Op-Ed: Auto brokers are undermining MAAP compliance with a dangerous double standard

Much has been made of late about the existence and impact of brokers in retail automotive.

Criticisms largely revolve around the fact that these individuals and organizations operate without appropriate licenses, and many are given access to OEM back-end systems by unsuspecting dealers so they can check inventory and submit credit applications to captive finance institutions.

In short, the dealers that choose to do business with these brokers are giving them carte blanche to operate on their behalf, and in return, they get the "benefit" of selling dozens of vehicles to buyers they never see, resulting in thousands of dollars in gross profit losses, zero trade-in vehicles, and virtually no service business.

While I share the aforementioned concerns with others, I have one very significant issue with how these brokers operate and it has everything to do with MAAP pricing policies implemented by most OEM brands. For those that don't know MAAP, it usually stands for “Minimum Accepted Advertised Price.”

These policies dictate what franchised dealers can advertise when we market new vehicles for sale to the public.

These policies are designed to protect OEM brands from dealers that engage in unscrupulous, deceptive, distressed, or otherwise brand-destroying advertising and merchandising. For OEM franchises with MAAP pricing policies, they invest in elaborate systems to monitor and enforce MAAP pricing.

Everything from TV and radio ads to dealer websites and 3rd party listing sites like Autotrader and TrueCar are subject to scrutiny if franchised dealers are found to be advertising on any of these platforms.

The penalties for violating these policies will often result in dealers losing their co-op advertising dollars or other performance bonus monies. For volume brands, this can result in hundreds of thousands (if not millions) of dollars being at risk for dealers found to be violating these policies.

The fact is that most of these brokers are operating public-facing websites or they are engaged in advertising of some sort to generate leads.

The ads they are running are for new vehicles being supplied to them by franchised dealers that would otherwise be subject to MAAP pricing scrutiny if the vehicles were being marketed on their dealer website or other dealer-branded advertisements.

Because these ads are appearing on a broker's website or elsewhere, they are not being scrutinized, even though the situation is very much tantamount to the scrutiny franchised dealers receive when we advertise on places like TrueCar or Cars.com.

Therefore, the existence of these brokers and how they operate has created a loophole for dealers to get around MAAP pricing rules, effectively creating a double standard for how these dealers are operating versus those of us not engaged in broker business.

This is an unfair competitive disadvantage for dealers trying to operate compliantly with integrity.

So, how do we close this MAAP pricing advertising loophole?

OEMs should require all brokers doing business with franchised dealers to register with the OEMs, just like our salespeople do.

Dealers should be required to report the existence of a relationship with a registered broker.

When a car is sold through a broker, even if the dealer is delivering the car to the end user, the broker's name should be on the RDR when the sale is reported to the manufacturer.

Furthermore, OEM advertising compliance teams should be required to scrutinize the websites, social media posts, and public-facing advertisements of these brokers for compliance with MAAP pricing standards.

Dealers registered as doing business with a broker found to be in violation of MAAP pricing should receive a strike against them, just like they would if they were found to be advertising in a non-compliant fashion on their dealer-owned website or other 3rd party site like Cars.com.

With hundreds of thousands (if not millions) of dollars at risk, OEMs simply cannot stand by silently and allow brand MAAP advertising standards to be subverted by these brokers.

It's a dangerous and destructive double standard that needs to be eliminated. If brokers are going to exist and be allowed to operate as sales agents of franchised dealers, they must be held to the same standards as franchised dealers.