A California judge has ruled that American Honda Motor Company must discontinue online sales of Honda-backed extended service contracts as of November 1. The decision was reached after almost a year and a half of legal wrangling.
Such sales practices were to be banned by Honda in 2008, but the decision was contested by a Middletown, Rhode Island dealership. Saccucci Honda depended on the internet contract bonuses for a good share of its profits. The dealership believes that prevention of the contract sales by Honda would be a violation of the law and of the franchise agreement.
Judge Mary Lisi, chief judge of the U.S. District Court for the District of Rhode Island made the ruling in favor of Honda and stated, "This is not a situation where Honda is threatening to curtail Saccucci’s bloodline — its supply of automobiles — a primary consideration of the dealer act,"
The move to stop online service contract sales was made by Honda after they were alerted to the fact that Saccucci was selling them at cost, causing buyers to believe that warrantees sold in-house are too expensive.
The dealership was reportedly selling as many as 250 extended service warrantees a month online to buyers across the U.S. The payoff for Saccucci totaled somewhere between $60,000 and $95,000 per quarter in factory bonus money based on volume.
The dealership is owned by Cora Saccucci and her daughters Barbara and Carol. Carol Saccucci said, “The judge found the Dealers’ Day in Court Act only applies to the supply of cars, not anything else we sell. We feel we have a good chance on appeal.”
The Saccuccis aren’t the only dealers selling extended service contracts online. Honda manager in charge of the warranty program, Dan Spafford, has testified that around twelve dealers around the nation had sold them online. He also reports that Honda’s goal is to create a solution in lieu of the ban that will be more long-term.
The National Automobile Dealers Association (NADA) is contributing financially for the Saccuccis appeal. NADA attorney Jim Moors says they feel the judge’s ruling was too narrow. "We’re not weighing in on the service contract decision," Moors said. "Our interest is that we think the judge’s decision was too narrow because it only covered car selling and not other selling activities. This decision is only binding in Rhode Island, but other states do look at what other states are doing."