A recent letter from the Alliance for Automotive Innovation to the U.S. Department of Justice (DOJ) has initiated intense backlash within the automotive retail industry. The letter, which calls on the DOJ to examine state dealership, franchise, and warranty laws, has been labeled a “declaration of war” by many in the dealer community. On the latest episode of CBT Now, we are joined by Len Bellavia, Esq., founding partner at DealerLaw.com, to unpack the legal and strategic implications of this move and what it could mean for the future of dealer-manufacture relationships.
Bellavia clearly stated that the automaker group’s letter was not only inflammatory but also strategically unwise. He argues that the Alliance misuses an executive order originally signed by President Trump in its appeal to the DOJ. This order, which is meant to support small business startups, is being used as a tool to undermine decades of state-level franchise protections.
At the core of the Alliance’s arguments is the push to eliminate revealable market area protection. These laws prevent manufacturers from placing new dealerships near existing ones, a safeguard common across franchise industries and essential for protecting dealer investments. Bellavia argues that removing such protections would pave the way for manufacturers to saturate markets and squeeze dealers out of viability.
Despite the seriousness of the challenge, Bellavia remains optimistic about the industry’s responses. He praised the National Automobile Dealer Association (NADA) for issuing a detailed rebuttal and encouraged all dealers to read the Alliance’s letter to understand what’s at stake. Additionally, he predicts that the fallout will ultimately strengthen the dealer community’s position.
The letter, he suggests, could serve as a powerful legal tool for dealers to push back against costly manufacturing mandates, such as multi-million-dollar facility renovations, forcing inventory acceptance, or inequitable warranty compensation.
“I would think that every general counsel for every OEM should disavow any participation or approval of this letter if they’re smart.”
Bellavia also addressed the constitutional and legislative barriers standing in the Alliance’s way. Under the Supremacy Clause, federal law can override state law, but no federal legislation currently governs dealer franchise frameworks. Instead, over the past 70–80 years, bipartisan, state-specific processes have established these protections, which manufacturers have consistently failed to overturn.
He concluded by speculating that the Alliance may face internal turmoil as a result of the fallout.