PRINTER'S NO. 1693
No. 1315 Session of 2000
INTRODUCED BY TOMLINSON, BOSCOLA, JUBELIRER, MELLOW, DENT,
KUKOVICH, LAVALLE, GREENLEAF, HOLL, LOEPER, WHITE, CORMAN,
PUNT, STOUT, TILGHMAN, TARTAGLIONE, KASUNIC, EARLL, WENGER,
SALVATORE, CONTI, HART, THOMPSON, STAPLETON, KITCHEN, MOWERY,
MADIGAN, WAGNER, O'PAKE, COSTA, GERLACH, MUSTO, HELFRICK,
WOZNIAK, BODACK, FUMO AND MURPHY, FEBRUARY 29, 2000
REFERRED TO CONSUMER PROTECTION AND PROFESSIONAL LICENSURE,
FEBRUARY 29, 2000
AN ACT
1 Amending the act of December 22, 1983 (P.L.306, No.84), entitled
2 "An act providing for the State Board of Vehicle
3 Manufacturers, Dealers and Salespersons; and providing
4 penalties," further defining "franchise"; and further
5 providing for powers and duties of the State Board of Vehicle
6 Manufacturers, Dealers and Salespersons, for protest hearing
7 decision within 120 days unless waived by the parties, for
8 reimbursement for all parts and service required by the
9 manufacturer or distributor, for reimbursement audits, for
10 unlawful acts by manufacturers or distributors, for
11 restriction of manufacturer invoking a right of first refusal
12 and for limitations on establishing or relocating dealers.
13 The General Assembly of the Commonwealth of Pennsylvania
14 hereby enacts as follows:
15 Section 1. The definition of "franchise" in section 2 of the
16 act of December 22, 1983 (P.L.306, No.84), known as the Board of
17 Vehicles Act, amended April 19, 1996 (P.L.104, No.27), is
18 amended to read:
19 Section 2. Definitions.
20 The following words and phrases when used in this act shall
1 have the meanings given to them in this section unless the
2 context clearly indicates otherwise:
3 * * *
4 "Franchise." The written agreement between any new vehicle
5 manufacturer or distributor and any new vehicle dealer [or
6 between any new vehicle manufacturer and distributor] which
7 purports to fix the legal rights and liabilities of the parties
8 to such agreement, and pursuant to which the dealer [or
9 distributor] purchases [and], resells, services, separately
10 services or performs warranty repairs on the franchise product
11 or leases or rents the dealership [or distributorship] premises.
12 * * *
13 Section 2. Section 4(5) of the act, amended April 19, 1996
14 (P.L.104, No.27), is amended to read:
15 Section 4. Powers and duties of board.
16 The board shall have the power and its duty shall be to:
17 * * *
18 (5) Bring criminal prosecutions for unauthorized,
19 unlicensed or unlawful practice and bring an action to enjoin
20 such practices. Duly authorized agents of the bureau shall be
21 authorized to issue citations for violations of this act and
22 any law enforcement officer shall be authorized to issue
23 citations for violations of this act by unlicensed dealers or
24 brokers.
25 * * *
26 Section 3. Section 8 of the act is amended by adding
27 subsections to read:
28 Section 8. Protest hearing decision within 120 days unless
29 waived by the parties.
30 * * *
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1 (c) Reconsideration.--In the event a decision of the board
2 is remanded by a court of competent jurisdiction for further
3 action by the board, the board shall consider the action and
4 issue a final determination, not later than 120 days following
5 receipt of the record from such court, unless the 120-day time
6 period for the board to issue a final determination is waived or
7 extended by the parties.
8 (d) Dealer protest of automobile or truck manufacturer act
9 or omission.--
10 (1) Except for protests authorized under section 13 or
11 27 and not withstanding any other remedy available under this
12 act, any new vehicle dealer who believes that an automobile
13 or truck manufacturer or distributor with whom the new
14 vehicle dealer holds a franchise agreement has violated or is
15 violating any provision of this act, may file a protest with
16 the board setting forth the factual and legal basis for such
17 violation.
