Pub. 57 2016-2017 Issue 1

24 No manufacturer has ever failed because of franchise laws. During the past 20 years, individual dealers have been much more likely to invest capital inmultiple dealerships of different brands. Market incumbents reaping monopoly rents have an incentive not to diversify. Yet, today, a multi-point dealer is just as likely to have a domestic and an international brand, rather than just domestic or just international brands. Indeed, over this period, the establishment of new dealerships has likely been aided by franchise laws that help assure potential investors of the safety of their investment. The recruitment of dealers, particularly for a new entrant, is made far easier with the presence of franchise laws than without. And this brand diversity benefits consumers as well. Indeed, at one time, the federal government scrutinized manufacturer restrictions on dealers representing more than one manufac- turer (so-called “dualing arrangements”). It did so presum- ably because of concerns that dualing prohibitions limited competition that otherwise benefitted consumers. Having dealers representing multiple brands is good for competition. It certainly allows consumers to compare vehicles much more easily. State franchise laws relating to dealer networks have not preventedtheautomakers fromreorganizingoreliminating brands. Notwithstanding the existing state franchise laws, the domestic manufacturers have been able to institute “channel- ing” arrangements which involve the combination of multiple brands within one dealership. For example, Chrysler (now FCA) has moved aggressively to set up the Jeep, Chrysler, and Dodge configuration for many of its locations. Similar activity has occurred with GM brands. This process, often implemented at the expense of the dealers involved, has enabled the domestic manufacturers to package several brands under one dealership roof. Similarly, the state franchise laws have not preventedmanufac- turers from terminating or eliminating brands entirely. Saturn, Oldsmobile, Mercury, Pontiac, and Plymouth dealers did not have any veto rights over the elimination of these brands. Rather, as with individual terminations, the state dealer net- work laws in those instances simply accounted for the fact that the dealer body had assumed a significant cost by establishing andmaintaining themanufacturer’s retailing network over the years and operated to inject a modicum of good faith into the manufacturer’s plan to restructure. The shuttering of the one hundred year oldOldsmobile brand is a case inpoint. In this connection, we need to re-emphasize that dealers have only a single source for their products and cannot stock their shelveswithmerchandise fromothermanufacturers. It is also critical to remember that dealers have no control over the product they sell, as research, development, and design all occur within the manufacturer. So when made GMmade the announcement in December 2000 that Oldsmobile would be eliminated, it came as a surprise to many dealers. 51 Note that these dealers had already suffered declining investment by GM in Oldsmobile products, advertising, and even quality. This had reduced the value of Oldsmobile franchises andmade them virtually impossible to sell. Indeed, when the announce- ment came, the affected dealers’ only recourse was found in the state franchise laws. GM, undoubtedly prompted by the presence of these laws, offered a “buyout” package to its Olds dealers which included a payout of cash based on a stated re- cent sales formula and certain other provisions. Although the average payment offered (approximately $360,000) 52 was well below the actual injury the dealers had sustained, the vast majority of Oldsmobile dealers took the package and eschewed the courtroom. In the final analysis, while the state franchise laws did result in some compensation to GM’s loyal Oldsmobile dealer body, those laws neither precluded GM fromterminating the brand nor provided an unjust enrichment to the dealer body. In light of the ongoing overreach and opportunism by manu-  NADA RESPONSE — CONTINUED FROM PAGE 22 51 Indeed, this announcement came less than a month and a half after new, five year franchise agreements between GM and its Oldsmobile dealers became effective. 52 “Most Suzuki Dealers Take Buyouts,” Automotive News (December 10, 2012) (“GM said it cost $1 billion to wind down about 2,800 Oldsmobile stores.”); “New GM CEO Henderson Lays Out Survival Plan,” Automotive News (April 13, 2009) (quoting GM CEO Fritz Henderson as saying that the cost of eliminating the Oldsmobile dealers was $1 billion).