At CNCDA, one of the most common calls we receive is from dealers frustrated about actions taken by their manufacturer. The topics of these calls vary significantly. Dealers often identify unfair OEM performance standards or describe how they are not reimbursed at their approved labor and parts rate for warranty work. Occasionally, calls involve even more aggressive actions, such as franchise terminations.

California’s franchise laws provide dealers with a critical tool to push back against manufacturer abuse. Dealers can file various “protests” at the New Motor Vehicle Board alleging that a manufacturer’s actions violate our state franchise law. The protest process can involve mediation and – if unsuccessful – a legal proceeding in front of an administrative law judge with expertise in dealer/manufacturer relations.

A significant benefit of the dealer protest right often involves “burden-shifting.” As lawyers know, which party has the burden of proof is incredibly important. In many protests, California law states that the manufacturer has the burden of proof to defend its actions as lawful, even though the dealer filed the protest. This can provide a substantial advantage to dealers.

Even if you are reluctant to file a protest against your manufacturer, simply knowing your rights can empower you to negotiate more effectively. Outlined below are a few key dealer protest rights at the New Motor Vehicle Board.

Termination or non-renewal of a franchise. Perhaps the most important franchise right – Vehicle Code section 3060(a) – allows dealers to challenge the termination of a franchise. To successfully terminate a franchise, a manufacturer must show “good cause,” an onerous burden to satisfy.

Franchise modification. Like a termination proceeding, Vehicle Code section 3060(b) requires a manufacturer to show that there is “good cause” to modify an existing franchise. This protest right can help push back against unfair changes to the franchise relationship imposed by manufacturers.

New or relocated dealership within a 10-mile radius. If a manufacturer seeks to add or move a dealership within 10 miles of an existing dealership, a dealer can file a protest pursuant to Vehicle Code section 3062.

Warranty reimbursement. Has a manufacturer disapproved or reduced the amount owed to your dealership for warranty or recall work? Or, has a manufacturer refused to approve your submitted parts or labor rates? If so, California law allows you to file a protest challenging such actions.

Manufacturer audits, chargebacks, and disapproval of incentive claims. If a manufacturer disapproves an incentive or charges back a warranty claim, dealers can file a protest.

Performance standards and incentive programs. Created by CNCDA’s 2019 franchise bill (AB 179), this new protest right allows dealers to challenge unreasonable performance standards or incentive programs at the New Motor Vehicle Board.