18 (2) The board shall issue a final determination within
19 120 days after the protest is filed, unless the 120-day time
20 period for the board to issue a final determination is waived
21 or extended by the parties.
22 (3) It shall be the burden of the automobile or truck
23 manufacturer to prove it has not violated any provision of
24 this act as set forth in the protest filed by the new vehicle
25 dealer.
26 (4) The protested action shall not become effective
27 until the final determination is issued by the board and
28 shall not be effective thereafter, if the board has
29 determined that there is good cause for not permitting the
30 protested action.
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1 (5) The board shall be empowered to direct or require
2 the automobile or truck manufacturer or distributor to
3 perform such acts as necessary in order for the manufacturer
4 or distributor to comply with the provisions of this act.
5 Section 4. Sections 9, 12, 16 and 27 of the act, amended or
6 added April 19, 1996 (P.L.104, No.27), are amended to read:
7 Section 9. Reimbursement for all parts and service required by
8 the manufacturer or distributor; reimbursement
9 audits.
10 (a) Manufacturers or distributors to notify dealers of their
11 obligations.--Each new vehicle manufacturer or distributor shall
12 specify in writing to each of its new vehicle dealers licensed
13 in this Commonwealth the dealer's obligations for predelivery
14 preparation and warranty service on its products, shall
15 compensate the new vehicle dealer for service required of the
16 dealer by the manufacturer or distributor and shall provide the
17 dealer with a schedule of compensation to be paid the dealer for
18 parts, work and service, and the time allowance for the
19 performance of such work and service.
20 (b) Schedule of compensation to include reasonable
21 compensation.--[In]
22 (1) Except as otherwise provided for in paragraphs (2),
23 (3) and (4), in no event shall the schedule of compensation
24 fail to include reasonable compensation for diagnostic work,
25 repair service, original equipment manufacturer parts and
26 labor. Time allowances for the diagnosis and performance of
27 warranty work and service shall be reasonable and adequate
28 for the work to be performed. In the determination of what
29 constitutes reasonable compensation, the principal factors to
30 be given consideration shall be the prevailing wage rates
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1 being paid by the dealers in the community in which the
2 dealer is doing business. The hourly labor rate paid to a
3 dealer for warranty services shall not be less than the rate
4 charged by the dealer for like service to nonwarranty
5 customers for nonwarranty service and repairs at a reasonable
6 rate. This [subsection] paragraph shall not apply to
7 manufacturers or distributors of manufactured housing or
8 recreational vehicles.
9 (2) In no event shall the schedule of compensation from
10 an automobile or truck manufacturer or distributor fail to
11 include reasonable compensation for diagnostic work, repair
12 service, original equipment manufacturer parts and labor.
13 Time allowances for the diagnosis and performance of
14 warranty, goodwill or recall work and service shall be
15 reasonable and adequate for the work to be performed.
16 Compensation paid to a dealer for warranty, goodwill or
17 recall work and services shall not be less than the costs
18 charged in dollar amount and the period of time assessed by
19 the dealer for like service to nonwarranty customers for
20 nonwarranty service and repairs. Increases in dealer
21 warranty, goodwill or recall parts, work, diagnostic and
22 service compensation pursuant to this section shall be
23 requested by the dealer in writing.
24 (3) An automobile or truck manufacturer or distributor
25 shall not furnish a part to a dealer at no cost or at a
26 substantially reduced cost for use by the dealer in
27 performing work for which the manufacturer or distributor is
28 required to compensate the dealer under this section.
29 (4) For purposes of determining reasonable compensation
30 for warranty, goodwill or recall parts, work and service paid
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1 to a dealer by the automobile or truck manufacturer or
2 distributor for costs charged by the dealer to a retail
3 customer, menu-priced parts or services, group discounts,
4 special event discounts and special event promotions shall
5 not be considered. For purposes of determining labor
6 compensation for warranty body shop repairs paid to a dealer
7 by the automobile or truck manufacturer or distributor for
8 charges paid by the dealer to a retail customer, internal or
9 insurance-paid repairs shall not be considered.
10 (c) Copy of obligation to be filed with board.--A copy of
11 the delivery and preparation obligations of its dealers shall be
12 filed with the board by every vehicle manufacturer and shall
13 constitute the dealer's only responsibility for product
14 liability as between the dealer and the manufacturer.
