Prohibiting Unauthorized Charges: Subaru’s Technical Service Content
By: Savannah N. Criado
On October 28, 2024 Subaru announced a “service technical content charge.” Subaru explained that the charge will appear on the parts statement of its franchised dealers from October 2024 through March 2025. This charge is not a result of individual dealer orders nor is it a result of widespread dealer request for additional technology. Rather, Subaru provides that it has made significant investments, seemingly on its own initiative, and its franchised dealers must help subsidize such investment. More specifically, Subaru writes – “To be able to continue to invest in the future, there is a need to share these costs with the retailer body.” However, Subaru is not permitted to unilaterally impose charges onto its dealers without receiving consent from the individual franchised dealers nor is Subaru permitted to take advantage of its bargaining power as a manufacturer under state franchise laws to arbitrarily recoup the monies spent on its investment.
State legislatures across the nation have widely adopted independent dealer-protections by virtue of their respective franchise provisions. As a whole, these franchise laws are designed to provide protections for dealers against manufacturer attempts to take advantage of its bargaining power. The United States Supreme Court explained the importance of the franchise laws: “…when the dealer has invested to the extent required to secure a franchise, he becomes in a real sense the economic captive of his manufacturer…” New Motor Vehicle Bd. v. Orrin W. Fox Co., 439 U.S. 96, 100 n. 4 (1978) (quoting S. Rep. No. 2073, 84th Cong., 2d Sess., 2 (1956)). Subaru’s actions evidence the exact sort of behaviors that the franchise laws were designed to protect against.
For one, the technical service content was not ordered by any individual dealer as a separate part for delivery—Subaru simply provided access to dealers to this software as it would through any other program it requires dealers to use. State franchise laws, generally, prohibit manufacturers from requiring dealers to place an order for any part/accessory/equipment/material. Moreover, state franchise laws largely prohibit manufacturers from engaging in any predatory, coercive, or unreasonable actions against its franchised dealers. Unilaterally charging dealers for this content, arbitrarily establishing the rate at which this content will be charged, as well as the duration in which dealers would be charged, for Subaru’s own chosen investment would likely fall under any of these prohibited behaviors. Additionally, the imposition of the technical service fee constitutes a modification of the terms of the dealer agreement and the various investments dealers have already agreed to make to receive training materials for its technicians. If Subaru wishes to modify these terms, it must follow the processes and procedures outlined for doing the same under its own Dealer Agreement terms (i.e. receiving a written instrument duly signed by both the dealer and the manufacturer). Otherwise, Subaru must be prevented from attempting to profit off its dealer-body by virtue of “training” and “service” materials that fall outside the investments dealers have already agreed to make.
BSM is continuing to monitor the status of the technical service content charge, as well as the legality of the same under various state franchise laws. Questions regarding Subaru’s implementation of the technical service content charge within your respective state should be directed to your experienced dealer lawyer.