The battle over dealership renovation programs has blossomed into a federal case.
A lawsuit in Florida charging General Motors with illegal two-tier pricing because of incentives connected to facility renovations could affect dealers nationwide.
Billionaire megadealer Norman Braman is suing General Motors over the manufacturer's Essential Brand Elements program. Last week in federal court Braman's lawyers amended the complaint, originally filed in Miami-Dade County Circuit Court in January, to allege that GM's program amounts to two-tier pricing in violation of the federal Robinson-Patman Act. Braman also says GM violated Florida law when it stopped paying program incentives to his Miami Cadillac store.
Braman, a longtime dealer and former owner of the Philadelphia Eagles football team, told Automotive News last week that GM is waging war on dealers.
"Are we back to the old philosophy: 'If it's good for General Motors, it's good for the country?'" said Braman, playing off former GM President Charlie Wilson's oft-misquoted 1953 testimony. "That philosophy died a long time ago. This whole situation has just reached a point where dealers have to do something about it."
The Braman lawsuit will be widely watched throughout the industry. It is shaping up to be a test case in at least two ways:
First, do manufacturer facility programs that reward participating dealerships with volume-based incentives result in illegal two-tier pricing?
And, second, has the state of Florida found a way to defuse the tensions that arise between the have and have-not dealers as a result of these programs? If so, other state dealer associations could look to the Florida law as a prototype for their own states.
The 2009 Florida law being put to the test calls for manufacturers to pay a "reasonable" -- presumed to be 80 percent or more -- portion of an incentive to dealers who don't comply with facility requirements if they satisfy other elements of the manufacturer's program. But GM has told dealers in Florida it will only pay 20 percent, said John Forehand, the Florida lawyer representing Braman in the lawsuit.