Illegal Care by Volvo Program Halted in California as Result of Dealer Association Petition
Contact: Jenny Dudikoff
Phone: 916-599-5415
SACRAMENTO, CA – The California New Car Dealers Association (CNCDA), representing nearly 1,200 new car dealerships statewide, has been further vindicated by its victory against Volvo Car USA over Volvo’s program Care by Volvo (CbV). The Department of Motor Vehicles (DMV) issued a comprehensive report agreeing with CNCDA’s claims that multiple aspects of Volvo’s CbV program violate California law and are illegal. As a result of the DMV findings resulting from the claims brought by CNCDA’s petition, Volvo terminated CbV 1.0 in California – the only state in the nation where Volvo has been forced to terminate the program.
Last week, in a California New Motor Vehicle Board (NMVB) hearing, the NMVB received and reviewed the Department of Motor Vehicles (DMV) investigative report on Volvo’s CbV program. The DMV found numerous violations of California’s vehicle code (VC), demonstrating that Volvo’s CbV had been in violation of the California VC since its inception in 2017. At the NMVB hearing last week, counsel for Volvo publicly stated on the record that they have stopped the illegal “subscription” program in the Golden State.
Volvo also agreed to work closely with the DMV to ensure its new program, CbV 2.0, does not also violate California franchise laws.
“We are extremely pleased with the outcome of the investigation and the overwhelming victory for California’s new car dealers and the motor vehicle franchise system. As a direct result of our petition, Volvo stopped Care by Volvo 1.0 after the DMV agreed with and confirmed our claims that numerous elements of the program were in fact illegal,” stated Brian Maas, President of the California New Car Dealers Association. “It is critical that manufacturers abide by California franchise laws to continue protecting dealers and consumers. Our dealer members support innovation. At the same time, the DMV findings and Volvo’s recent termination of the program further demonstrate that illegal behavior by manufacturers will not be tolerated. CNCDA will continue to hold those accountable who violate the law. We look forward to further monitoring Volvo’s activities and are committed to ensuring they follow the law in the future.”
Early last year, CNCDA filed a petition with the NMVB, the Board heard arguments from both CNCDA and Volvo, and then unanimously ordered that the DMV investigate CNCDA’s claims that as a licensee of the DMV, Volvo was in violation of the California Vehicle Code (VC) by introducing CbV.
The CbV program was 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 2018, CNCDA alleged that the CbV program was illegal and violated 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 issued their written report which found Volvo’s CbV “subscription” program to be illegal and found four specific violations. The DMV ultimately 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.
During last week’s hearing, Volvo represented to the Board that it terminated CbV in California and that it had “no intention to run it;” therefore, the NMVB decided not to take further action against Volvo. CNCDA will closely watch Volvo’s activities in California in order to protect dealers and will be prepared to monitor how CbV 2.0 unfolds, ensuring it is adhering to California franchise laws.
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.
###
About CNCDA
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.