15 (d) Indemnification required.--Notwithstanding the terms of
16 any franchise agreement, it shall be a violation for any new
17 vehicle manufacturer to fail to indemnify its franchised dealers
18 against any judgment for damages or settlement approved in
19 writing by the manufacturer, including, but not limited to,
20 court costs and reasonable attorneys' fees of the new vehicle
21 dealer, arising out of complaints, claims or lawsuits including,
22 but not limited to, strict liability, negligence,
23 misrepresentation, express or implied warranty or rescission of
24 the sale as defined in 13 Pa.C.S. § 2608 (relating to revocation
25 of acceptance in whole or in part) to the extent that the
26 judgment or settlement relates solely to the alleged defective
27 or negligent manufacture, assembly or design of new vehicles,
28 parts or accessories or other functions by the manufacturer or
29 distributor beyond the control of the dealer.
30 (e) Warranty reimbursement and incentive or reimbursement
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1 program approval and audits.--
2 (1) Any warranty, recall, goodwill, service contract or
3 any other required service parts or labor reimbursement claim
4 or incentive or reimbursement program claim filed by the
5 dealer with the manufacturer or distributor in the manner and
6 on forms the manufacturer or distributor reasonably
7 prescribes which is not specifically disapproved in writing
8 or by electronic transmission 30 days after receipt by the
9 manufacturer or distributor is considered approved and
10 payment to the dealer must follow within 30 days.
11 (1.1) Where the automobile or truck manufacturer or
12 distributor disapproves any claim, the manufacturer or
13 distributor shall describe in writing what reasonable
14 corrective action the dealer must perform to receive payment
15 for the claim or the claim shall be deemed approved within 30
16 days of the original disapproval and payment to the dealer
17 shall be made within 30 days of the deemed approval. The
18 automobile or truck manufacturer or distributor shall not
19 deny a claim or reduce the amount to be reimbursed, if the
20 dealer has reasonably substantiated the claim in accordance
21 with reasonable written requirements of the manufacturer or
22 distributor, provided that the dealer has been notified of
23 the requirements prior to the time the claim arose and the
24 requirements were in effect at the time the claim arose.
25 (2) The manufacturer or distributor shall be permitted
26 to audit claims within a two-year period from the date the
27 claim was paid or credit issued by the manufacturer or
28 distributor and to charge back any false or unsubstantiated
29 claims. If there is evidence of fraud, this subsection does
30 not limit the right of the manufacturer or distributor to
20000S1315B1693 - 7 -
1 audit for longer periods and charge back for any fraudulent
2 claim, subject to the limitations period under 42 Pa.C.S.
3 (relating to judiciary and judicial procedure).
4 (f) Applicability.--This section shall also apply to each
5 medium-duty and heavy-duty truck component and engine
6 manufacturer or distributor that provides integral parts of
7 vehicles, provides major components by selling directly to
8 dealers or who enters into a contract with a medium-duty and
9 heavy-duty truck dealer which authorizes the dealer to perform
10 warranty or other services on the products produced or
11 distributed.
12 Section 12. Unlawful acts by manufacturers or distributors.
13 (a) Unlawful coercive acts.--It shall be a violation for any
14 manufacturer, factory branch, distributor, field representative,
15 officer, agent or any representative whatsoever of such
16 manufacturer, factory branch or distributor licensed under this
17 act to require, attempt to require, coerce or attempt to coerce
18 any new vehicle dealer in this Commonwealth to:
19 (1) Order or accept delivery of any new vehicle, part or
20 accessory thereof, equipment or any other commodity not
21 required by law which shall not have been voluntarily ordered
22 by the new vehicle dealer, except that this paragraph is not
23 intended to modify or supersede any terms or provisions of
24 the franchise requiring new vehicle dealers to market a
25 representative line of those vehicles which the manufacturer
26 or distributor is publicly advertising.
27 (2) Order or accept delivery of any new vehicle with
28 special features, accessories or equipment not included in
29 the list price of such vehicles as publicly advertised by the
30 manufacturer or distributor.
