Add-Points – To Protest or Not Protest? There is Only One Correct Answer

By W. Kirby Bissell

With supply chain shocks from COVID normalizing and inventories recovering, the marketplace for automotive sales is returning to normal.  Customers are no longer taking whatever price is offered on available inventory and dealerships are actually having to negotiate to make a sale.  At the same time, OEMs are taking advantage of the historically-hot market for new vehicle sales that existed in the aftermath of supply chain shortages to add dealerships.  

Every state offers some ability for existing dealerships to protest add-points, but individual dealerships sometimes question whether to protest.  Sometimes those concerns stem from an OEM-dealership relationship perspective.  Other times the litigation surrounding an add-point can be a point of frustration.  However, from a business perspective, there is little downside to protesting an add-point.

First, the protest delays the addition of a competitor to the marketplace.  This alone can oftentimes justify the expenditure.  Second, OEMs expect such protests – they are not surprised when one is initiated, in fact, they often plan for it.  Third, existing dealerships never know what the outcome of the protest will be and even if the add-point is ultimately allowed, there are other benefits to be gained in protesting.

When OEMs are committed to establishing an add-point, a well-litigated protest can resolve favorably for the protesting dealerships.  Benefits from additional inventory, operational concessions and even the award of open points are within the range of outcomes or possibilities.  Further, it also not unheard of for an OEM to simply test the market and notice the add-point only to shortly thereafter backtrack when it confirms that the surrounding dealers are aware of and prepared to assert their legal rights.  There are also statutes in most states that prevent retaliation against dealerships for exercising their statutory rights.

So, in summation, the potential pitfalls from filing an add-point protest are minimal.  And, the potential benefits are sometimes significant.  Franchise laws and the ability to file add-point protests were passed by state legislatures to ensure fair competition and adequate consumer care and convenience.  They are tools in each dealership’s toolbox and their use is neither negative nor infrequent.  Thus, next time your dealership receives a statutory notice regarding an add-point in a market area, there should be little question as to your next move – contact your experienced dealership counsel and press forward in exercising your rights.