DMV Investigation Finds Volvo Program Illegal, Now Enforcement Action Must be Taken
Contact: Jenny Dudikoff
SACRAMENTO, CA – The California New Car Dealers Association (CNCDA), representing nearly 1,200 new car dealerships statewide, has been vindicated in seeking review by the Department of Motor Vehicles (DMV) of Volvo Car USA concerning Care by Volvo (CbV). The DMV agreed with CNCDA and found multiple aspects of the ongoing program illegal.
After CNCDA filed a petition early last year with the California New Motor Vehicle Board (NMVB), the Board heard arguments and unanimously ordered that DMV investigate CNCDA’s claims that as a licensee of the of the DMV, Volvo had been in violation of the California Vehicle Code (VC) by introducing CbV.
CbV is aimed at getting consumers to lease their cars directly from Volvo, instead of buying or leasing them directly from a Volvo dealership. Described by Volvo as a “subscription” program, CbV offers customers a two-year lease with a fixed, standardized, pre-determined monthly charge including cost of the vehicle, insurance, maintenance, road hazard protection and normal wear and tear. CbV is currently available for two Volvo models – the XC40 and the S60. Both models are also sold and leased by Volvo dealers directly to consumers outside of the CbV program. Through CbV, Volvo undercuts its dealers on price when the dealers lease the same vehicle to consumers.
In 2019, CNCDA alleged that the CbV program is illegal and violates several provisions in the California VC aimed at protecting franchisees and consumers. The NMVB unanimously agreed that CNCDA’s claims were warranted and directed the DMV to investigate the following specific allegations, each of which constitute a separate ground for disciplinary action against Volvo’s DMV license under the law:
- Care by Volvo creates competition between manufacturer and dealers
- Care by Volvo is an illegal franchise modification without notice to its dealers
- The Care by Volvo Program preferentially allocates vehicles and refers sales to dealerships controlled in part by Volvo
- The Care by Volvo Program undermines the purpose of prohibiting payment packing
After a six-month long investigation, the DMV has issued their written report which finds Volvo’s CbV “subscription” program to be illegal and found four specific violations. The DMV agreed with CNCDA on the first three claims listed above, resulting in “potential legal consequences,” constituting cause for license discipline pursuant to the California VC. With these findings, the DMV has submitted its report to the NMVB for its consideration.
“We are extremely pleased with the outcome of the investigation and continue to be encouraged that the New Motor Vehicle Board and the DMV agreeing with our essential claims against Volvo. While the successful investigation confirmed Volvo’s illegal actions, it is shocking that Volvo is still offering the Care by Volvo program in California despite the clear findings in the DMV report. Illegal behavior by manufacturers must be stopped and Volvo should suffer the consequences for their flaunting of California law. Our franchise laws need to be upheld to protect dealers and consumers,” stated Brian Maas, President of the California New Car Dealers Association. “Our dealer members continue to support innovation, including subscription-based models, but DMV licensees such as Volvo must follow the law. We therefore urge the New Motor Vehicle Board and DMV to take immediate action to force Volvo to come into compliance or face severe sanctions.”
For more information and details of the DMV’s full report, please click here.
Click here to view the May 14, 2020 Cease and Desist letter from CNCDA attorneys to Volvo Car USA.
For more than 96 years, CNCDA has represented the interests of California’s franchised new car dealers. CNCDA members are primarily engaged in the retail sale and lease of new and used motor vehicles, but also provide customers with automotive products, parts, service and repair. Our members sold more than 2 million new cars and trucks in 2019 and employed more than 140,000 Californians, significantly contributing to our state’s economy. As the nation’s largest state association of franchised new car and truck dealers—with nearly 1,200 members—CNCDA serves its members by providing legal compliance and legislative, regulatory and legal advocacy.