he Supreme Court declined yesterday to review a decision invalidating a state law to limit the number of dealers that manufacturers of motor vehicles can franchise.
Eighteen states, including Virginia, have laws similar to a 1976 Georgia statute at issue in the case. Nineteen additional states, including Maryland, have laws that try to aid franchised dealers in other ways.
The court action was a victory for General Motors Corp. GM said the Georgia law created restraints of trade that "have no purpose except stifling competition."
In addition to GM, the case involved General GMC Trucks Inc., which was franchised to sell the so-called "9500 Seires" of heavy trucks in the Atlanta metropolitan area, and Trade City, Inc., a dealer 21 miles from General GMC in a different county and trading area.
Learning that GM was planning to expand Trade City's franchise so that it could sell the 9500 Series as well as light-and medium-duty trucks. General GMC complained to the Georgia Motor Vehicle Commission that its franchise agreement was being breached by GM.
General GMC complained that under its franchise agreement, it had "few, if any rights." But it had to become "an economic captive of the manufacturer" by being compelled to invest more than $2.5 million "for the single purpose of selling and maintaining heavy-duty trucks," the dealer said.
In contrast, GM contended that the Georgia law allows an existing dealer to restrict competition by filing a complaint that a new dealership was being established in his "community or territory."
Thus, GM said, General GMC, if it prevailed, would stop Trade City from strengthening its competitive position - after it had spent $350,000 gearing up sell the 9500 Series.
The commission ruled for General GMC, saying no other GM dealer could sell the 9500 Series in a 37-county area stretching from Alabama to South Carolina.
But GM won in the Georgia Supreme Court, which said, "there is no bar to placing an additional franchise if the market needs a new dealership." That court ruled that the state law imposed unconstitutional restraints on trade. The ruling conflicts with decisions by several federal and state courts.