On Friday, two auto dealer associations filed suit in Illinois against the Secretary of State and two carmakers, formally requesting that the legal system enforce state laws regarding automotive sales regulations.

The suit has been filed by the Illinois Automobile Dealers Association (IADA) and the Chicago Automobile Trade Association (CATA) in Cook County. They believe the Secretary of State has willingly neglected to enforce Illinois law that requires new cars to be sold through licensed franchised car dealers rather than direct from the manufacturers. The lawsuit takes direct aim at two specific carmakers: Rivian Automotive Inc. and Lucid USA Inc.

In a press release Friday, President of the IADA Pete Sander said, “We have no choice but to file this lawsuit, both to protect consumers as well as the hundreds of franchised dealers across the state who contribute to the local economy. We warned the Secretary of State’s office that consumers will be the losers if it does not enforce the laws it is required to enforce.”

Broken promise

The lawsuit stems from a commitment made by the Secretary of State two years ago. When Illinois granted Tesla 13 dealer licenses in a hotly contested battle in 2019, both the CATA and IADA agreed only once the Secretary of State vowed that the franchise-dealer law would be strictly enforced subsequently.

The all-electric truck and SUV manufacturer, Rivian, is expecting to open 10 retail locations in Illinois alone in 2021.

The Attorney General’s office in Illinois released an informal opinion in July 2020 that goes contrary to state law regarding dealer structure, according to the groups, opining that the law doesn’t expressly state that new  manufacturers have to establish the traditional franchised dealership network to sell vehicles.

Not against new market entrants

While the lawsuit is directed at both Rivian and Lucid as well, the press release makes clear that Illinois dealer associations aren’t against the carmakers nor their entrance into the market. Rather, it’s solely on the sales structure of selling direct to the consumer.

“We welcome new manufacturers to Illinois, especially those who are building innovative vehicles,” said David Sloan, President of the CATA. “Our franchised members already sell dozens of electric and hybrid vehicles. We ask that manufacturers sell them in Illinois according to state law. We’re not demanding they cease operations in the state, just that they franchise a dealer.”

Consumer protection and benefits, as well as dealer protection, are a focal point for the franchised model to both the IADA and the CATA. Key components include a professionally-trained staff for repairs, availability of parts and service, competitive pricing structures, and revenue generation that benefits the community.

The dissonance between the Attorney General’s informal opinion and the dealer groups’ interpretation of the law, not to mention the promise of no other direct-to-consumer auto sales licenses, has reached a head.

IADA president Peter Sander said, “Our patience has run out. It is time for everyone to step back and let the court decide what is in the best interest of the people of Illinois. There are too many conflicting signals coming from those who are charged with regulating our industry as well as protecting consumers and Illinois employers.”

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