Can a Mississippi motor vehicle manufacturer's wholly owned subsidiary get a dealer's license, including in markets where the manufacturer already has franchised dealerships?
Plain-English summary
The Executive Director of the Mississippi Motor Vehicle Commission asked two questions about manufacturer-affiliated dealerships:
- Can a vehicle manufacturer's wholly owned subsidiary qualify for a Mississippi motor vehicle dealer's license?
- If a manufacturer already has franchised dealerships, can a subsidiary later obtain its own dealer's license?
This was a sensitive question. The franchise dealer model has been the dominant U.S. structure for decades: manufacturers sell vehicles through independent franchised dealers. New entrants (especially electric vehicle makers like Tesla and Rivian) have been challenging that model by selling directly to consumers, sometimes through manufacturer-owned subsidiaries that hold dealer licenses. The franchise dealers' associations have lobbied for state laws that protect the traditional model.
The AG worked through Mississippi's Motor Vehicle Commission Law (§ 63-17-51 et seq.). Section 63-17-55(b) defines "motor vehicle dealer" as any "legal entity, not excluded by paragraph (c) of this section, who holds a bona fide contract or franchise in effect with a manufacturer, distributor or wholesaler of new motor vehicles, and a license under the provisions of the Mississippi Motor Vehicle Commission Law." Section 63-17-55(c) lists exemptions (court-appointed receivers, public officers, certain manufacturer-employee transactions) but does not exempt or prohibit manufacturer-owned subsidiaries.
So the AG read the statute as not categorically prohibiting subsidiary dealer licenses. The subsidiary still had to be a "legal entity" (an LLC qualifies) and hold a "bona fide contract or franchise in effect with a manufacturer." The Motor Vehicle Commission, not the AG, would decide on a case-by-case basis whether the entity qualified.
For the second question, the AG also said no statutory bar existed. But the AG explicitly declined to address whether existing franchise agreements would create contractual issues. That was a contract-interpretation question outside the AG's authority.
Currency note
This opinion was issued in 2021. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
What the opinion said for each audience, at the time
For Mississippi traditional franchise dealers in 2021
The opinion was likely concerning. The AG read Mississippi statutes as not categorically blocking manufacturer subsidiaries from holding dealer licenses, and not blocking subsidiaries from getting licenses even where the manufacturer already had franchised dealers. That left the door open for direct-sale operations.
The franchise dealers' main protection was their existing franchise agreements (private contracts) and any specific state law provisions on dealer-protection (which the AG did not address in detail). State legislatures elsewhere had enacted dealer-protection laws that explicitly barred manufacturer-affiliated dealerships in markets with franchised competitors. Mississippi's statutes, as read in 2021, were not that explicit.
For electric vehicle manufacturers (Tesla, Rivian, Lucid)
The opinion was favorable to direct-sales models, at least at the level of Mississippi's licensing statutes. A manufacturer subsidiary could in principle obtain a dealer's license. The "bona fide contract or franchise in effect with a manufacturer" requirement could be satisfied by an internal contract between the parent and subsidiary.
That said, the franchise-agreement-based exclusions and any later legislative action remained unaddressed. EV manufacturers entering Mississippi had to consider both the licensing statute (favorable per this opinion) and any private franchise commitments and any state-law dealer protections that might come into play through other statutes.
For the Mississippi Motor Vehicle Commission
The opinion gave the Commission flexibility. The Commission could issue licenses to qualifying manufacturer subsidiaries on the merits, without a categorical bar from the AG's office. The Commission's case-by-case review would be the operative gatekeeper.
For franchise dealer attorneys
The 2021 opinion was a green light for the licensing analysis only. Franchise dealer attorneys would still rely on:
- Specific franchise agreements (e.g., territorial protection clauses)
- Any specific dealer-protection statutes the legislature might enact
- Common-law claims of tortious interference with contract
- Federal automobile dealer protection laws
The opinion didn't undermine any of those. It just said the licensing statute itself didn't categorically bar subsidiary dealerships.
For consumers buying directly from a manufacturer
If a manufacturer subsidiary obtained a Mississippi dealer's license, consumers could purchase directly from that subsidiary in Mississippi. The transaction would still go through the licensed dealer-of-record (the subsidiary), which had to comply with all Mississippi consumer protection, lemon law, and titling requirements.
Common questions
Q: Why is this controversial?
A: Because most U.S. car sales for the last century have used the franchise dealer model: manufacturers sell to independent dealerships, who sell to consumers. Tesla pioneered the direct-to-consumer model, and several states have laws (often pushed by dealer associations) restricting manufacturer-owned dealerships. The 2021 Mississippi opinion read the state's licensing statute as not categorically restrictive.
Q: What's the "bona fide contract or franchise" requirement?
A: Section 63-17-55(b) requires the dealer to hold a "bona fide contract or franchise in effect with a manufacturer, distributor or wholesaler of new motor vehicles." For a manufacturer-owned subsidiary, this would be an intra-corporate contract between the parent (manufacturer) and the subsidiary (dealer). Whether such an arrangement is truly "bona fide" is a fact question for the Commission.
Q: Does this affect existing franchise agreements?
