Harley wins dealer’s challenge to Internet Sales Policy

Attorneys from Seyfarth Law recently posted news about a Massachusetts federal court ruling in favor of Harley-Davidson over a dealer.

Ronnie’s Cycle Sales of Pittsfield, an authorized Harley-Davidson dealer since 1956, challenged Harley’s 2021 Internet Sales Policy in its filing (Ronnie’s Cycle Sales of Pittsfield, Inc. v. Harley-Davidson Motor Company, Inc.). Under the 2014 dealer agreement between the dealer and the manufacturer, the parties agreed the dealer would operate from a single (brick-and-mortar) location in Western Massachusetts and would be responsible for promoting the retail sale of Harley-Davidson motorcycles in its territory.

According to Harley’s dealer agreement, the dealer can’t sell to non-retail customers but could sell P&A through its website, “only as permitted by [Harley-Davidson] in writing,” the law firm states.

In the dealer agreement, Harley had the right to enforce policies that were believed necessary to carry out the purpose or intent of the agreement. In June 2021, the manufacturer announced it was implementing a new Internet Sales Policy to ensure that its trademark was represented consistently across all internet sales channels. 

The policy allowed customers to order products online for pickup at any Harley-Davidson dealership. It also allowed dealers to ship products ordered online directly to retail customers, but only if those customers resided in the dealer’s assigned territory. It prohibited the sale of Harley parts and accessories to non-Harley OEM retail locations. Still, it allowed the sale of parts and accessories to non-OEM retailers if those non-OEM retailers were located in the dealer’s assigned territory.

Harley then adopted a non-retail sales policy prohibiting dealers from selling its products to non-authorized aftermarket retailers outside the dealer’s assigned territory.

The Massachusetts dealer believed the new policies threatened its business model since Ronnie’s derived most of its revenue from selling Harley parts and accessories to an affiliated non-Harley OEM retail location in its assigned territory. The retailers sold these products to two affiliated aftermarket stores in New York and Vermont, with a “lucrative online business” selling branded parts and accessories to customers nationwide. Harley believed these practices were unauthorized due to its revised non-retail and Internet Sales policies.

Unfortunately, the law firm sided with Harley in this case, saying Ronnie’s was explicitly prohibited from selling to the customer in question because (1) the affiliated retail location within the dealer’s assigned territory was a non-Harley OEM retail location (selling other motorcycle brands) and (2) the dealer could not sell parts and accessories to the non-OEM aftermarket retail locations outside of the dealer’s assigned territory.

Harley offered to help Ronnie’s Cycle transition its business practice to focus on retail sales at its physical location, but the dealer rejected this assistance and filed suit in federal court in February 2022, alleging the manufacturer had breached the dealer agreement between the parties; had unlawfully modified the dealer agreement; and had imposed anticompetitive territorial restrictions in violation of the Massachusetts Antitrust Act.

Court dismisses dealer’s claims

In an unpublished decision in December, the court granted the motion, holding that the manufacturer had not breached the dealer agreement or done anything unfair by adopting a new Internet Sales Policy.  The court noted that the manufacturer had expressly reserved the right to establish policies “necessary” to carry out the purpose of the agreement that the Internet Sales Policy “translates [Harley’s] traditional desire for a territory-based sales network run by physical dealers”; and that the dealer had offered no basis for the court to overturn the parties’ agreement as written.

The court also said the policies did not violate the Massachusetts Dealers’ Bill of Rights, which prohibits unfair methods of competition and unfair or deceptive acts or practices in the automobile industry.  The court concluded that Harley had offered a “plausible business rationale” for its sales policies and that it had not threatened to terminate the dealer but had offered assistance to transition the dealer to the sales practices contemplated by the dealer agreement. As such, the court found no evidence that would enable a reasonable jury to find that the manufacturer had adopted the Internet Sales Policy in violation of the Massachusetts dealer statute.

The court dismissed the dealer’s claim Antitrust Act claim because it only applies to commerce in Massachusetts, and over 95% of the dealer’s revenue was from sales outside New England.  The court found that the case was subject to the “rule of reason,” requiring that the dealer demonstrate that the Internet Sales Policy would have an anticompetitive effect in a properly defined relevant market. Finally, the court dismissed the antitrust claim because the dealer had not attempted to demonstrate that it could offer such evidence.