20000S1315B1693 - 8 -
1 (3) Participate monetarily in an advertising campaign or
2 contest or to purchase unnecessary or unreasonable quantities
3 of any promotional materials, training materials, showroom or
4 other display decorations or materials at the expense of the
5 new vehicle dealer.
6 (4) Enter into any agreement with the manufacturer or to
7 do any other act prejudicial to the new vehicle dealer by
8 threatening to terminate or not renew a franchise or any
9 contractual agreement existing between the dealer and the
10 manufacturer or distributor, except that this paragraph is
11 not intended to preclude the manufacturer or distributor from
12 insisting on compliance with the reasonable terms or
13 provisions of the franchise or other contractual agreement
14 and notice in good faith to any new vehicle dealer of the new
15 vehicle dealer's violation of such terms or provisions shall
16 not constitute a violation of the act.
17 (5) Change the capital structure of the new vehicle
18 dealer or the means by or through which the new vehicle
19 dealer finances the operation of the dealership, provided
20 that the new vehicle dealer at all times meets any reasonable
21 capital standards determined by the manufacturer or
22 distributor in accordance with uniformly applied criteria,
23 and also provided that no change in the capital structure
24 shall cause a change in the principal management or have the
25 effect of a sale of the franchise without the consent of the
26 manufacturer or distributor. The consent shall be granted or
27 denied within 60 days of receipt of a written request from
28 the new vehicle dealer.
29 (6) (i) Refrain from participation in the management of,
30 investment in or the acquisition of any other line of new
20000S1315B1693 - 9 -
1 vehicle or related products. This [paragraph]
2 subparagraph does not apply unless the new vehicle dealer
3 maintains a reasonable line of credit for each make or
4 line of new vehicle, the new vehicle dealer remains in
5 compliance with the reasonable terms of the franchise
6 agreement and any reasonable facilities requirements of
7 the manufacturer or distributor, and no change is made in
8 the principal management of the new vehicle dealer. The
9 reasonable facilities requirements shall not include any
10 requirement that a new vehicle dealer establish or
11 maintain exclusive facilities, personnel or display space
12 when such requirements or any of them would be
13 unreasonable in light of economic conditions and would
14 not otherwise be justified by reasonable business
15 considerations. [Nothing in this paragraph] Except as
16 provided in subparagraph (ii), nothing in this
17 subparagraph shall permit the addition of a line-make to
18 the dealership facilities without the written consent of
19 the manufacturer or distributor. Any consent required
20 from the manufacturer or distributor with regard to
21 dualling of two or more franchises shall be granted or
22 denied within 60 days of receipt of a written request
23 from the new vehicle dealer.
24 (ii) No automobile or truck manufacturer or
25 distributor shall limit or restrict the addition of a
26 line-make to the dealership facilities where the new
27 vehicle dealer maintains a reasonable line of credit for
28 each make or line of new vehicle and the new vehicle
29 dealer remains in compliance with the reasonable terms of
30 the franchise agreement and any reasonable facilities
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1 requirements of an automobile or truck manufacturer or
2 distributor.
3 (7) Prospectively assent to a release, assignment,
4 novation, waiver or estoppel which would relieve any person
5 from liability to be imposed by this act or to require any
6 controversy between a new vehicle dealer and a manufacturer,
7 distributor or representative to be referred to any person
8 other than the duly constituted courts of the Commonwealth or
9 the United States of America, if such referral would be
10 binding upon the new vehicle dealer. A dealer and the
11 manufacturer, distributor or representative, by themselves or
12 through their respective counsel, are permitted to agree to
13 execute a written agreement or to arbitrate in a binding or
14 nonbinding manner after a controversy arises.
15 (8) Expand, construct or significantly modify facilities
16 without assurances that the manufacturer or distributor will
17 provide a reasonable supply of new vehicles within a
18 reasonable time so as to justify such an expansion in light
19 of the market and economic conditions or require a separate
20 facility for the sale or service of a line-make of a new
21 vehicle if the market and economic conditions do not clearly
22 justify the separate facility.