A: The AG specifically declined to address that. Franchise agreements often include territorial protection clauses (the manufacturer agrees not to set up another dealership within a defined area) and exclusivity terms. A manufacturer setting up a subsidiary dealership in a franchised dealer's territory could breach those private contractual commitments, regardless of the licensing statute.
Q: Are there other Mississippi statutes that might restrict this?
A: The 2021 opinion was about § 63-17-51 et seq. (the Motor Vehicle Commission Law). Other statutes (consumer protection, antitrust, unfair trade practices) might also bear on direct-sale arrangements, but those weren't analyzed.
Q: Why does Mississippi treat manufacturers slightly differently in § 63-17-55(c)?
A: Subsection (c) has a special set of exclusions for vehicle manufacturers operating "projects" under § 57-75-5(f)(iv), which is a Mississippi economic-development statute. The 2021 opinion noted these exclusions exist but they did not address manufacturer subsidiaries holding dealer licenses for general retail purposes. The exclusions are narrow (limited employee leases, end-of-lease auctions, special-tag dispositions).
Q: Does this mean direct-to-consumer sales are wide-open in Mississippi?
A: Not quite. The opinion only addressed the licensing question, and only said the Motor Vehicle Commission Law does not categorically prohibit manufacturer subsidiaries from obtaining dealer licenses. Other restrictions (private franchise agreements, other statutes, FTC rules, manufacturer's own internal policies) all remained in place.
Background and statutory framework
The Mississippi Motor Vehicle Commission Law (§ 63-17-51 et seq.) regulates the licensing and conduct of motor vehicle dealers in the state. The Commission issues licenses, investigates complaints, and oversees the dealer-manufacturer relationship.
The franchise dealer model is built on top of these licensing statutes through private contracts. A dealer holds a license from the state and a franchise agreement from a specific manufacturer (or distributor). The franchise agreement governs branding, exclusivity, training, warranty work, and supply. It is the agreement, not the license, that creates the manufacturer-dealer relationship.
The 2021 opinion's analysis was textual. The licensing statute does not categorically distinguish between independent dealers and manufacturer-affiliated dealers. The "bona fide contract or franchise" language requires some kind of contractual relationship with a manufacturer, distributor, or wholesaler, but doesn't specify that the dealer must be at arm's length from the manufacturer. A wholly owned subsidiary with an intra-corporate franchise contract could in principle qualify.
The exclusions in subsection (c) include a special carve-out for manufacturers operating Mississippi economic-development projects (under § 57-75-5(f)(iv)). This was likely added to facilitate specific manufacturer activities (e.g., Nissan's Canton plant) without forcing them to obtain general dealer licenses. The carve-out is narrow.
State legislatures and courts elsewhere have varied on this question. Some states have explicit bans on manufacturer-owned dealerships when traditional franchised dealers exist; others permit them; some have exceptions for new entrants without existing franchise networks. The 2021 Mississippi opinion put Mississippi in the permissive camp at the licensing-statute level.
Citations and references
Statutes:
- Miss. Code Ann. § 27-19-309(8), distinguishing-number tags for motor vehicle manufacturers
- Miss. Code Ann. § 57-75-5(f)(iv), Mississippi Major Economic Impact Act, motor vehicle manufacturer projects
- Miss. Code Ann. § 63-17-51 et seq., Mississippi Motor Vehicle Commission Law
- Miss. Code Ann. § 63-17-55(b), definition of "motor vehicle dealer"
- Miss. Code Ann. § 63-17-55(c), exemptions from dealer-licensing requirement
- Miss. Code Ann. § 63-17-55(i), definition of "manufacturer"
Cases cited:
- City of Tchula v. Mississippi Public Service Commission, 187 So. 3d 597, 599 (Miss. 2016), no occasion to add to plain language
Prior AG opinions cited:
- MS AG Op., Barefield (Feb. 22, 1990), particular-applicant licensing question is a fact issue for the Commission
Source
- Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
- Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2021/04/W.Jernigan_February-16-2021-Motor-Vehicle-Dealer-License-for-Subsidiary-of-Manufacturer.pdf
Original opinion text
February 16, 2021
William Jeffrey Jernigan, Esq.
Executive Director
Mississippi Motor Vehicle Commission
1755 Lelia Drive, Suite 200
Jackson, Mississippi 39216
Re: Motor Vehicle Dealer License for Subsidiary of Manufacturer
Dear Mr. Jernigan:
The Office of the Attorney General has received your request for an official opinion.
Questions Presented
- Does a vehicle manufacturer's wholly owned subsidiary (i.e., an LLC) qualify for a motor vehicle dealer's license under Mississippi law?
- If a vehicle manufacturer or distributor currently has franchised dealerships, may a subsidiary that is wholly owned by such manufacturer or distributor later obtain a vehicle dealer's license?
Brief Response
In response to your first question, as you note in your request, "it doesn't appear to be directly prohibited." We, too, find no statutory prohibition to a wholly owned subsidiary of a vehicle manufacturer obtaining a motor vehicle dealer's license in Mississippi, so long as the subsidiary meets all applicable statutory and/or regulatory requirements for obtaining such license.
