I hope everyone is safe, healthy, and learning how to effectively conduct business in the time of COVID-19. While I had promised a Part II on Advertising, I am seeing more efforts by manufacturers to challenge motor vehicle dealers’ franchise law rights. It is more timely to remind you of the significant updates made to your franchise law in 2015. The following is a summary of the more significant changes that were made. Please keep the following in mind when dealing with the manufacturer.

1. Facility Upgrades. Once your dealership is found in compliance with a manufacturer’s facility requirements, for a period of ten (10) years thereafter, a motor vehicle dealer shall be deemed to be in compliance with any program requirement pertaining to the construction of facilities or the installation of signs or other franchised image elements. This restriction can help with a variety of manufacturer’s programs, including those related to any sales rebates, incentives or other monies. For example, if you were compliant five years ago, and they change a program that requires an update to your facility, you are deemed compliant for five more years without making any changes.
2. Purchase of Goods and Services. A provision now protects dealers concerning the purchase of goods or services from specific vendors. If the dealer can obtain goods or services of substantially similar quality and overall design from a vendor chosen by a dealer, then those can be used. Should the manufacturer wish the dealer to use specific goods or services, the manufacturer must pay the difference in price between the goods and services of the manufacturer’s proposed vendor and a motor vehicle dealer’s selected vendor.
3. Warranty Reimbursement. A specific formula was implemented that requires dealers to receive retail rate for both warranty service and parts. In order to assist the dealer, certain work or items are excluded from the calculation, including parts sold at wholesale, routine maintenance such as fuels, filters, and belts, nuts, bolts, fasteners, and other similar items, tires, and vehicle reconditioning. By excluding these lesser items, a truer rate of retail is achieved. The dealer can seek to determine the retail rate every twelve (12) months. All claims submitted under warranty and recall work must be either approved or disapproved by a manufacturer within thirty (30) days. A manufacturer can only do an audit for the last twelve (12) months of service records. Once a claim is approved and paid, it may not be charged back against the dealer unless the manufacturer can show that the claim was either false or fraudulent or that the repairs were not properly made or were unnecessary. This puts a significant burden upon the manufacturer.
4. Open Account Protection. This was a significant change in franchise law to protect your open account with the manufacturer. Now, if a dealer disagrees with a manufacturer over a charge, delivery or chargeback, all the dealer has to do is to tell the manufacturer of its objection and to not remove the monies from their open account during the resolution of the dispute. The dealer gets to keep its monies until an administrative procedure takes place, and perhaps, even until court litigation occurs, if pursued. In other words, the dealer gets to keep their money until the manufacturer proves their position. Previously, the manufacturer would just take your money, and a dealer would be left arguing to get some of their money back.
5. Changes to the Franchise Agreement. If a manufacturer makes a change to a dealer’s area of responsibility, the manufacturer must give notice of at least sixty (60) days prior to the change and an explanation of the basis for the change. Importantly, the manufacturer is prohibited from using any decrease in sales to punish a dealer, and must give the dealer twenty-four (24) months to become sales effective prior to taking any negative action based upon sales performance. This certainly gives the dealer time to adapt to the new changes without immediate negative consequences.
6. Captive Finance Companies. Our franchise law now prohibits “captive finance sources,” which mean the financial source that provides automotive related loans, which are directly or indirectly controlled, operated or owned by a manufacturer, from taking action contrary to our franchise law. Consequently, captive finance companies have to follow our franchise law in their relationship with a motor vehicle dealer. Again, this protects the dealer against a manufacturer that may be attempting to gain pressure through a captive finance company.
7. Manufacturer Direct Sales. Our statute was upgraded to prevent a manufacturer from directly or indirectly operating a dealership, including displaying a motor vehicle intending to facilitate a sale of a new motor vehicle other than through a franchised dealer. Consequently, our current law is extremely strong and prevents the display of motor vehicles in the State of West Virginia and prevents direct manufacturer sales through the display model.
8. Performance Standards. One of the more significant sections was a section of the West Virginia franchise law to prevent performance standards that are not equally applied, taking into account the availability of vehicles, and is not fair and reasonable based upon accurate and verifiable data. It is the manufacturers’ responsibility to prove that their performance standards comply with these guidelines.
9. Dealer Data. While this is an everchanging topic, our change in 2015 recognized that customer information is the dealer’s data and property. While manufacturers may receive information related to our customers that may affect the sale and delivery of the new motor vehicle and any successive safety and recall notices, it also prohibits the manufacturer from providing access to the customer or dealership information to third parties without first obtaining your prior express written consent. Importantly, this consent can be revocable by the dealer with ten (10) days written notice. Furthermore, a dealer is allowed, and the manufacturer is required, to provide the dealer a list of all specific third parties who have obtained any data from the dealer within the last twelve (12) months. The dealer must request this information in writing. Furthermore, the new statute allows a dealer to install a means to regulate and continually monitor what specific data is accessed from the dealer’s computer system by the manufacturer.

Last, a very important change was made which makes the manufacturer or third party vendor indemnify and hold harmless the dealer from all damages, attorneys’ fees and costs, and other costs and expenses incurred by a dealer from complaints or claims arising from the illegal use or disclosure of a dealer’s customer data from its system.

As you can see, these were significant changes made five (5) years ago. Many dealers may not realize the extensive nature of these changes, and how our franchise law can assist them in their relationship with a manufacturer. I hope you find this information useful and encourage you to reach out to me with any questions. Know your rights, and don’t be taken pushed around by the manufacturer.

Good luck this Fall.