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CATA, IADA sue Ill. secretary of state over manufacturer-direct sales

April 2, 2021
The state’s two leading dealer associations have filed suit against the Illinois secretary of state’s office and two vehicle manufacturers that intend to sell new vehicles directly to consumers, rather than employing a franchised dealer network.
Officials of the Chicago Automobile Trade Association and the Illinois Automobile Dealers Association said they were forced to seek remedy in the courts after Secretary of State Jesse White’s office "turned a blind eye" to unlicensed and unregulated vehicle sales by Rivian Automotive, and potential future sales by Lucid U.S.A. State law requires new-vehicle retail sales to be conducted by licensed franchised dealers, not directly by manufacturers.
 
"We have no choice but to file this lawsuit, both to protect consumers as well as the hundreds of franchised dealers across the state who contribute to the local economy," said Pete Sander, president of the IADA. "We warned the secretary of state’s office that consumers will be the losers if it does not enforce the laws it is required to enforce."
 
More than 300 Illinois dealers have signed on as plaintiffs in the case. Additional dealers can join here.
At issue are the benefits to consumers and to the Illinois economy generated by more than 700 dealers operating 2,300 franchises across the state. Those benefits include:
 
Consumer protection. Dealers maintain service centers with trained staff to perform all recall and warranty repairs, where the dealers act as advocates for the consumers with the manufacturers.
 
Availability of parts and service. Dealers maintain an inventory of parts and provide timely service to consumers who depend on the daily use of their vehicles.
 
Price competition. Consumers have many choices, with the competition among dealers saving buyers money. Direct sales from manufacturers result in a monopoly that offers no price benefit.
 
Community benefits. The franchised dealers are long-established local businesses that generate millions of dollars of revenue and economic development, employ 42,000 people across the state and support many local causes and events. 
 
"We welcome new manufacturers to Illinois, especially those that are building innovative vehicles," said David Sloan, the CATA president. "Our franchised members already sell dozens of electric and hybrid vehicles. We ask that manufacturers sell them in Illinois according to state law. We’re not demanding they cease operations in the state, just that they franchise dealers."
 
Over the past several years, the two dealers associations have sought the secretary of state’s office to enforce laws on the books. The state agency initially granted Tesla a license to sell electric vehicles from a small number of locations in Illinois. The associations agreed to a settlement on the Tesla issue only if the secretary of state vowed to strictly enforce that law going forward.
 
That promise from White’s office now appears to be in jeopardy. In the lawsuit, the groups charge that the office has made "excuses to avoid its enforcement duties" and has "walked a thin line" between enforcement while eroding the requirements regarding new companies seeking to sell in Illinois. 
 
In recent months, the Illinois attorney general’s office has issued an informal opinion that directly conflicts with state laws, according to the CATA and the IADA. As a result, the auto dealer associations are seeking a court order requiring White to enforce existing state laws regulating the sale of new vehicles. The lawsuit also seeks an injunction halting further issuance of dealer licenses to vehicle manufacturers.  
 
"Our patience has run out," Sander said. "It is time for everyone to step back and let the court decide what is in the best interest of the people of Illinois. There are too many conflicting signals coming from those who are charged with regulating our industry as well as protecting consumers and Illinois employers."
 
The economic impact of automotive sales in Illinois is significant. Each year the industry generates $34.4 billion in annual sales resulting in $2.2 billion in state sales tax, which is 14% of all state sales tax generated each year. In addition to the 42,000 people directly employed, the industry indirectly supports another 50,500 Illinois jobs. 
 
The CATA and the IADA were joined in the lawsuit by the Peoria Metro New Car Dealers Association and the Illinois Motorcycle Dealers Association, as well as numerous franchised dealerships. The lawsuit was filed in Cook County Circuit Court. 
 
 

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