July 28, 2014

What Year Is It? Is RV's Model Year Important, and What Does Law Require?

“Is it brand new?” and “what year is it?”

Dealers commonly confront those two questions when selling our industry’s products.

I recently heard a discussion between industry and supplier executives about model year designations. The question was whether the manufacturer should accept a large dealer’s demand to create new model year designations earlier than originally planned. As usual, the best answer combines both a business and legal analysis.

The legal analysis involves common sense and a basic knowledge of the Federal Trade Commission rules. Applying both should keep manufacturers out of trouble.

In the mid-1970s, the Federal Trade Commission addressed a problem that often arose at the end of a calendar year:  manufacturers changing the model year on vehicles unsold at the end of the year. Model years were being “reassigned,” and the FTC acted to end that deceptive practice. Forty years later, it is well-accepted that relabeling an RV to a following model year is both deceptive and a violation of federal regulations. Yet, reported cases show some manufacturers are still engaged in that practice. When the manufacturer is caught, the results are expensive. Therefore, this article provides four basic rules manufacturers should follow:

First, a model year can be used to designate a “discrete vehicle model,” regardless of the calendar year in which the vehicle was actually produced, provided the production period does not exceed two years. In other words, an RV made in 2014 could have a 2016 model year designation, but couldn’t be called a 2017 model.

Second, the model year assigned to an RV must be determined by either the (a) characteristics of the vehicle designated or (b) date of manufacture. If RV models containing identical characteristics are manufactured in August 2014, then it would be a deceptive consumer practice and a violation of FTC rules to designate some as 2014 models and some as 2015 models. On the other hand, a product changed by the manufacturer could be assigned a different year. Also, it is acceptable for the RV manufacturer to choose a cutoff date, such as April 15, 2014, and designate RVs manufactured after that date as being assigned a new model year.

Third, for manufacturers with multiple plants, the FTC has a 30-day rule. RV models manufactured in separate plants may contain the same model year designation even though the production end dates differ. However, the first RV with a new model year may not be manufactured more than 30 days before the last day of manufacture of the prior year model.

Fourth, the rule for motor homes — often called “multi-stage” vehicles — requires special attention. As we know, the motorized RV industry buys chassis from chassis manufacturers. A chassis, consisting of a frame, an engine and steering mechanism (and a few other things) is then upfitted with the living quarters and other amenities. For multi-stage RVs, the chassis can be manufactured two years before the RV is completed and still contain the year of its final completion date as its model year. In some states, including California, a manufacturer must disclose not only the date the RV was completed but also the date the chassis was manufactured.

By following these simple rules, manufacturers can avoid model year designation claims and litigation.

This article also appeared in RV Focus: A Newsletter for the RV Industry Professional, authored by lawyers who understand the RV industry and take a practical look at legal issues that can affect a company. Legal problems are costly and distracting, and company time is better spent focusing on production, sales, cost control and business relationships.

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