Violating state franchise laws. How quickly would a daily fine of $10,000 add up? What if that fine wasn’t just per day, but for each infraction at each dealer in a state?
They are dry reads (I know, I’m working through them) but the franchise laws and statutes in many of the states have a lot of similarities. I’m not the expert on this, but I believe commonalities came about as a result of the actions of auto dealer associations working off a common document when they spent the time in the 60’s and 70’s getting these laws enacted across the country. While powersports machines are not always classified as motor vehicles in every state (and thus the standard franchise laws don’t always apply to everything a dealer sells), in a majority of areas the laws that protect auto dealers also protect powersports operations.
There are a few things that it’s important for dealers to know.
- In order for an OEM to sell vehicles in a state, they must agree to abide by that state’s motor vehicle statutes
- Many dealers think that their vendors willingly comply with local statutes (because that would be the right thing to do), but they don’t
- Our vendors use the ignorance of the law against us. Unless a dealer calls them out, they’ll just keep on doing what they do, regardless of what they should be doing
- Only a small % of dealers actually know the laws in the states they operate in
Here’s a section of The Texas Occupations Code. Once a dealer has notified the motor vehicle commission that a vendor is not in compliance with statute, then the commission will give the vendor an opportunity comply. If they choose not to, then the motor vehicle commission can fine a vendor up to $10,000 per day, per occurrence.
Sec. 2301.801. CIVIL PENALTY. (a) If, after a proceeding under this chapter and board rules, the board determines that a person is violating or has violated this chapter, a rule adopted or order issued under this chapter, or Section 503.038(a), Transportation Code, the board may impose a civil penalty. The amount of the penalty may not exceed $10,000 for each violation. Each act of violation and each day a violation continues is a separate violation.
(b) In determining the amount of the penalty, the board shall consider:
- (1) the seriousness of the violation, including the nature, circumstances, extent, and gravity of any prohibited act, and the harm or potential harm to the safety of the public;
- (2) the economic damage to the public caused by the violation;
- (3) the history of previous violations;
- (4) the amount necessary to deter a future violation;
- (5) efforts to correct the violation; and
- (6) any other matter that justice may require.
(c) Notwithstanding any other law to the contrary, a civil penalty recovered under this chapter shall be deposited in the state treasury to the credit of the Texas Department of Motor Vehicles fund.
Currently, the Texas Motorcycle Dealers Association has notified 4 vendors that they are not in compliance with Texas law. One has asked for a meeting with the board as they would like to pursue some solutions. The other 3 are slow walking their responses.
While the board of the TMDA would prefer to work with the vendors to find a middle ground that works for both sides, I think it’s inevitable that we will soon be lodging formal complaints with the motor vehicle commission. The current violations are not gray areas, they are relatively clear cut. I think the vendors will have a very short time frame for coming into compliance, or they’ll start incurring some significant fines. When you consider that most of the major brands have 100+ dealers in TX, and the number of current violations, these penalties could easily exceed a million dollars a day. In a worst case scenario, some brands could lose their license to retail in TX.
The other thing that’s important for dealers to understand is that TX is not an outlier when it comes to dealer friendly statutes, and strong enforcement mechanisms. Many other states have similar laws on the books, and most motor vehicle commissions don’t take kindly to OE overreach.
For those vendors who are slow walking your responses, take this as your last call to come into compliance. The TMDA is more than willing to sit down to work towards an equitable solution, but now it’s your turn to reach out to us, because our attorney has already knocked on your door.
Your time is running out.
#Powersports #FranchiseProtections #MotorVehicle #Statute #Compliance