Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—N.D. WVa.: Auto dealers’ challenge to document fee limits under discount purchase program fails, (Jun 3, 2014)

By Linda O’Brien, J.D., LL.M.

Two auto dealerships were unable to show that the rules for a manufacturer’s employee discount purchase program—limiting the amount of document fees charged by dealers—violated the West Virginia consumer protection law or the motor vehicle advisory dealers board directive that all consumers must be charged the same fees, the federal district court in Clarksburg has ruled (West Virginia Automobile and Truck Dealers Association, May 30, 2014, Keeley, I.).

Ford Motor Company allows dealers to participate in discount programs to reward loyalty to the company and generate sales. There are discount programs for Ford employees and business partners under which new Ford vehicles can be purchased. According to the program rules, dealers are encouraged, but not obligated, to participate. However, participating dealers must comply with the terms of the programs. The program rules limit the document fees that may be charged to program customers. Two dealerships, Corwin Ford Sales and Bert Wolfe Ford, participated in the discount programs and charged document fees that were the maximum amount allowed under state law and the same amount charged to non-discount program customers. After Ford advised the dealerships to comply with the program rules, the dealers unsuccessfully challenged the violation through Ford’s internal dispute resolution panel, the Ford Dealer Policy Board (FDPB).

The West Virginia Automobile and Truck Dealers Association (WVATDA) filed suit against Ford on behalf of the dealers, seeking declaratory relief. The WVATDA contended that the document fee limits under the program rules violated the West Virginia Consumer Credit Protection Act (WVCCPA), since state law allowed dealers to charge fees in excess of those amounts and to prohibit them from doing so under the program rules would violate state law. The WVATDA also contended that the rules interfered with the dealers’ right to charge the higher document fee allowed under state law. Ford moved for judgment on the pleadings.

The court found that Ford did not violate the WVCCPA or a state motor vehicle advisory dealers board directive that all consumers must be charged the same fees, since the dealers were free to opt out of the discount buying program and charge customers the higher fees allowed under state law. The WVCCPA prescribes maximum charges for all creditors making consumer credit sales and requires that credit customers pay the same fees as those paid by cash customers but does not require that every customer must pay the same fee as every other customer. However, a directive from the West Virginia Motor Vehicle Dealers Advisory Board (WVMVDAB) mandated that the dealers charge every customer the same amount regardless of whether it involves a lien or a cash sale.

There was no dispute that the dealers would violate the directive by charging customers who purchased vehicles under the discount program less than customers who did not purchase vehicles under the program and were charged the higher amount allowed under state law. The court noted that participation in the discount program was voluntary and therefore Ford did not require dealers to engage in an unlawful practice. The dealers could either opt out of participating in the discount buying program or charge all customers the same document fees.

Moreover, in rejecting the WVATDA’s argument that the extensive customer base required its dealers’ participation in the program, the court stated that the dealers presented no evidence of gross sales from program purchases or any anticipated lost revenue if they chose to opt out of the program. Finally, the program rules that allow dealers to inform customers that any additional fees permitted by state law were paid by Ford as dealer reimbursement was not a fraudulent misrepresentation. The rules expressly stated that dealers could only engage in business practices allowed under state and local laws and there was no evidence that the dealers actually falsely told purchasers under the discount program that Ford paid the additional document fee amount. Thus, the program rules did not violate public policy, the WVCCPA, or the WVMVDAB directive, the court concluded.

The case is No. 1:14CV32.

Attorneys: Daniel E. Myers (Fuller & Myers) and Johnnie E. Brown (Pullin Fowler Flanagan Brown & Poe PLLC) for West Virginia Automobile and Truck Dealers Association. Kurt D. Williams (Berkowitz Oliver Williams Shaw & Eisenbrandt LLP) and Michael Bonasso (Flaherty Sensabaugh & Bonasso PLLC) for Ford Motor Company.

Companies: West Virginia Automobile and Truck Dealers Association; Ford Motor Company

Cases: FranchisingDistribution WestVirginiaNews