23 (9) Agree as a condition to granting or renewing a
24 franchise to waive, limit or disclaim a right that the dealer
25 may have to protest the establishment or relocation of
26 another vehicle dealer in the relevant market area as
27 provided in section 27, unless such agreement is voluntary.
28 (b) Violations.--It shall be a violation of this act for any
29 manufacturer, factory branch, distributor, field representative,
30 officer, agent or any representative whatsoever of such
20000S1315B1693 - 11 -
1 manufacturer, factory branch or distributor licensed under this
2 act to:
3 (1) Delay, refuse or fail to deliver new vehicles or new
4 vehicle parts or accessories in a reasonable time and in
5 reasonable quantity relative to the new vehicle dealer's
6 facilities and sales potential after acceptance of an order
7 from a new vehicle dealer having a franchise for the retail
8 sale of any new vehicle sold or distributed of an order from
9 a new vehicle dealer having a franchise for the retail sale
10 of any new vehicle sold or distributed by the manufacturer or
11 distributor as are covered by such franchise, if such
12 vehicle, parts or accessories are publicly advertised as
13 being available for immediate delivery. There is no violation
14 if the failure is caused by acts or causes beyond the control
15 of the manufacturer or distributor.
16 (2) Unfairly discriminate among its new vehicle dealers
17 with respect to warranty, recall, service contract or any
18 other service required by the manufacturer or distributor
19 with regard to labor or parts reimbursement.
20 (3) Unreasonably withhold consent to the sale, transfer
21 or exchange of the franchise to a qualified buyer capable of
22 being licensed as a new vehicle dealer in this Commonwealth
23 who meets the manufacturer's or distributor's reasonable
24 requirements for appointment as a dealer.
25 (4) Arbitrarily and capriciously withhold consent to the
26 relocation of an existing new vehicle dealer.
27 (5) Fail to respond in writing to a request for consent
28 as specified in paragraphs (3) and (4) within 60 days of
29 receipt of a written request on the forms, if any, generally
30 utilized by the manufacturer or distributor for such purposes
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1 and containing the information required. The failure to
2 respond within the time period set forth in this subsection
3 shall be deemed to be approval of the request and the
4 manufacturer or distributor shall execute and deliver a
5 franchise to the applicant within ten days of the expiration
6 of this time period. A manufacturer or distributor shall
7 acknowledge in writing to the applicant the receipt of the
8 forms, and, if the manufacturer or distributor requires
9 additional information to complete its review, the
10 manufacturer or distributor shall notify the applicant within
11 15 days of the receipt of the forms. If the manufacturer or
12 distributor fails to request additional information from the
13 applicant within 15 days after receipt of the initial forms,
14 the 60-day time period for approval shall be deemed to run
15 from the initial receipt date. Otherwise, the 60-day time
16 period for approval shall run from receipt of the
17 supplemental requested information. In no event shall the
18 total time period for approval exceed 75 days from the date
19 of the receipt of the initial forms.
20 (6) Prevent or attempt to prevent by contract or
21 otherwise, any new vehicle dealer from changing the executive
22 management control of the new vehicle dealer unless the
23 manufacturer or distributor, having the burden of proof, can
24 show that such change of executive management will result in
25 executive management or control by a person or persons who
26 are not of good moral character or who do not meet
27 reasonable, preexisting, and, with consideration given to the
28 volume of sales and service of the dealership, uniformly
29 applied minimum business experience standards. Where the
30 manufacturer or distributor rejects a proposed change in
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1 executive management control, the manufacturer or distributor
2 shall give written notice of its reasons to the dealer within
3 60 days of notice to the manufacturer by the dealer of the
4 proposed change; otherwise the change in the executive
5 management of the new vehicle dealer shall be presumptively
6 deemed approved.
