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The Business Council opposes this legislation which seeks to change provisions of the state's automobile dealers franchise law to alter certain practices in the current manufacturer/dealer relationship. We believe this would negatively impact the automobile industry in New York.
The bill seeks to update the automobile dealers franchise law to protect dealers from perceived unfair practices such as prohibiting franchisors from requiring dealers to sell factory extended service contracts instead of dealer selected service contracts and restricting franchisor's authority to make changes to dealer's geographic area of responsibility
This bill inappropriately expands state government into a private business relationship between auto manufacturers and dealers and will promote harmful and costly litigation damaging to the automaker, the dealers and consumers.
It will encourage litigation by establishing causes of action over even routine business decisions by manufacturers such as where to locate a new dealership or how it offers training programs for auto technicians. If enacted the law would effectively nullify current contractual agreements between franchisor and franchisee in favor of the laws new provisions. This would empower the state of New York to interfere and change current contracts in violation of article 1, section 10 of the U.S Constitution prohibiting any State from passing a law impairing the obligation of contracts.
Additionally, the bill will establish statutorily created profits to be paid to dealers for warranty repairs and parts such as tires, engine and transmission assemblies, routine maintenance and batteries. The franchisor would no longer be able to include these parts and labor activities under their reimbursement requirements, freeing up the dealer to establish its own price. This will provide an incentive to dealers to increase repair prices charged to consumers.
The litigation costs, restrictive mandates on business decisions, and non-market based statutory profits will damage manufacturers, dealers and consumers alike. There is no apparent public policy justification for this legislation and it sends the wrong signal to manufacturers at a time when New York is seeking to grow its manufacturing base. The automobile industry has made great strides in the past two years with manufacturers growing again and dealers recording record profits. General Motors alone has invested approximately $958,000,000 in New York State since 2009. Now is not the time for the state to impose costly mandates and restrictions on the automobile industry.
For these reasons we strongly urge the legislature to disapprove A.7844.