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New 'Dualing' Amendments to Dealer-Protection Laws Pass Legislatures

By Rick J. Gibson, Jeffrey J. Jones, J. Todd Kennard and Douglas M. Mansfield
September 25, 2009

Historically, some automobile manufacturers have sought to focus their own dealers on that manufacturer's brands to the exclusion of competitive brands. Many auto dealer contracts prohibit “dualing,” that is, operating competing linemakes out of the same facility. Under new legislation passed in some states, automobile manufacturers could be forced to allow dualing, notwithstanding any terms to the contrary in written agreements and trademark laws.

The South Carolina legislature added new provisions that make it unlawful for a manufacturer to prohibit a dealer from being involved in managing, investing in, or acquiring any other make or line of new motor vehicles if: 1) “the requirements are unreasonable considering current economic conditions and are not otherwise justified by reasonable business considerations”; 2) the dealer has maintained a reasonable line of credit for each line; and 3) the dealer remains in compliance with reasonable capital standards and reasonable facilities requirements specified by the manufacturer. See S.C. Code Ann. ' 56-15-75. Under the new provision, “[r]easonable facilities requirements shall not include any requirement that a motor vehicle dealer establish or maintain exclusive facilities, personnel, or display space, unless the manufacturer or distributor establishes by a preponderance of the evidence that such requirements are justified by current economic conditions or reasonable business considerations.” Id.

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