Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: Nissan dealers claim preferred dealers’ incentives constitute price discrimination, (Feb 24, 2016)

By Linda O’Brien, J.D., LL.M.

Auto manufacturer Nissan has engaged in price discrimination by forming alliances with select preferred dealerships and offering them financial incentive arrangements that are not reasonably available to all of its dealers, according to a complaint filed in the federal district court in Cleveland, Ohio (Bedford Nissan, Inc. v. Nissan North America, Inc., February 23, 2016).

Nissan North America, Inc. (NNA) is a manufacturer and distributor of new motor vehicles. NNA’s brands include Nissan and Infiniti. Bedford Nissan, Mentor Nissan, MD Auto Group, and Nissan of North Olmsted are motor vehicle dealers and authorized franchisees of NNA. Bernie Moreno is the owner of Bernie Moreno Companies (BMC) that operates 31 auto dealerships in Ohio, Massachusetts, Kentucky, and Florida.

The complaint states that in March 2012, BMC’s company—M6 Motors—purchased a Nissan dealership’s assets in Middleburg, Ohio and opened Airport Nissan. NNA enticed Moreno to purchase the dealership assets by offering him financial incentive arrangements, the plaintiffs alleged. Moreno and NNA entered into an “Intervention Agreement” whereby NNA agreed to provide Airport Nissan $3.75 million if the dealer achieved certain sales performance metrics. Nissan of North Olmstead and Bedford Nissan are direct competitors with Airport Nissan.

In April 2012, BMC’s company, M14 Motors purchased a Nissan dealership’s assets in Streetsboro, Ohio and opened Nissan of Streetsboro. NNA enticed Moreno to purchase that dealership’s assets by offering him financial incentive arrangements. Moreno and NNA entered into an “Intervention Agreement” whereby NNA agreed to provide Nissan of Streetsboro with an unknown amount of money if the dealer achieved certain sales performance metrics. Bedford Nissan and Mentor Nissan are direct competitors with Nissan of Streetsboro, the complaint states.

The lawsuit claims that NNA’s unlawful practice of forming alliances with select preferred dealers and providing them with financial incentive arrangements was a secret until an article in Automotive News about Moreno was published on February 8, 2016. The article stated that a preferred NNA dealer (1) receives annual or quarterly payments for reaching certain sales performance levels and (2) is allowed to purchase and sell new Nissan vehicles at substantially lower prices than non-preferred Nissan dealers. It is unknown how a Nissan dealer qualifies for the illegal incentive program, since it is not equally available to all Nissan franchisees.

According to the complaint, under NNA’s illegal incentive program, certain preferred Nissan dealers are provided sales incentives that are not offered to non-preferred dealers, which results in a discriminatory pricing scheme. The Automotive News article stated that the purpose of the program was to transform NNA’s dealer network by eliminating intra-brand competition among Nissan dealers in certain markets. NNA has unilaterally chosen Moreno as its preferred dealer for the Northeast Ohio market, allegedly to the detriment of the plaintiff dealers. This unlawful program provides preferred dealers with a significant advantage over their non-preferred competitors and has resulted in lost retail sales to the non-preferred dealers.

The plaintiffs assert claims for breach of fiduciary duty, breach of dealer sales and service agreement, and violations of the Robinson-Patman Act, Automobile Dealers Day in Court Act, and Ohio Dealer Act. The action seeks declaratory and injunctive relief, treble and punitive damages, pre- and post-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 1:16-cv-00423-DAP.

Attorneys: Robert A. Poklar, Matthew C. Miller, and Gary W. Johnson (Weston Hurd LLP) and Christopher M. DeVito (Morganstern, MacAdams & DeVito Co., L.P.A.) for Bedford Nissan, Inc., MMN, LLC d/b/a Mentor Nissan, MD Auto Group, LLC, and Nissan of North Olmstead.

Companies: Bedford Nissan, Inc.; MMN, LLC; MD Auto Group, LLC; Nissan of North Olmstead; Nissan North America, Inc.

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