SALES PERFORMANCE LEGISLATION

Transcription

1 Automotive Trade Association Executives Legal and Legislative Conference October 24, 2017 SALES PERFORMANCE LEGISLATION Joseph F. Roesner, The Fontana Group, Inc. Larry Doll, Illinois Automobile Dealers Association Brian Maas, California New Car Dealers Association Peter Kitzmiller, Maryland Automobile Dealers Association

2 New York State Vehicle & Traffic Law Section 463 (2) It shall be unlawful for any franchisor, notwithstanding the terms of any franchise contract: (gg) To use an unreasonable, arbitrary or unfair sales or other performance standard in determining a franchised motor vehicle dealer s compliance with a franchise agreement. 2

3 GM Performance Standard General Motors Dealer Sales and Service Agreement ARTICLE 9. REVIEW OF DEALER S SALES PERFORMANCE Satisfactory performance of Dealer s sales obligations under Article 5.1 requires Dealer to achieve a Retail Sales Index equal or greater than 100.General Motors expectations of its sales and registration performance for a Line-Make in a particular area may exceed this standard for individual dealer compliance.. 3

4 Beck NY Court of Appeals Decision GM measures a dealer s sales performance by comparison to a statewide class of dealers, but adjusts the standard to reflect certain local market peculiarities with respect to one metric: local consumer purchasing preferences for certain vehicle types 4

5 Beck NY Court of Appeals Decision To comply with the Dealer Act, if a franchisor intends to measure a dealer s performance based on a comparison to statewide data for other dealers, then the comparison data must take into account the market-based challenges that affect dealer success. 5

6 Beck NY Court of Appeals Decision this is an industry in which the parties hold unequal bargaining positions, and an industry standard may reflect the entrenchment of the very inequality and favoritism that the legislature sought to counterbalance in the Dealer Act. Thus, GM may not rely on a standard that is unreasonable and unfair simply because of its prevalence within an industry the legislature sought to regulate. 6

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14 Manufacturer Assigned Dealer Area 14 6

15 Manufacturer Assigned Market Manufacturer Assigned Market Areas Areas Collection of Census Tracts and/or Zip Codes Dealers are assigned Census Tracts based on Proximity to the Centroid of the Census Tract Adjustment in assignment can be made to take into account natural or man-made boundaries; some manufacturers also consider sales dominance 15

16 Factors Potentially Not Fully Accounted Manufacturer Assigned Market for in Assigned Areas Drive Times Areas Toll Roads or Toll Bridges Travel Patterns and/or Shopping Patterns Work Commute Patterns or Locations Media Coverage 16

17 Expected Registrations State Segment Brand Industry Share Small Car 10, , % Large Car 40, , % Total 50, , % AGSSA Segment Industry State Share Expected Registrations Small Car 5, % 500 Large Car 5, % 1,000 Total 10,000 1,500 17

18 Cautions to Using Segmentation Analysis to Calculate Market Potential Differences between your market & the chosen benchmark: Competitive Representation Demographic Differences not controlled by Segmentation Topography and/or Weather Import or Domestic Bias Competitive Manufacturing/Research Facilities Automotive Supplier in Area Lease vs. Purchase Preference 18

19 Additional Factors Affecting Performance Allocation of Vehicles Brand Loyalty Open Points and Unassigned Areas Disparate Incentives Destructive Competition Advertising Support Appropriateness of Advertising to the Market 19

20 New Illinois Law 20

21 INTRODUCED (9) The extent to which local market factors in the dealer s relevant market area impacted the dealer s sales. For the purpose of this paragraph (9), local market factors includes, but is not limited to, the following: (i) the popularity of vehicle brand sold by the dealer as compared to the popularity of competing brands within the dealer s relevant market area; (ii) local demographics; (iii) the proximity of same line-make dealers; (iv) the proximity of motor vehicle manufacturers to the dealer s market; and (v) distance and drive time for customers in the dealer s market area to the dealership impacted the dealer s sales.

22 FINAL (9) The extent to which local market factors in the dealer s market area presented by the dealer impacted the dealer s performance.

23 MARK-UP (9) The extent to which local market factors in the dealer s relevant market area presented by the dealer impacted the dealer s performance sales. For the purpose of this paragraph (9), local market factors includes, but is not limited to, the following: (i) the popularity of vehicle brand sold by the dealer as compared to the popularity of competing brands within the dealer s relevant market area; (ii) local demographics; (iii) the proximity of same line-make dealers; (iv) the proximity of motor vehicle manufacturers to the dealer s market; and (v) distance and drive time for customers in the dealer s market area to the dealership impacted the dealer s sales.

24 Contact Information Joseph F. Roesner, The Fontana Group, Inc Larry Doll, Illinois Automobile Dealers Association Brian Maas, California New Car Dealers Association Peter Kitzmiller, Maryland Automobile Dealers Association