7 (7) Offer in connection with a sale of a new vehicle or
8 vehicles to the Federal Government, the Commonwealth or any
9 political subdivision thereof, any discounts, refunds or any
10 other type of inducement to any new vehicle dealer without
11 making the same offer or offers available to all other of its
12 new vehicle dealers within this Commonwealth. [This paragraph
13 shall not be construed to prevent the offering of incentive
14 programs or other discounts if the discounts are equally
15 available to all franchised vehicle dealers in this
16 Commonwealth on a proportionally equal basis.]
17 (8) Fail to indemnify its franchised dealers,
18 notwithstanding the terms of any franchise agreement, against
19 any judgment for damages or settlement approved in writing by
20 the manufacturer or distributor, including, but not limited
21 to, court costs and reasonable attorney fees of the new
22 vehicle dealer, arising out of complaints, claims or
23 lawsuits, including, but not limited to, strict liability,
24 negligence, misrepresentation, express or implied warranty or
25 rescission of the sale as defined in 13 Pa.C.S. § 2608
26 (relating to revocation of acceptance in whole or in part) to
27 the extent that the judgment or settlement relates solely to
28 the alleged defective or negligent functions by the
29 manufacturer or distributor beyond the control of the dealer.
30 (9) Sell or exchange with a second or final stage
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1 manufacturer, retail consumer or end user except through a
2 licensed new vehicle dealer. This paragraph shall not apply
3 to manufacturer or distributor sales of new vehicles to the
4 Federal Government, charitable organizations and employees of
5 the manufacturer or distributor or to motorcycle
6 manufacturers or distributors.
7 (10) (i) Modify a franchise during the term of the
8 franchise or upon its renewal if the modification
9 substantially and adversely affects the new vehicle
10 dealer's rights, obligations, investment or return on
11 investment without giving 60 days' written notice of the
12 proposed modification to the new vehicle dealer unless
13 the modification is required by law, court order or the
14 board. Within the 60-day notice period, the new vehicle
15 dealer may file with the board and serve notice upon the
16 manufacturer or distributor a protest requesting a
17 determination of whether there is good cause for
18 permitting the proposed modification. The board shall
19 promptly schedule a hearing and decide the matter within
20 180 days from the date the protest is filed. Multiple
21 protests pertaining to the same proposed modification
22 shall be consolidated for hearing. The proposed
23 modification shall not take effect pending the
24 determination of the matter. In determining whether there
25 is good cause for permitting a proposed modification, the
26 board shall consider any relevant factors, including, but
27 not limited to:
28 (A) The reasons for the proposed modification.
29 (B) Whether the proposed modification is applied
30 to or affects all new vehicle dealers in a
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1 nondiscriminatory manner.
2 (C) Whether the proposed modification will have
3 a substantial and adverse effect upon the new vehicle
4 dealer's investment or return on investment.
5 (D) Whether the proposed modification is in the
6 public interest.
7 (E) Whether the proposed modification is
8 necessary to the orderly and profitable distribution
9 of products by the manufacturer or distributor.
10 (F) Whether the proposed modification is offset
11 by other modifications beneficial to the new vehicle
12 dealer.
13 (ii) This paragraph shall not apply to recreational
14 vehicle manufacturers, distributors or dealers.
15 (11) Fail or refuse to offer to its new vehicle dealers
16 all new model vehicles, parts or accessories manufactured for
17 that line-make franchise, or to require or attempt to require
18 a new vehicle dealer already a party to a franchise for the
19 retail sale of new vehicles for that line-make of a
20 manufacturer or distributor to possess a separate franchise
21 to order, obtain or sell additional new model vehicles, parts
22 or accessories, or vary for any similarly equipped new
23 vehicle, part, accessory or other merchandise the price
24 charged to any of its new vehicle dealers or require any of
25 its new vehicle dealers to pay an extra fee, remodel or
26 renovate the new vehicle dealer's existing facilities,
27 purchase or construct a new facility, unreasonably purchase
28 parts, supplies, tools, equipment, operational services,
29 other merchandise or unreasonably participate in training
30 programs in order to receive any new model vehicles, parts or
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1 accessories. Determination of the price of the vehicle, part
2 or accessory shall include the use by a manufacturer,
3 distributor or finance subsidiary of any device including,
4 but not limited to, incentive or sales promotion plans,
5 programs, refunds, rebates, credits or other consideration
6 which has the effect of causing a difference in the price of
7 a new vehicle, part or accessory offered to its new vehicle
8 dealers or the ultimate purchaser.
