Pub. 7 2017 Issue 2

9 wholesale price for a new vehicle to en- force compliance with operational ob- jectives. The unlawful nature of certain incentive programs has been suggested by some where the program connects the manipulation of gross margins to operational objectives, resulting in a non-participating dealer indirectly pay- ing more for a vehicle purchased from the manufacturer than a dealer who is fully participating in the incentive program. While the Illinois law discussed above attempts to address unlawful in- centive programs, few dealers are will- ing to risk confrontation and incur the expenses associated with challenging the manufacturer over such programs. Some manufacturer representatives may tell dealers the programs are “volun- tary”. They assert that, as such, these programs treat participating dealers non-discriminatorily, notwithstanding the reality of many dealers who cannot earn the full available margin under the incentive program and have to purchase vehicles from the manufacturer, in ef- fect, at a higher price. Dealers should assess their factory incentive programs with an eye towards evaluating, in con- sultation with their business and legal advisors, whether near-term rewards of participation outweigh possible long- term diminution of dealership opera- tional independence and control.  Julie A. Cardosi is Principal of the private firm, Law Office of Julie A. Cardosi, P.C., of Springfield, Illinois . She has practiced law for over 30 years, and represents the unique business interests of franchised motor vehicle dealers throughout Illinois. Formerly the first in-house staff legal counsel for the Illinois Automobile Dealers Association, she concentrates her practice in the areas of dealership ownership transfers, mergers and acquisitions, franchise law, dealership law, commercial real estate transfers, and other areas impacting day-to-day dealership operations. While at IADA, she was the primary author of major legislation which amended the Motor Vehicle Franchise Act to create the IllinoisMotor Vehicle Review Board. She has also served as a former Illinois Assistant Attorney General and Deputy Chief of the Consumer Fraud Bureau of the Attorney General’s O ice. The information contained in this material is not intended to be considered legal advice and should not be acted upon as such. Because of the generality of this material, the information provided may not be applicable in all situations and should not be acted upon without legal advice based on the specific factual circumstances. Under state law, the Illinois Motor Vehicle Franchise Act proscribes price discrimination by prohibiting manu- facturers from discriminating in price between dealers. For example, Section 4(e)(2) deems it a violation for a manu- facturer, distributor, wholesaler, dis- tributor branch or division, or officer, agent or representative thereof: “(2) to offer to sell or lease, or to sell or lease, any new motor vehicle to any motor vehicle dealer at a lower actual price therefor than the actual price of- fered to any other motor vehicle dealer for the same model vehicle similarly equipped or to utilize any device includ- ing, but not limited to, sales promotion plans or programs which result in such lesser actual price or fail to make avail- able to any motor vehicle dealer any preferential pricing, incentive, rebate, finance rate, or low interest loan pro- gram offered to competing motor vehicle dealers in other contiguous states.” (815 ILCS 710/4(e)(2)). Similarly, under Section 4(e)(3), it is a violation for the manufacturer or distributor “to offer to sell or lease, or to sell or lease any new motor vehicle to any person, except a wholesaler, dis- tributor or manufacturer’s employees at a lower actual price therefor than the actual price offered and charged to a motor vehicle dealer for the same model vehicle similarly equipped or to utilize any device which results in such lesser actual price.” (815 ILCS 710/4(e)(3)). Not all manufacturer incentive pro- grams contravene the law. Several pro- grams, however, use the lure of a lower