General Motors recently sent a bulletin to all of its dealers advising them of a new disclosure requirement when selling or serving GM vehicles. GM is requiring its dealers to use a form entitled "The Disclosure of Non-GM Products Customer Acknowledgment Form" whenever the dealer sells a vehicle to a customer with a non-GM service contract or service agreement or when non-GM products and/or accessories are sold and/or installed by the dealer.
The LaBonte Law Group has serious concerns about the legal implications if a dealer uses the new disclosure form. We believe that GM's new
requirements
are in violation of the New York State Motor Vehicle Dealer Franchise Act and your Dealer Sales and Service Agreement. GM
apparently
seeks to impose a chilling effect on your ability to sell non-GM service contracts and increase your liability for selling vehicles with non-GM after-market equipment or parts (which you may not even know are installed on a used vehicle).
The National Automobile Dealers Association (NADC) has contacted GM in an attempt to learn more about the disclosure requirements and recently issued the following memo to its members.
TO GM Dealers
FROM Jim Moors, Senior Counsel, NADA
DATE August 17, 2017
RE GM Bulletins 17-12 and 17-13 (dated August 10, 2017)
___________________________________________________________
NADA has been contacted by many GM dealers and dealer association executives about an August 10, 2017, communication from GM to its dealers concerning the above-referenced bulletins, which address disclosure requirements applicable to the sale or servicing of GM vehicles with non-GM equipment, parts or accessories, and the sale of non-GM service contracts. The communication discusses dealer responsibilities for disclosure required under the GM Dealer Sales and Service Agreement (DSSA).
We reached out to GM last week when the bulletins first came to our attention seeking clarification on a number of points, many of which have been conveyed to us by GM dealers and association executives. Our efforts in that regard continue.
The purpose of this memo is to strongly recommend that you pay careful attention to what GM has sent you. In particular, note that dealers appear to be required to use a new GM form to make the required disclosures. This could be inconsistent with paragraph 5.1.1 of the DSSA, which requires such disclosure to be "on the purchase order or bill of sale" and certain state laws that dictate disclosure content. Another very troubling aspect of the August 10 communication is the sanctions that dealers may face for failing to comply with GM's mandates. These sanctions include:
- up to a $500 surcharge per incident/VIN;
- rendering the dealer ineligible for consideration for additional GM dealership opportunities;
- suspension from various current and future sales programs including, but not limited to, SFE and EBE; or
- termination of the DSSA.
Thirdly, the August 10 communication suggests that dealers are required to disclose the presence of non-GM parts on used GM vehicles that the dealer is selling, possibly even if the dealer did not install those parts itself.
NADA believes that these requirements and the threatened sanctions may go beyond what appears to be required or authorized under the DSSA. It is also unclear exactly what products are subject to the disclosure requirements.
While NADA cannot offer dealers legal advice, we strongly recommend that you not take any action that indicates agreement with the new requirements without consulting your legal counsel. Your legal counsel can advise you about your obligation to comply with the disclosure requirements in the DSSA. Dealers and their counsel should also review any disclosure requirements that may be applicable under their state law. Finally, a number of states have enacted restrictions on manufacturers that attempt to require dealers to sell or favor the sale of OEM service contracts or parts. These laws may be applicable to GM in this situation.
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The LaBonte Law Group advises GM dealers to send a letter to the factory advising them that you believe that the disclosure requirement is illegal under New York State Law and under the terms of your DSSA. Your letter should also indicate that you intend to wait until you receive additional guidance from NADA, NYSADA, GNYADA and/or our firm before you make the final decision on whether to comply with their request. If you need assistance with preparing a letter please do not hesitate to give us a call.
Please keep an eye out for further communications from NADA, NYSADA, GNYADA or the LaBonte Law Group on this matter as the situation develops.
For more information on this disclosure requirement or to discuss this matter in more detail call us at 516-280-8580 or e-mail at slabonte@labontelawgroup.com.
