Automotive Expert Witness On Auto Sales

In How Long An Arm? automotive expert witness Richard O. Neville writes:

Can a state law prohibiting direct sales to consumers by a manufacturer have an extra-territorial reach into another state? The Fourth Circuit has said it cannot. The case involved a Volvo and GM truck dealer, Carolina Trucks & Equipment, Inc. (CT&E) which found itself in an out-of-trust situation in 2002 with its floor plan lender, Volvo Commercial Finance (VCF). Later, after termination of its dealer agreement, the dealer settled with VCF. It had also sued Volvo Trucks North America, the manufacturer; one of its complaints was that VTNA was selling used trucks direct through its Arrow Truck Sales unit (although specifically permitted by its dealer agreement)….

The court quoted from the Dealers Act: a manufacturer “may not sell, directly or indirectly, a motor vehicle to a consumer in this State”2 except through the franchises that manufacturers are generally prohibited from owning themselves. Commenting on the ambiguity of the phrase “in this state,” the court did not find that it gave the state’s laws extraterritorial reach, and that “…state laws may not generally operate extraterritorially…” To find otherwise, the court went on, would raise constitutional Commerce Clause issues. Arrow’s advertising, the court held, was an “even more tenuous link between South Carolina and Arrow’s sales in Atlanta…” To find otherwise would be to ban out-of-state advertising of goods and services.

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