Pub. 58 2017-2018 Issue 3

21 SPRING 2018  TEXAS FRANCHISE LAWS — CONTINUED ON PAGE 22 The prohibition on manufacturer or distributor ownership, operation, control, or acting in the capacity of a dealer, upon the 2001 codification, is now § 2301.476, Texas Occupations Code. cupations Code, repealing article 4413(36), effective June 1, 2003, and codifying the statute in Chapter 2301 of the Occupations Code. 26 The prohibition on manufacturer or distributor ownership, operation, control, or acting in the capacity of a dealer, upon the 2001 codification, is now § 2301.476, Texas Oc- cupations Code. Another exception was added for a rental business in 2003. 27 Additionally, in 2007, the Legislature incorporated an exception to the manufacturer and distributor ownership prohibition for a manufacturer or distributor owning an interest in a motor vehicle dealership on or before Janu- ary 1, 2007, and engaged in the sale of used trucks with a GVW of 16,000 pounds or more. 28 This exception expires September 1, 2023. 29 The exception for ownership in a used truck facility specifi- cally precludes performing warranty repairs. If warranty repairs are performed at the excepted used truck dealership in which a manufacturer or distributor owns an interest, then a violation of the statute occurs. 30 This used truck warranty repair prohibition is in line with the manufacturer and distributor proscription disallowing a manufacturer and distributor from “acting in the capacity of a dealer” under § 2301.476(c)(3). A person who violates the 2007 exception by performing or offering to perform new motor vehicle warranty repairs is subject to a civil penalty; a suit for injunctive relief; and, a denial, revocation, or suspension of their license. 31 The agency has previously enforced the manufacturer and distributor prohibition regarding the owning, operating, controlling a dealer or dealership or acting in the capacity of a franchised or nonfranchised dealer regarding motor vehicle sales. For example, In the Matter of Ford Motor Company, Individually, and DBA FORD PREOWNED. COM, Docket No. 00-0046-ENF, theMotor Vehicle Divi- sion's Enforcement Section filed a complaint alleging that the Ford Motor Company (“Ford”) violated statutory and regulatory provisions by engaging in business or acting as a dealer without obtaining a dealer's license and by directly or indirectly operating or controlling a dealer or dealership or acting in the capacity of a dealer. 32 The underlying facts provide that Ford was acting as a dealer and attempting to sell motor vehicles through its operation of a website known as “The Showroom.”The advertised vehicles were owned by Ford and its financial arm, FordMotor Credit Company. Prices for the used vehicles were set by Ford. A consumer could “hold” a vehicle with a $300.00 deposit and also arrange for Ford financing as well as purchase an extended service plan fromFord. The Ford Call Center con- firmed the consumer’s interest and delivered the vehicle to the pre-arranged Ford dealership for test-driving.The consumer received a refund of their deposit if the customer chose not to purchase the vehicle, or, if buying the vehicle, the dealership was required to generate the necessary paperwork. 33 Dealers were not allowed input into the vehicle pricing; dealers were not allowed to negotiate a price; a vehicle de- livered to the dealership was not available for sale unless the customer rejected it; the dealer could not offer to show the Ford “Showroom” customer any other vehicle in the dealer’s existing inventory until the “Showroom” customer rejected Ford’s vehicle; the dealership was prohibited from receiving any reserve if “Showroom” Ford financing was obtained; the dealership was prohibited from selling an extended service plan other than the “Showroom” plan; the dealership was prohibited from offering any add-ons to the vehicle unless the customer expressed an interest. 34 The Administrative Law Judge (ALJ) determined that: After careful review of and reflection upon the record and the statutory criteria in dispute in this matter, the ALJ is persuaded that the greater weight of the evidence supports a finding that Respondent Ford Motor Com- pany is a manufacturer that acted in the capacity of a dealer and operated or controlled a dealer or dealership by selling or offering to sell motor vehicles in violation of TMVCC §5.02C(c). The ALJ is further convinced that Respondent Ford Motor Company violated TMVCC §4.01 by acting as a dealer without a dealer’s license. 35 (Emphasis added.) The Proposal for Decision also discusses that the intent of the Legislature is to maintain the balance of power between dealers and manufacturers by prohibiting motor vehicle manufacturers fromcompeting directly with dealers who are, at the same time, wholly dependent on those manufacturers for their supply of vehicles. 36 Ford filed a Motion for Summary Judgment in U. S. Dis- trict Court against the agency alleging a violation of the