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Two-Tier Pricing Hidden by Incentives

The Program:

Over the last decade, manufacturers have attempted to standardize each customer’s buying experience by requiring consistent brand imaging for dealerships. Thanks to favorable franchise laws in Iowa, manufacturers generally cannot terminate a franchise because a dealer failed to satisfy the latest factory image requirements. But what if the failure to satisfy the image requirements only costs a bonus? This bonus, or “factory-mandated dealership franchise upgrade program,” is an attempt to get around strong franchise laws such as Iowa law.

For example, GM introduced the Essential Brand Elements (“EBE”) program in 2009, shortly after its bankruptcy. This program, “rewards dealers who voluntarily meet customer experience standards.” Currently, nearly every manufacturer has a similar program, and, because of the lucrative bonuses, the programs have a high level of participation. However, some argue that this incentive program is actually a two-tier pricing system that is structured to avoid the Robinson-Patman Act, which offers protections against price discrimination.

The Update:

Meeting the image requirements can be very expensive for dealers. Take Norman Braman of Braman Management in Florida for example. He was informed that in order to meet GM’s brand image requirement, he would need to cover the exterior walls of his showroom with limestone. Unfortunately, his current structure would not support the weight, and due to local zoning and building laws, he would have to demolish his showroom and rebuild in order to comply. Braman suggested that he put in an alternative material that looked like limestone, but GM refused to allow this alteration.

Braman sued in Florida, claiming that the EBE program was a violation of the Robinson Patman Act. This suit was the first of its kind and could have resulted in big changes for incentive programs. However, the parties delayed trial at the end of May and reached a settlement agreement instead.

What does that mean for me?

Since the Braman case settled, there is no court decisions and the uncertainty for Iowa dealers continues. Incentive programs will likely continue until there is another test case.

What can I do?

Keep an eye on the legal news, IADA, and NADA updates. The Arenson Law Group, PC, blog at www.arensonlaw.com/blog is a good place to check for emerging legal developments. If the incentive program is creating a significant financial burden for you or if you have legal questions, contact experienced auto-dealer counsel.


Hard Market Creates Insurance Concerns

Due in large part to the many natural disasters in the past several years, the insurance industry has shifted from a soft market to a hard market. Generally, a soft market provides wider coverage, lower premiums, and lower credit standards. Today’s hard market, however, involves less coverage, higher prices, and an increase in the required credit standards.

How does this apply to me?

The most obvious way that this shift applies to you is that your insurance prices are likely on an upward slope, and experts expect that trend to continue for the next several years. You may not notice right away, especially if the insurance company is raising rates through the back door – by raising the deductible instead of raising the premiums.

What should I do?

Take a hard, active look at your current insurance situation. If you haven’t already, consider subdividing your insurance policies so you can get the best coverage for each situation. Consider how much you actually need for each insurance type. Are you losing a great deal more because of hail rather than theft? Then you should adjust your insurance plans accordingly. Make your insurance carriers work for your business.

You should also be sure that your insurance company will notify you if there are going to be any changes in your policy. Many policies that the agent may inform you of changes or cancellation of your policy, but that simply isn’t good enough. Iowa law provides some protection for you:

  • 10 days’ notice of cancelation for cause after the first sixty days of the policy
  • 30 days’ notice is required if cancelation is due to the insurer’s loss of reinsurance
  • 45 days’ notice if the insurer intends to refusal renewal of the policy

Seriously consider having your attorney look over your current policy. As a precaution, you should allow an attorney to look over any new policies that you are considering.


New study shows divorce may be harder on men

A study recently published in the Journal of Men’s Health showed that men actually have a harder time following a divorce, opposing the oft-held belief that women take divorces the hardest. According to the study, men were found to be more at risk of having high blood pressure, suffering from a stroke, and developing heart disease, not to mention being nearly 40% more likely to commit suicide.

In response to this study, relationship expert Lewis Denbaum gave three reasons why men are  more likely to have these issues than women after divorce. As Denbaum stated, men “lose their sense of identity, have their paternal instinct challenged, and don’t allow themselves to grieve properly.”

Whether you are a man or woman, older or younger, married for one year or ten years, divorce can be difficult. Our attorneys at Arenson Law Group, PC are prepared to help anyone in Cedar Rapids through this difficult process while protecting their rights and interests. Talk to us at (319) 363-8199 today if you are considering divorce.


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