A Maryland bill setting rules on how automakers measure dealer performance in the state was signed into law last week.
House Bill 1120 champions so-called fairness requirements when calculating a dealership's performance metrics — sometimes known as retail sales-effectiveness ratings — by requiring automakers to take into account the influences of demographic and geographic factors.
The legislation follows a case last year, when Beck Chevrolet in Yonkers, N.Y., took on General Motors after the automaker tried to terminate the franchise for poor sales.
The court ruled the factory violated New York law after litigators argued the company's metric, known as the retail sales index, unfairly measured the franchise against the state average and neglected local-market nuances.
"There's a long laundry list of components that dealers perform to," said attorney Aaron Jacoby, automotive group leader at Los Angeles law firm Arent Fox. "There's customer satisfaction. There's number of sales, hitting certain performance thresholds."
Jacoby, who was involved in the New York case and in advising Maryland state representatives, said, "Dealers are expected to all be above average — which is a ridiculous standard, because it's not possible mathematically."
As laid out in the Maryland law, local-market nuances can include even tastes and proclivities of regional clientele. "It may be that in one area Korean cars are preferred over Japanese or German cars, or vice versa," Jacoby said.
The attempt to give accurate weight to such considerations is just one of the difficulties in setting fair and equal sales targets for licensed dealerships.
"It turns on its head — both in New York and in Maryland — the old metric, and the manufacturers will have to consider new methods to deal with the new paradigm," Jacoby said.