Pub. 56 2015-2016 Issue 3

39 SPRING 2016 1 “Our Mission: To prevent business practices that are anti-competitive or deceptive or unfair to consumers; to enhance informed consumer choice and public understanding of the competitive process; and to accomplish this without unduly burdening legitimate business activity.” “ Our Vision: A U.S. economy characterized by vigorous competition among producers and consumer access to accurate information, yielding high-quality prod- ucts at low prices and encouraging efficiency, innovation, and consumer choice.” www.ftc.gov/about-ftc 2 These cities include: Laredo, Lubbock, Garland, Irving, Amarillo, Grand Prairie, Brownsville, Pasadena, Mesquite, McKinney, McAllen, Killeen, Waco, Car- rollton, Beaumont, Abilene, Frisco, Denton, Midland, Wichita Falls, Odessa, Round Rock, Richardson, Tyler, Lewisville, College Station, The Woodlands, San Angelo, Pearland, League City, Kingwood, Longview, Sugar Land, Edinburg, Mission, Baytown, Pharr, Temple, Harlingen, Bryan, North Richland Hills, Victoria, New Braunfels, Conroe, Spring, Port Arthur, Euless. 3 Houston, San Antonio, Dallas, Austin, Fort Worth, El Paso, Arlington, Corpus Christi, Plano. 4 The fact that 24% of the Texas franchised dealers reside in towns of 15,000 or less in population shows that the Fortune 500 dealer is not the typical dealer. FTC Transcript, January 19, 2016, Segment 2, Professor David Sappington, University of Florida: “And as we’ve heard a bit this morning, I think the basic story that tries to justify these regulations is that if we have a setting where there’s a huge dominant manufacturer and a small dealer who is beholden to the manufac- turer, it may turn out to be the case that manufacturer would abuse that power. And, in fact, withhold payments for warranty work, for example, from the dealers. And consumers would be harmed in the process, because dealers would not have the proper incentives to do the warranty work properly. Now, that’s a story that one might tell, but that’s not the way I perceive the industry and I think a more realistic depiction of today’s industry is that, in fact, we have many manufacturers competing against one another to reach customers. They do so through their dealers, but those dealers notice now in this new picture are not tiny little entities, as Dan [Daniel Goldberg] has mentioned, they are in fact major players, major economic entities. . .In addition, if we just look at the list of dealers who are now currently on the Fortune 500 list of the nation’s largest corporations, we do see the dealers showing up there. So that picture from back in the 1950s really does not capture the industry today, in my view.” 5 FTC Transcript, January 19, 2016, Segment 1, Professor Henry Schneider, Cornell University: “If there were intense competition at sort of the dealer level–either intra-brand or inter-brand–you would see tighter margins and so on. And I’m not arguing that a dealer should make no profits. Certainly comfortable profits in order for dealers to be able to make investments in their properties and so on would be in everybody’s interest for sure.” 6 Id. Professor Henry Schneider: “But again, from as an outsider’s economist perspective, my feeling would be that this is effectively if you want to subsidize or sort of protect local communities or economies, there are much more efficient ways to do that than to effectively have a subsidy paid by car makers, or especially car shoppers, and filtered through car dealerships. It’s not a particularly efficient or fair approach to sort of protecting communities and economies.” 7 Id. FTC Transcript, Segment 2. 8 Act of April 7, 1971, 62nd Leg., R.S., ch. 51, 1971 Tex. Gen. Laws 89. 9 U.S. CONST. amend. X.: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” 10 15 U.S.C. §§ 1 - 7 (1890). 11 BMW of North America, Inc. Dealer Agreement, ¶ D, Form 78/12A: “Dealer agrees that, without the prior written consent of BMW, Dealer will not (i) make any major structural change in any of Dealer’s Premises, (ii) change the location of any of Dealer’s Premises or (iii) establish any additional location for Dealer’s BMW Operations.” Similar language is included in the 2010 BMW Center Agreement (Vers. 2010.01CA), Article D: “In the event that Center [franchised dealership] desires to: (a) change its principal place of business from that first set forth in this Agreement; (b) change any location of the Center Facilities; (c) establish any additional locations for either operating its business or storage of BMW Products; (d) make any major structural or design change in the Center Facilities; or (e) change the usage or function of any locations or facility approved herein or otherwise utilize such locations other than the approved functions, Center must obtain the prior written approval of BMW NA for any such change or establishment.” 