One Comment

  1. 1

    etenner

    I agree with Leonard that the state legislatures need to get involved. I have had the same experience representing auto dealers in buy/sells in California over the last 28 years that Leonard has had. I saw one ROFR exercised in 25 years and now I am seeing it more often. California has always had laws requiring manufacturers to approve a buyer within a limited time period, so I don’t think that is the catalyst. I think it has more to do with Manufacturers looking for ways to get dealers to put the Manufacturer’s interests ahead of the dealers. I think they were emboldened by 2008 and have been looking for ways to get more of what they want ever since – and have been succeeding. Manufacturers and dealers have competing interests. Dealers often want to focus on making more money which sometimes means making more profit on each sale at the expense of selling more cars. Manufacturers, on the other hand, want dealers to sell more cars and don’t care about a dealer’s profitability as long as they meet the manufacturers minimum capital requirements. If the manufacturer can put a buyer in who will focus on selling more cars, by exercising a right of first refusal on a buyer who may focus more on their own profitability – it benefits the manufacturer in many ways. Not only do they sell more cars, but they reward the dealers who sell more cars by giving them preferential treatment when they want to buy a dealership. It seems to me that it may have some anti-competitive components – although I have not done that analysis.

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