Despite restrictions on factory ownership, manufacturers can buy dealerships in most states with little legal trouble.
As of March 31, 23 states had no restrictions. In the states with restrictions or bans, vaguely worded laws give automakers leeway to buy retail operations.
Here are the primary loopholes:
Texas bars factories from operating dealerships; it says nothing about owning retail operations.
Similarly, Ohio law says manufacturers cannot perform services or sell goods in competition with dealers, but it does not mention owning dealerships.
Pennsylvania forbids manufacturers from selling vehicles to retail consumers outside the dealer channel, but the law says nothing about ownership.
Florida allows joint ventures with factories that let the dealer buy the dealership over time. The dealer must make a significant investment and expect to obtain full ownership under reasonable terms and conditions. The law does not define a significant investment or reasonable terms.
Twenty state laws have an identical provision; two other state statutes have wording on joint ventures that is equally vague.
Seven states - Connecticut, Delaware, Idaho, Kentucky, Michigan, Vermont and Wyoming - prohibit factories from unfair competition with their dealers. The laws do not define what is fair or unfair.
Sixteen states, including Alabama, bar factories from competing with dealers in their relevant market area. Massachusetts and North Carolina prohibit factories from owning, operating or controlling a store within another dealer's relevant market area.
So if the relevant market area is 15 miles from a dealership, a manufacturer could buy out every dealership in a 15-mile radius of a store without breaking the law.
Three states - New Hampshire, Rhode Island and Tennessee - prohibit factories from competing with dealers in a relevant market area but do not define a relevant market area.
Twenty-five state statutes let factories own dealerships temporarily during the transition between dealer owners. But 15 of those state laws do not define 'temporarily,' so a manufacturer could own the dealership indefinitely.