Mada proposes Clarification to Maintain a Clear Division Between Vehicle Manufacturers and New Vehicle Dealers

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MADA Proposes Clarification to Maintain a Clear Division Between

Vehicle Manufacturers and New Vehicle Dealers

SF 679 (Metzen, Dahle, Dahms, Cohen, and Jensen)

HF 774 (Atkins, Hoppe, Lesch, Davids, and Fritz)
1. MADA seeks to clarify the intent of the Motor Vehicle Franchise Protection Act, §80E.13 by restating that an auto manufacturer is prohibited from owning a dealership.

Minnesota Chapter 80E regulates the contractual relationships between Minnesota motor vehicle dealers and motor vehicle manufacturers. This regulation contemplates a clear division of business rights and responsibilities between new vehicle dealers (franchisees) on one hand, and motor vehicle manufacturers (franchisors) on the other.

State law is necessary to ensure fairness in these contracts because of the enormous disparity in bargaining power between the Minnesota franchisee and a global automaker.

Current Minnesota law – as well as every state law in America -- prohibits motor vehicle manufacturers (i.e. General Motors, Ford, Toyota, etc.) from selling vehicles directly to consumers in competition with franchisees (i.e. independently-owned auto dealerships) because of the unfair competition that results.

The reason for this public policy: Since the franchisees can only get their inventory of new vehicles from one source – that is, the franchisor – allowing the franchisor to undercut the franchisee by selling directly to consumers would invalidate the contract and jeopardize the required investments made by the franchisee.

Various factors facing the global auto industry – i.e. the possibility of entire lines being re-branded; emerging manufacturers desire to operate free from regulations that apply to current businesses -- have prompted several states to address this issue in their state franchise laws this year.

The Alliance of Automotive Manufacturers, the national association representing most of the major automakers, also considers this bill to be a clarification, and is NOT opposed to it.

2. The dealer licensing statute, §168.27, contains an ambiguity that should also be made clear:

  • Motor vehicle manufacturers don’t currently hold dealer licenses. However the plain language of §168.27 Subd. 1(a) seems to require them to have a license.

  • A franchise contract with the appropriate manufacturer is required to obtain a license to sell new vehicles of the manufacturer’s line make. However, a manufacturer wouldn’t appear to be eligible to have a contract with itself.

MADA seeks to clarify Minnesota dealer licensing statute, to:

  • Exempt vehicle manufacturers and distributors from the clear requirement in existing law to be licensed as motor vehicle dealers for the lines of vehicles that they sell; and

  • Prohibit motor vehicle manufactures from obtaining dealer licenses.

For more information please contact Jacob Millner, Government Affairs Associate,

Minnesota Automobile Dealers Association at 612-804-0578.

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