A federal court in Massachusetts ruled that selling and servicing under Volvo Cars USA’s branded prepaid maintenance program isn’t part of dealerships’ franchise obligations.
The Plaintiffs, two Volvo dealerships in Hyannis and Plymouth argued that their reimbursements fell short of their usual service charges. They claimed that this practice violated state law, which mandates that manufacturers pay dealers fairly for their work.
Volvo Car U.S., Volvo Car Financial Services, and Fidelity Warranty Services were the defendants.
The automaker’s prepaid maintenance program lets customers pay beforehand to lock in discounted rates for inevitable services like oil changes and tire rotations. However, the program isn’t run directly by the manufacturer and is handled by Fidelity. Dealerships decide how much they want to charge for these plans by picking a “tier” that sets how much they get paid for the work. When dealerships pick a higher tier, they receive more per job but must pay Fidelity a larger fee per contract sold.
Volvo Car argues that it does not need to reimburse dealerships at the retail labor rate for work covered by the maintenance plan because Volvo Financial Services and Fidelity offer the program.
The courts rejected the dealerships’ argument, ruling in favor of the Defendants, stating that Volvo doesn’t require selling the prepaid plans and that the state law doesn’t apply.
The court clarified that dealerships may face commercial pressure from Volvo to promote the program, but this doesn’t create a legal obligation to participate. It was noted that while many dealerships choose to sell these plans, at least 19 of the 281 authorized Volvo dealerships nationwide have opted out, demonstrating that participation is voluntary. This decision underscores the distinction between optional business opportunities and contractual franchise requirements, emphasizing that Volvo’s prepaid maintenance program falls into the former category.
