manner of brokering “business- es,” both in the physical and virtual worlds, that will arrange a new car sale or lease. These brokers are certainly “dealing in motor vehicles,” so why aren’t regulators doing anything to hold these unlicensed businesses accountable? Brokering is a big problem ( and getting bigger ) for new car deal- ers because it represents unfair and unregulated competition. But it is an even BIGGER problem for consumers, who are left vulnerable to Internet scam artists using bait and switch tactics that no licensed new car dealer would EVER dream of using. And these unlicensed brokers continue to get away with it. NJ CAR has made a concerted effort to bring the most visible and egregious examples of unlicensed brokering activity to the attention of State regulators. We’ve been frustrated by the fact that neither the Attorney General’s office, nor the New Jersey Motor Vehicle Commission ( NJMVC ) seem to be able to get their arms around this problem. The Division of Consumer Affairs in the Attorney General’s office, recognizes that many of these unlicensed brokers are falsely holding themselves out to be authorized representatives of manufacturers and are often advertising deals that do not comply with the requirements of the State’s motor vehicle ad- vertising rules. Both of these activities are clear violations of the Consumer Fraud Act, yet NJ CAR is aware of no enforcement action brought against any such broker. Title 39 of the New Jersey Statutes Annotated ( N.J.S.A. ) says that a business cannot “ offer to buy, sell or deal in motor vehicles” unless they are licensed. These unlicensed brokers are clearly offering motor vehicles for sale and, therefore, dealing in motor vehicles. Still, these transactions are, in most cases, consummated on a licensed dealer’s paperwork. That’s the problem. Both dealers and manufacturers are moving product and taking full advantage of these brokers as an alternative distribution channel. The NJMVC seems satisfied that a licensed dealer ( whether in New Jersey or out-of-state ) is a party to the transaction and the Commission seems to be turning a blind eye to the fact that an unlicensed business entity has served as a broker in the deal. This is troublesome, because the Commission’s own regulations specifically include brokering within the definition of what it means to buy, sell or deal in motor vehicles. It’s right there in N.J.A.C. 13:21-15.1 et seq.: “Business of buying, selling or dealing in motor vehicles” means en- gaging in the business of buying or selling motor vehicles on one’s own account or on behalf of another or participating in any transaction, including the brokerage or auctioning of motor vehicles… (emphasis added) The hands-off position of the NJMVC is in direct conf lict with the plain language of its own regulations. So, here’s a question for dealers who do business with unlicensed brokers: WHY? It’s your license and reputation on the line and it is entirely possible that delegating sales and marketing to an unlicensed business entity could expose your dealership to liability or even the potential for NJMVC enforcement action down the road. We understand that manufacturer stair-step programs and the pressure to meet increasingly unrealistic sales objectives is forcing more and more dealers to turn to brokers. The increased role brokers play in the New Jersey marketplace and the detri- mental impact that brokers has on the value of your franchise has prompted NJ CAR to start a conversation about solutions. First and foremost, the Coalition is calling on the Attorney General and the NJMVC to do their job—and enforce the consumer protection and motor vehicle licensing regulations already on the books. Secondly, we are looking at potential leg- islative changes that could lead to more effective enforcement. Lastly, we think it’s time to have a discussion among new car dealers about whether or not the utilization and reliance on unlicensed brokers, in and of itself, is ( or should be considered ) a violation of the terms and conditions of your new car dealer license and your manufacturer’s franchise agreement. Brokering is one of those issues that all car dealers can agree on: it’s bad for business. The only problem is that it seems that it’s “brokering” when another dealer does it, but “good marketing” when your dealership is the one utilizing unlicensed brokers. This complex issue is going to be difficult to resolve at the State House, unless or until we can get all dealers on the same page. If you have strong feelings ( either pro or con ), about brokering, please reach out to me directly so the Coalition can consider all points of view as it develops a plan to address this unlicensed activity.