Chicago Business Litigation Lawyer Blog
The allocation spreadsheet arrives on a Monday morning. Two crosstown competitors received the inventory the dealer ordered months ago. The factory’s stair-step bonus program pays a per-unit kicker the dealer cannot possibly hit because the dealer cannot get the cars to sell. Then the region manager calls to explain that the dealer’s “minimum sales responsibility” number is slipping, and unless volume climbs, the incentives the dealer does receive will be clawed back.
Illinois dealers should not accept this as the cost of doing business. The Illinois Motor Vehicle Franchise Act does not tolerate arbitrary allocation, price discrimination across dealers, or the use of new-vehicle sales performance as a lever to cut a dealer out of used-vehicle and certified pre-owned programs. The statute is specific. The remedies are serious. And in our experience, the dealers who document these practices in real time are the dealers who get paid.
The central Illinois statute on allocation is 815 ILCS 710/4(d)(1), which prohibits a manufacturer, distributor, or wholesaler from adopting or implementing “a plan or system for the allocation and distribution of new motor vehicles to motor vehicle dealers which is arbitrary or capricious.” 815 ILCS 710/4(d)(1). The statute goes further. Under 815 ILCS 710/4(d)(2), a dealer may submit a written request and compel the manufacturer to disclose “the basis upon which new motor vehicles of the same line make are allocated or distributed to motor vehicle dealers in the State and the basis upon which the current allocation or distribution is being made or will be made to such motor vehicle dealer.” 815 ILCS 710/4(d)(2). Factories hate that request. They are required to answer it.
The delivery obligation is not a hollow one. 815 ILCS 710/4(d)(3) forbids the manufacturer from refusing “to deliver in reasonable quantities and within a reasonable time after receipt of dealer’s order, to any motor vehicle dealer having a franchise or selling agreement . . . such motor vehicles as are covered by such franchise or selling agreement specifically publicly advertised in the State . . . to be available for immediate delivery.” 815 ILCS 710/4(d)(3). The advertised-availability language matters. When the factory is running national or regional campaigns touting immediate delivery of a specific model, the factory has made a promise the statute enforces.
Stair-step and incentive discrimination receive separate statutory treatment. Under 815 ILCS 710/4(e)(2), no manufacturer may sell “any new motor vehicle to any motor vehicle dealer at a lower actual price therefor than the actual price offered to any other motor vehicle dealer for the same model vehicle similarly equipped or . . . utilize any device including, but not limited to, sales promotion plans or programs which result in such lesser actual price or fail to make available to any motor vehicle dealer any preferential pricing, incentive, rebate, finance rate, or low interest loan program offered to competing motor vehicle dealers in other contiguous states.” 815 ILCS 710/4(e)(2). The “any device” language is the hook. A stair-step that is mathematically unachievable for certain dealers, or one designed with tiers only the factory’s favorites can reach, is exactly the sort of device the legislature had in mind.
The newest weapon in the statute is aimed at a practice factories perfected in the last decade: tying used-vehicle program access to new-vehicle quotas. 815 ILCS 710/4(d)(9) prohibits the manufacturer from using “the performance of a motor vehicle dealer relating to the sale of the manufacturer’s, distributor’s, or wholesaler’s vehicles or the motor vehicle dealer’s ability to satisfy any minimum sales or market share quota or responsibility relating to the sale of the manufacturer’s, distributor’s, or wholesaler’s new vehicles in determining” the dealer’s eligibility for certified or program used vehicles, the volume or model available, the price, or “the availability or amount of any discount, credit, rebate, or sales incentive.” 815 ILCS 710/4(d)(9). If the factory is punishing a dealer’s CPO access because the dealer missed a new-vehicle objective, the statute is already violated.
Dealers who suspect allocation or incentive abuse should do three things. First, pull the allocation and incentive records for the relevant period and send a written request under 815 ILCS 710/4(d)(2). A written request forces the factory to put its reasoning on paper. Second, benchmark the dealer’s treatment against at least two peer dealers in the same region. Stair-step discrimination cases live or die on comparable deal-by-deal data. Third, document every communication. Region managers talk. Those calls and meetings are where the factory explains, in unguarded language, why the dealer was cut out. Those admissions win cases.
The remedy structure has teeth. 815 ILCS 710/13 authorizes a private right of action under the Act and permits treble damages for willful and wanton violations. The prospect of treble damages is what puts the factory’s general counsel on the phone.
A few cautions are warranted. Not every allocation shortfall is unlawful. A dealer who ordered low trim packages no customer wants cannot blame the factory for empty slots. Sales performance metrics are a legitimate factor in allocation models, and courts will not second-guess a facially neutral formula applied uniformly. The question is whether the formula, or the way it is actually applied, is arbitrary, capricious, or discriminatory in practice. In our experience, the best cases are the ones where the dealer can line up two similar dealers, show that one received inventory and incentives and the other did not, and produce the manufacturer’s own documents explaining why.
The Illinois Motor Vehicle Franchise Act was written because the legislature understood what every dealer principal knows. When a manufacturer controls allocation, incentives, and program access, it controls the dealer. The statute levels that field only when dealers actually use it. Waiting for the next audit notice is usually waiting too long.
If you are an Illinois dealer watching allocation tilt against you, watching stair-step targets move on you mid-quarter, or watching your used-vehicle program access contract because of new-vehicle performance, the time to paper the record is now. DiTommaso Lubin PC represents Illinois dealers in allocation, incentive, termination, and transfer disputes under the Motor Vehicle Franchise Act. We can be reached at 630-333-0333 or online.