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Makers taking tough line on broker abuse

Date: 20 February 2008

Rupert Saunders

The recent court case involving Renault and FleetPro reflects the general hardening of manufacturers' attitudes against 'unauthorised resellers', writes Rupert Saunders

The judgement in the High Court case of Renault vs FleetPro and Russell Thoms makes fascinating reading; not so much for the outcome of the case but the insight it reveals into affinity schemes and shifting attitudes towards brokers.

In the case, Renault sued for losses of almost £700,000 on the grounds that FleetPro had fraudulently sold cars - intended for members of the pilots' union, BALPA - at a discount. It transpired FleetPro was ordering cars under the BALPA affinity scheme and passing on the discount to other brokers who sold them to the public.

The Judge, Richard Seymour QC, accepted that "the importer was misled by the statements in the orders placed by FleetPro" and that "Mr. Thoms personally is liable for the misrepresentations contained in the orders submitted by FleetPro". But he didn't award damages because two of Renault's own staff had "turned a blind eye" to the fraud and Renault itself had actually made money from the sales, despite the fraud.

Keith Hawes, Renault fleet boss, has emphasised that it fought the case in order to send a clear message to brokers who abuse their terms.

"We achieved our objective in ensuring that this company was proven to be fraudulent and hopefully this move will act as a deterrent to other companies out there ruining the reputation of legitimate contract hire customers," he told me.

"I can confirm that Renault UK does not support this type of business ethic and that we are working closely with our dealer association to stop unscrupulous and dishonest operators from abusing terms."

This reflects the current mood among the carmakers to protect their franchised dealers and margins by clamping down on sales through so-called 'unauthorised resellers'. That generally means brokers who take cars off dealers' hands without specifying an end-user, allowing the dealer to claim a sale and get their registration volume bonuses.

While BMW has taken a high profile lead on this, we know that Ford, Volkswagen, Renault and others are also watching for signs of abuse. But it was not always like this.

Evidence presented during the court case shows that Renault and others (especially Citroen and Vauxhall) were competing hard to provide the most advantageous terms through affinity schemes. These included Vectras at "30% off list price", and full-spec, leather-clad Picassos at £12,999 with free satnav.

What is equally surprising is how much effort went into supplying relatively few cars - highlighting a grey area between fleet and retail business. Only three of the Renaults sold went to genuine BALPA members over a 10-month period, and a similar scheme with Microsoft generated just five sales in three years.

Whether the industry will fundamentally change as a result of the new stance towards discounting remains to be seen. As one broker told me: "Discounting is a fact of life. So long as some manufacturers set targets for more sales than can be achieved at list prices, some operators will resell."