KKC News

Public Workshop Examining the U.S. Auto Distribution System

By:  Donn Wray – Katz & Korin, PC

As a firm dedicated to the representation of automotive retail businesses, K&K shares the concern of the industry that government intervention impacting the long-successful dealer franchise system is unnecessary and potentially disruptive to the interests of consumers, the employees of dealerships, and the owners of dealerships who have invested millions in their businesses.

As an attorney representing franchised new vehicle dealers for over 30 years, I have frequently seen consumers benefit from the intercession of an independent franchised dealer on the consumer’s behalf to advance consumer claims against the manufacturer.  Typically this arises in the service context, either with respect to warranty coverage questions or, on some occasions, adjustments in favor of the consumer regarding a vehicle that is post-warranty.

Manifestly, if the independent franchised dealer is replaced by a factory-owned operation, or a direct agent of the factory that is not independent, the possibility of such intercession will cease to be:  The consumer will be dealing directly with the factory, thereby losing the voice of a knowledgeable advocate pressing for relief on the consumer’s behalf.  This advocacy is motivated by the relationship the dealership, as an independent (usually locally owned) business has with its customer.  I cannot count the times over the years that service managers have contacted the “zone representative” to obtain reconsideration of service participation denial and obtained at least some relief for the consumer, and these are just the instances of which I am aware.  Such dealer efforts on behalf of customers are so routine as to be unremarkable, but that will no longer be the case if the independent dealer is eliminated or compromised.  A direct factory employee or captive agent will likely feel constrained from challenging a superior’s decision to deny parts or service assistance to a consumer.

Given the required brevity of these comments, this comment addresses only one of the benefits derived by consumers from the existing franchised dealership system.  I am confident that other commentators will point out the many other consumer benefits derived from the existing century-old arrangement.  There is no reason to change or disrupt it.  It would be economically destructive to existing local businesses and their employees, and harmful to consumers.


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