Dealers often complain about incentive programs that favor exclusive dealerships over ones that share space with other brands. But a dealership group that sued over such unequal treatment has had its day in court, and lost.
The unsuccessful challenge came from Ohio retailer Brentlinger Enterprises, which had accused Volvo Cars of North America of illegal price discrimination in the way it compensates dealerships under its Facility Investment Initiative.
However, a federal judge in Columbus ruled that the program, which allocates incentives to dealerships based on meeting Volvo's brand image and exclusivity requirements, is neither illegal nor unreasonable.
It was the only such dealership lawsuit challenging the program, attorneys for both sides said.
Volvo's Facility Investment Initiative, launched in 2014, is a tier-based program that provides higher bonuses per vehicle sold and larger allocations of high-in-demand vehicles to dealerships that comply with Volvo's design standards and are exclusive to Volvo's products than it does to stores that don't meet both criteria, according to the decision.
The program started in response to a J.D. Power report showing a 5.8 percent gap concerning facility appearances between Volvo and its luxury competitors, the decision said.
Brentlinger Enterprises has four buildings on its Dublin, Ohio, campus. Three are exclusive to brands -- Audi, BMW and Land Rover -- but Brentlinger's MAG Volvo of Dublin is in the fourth building, which it shares with seven other brands sold by the dealership group.
Under the Facility Investment Initiative, MAG Volvo receives a $250 incentive per new qualifying vehicle sold in part because it is classified as "shared," according to the decision. Meanwhile, its nearest competitor, Byers Volvo in Columbus, gets a $500 incentive per vehicle sold because, along with meeting other Volvo requirements, it is a stand-alone store and is classified as "exclusive."
Exclusive dealerships also receive an extra allocation of high-demand vehicles unavailable to stores that are in lower classifications, the decision said. For example, exclusive dealerships received a greater number of XC90 large premium crossovers than did other stores, as well as two XC90 demonstrators. MAG Volvo received only one XC90 demonstrator, the court said.
Brentlinger's suit alleged violations of the Ohio Motor Vehicle Franchise Act, the federal Automobile Dealer's Day in Court Act and the federal Robinson-Patman Act, which prohibits price discrimination.
In dismissing the case, U.S. District Judge George Smith said Brentlinger has the option of building a stand-alone Volvo store -- as it did for Audi vehicles -- and found no evidence that the Facility Investment Initiative is unreasonable.
There also was no evidence that the program is "unjustifiable commercially," the judge said, adding: "An undisputed minus 5.8 percent difference in customer satisfaction regarding appearance is a sufficient business justification to begin a program which supports those who already have made the investment in new facilities and rewards dealers who choose to make a new investment in their facilities consistent with Volvo's branding decisions."
A Volvo spokeswoman said the company is pleased with the ruling.
Brentlinger Enterprises is undecided about an appeal, according to its lawyer, Steven Blatt of Mineola, N.Y.