In response to your second question, we know of no statutory provision explicitly preventing a manufacturer's or distributor's wholly owned subsidiary from obtaining a dealer's license at some point after the manufacturer or distributor has franchised dealerships within Mississippi, so long as such subsidiary meets all applicable statutory and/or regulatory requirements for obtaining such license. Determining whether this practice is impacted by existing or future franchise agreements entered into by the manufacturer requires us to interpret such agreements, which is beyond the authority of this office.
Applicable Law and Discussion
At the outset, we note that whether a particular applicant qualifies for a license from the Mississippi Motor Vehicle Commission (the "Commission") is a question of fact to be addressed by the Commission. See MS AG Op., Barefield at *1 (Feb. 22, 1990) ("Whether a particular person or business is required to obtain a license under the Motor Vehicle Commission Law is a factual issue that cannot be determined by this office.").
Addressing your first question, the Mississippi Code defines "Motor vehicle dealer" in the following manner:
any person, firm, partnership, copartnership, association, corporation, trust or legal entity, not excluded by paragraph (c) of this section, who holds a bona fide contract or franchise in effect with a manufacturer, distributor or wholesaler of new motor vehicles, and a license under the provisions of the Mississippi Motor Vehicle Commission Law . . . .
Miss. Code Ann. § 63-17-55(b) (emphasis added). Section 63-17-55(c), in turn, exempts the following from the definition of "motor vehicle dealer":
(i) Receivers, trustees, administrators, executors, guardians or other persons appointed by or acting under judgment, decree or order of any court;
(ii) Public officers while performing their duties as such officers;
(iii) Employees of persons, corporations or associations enumerated in paragraph (c)(i) of this section when engaged in the specific performance of their duties as such employees; or
(iv) A motor vehicle manufacturer operating a project as defined in Section 57-75-5(f)(iv)[1]; and the provisions of the Mississippi Motor Vehicle Commission Law shall not apply to:
1. a. Any lease by such a motor vehicle manufacturer of three (3) or fewer motor vehicles at any one time and related vehicle maintenance, of any line of vehicle produced by the manufacturer or its subsidiaries, to any one (1) employee of the motor vehicle manufacturer on a direct basis; or
b. Any sale or other disposition of such motor vehicles by the motor vehicle manufacturer at the end of a lease through direct sales to employees of the manufacturer or through an open auction or auction limited to dealers of the manufacturer's vehicle line or its subsidiaries' vehicle lines; or
2. Any sale or other disposition by such a motor vehicle manufacturer of motor vehicles for which the manufacturer obtained distinguishing number tags under Section 27-19-309(8).
Miss. Code. Ann. § 63-17-55(c). Section 63-17-55(c) contains no exemption for an entity that is a wholly owned subsidiary of a motor vehicle manufacturer.
Pursuant to Section 63-17-55(b), a "motor vehicle dealer" is, in part, (1) "any . . . legal entity;" (2) not excluded by Section 63-17-55(c); and that (3) "holds a bona fide contract or franchise in effect with a manufacturer, distributor or wholesaler of new motor vehicles." First, whether a particular entity seeking a license is a "legal entity" is a question of fact that this office cannot decide by official opinion. However, in your request, you reference the motor vehicle manufacturer's wholly owned subsidiary being an LLC, which is a "legal entity." Second, as set forth above, Section 63-17-55(c) contains no exemption for a manufacturer's wholly owned subsidiary. Finally, whether the subsidiary "holds a bona fide contract or franchise in effect with a manufacturer, distributor or wholesaler of new motor vehicles" is a question of fact to be determined by the Commission.
"Where the language in a statute is plain and unambiguous," there is no occasion for this office "to add to the law as the Legislature has written it." City of Tchula v. Mississippi Pub. Serv. Comm'n, 187 So. 3d 597, 599 (Miss. 2016). This Office's authority to respond to opinion requests is limited to the interpretation of state laws as written and passed by the Legislature. Based on a plain reading of the Mississippi Motor Vehicle Commission Law, codified at Section 63-17-51 et seq., there is no express statutory prohibition on a motor vehicle dealer's license being issued to an entity on the basis that such entity is a wholly owned subsidiary of a vehicle manufacturer. However, any applicant for a motor vehicle dealer's license must meet all applicable statutory and regulatory requirements associated with obtaining such license.
In response to your second question, we know of no statutory provision preventing a manufacturer's or distributor's wholly owned subsidiary from obtaining a dealer's license at some point after the manufacturer or distributor has franchised dealerships within Mississippi, so long as such subsidiary meets all applicable statutory and/or regulatory requirements for obtaining such license. Determining whether this practice is impacted by existing or future franchise agreements entered into by the manufacturer requires us to interpret such agreements, which is beyond the authority if this office.
If this office may be of any further assistance to you, please do not hesitate to contact us.
Sincerely,
LYNN FITCH, ATTORNEY GENERAL
By: /s/ Gregory Alston
Gregory Alston
Special Assistant Attorney General
[1] "Manufacturer" is defined as "any person, firm, association, corporation or trust, resident or nonresident, who manufactures or assembles new motor vehicles." Miss. Code. Ann. § 63-17-55(i).