Why do Maryland Drivers and Dealers Need Protection From Unfair Performance Standards in SB1004?

Q: What is the problem dealers face and how does it hurt consumers?
A: The performance standards car manufacturers use to assess dealer’s performance and to award benefits like sales incentives that dealers and consumers rely on — often treat dealers unfairly. This causes some Marylanders to pay more for vehicles than they might in other parts of the state – or in other jurisdictions like Virginia or Delaware. This hurts Maryland businesses and consumers.

Q: How can the proposed legislation solve the problem?
A: Maryland has a statute (Transportation §15-207) that is intended to protect dealers from several abusive practices by manufacturers. It addresses the performance standards manufacturers use to evaluate dealers but its language can allow dealers’ performances to be assessed uniformly using state averages – a practice that is unfair because each dealer must perform under its local market conditions. When dealers are subject to discrimination on price and incentive issues by the manufacturers, consumers can also be unfairly denied access to important benefits. The proposed amendments to §15-207(e) strengthen the statute by clarifying ambiguities in the existing language that could lead to uncertain judicial decisions.

Q: What specific changes are needed?
A: The current statute was written years ago, and didn’t address many of the elements that make up performance standards today. Under current law, dealers (and their customers) can be denied access to important benefits because they fail to meet broad-brush standards like state averages. No county in Maryland meets both the import and domestic state average requirements. Markets are different. The market for auto sales in Frostburg is very different from the market in Silver Spring – and judging dealers in one area by standards based on a different market can hurt both dealers and consumers. Adding language to the statute that eliminates ambiguity, prevents misinterpretation and makes sure the assessment standards consider local market conditions, natural barriers, and other local concerns, makes it easier for dealers to contest unfair standards in court or before an administrative law judge, and will make the standards fairer for dealers and consumers.

Q: What do the manufacturers believe?
A: Manufacturers argue that dealers are fairly measured by the same standard across the state. Unfortunately, measuring dealer performance by a single standard or a state average that does not reflect local conditions prevents some dealers from being able to obtain the price incentives consumers rely on. This hurts consumers and dealers.

Q: Is there precedent for the changes being considered?
A: A recent appellate court decision in New York (Beck Chevrolet vs. General Motors) clarified that, under NY state law, dealers in NY cannot all be assessed by the same standards because, for example, a dealer in Buffalo doesn’t sell the same models of a brand as a dealer in Manhattan. As a result, manufacturers are changing their performance measurements in New York. Maryland needs to change its statute to make the same kind of change happen here.