A dealer's ability to sell the business complete with franchise has been a controversial topic under the block exemption for years. Not surprisingly, perhaps, it doesn't only affect dealers in Europe. Start Automobile, a US Mercedes-Benz dealer, was recently prevented from selling its Mercedes dealership: Mercedes-Benz USA, LLC v. Star Automobile Co., et al., No. 3-11-cv-73, Order For Preliminary Injunction, (M.D. Ga. June 3, 2011).
The dealer agreement gave the manufacturer a right of first refusal, and on a preliminary application the Federal District Court accepted that the manufacturer would suffer "immediate and irreparable injury" if the injunction were not granted.
Not only did the dealer agreement to give the manufacturer a right of first refusal, but it also had a statutory right of first refusal under Georgia law. Applying principles governing the grant of an injunction in such a situation, the court said that an monetary damages would be difficult, if not impossible, to calculate. The harm the manufacturer would suffer if the injunction were denied would be likely to exceed any damage that an injunction would cause the defendant. Although there would be a delay in the transfer of the dealership, the company would continue to operate it.
The dealer challenged injunction on the grounds that it went against a state dealer statutory provision which governs the review and approval of all an ordinary business sale agreements as applied to dealers. And dealers enjoy a great deal more protection in the United States and they do in Europe, but the court explained that the rights of first refusal should be regarded as a counterweight to the approval provision. The court said this was "a less restrictive form of control a franchisor has over the identity of its business partners."
As this is only a preliminary injunction, the case might yet go to trial - though the court made clear that it considered the manufacturer was likely to succeed on its claim.
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