The Franchise Memorandum

The United States District Court in Minnesota late last month dismissed state statutory and federal antitrust claims brought by a Kia automobile dealership against manufacturer Kia Motors. Barnett Chrysler Plymouth Co. v. Kia Motors America, Inc., 2008 U.S. Dist. LEXIS 87216 (D. Minn. Oct. 27, 2008).

Barnett Kia has sold vehicles made by Kia since 1998. In 2006, Barnett discovered that the manufacturer offered discretionary advertising allowances to other Minnesota Kia dealers through the Regional Marketing Fund (“RMF”) program, through which Kia subsidizes fifty percent of a dealership’s advertising costs up to a fixed dollar amount. Even though Barnett had received discretionary advertising allowances, designated as RMF, on three prior occasions, Barnett did not know that the RMF advertising funds were available on a regular basis through the program. Luther Kia and Duluth Kia, which Barnett alleged are its direct competitors, also received RMF advertising dollars. Barnett alleged that the RMF allowances permitted its competitors to more effectively advertise within common market areas and that those competitors could offer automobiles to the public at a more competitive price as a result.

The district court dismissed each of Barnett Kia’s claims, holding that: (1) the Minnesota Act Against Unfair Discrimination and Competition does not extend to advertising allowances; (2) the Minnesota Motor Vehicle Sale and Distribution Act only applies to the relationship between motor vehicle dealers and manufacturers, whereas the RMF seeks to increase retail sales between the dealership and consumers; and (3) Barnett Kia’s allegation that Duluth Kia is a direct competitor for Robinson-Patman Act purposes is the type of speculative pleading that the United States Supreme Court sought to curtail in the recent case Bell Atlantic Corp. v. Twombly.