Honda executives decline to comment on the case. But according to the company's pretrial memorandum, dealers had complained of losing Honda Care sales to online sellers, who often sold the contracts at cost.
The court filing also maintained that online sales were damaging relations between dealers and customers, who felt they were being ripped off by dealers who sold the product in-house at a higher cost.
One dealer cited in the memorandum, Mike Muller, said he no longer would promote Honda Care at his Highland Park, Ill., dealership.
"If a customer can save money buying online, that's fine," Muller told Automotive News. "But who do they talk to if they have an issue or a misunderstanding? They come to the local dealer, who has to explain it. Then the local dealer's integrity is in question. We're in the middle of something that's no fault of our own.
"We're spending time, money and effort on a sale we never participated in."
Muller now promotes extended warranties backed by GE Capital. He sells Honda warranties only if customers request them.
Because of complaints like Muller's, Honda says it has the right to make changes it deems necessary for the good of the franchise.
"The policy of banning the vehicle service contracts falls squarely within that provision," Honda attorney Michael Keating said in his opening statement. "It's not that the dealers were losing sales, but their customers were upset because they saw them online cheaper, and they felt they were being ripped off."
Saccucci attorney Geoffrey Millsom says the new policy is anti-competitive and anti-consumer.
"The complaints came from dealers who want to protect their profits," Millsom said in his opening statement. "Honda is attempting to shut down small stores to protect larger dealers not selling online. Only 1 percent of the contracts are sold online. That still leaves 99 percent of them in the dealerships."
Honda wholesales the contracts to all dealers at the same price. Depending on the terms, they range from $420 to $790 for a Honda Fit with a $100 deductible to $540 to $1,265 for a sporty S2000 with a $100 deductible. Dealers can mark them up as they choose.
While Saccucci sells its online contracts at cost, in-house warranties are sold at a profit ranging from about $475 to $600.
Saccucci Auto also sells about 50 Ford and Lincoln Mercury extended contracts online monthly. Ford has not challenged its policy.
"Honda has always encouraged the use of technology," says Barbara Saccucci. "So why have a guideline restricting selling and posting prices online?"
"We found a way to make money using the Internet where other dealers haven't gotten there yet," she says. "I can't imagine a company surviving today if they aren't on the Internet. I couldn't understand why Honda did this. I still don't."