Pub. 2 2020-2021 Issue 2

15 with various products (insurance, tire and wheel, main- tenance) packed into the monthly price. To add insult to injury, Volvo directed the scarce allocation of its hottest car — the Volvo XC40 — to Care by Volvo and assigned the vehicle a monthly price below what a dealer could offer the same customer for the same vehicle through a comparable lease. Over the next few months, CNCDA exchanged five letters with Volvo’s leadership, expressing our concerns about the program. Chief among these concerns was that the program represented illegal manufacturer competition. In other words, Volvo was using Care by Volvo to compete against its dealers. This type of competition is strictly prohibited by California franchise law, namely subdivision (o) of Vehicle Code section 11713.3. Unfortunately, despite engaging CNCDA in a lengthy dialog through the spring and summer of 2018, Volvo re- fused to make any substantive changes to Care by Volvo. CNCDA President Brian Maas and I knew that we were not going to amicably resolve our differences with Volvo after we witnessed Volvo aggressively promoting the program with taglines such as “Subscribe, Don’t Buy” and “Don’t Buy Our Cars” at the November 2018 Los Angeles Auto Show. Since Volvo was unwilling to change the Care by Volvo program to resolve our concerns, CNCDA’s board of directors authorized CNCDA to retain the Glaser Weil law firm to prepare a legal strategy to force Volvo to comply with the law and to stop competing against their dealers. This process culminated with CNCDA’s filing a petition at the New Motor Vehicle Board (Board) in January 2019. Our Board petition described how Volvo used Care by Volvo to compete with dealers illegally. It also showed how Volvo’s attempt to force dealers to sign an adden- dum to their lease agreement was an illegal franchise modification, and how Volvo’s allocation of the XC40 was unlawful. Finally, we asked the Board to order the DMV to investigate Volvo in light of these issues. At its August 2019 meeting, after extensive testimony, the Board found that our concerns were warranted, and it unanimously ordered the DMV to investigate and report back to Board on its findings. In April 2020, the DMV issued its completed investiga- tion. As we alleged, the DMV found that Care by Volvo involved illegal competition, illegal franchise modification and unlawful vehicle allocation. The DMV’s investigative report further opined that Volvo might have engaged in false and misleading advertising when describing the program as a “subscription,” since it was just a two-year lease. (You can access this report at https://www.nmvb.ca.gov/publications/reports.html. ) Despite the DMV’s investigation, Volvo continued to operate Care by Volvo throughout April and May. However, in mid-June, we began receiving reports that Volvo was “pausing” Care by Volvo in advance of a substantial retooling of the program, which we hope will resolve our concerns. Unfortunately, we know little about Volvo’s plans in California, and Volvo has been reluctant to work seriously with CNCDA since the issuance of the DMV’s report. Moving forward, CNCDA will continue to pressure Volvo to end any illegal activity harming California dealers, in- cluding at the upcoming New Motor Vehicle Board meet- ing in July, when the Board will formally receive the DMV’s investigative report. Our chief goals in our litigation against Volvo have been to hold it accountable for violating the law and dissuading other manufacturers from implementing similar programs in California. The retail automotive industry finds its greatest success when dealers and manufacturers work collaboratively to create the best products and the best customer experience possible. The original iteration of Care by Volvo embodied the “move fast and break things” attitude. Hopefully, the next iteration is collaborative and compliant. 3 Have Questions? CONTACT US: Phone: (818) 224 - 4551 Email: Info@CarDealerCPA.com Website: CarDealerCPA.com Rudolph van Daalen Wetters, CPA Partner Phone : 818-224-4551 ext. 233 Email rudebugatti@hotmail.com Andy Slaman, CPA Partner Phone : 818-224-4551 ext. 224 Email andy@cardealercpa.com B ERLINER & C OMPANY