Harley-Davidson puts brakes on dealer sales-lawsuit

* Harley-Davidson sued over restrictions on dealer sales

* St. Paul dealer claims new policies threaten business

By Kyle Peterson

Nov 11 (Reuters) - A Harley-Davidson Inc dealer in St. Paul, Minnesota, has sued the motorcycle maker in federal court, claiming the company's restrictions on international sales by U.S. dealers and sales through third-party websites are unfair and weaken the dealer's profits.

In a lawsuit filed Nov. 1, St. Paul Harley-Davidson complained about new restrictions on its methods for selling motorcycle parts, accessories and clothing.

"These changes would deprive (St. Paul Harley-Davidson) of literally millions of dollars of annual revenues, thereby jeopardizing its ability to remain in business," the dealer said.

The dealer said it earned $8 million a year in revenue from those sales from 2008 through 2010.

Motorcycle sales declined in 2008 as the economic recession eroded discretionary spending. But sales have begun to improve.

Harley-Davidson last month said its third-quarter net income more than doubled from a year earlier.

A Harley-Davidson spokeswoman declined to comment on the specifics of the lawsuit. "We disagree with the dealer's premise," she said.

Harley-Davidson, which is especially protective of its brand, restricts sales of new inventory through third-party websites.

According to the lawsuit, the motorcycle maker said that starting Aug. 1, U.S. dealers may not sell Harley-Davidson parts and accessories to any customer outside the United States. The lawsuit said that starting Jan. 1, 2012, U.S. dealers may not sell new parts or accessories on third-party websites.

The policy revisions illegally alter the company's franchise agreement with dealers, the lawsuit claims.

Tom Giannetti, dealership president, said in an Oct. 7 post on the St. Paul Harley-Davidson website, that Harley-Davidson had changed its policies to block sales of products through websites such eBay and Amazon.com.

"These new policies are highly controversial and may be arguable," Giannetti said in the statement. "We certainly do not feel it is fair when we've spent years building a customer service-oriented business to promote the brand worldwide."

Shares of Harley-Davidson were up 4.4 percent at $39.30 on the New York Stock Exchange.

The lawsuit is St. Paul Motorsports, Inc., d/b/a St. Paul Harley-Davidson, vs. Harley-Davidson Motor Company, Inc., d/b/a Harley-Davidson Motor Company; No 0:11-cv-03229-PJS-TNL in the United States District Court For The District Of Minnesota Third Division.