The RMI has taken legal advice over the practice (also used by Audi and Lexus), which it believes may infringe Block Exemption regulations (BER).
Vardy, which has one of the UK’s most powerful motor retail brands, wants to use its own name across all operations.
A spokesman says: “Our four Mercedes outlets in Scotland adopt the manufacturer’s branding standard, which incorporates the name of the town. We are in constructive dialogue with Mercedes-Benz with a view to achieving a suitable compromise.
“After significant growth in recent years, we operate five distinctive brands: Reg Vardy, Rossleigh, Victoria, Trust and Bushbury. This is not ideal as we try to establish a strong brand identity and create an inclusive family feel, both internally and externally.
“Reg Vardy recognizes the value of brand uniformity but we are keen – like high street retail giants – to develop our primary brand across all operations to deliver consistency and transparency to customers.”
A Mercedes-Benz UK spokesman says: “We have been working with our retailers for some time on this issue to reach a resolution, and we should do so within a few weeks.”
Vardy was asked by BMW to find a brand title for its dealerships and chief executive Sir Peter Vardy chose Victoria, his daughter’s name. A BMW GB spokesman says: “We don’t ask dealers to use our name because we see more value in the owner’s brand equity.”
An Audi GB spokesman claims that decisions regarding retail outlet branding “are taken only with the full agreement of any Audi Centre involved”. However, dealers privately admit they have little real choice in the decision.
Lexus GB had no-one available to comment, but the company is thought to believe the use of its name at dealerships is important, partly because its brand awareness is lower than German rivals.
Manufacturers argue that the name outside a dealership should be consistent with customer expectations and brand standards. One of the key components of current BER rules though is that retailers should be at liberty to dual franchise. This would be difficult given the prominence of the carmakers’ brand.
Last year, Peugeot was told by the Office of Fair Trading that it could not insist its retailers adopt the ‘Blue Box’ showroom style for precisely this reason.
Graham Coleshill, head of legal services at the RMI, spotted the wording in the BER that suggests manufacturers could be overstepping the mark. He is considering the next move but says: “We are not planning any legal moves against manufacturers on the issue at this time.”
Coleshill has advised RMI members that BER appears to say standards must be “objectively justifiable” and not restrict the ability to add a second franchise.
Clarkslegal, adviser to the RMI and its members, says: “We are at the start of something that could prove to be of great significance to a number of dealers. Given that we have yet to see what the courts will make of it, this issue could run for some time.”
Pendragon, Europe’s largest car retailer, has also recognized the power of the dealership name. It is rebranding most premium franchises as Stratstone, with mainstream marques sold under Evans Halshaw or CD Bramall.