NYS Court of Appeals Decides Beck Case - Huge Win for Dealers
Today, the New York State Court of Appeals handed down a huge win for franchised dealers in the Beck v. GM case.
Many franchised motor vehicle dealers in New York struggle to achieve their respective manufacturers’ objectives regarding sales effectiveness. Today, the New York Court of Appeals agreed with the arguments made by these dealers and NYSADA for many years; that performance versus sales effectiveness is not enough to terminate, threaten to terminate, or take other actions adverse to the dealer.
While each manufacturer uses its own terminology to describe sales effectiveness, the underlying methodology is the same. Simply stated, each manufacturer calculates its statewide market share average and uses this calculation as the baseline for determining whether a dealer meets its sales objectives. The manufacturer deems the dealer sales effective if it’s sales equal one hundred percent of the sales necessary to achieve the manufacturer’s statewide market share in the dealer’s area of responsibility. While most manufacturers adjust the sales necessary to achieve sales effectiveness by segments (e.g. small cars, crossovers, trucks, etc) and some take into account a dealer’s pumpins and pump-outs, none consider local conditions that favor some brands of vehicles over others. The end result is some dealers appearing to underperform versus their peers in other markets in New York for reasons outside of their control. Manufacturers then use sales effectiveness to take adverse action against these dealers, including threatening termination or non-renewal of their franchise agreements, or requiring substantial investments in staff or their facilities.
According to the Court of Appeals, the Franchised Motor Vehicle Dealer Act makes it unlawful to “measure a dealer’s sales performance by a standard that fails to consider the desirability of the…brand itself as a measure of a dealer’s effort and sales ability.” If a manufacturer wishes to measure a dealer’s performance on “a comparison of statewide data for other dealers, then the comparison data must take into account the market-based challenges that affect dealer success.” It is not enough that all of the manufacturers use the same, or similar, statewide market share measurement. The Court of Appeals bluntly stated that a manufacturer cannot “rely on a standard that is unreasonably and unfair simply because of its prevalence within [the motor vehicle industry].”
Today’s decision is a major victory for franchised motor vehicle dealers throughout New York, which will have a far-reaching impact on the dealer/manufacturer business relationship.
NYSADA and GNYADA both wrote Amicus briefs in support of Beck Chevrolet in this matter. NADA contributed funds to help Beck Chevrolet with the litigation. Also, NYSADA/NADA’s Sales Effectiveness Study along with NYSADA’s Automotive Outlook, helped point out the flaws of using statewide averaging as a Sales Effectiveness Standard. These resources were extremely helpful to Beck Chevrolet in providing much needed statistical back up and support.
If you have any questions on this issue, please contact the Association at (518) 463-1148 and speak with Bob Vancavage (ext. 204) or Ed Richardson (ext. 210).