CNCDA Demands VW Cease Unlawful Competition Through Scout Brand
SACRAMENTO, CA, December 20, 2024— Today, the California New Car Dealers Association (CNCDA) issued a cease-and-desist letter to Volkswagen (VW) and its affiliate Scout following their recent announcement that they plan to sell vehicles under the Scout brand to California consumers in direct violation of state law.
CNCDA is the nation’s largest state dealer trade association (made up of nearly 1,200 California dealerships and over fifty VW dealerships), and its goal is to protect both the franchise system and California consumers while promoting legal and ethical business practices. CNCDA’s cease-and-desist letter details VW’s ongoing violations of California Vehicle Code section 11713.3(o). Scout is a VW affiliate under California’s Vehicle Code. California law states that manufacturers may not compete with their own franchisees by using affiliates to directly sell or service vehicles, which is precisely what VW and Scout intend to do.
VW’s violation of this state law threatens the livelihoods of thousands of existing VW dealership employees and could significantly impact tax revenues. VW’s illegal direct sales plans disregard the legal framework that protects consumer choice and competition within California’s automotive marketplace. VW’s sales of Scout-branded vehicles without participation from franchised dealer partners circumvent its legal obligation to ensure accountability, fair pricing, and consistent customer service.
“Volkswagen’s direct sales via its Scout brand represent a direct threat to the jobs, investments, and consumer protections California’s franchise laws are designed to safeguard,” said CNCDA President Brian Maas. “We strongly encourage Volkswagen to heed our call to abide by California law and immediately stop offering Scout vehicles directly to consumers without using their business partner local dealers.”
In response to concerns that VW would use the Scout brand to compete directly with their franchisees, last year, CNCDA sponsored a franchise bill in the California State legislature, Assembly Bill 473 (“AB 473”). The bill strengthened the state Vehicle Code to prohibit these actions. Scout was active throughout the bill’s legislative journey and publicly stated that it would not be able to choose its current distribution model if the bill were to go into effect. AB 473 was unanimously approved by California’s legislature, signed into law by Governor Newsom, and became effective on January 1, 2024. VW’s intent to sell vehicles without using franchisees using the Scout brand is a brazen violation of the law.
CNCDA remains steadfast in ensuring California law is followed and franchised dealers are protected. The association is prepared to take further action should this letter not result in the immediate cessation of direct sales by VW via Scout.
Read CNCDA’s Cease and Desist Letter to Scout here.
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Media Contact: Autumn Heacox, Director of Communications & Marketing, (916) 441-2599 x105 Aheacox@cncda.org
ABOUT CNCDA:
For 100 years, the California New Car Dealers Association has represented California’s franchised new car and truck dealers. CNCDA members are primarily engaged in the retail sale and lease of new and used motor vehicles and provide automotive products, parts, services, and repairs.
In 2023, California’s franchised new car dealers sold more than 1.77 million new cars and trucks, employed more than 138,807 people, paid $8.74 billion in sales tax, and donated $67.66 million to charitable and civic organizations. CNCDA is the Nation’s largest state association of franchised automotive dealers—with nearly 1,200 members— and provides legal compliance and legislative, regulatory, and legal advocacy.