12 Id. ¶ A: “Dealer recognizes and agrees that its appointment as a Dealer in BMW Products does not confer upon it the exclusive right to deal in BMW Products in any specific geographic area.. . .BMWNA reserves the right to grant or confer rights and privileges covering the sale and servicing of BMW Products upon such other Dealers selected and approved by BMWNA, whether located in Dealer’s geographic area or elsewhere, as BMWNA, in its sole discretion, shall deem necessary or appropriate.” Similar language is in the Vers. 2010.01CA agreement, Article A: “Subject to the terms of this Agreement, BMW NA appoints Center as a dealer of BMW Products and grants Center the non-exclusive right to buy and/or sell and/or service BMW Products. Center accepts such appointment and agrees to be bound by this Agreement. While Center recognizes that its performance will be primarily measured based upon its activities in its Primary Market Area, Center agrees that this appointment does not confer upon it the exclusive right to deal in BMW Products in any specific geographic area within the United States, nor does it limit the persons within the United States to whom Center may sell BMW Products for use therein. Center agrees that it will not sell BMW Products for resale in the United States or for resale outside the United States. In addition, Center agrees to abide by BMW NA’s Export Policy and all amendments and modifications thereto. Center acknowledges that BMW NA reserves the right to appoint additional BMW Centers, whether located near Center’s ocation or elsewhere, as BMW NA in its sole discretion deems necessary or appropriate. BMW NA agrees that it will not appoint additional representation without first conferring individually with the BMW Center(s) surrounding the proposed location to determine whether other alternatives to additional representation are satisfactory to BMW NA. If a decision is made to proceed with establishment of additional representation, BMW NA will provide such BMW Center(s) no less than thirty (30) days written notice of such decision.” 13 BMW of North America, Inc., Dealer Standard Provisions Applicable to Dealer Agreement, Form 78/12B, ¶ 12(b)(1). Under ¶ 12(e), if the dealer’s inter- est passes directly to the surviving spouse and children or to any of them and the general manager remains unchanged or within 90 days of the death of the owner and arrangements are made for the management satisfactory to BMWNA, then BMWNA will not terminate before the end of 12 months and may also extend the agreement. The Vers. 2010.01CASP also includes similar language in ¶¶ 12(b)(10),(12), and ¶ 12(g) as it allows for termination upon the death or permanent disability of the owner holding a majority or controlling interest or the permanent disability of the operator which may, at BMW NA’s option, result in termination, upon written notice to the dealership. BMW NA shall provide notice within a reasonable time after the death or permanent disability and termination is effective 60 days from the notice date. 14 Id. ¶ 12(b)(4). See Vers. 2010.01CASP ¶¶ 12(b)(10), (11). 15 Tex. Occ. Code Ann § 2301.462 (Vernon 2012). 16 BMW CORA (Center Operating Requirements Addendum) 2015 ¶¶ 3.4, 3.5, 3.6, 7.14(p. 8, 17) 02.26.2015 Version 2. 17 Id . ¶ 3.1, 3.2 (Page 7–02.26.2015 Version 2). 18 Glenn A. Mercer, “Factory Image Programs” (February 4, 2012). 19 A BMW dealership must meet the CORA facility requirements as a part of the “Added Value Program” in order to receive incentive monies. 20 Id . §§ 2301.4671, 2301.468. 21 Nissan Dealer Sales and Service Agreement, Standard Provisions, Section 3.A., Form #NDA-4S/9-99. See also Nissan Dealer Sales & Service Agreement, Article First: (a): Subject to the conditions and provisions of this Agreement, Seller (a) appoints Dealer as an Authorized Nissan Dealer and grants Dealer the non-exclusive right to buy from Seller those Nissan Products specified in Dealer’s current Product Ad- dendum hereto, for resale, rental or lease at or from the Dealership Locations established and described in accordance with Section 2 of the Standard Provisions;” 22 Id . Section 12.A.1.  DEALER FRANCHISE — CONTINUED ON PAGE 40