9 (12) Operate a system for the allocation, scheduling or
10 delivery of new vehicles, parts or accessories which is not
11 reasonable, fair or equitable to a new vehicle dealer, or
12 which directly or indirectly discriminates against a new
13 vehicle dealer or otherwise treats new vehicle dealers
14 differently as a result of a formula or other calculation or
15 process intended to gauge the performance of a new vehicle
16 dealer, or discriminates unreasonably between or among new
17 vehicle dealers in the sale of new vehicles owned by the
18 manufacturer or distributor. Upon the written request of any
19 of its new vehicle dealers, a manufacturer or distributor
20 shall disclose in writing to the new vehicle dealer the basis
21 on which new vehicles, parts and accessories are allocated,
22 scheduled and delivered among the new vehicle dealers of the
23 same line-make. The manufacturer distributor has the burden
24 of establishing the fairness of its allocation.
25 (13) Own, operate or control, either directly or
26 indirectly, any vehicle warranty or service facility. Nothing
27 in this subsection shall prohibit any manufacturer or
28 distributor from owning, operating or controlling any
29 warranty or service facility for warranty or service of
30 vehicles owned or operated by the manufacturer or
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1 distributor.
2 (14) Compel a dealer through a finance subsidiary of the
3 manufacturer or distributor to agree to unreasonable
4 operating requirements, or to directly or indirectly
5 terminate a new vehicle dealer through the actions of a
6 finance subsidiary of the manufacturer or distributor. This
7 subsection shall not limit the right of a financing entity to
8 engage in business practices in accordance with the trade of
9 retail or wholesale vehicle financing.
10 (15) Use any subsidiary corporation, affiliated
11 corporation or any other controlled corporation, partnership,
12 association, entity or person to accomplish what would
13 otherwise be illegal conduct under this act on the part of
14 the manufacturer or distributor.
15 (16) Release to any third party any customer information
16 which has been provided by the new vehicle dealer to the
17 manufacturer or distributor if the customer objects in
18 writing to releasing the information, unless the information
19 is necessary for the manufacturer or distributor to meet its
20 obligations to customers or new vehicle dealers under
21 requirements imposed by Federal or State law.
22 (17) Require or coerce or attempt to require or coerce a
23 new vehicle dealer to pay attorney fees of the manufacturer
24 or distributor related to hearings and appeals brought under
25 this act.
26 (c) Restriction on ownership of dealer.--
27 (1) Except as otherwise provided in this paragraph, a
28 manufacturer or distributor shall not directly or indirectly:
29 (i) own or hold an interest in a dealer licensed
30 under this act, which is engaging in the business of
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1 buying, selling or exchanging vehicles;
2 (ii) operate or control a dealer licensed under this
3 act, which is engaging in the business of buying, selling
4 or exchanging vehicles; or
5 (iii) engage in the business as a dealer.
6 Where a qualified person as described in paragraph (4) is not
7 part of the ownership and operation of a dealer, a
8 manufacturer or distributor shall be authorized to continue
9 to own, operate or control a dealer licensed under this act,
10 which has been owned, operated or controlled continuously for
11 the two years immediately preceding January 1, 2000, where
12 there is no other dealer available to own, operate or control
13 the licensed dealer. A manufacturer or distributor shall be
14 authorized to own up to a 5% equity interest in a publicly
15 traded company licensed to engage in the business as a dealer
16 under this act.
17 (2) A manufacturer or distributor may own or hold an
18 interest in a dealer, or otherwise operate or control a
19 dealer for a period not to exceed 12 months from the date the
20 manufacturer or distributor acquires an interest in the
21 dealer if:
22 (i) The person from whom the manufacturer or
23 distributor acquired the dealer was a franchised dealer.
24 (ii) The dealer is for sale by the manufacturer or
25 distributor at a reasonable price and on reasonable terms
26 and conditions.
27 (3) On a showing by a manufacturer or distributor of
28 good cause, the board may extend the time limit set forth in
29 paragraph (2). An extension under this paragraph may not
30 exceed 12 months. Where an extension under this paragraph is
20000S1315B1693 - 19 -
1 sought, the manufacturer or distributor shall provide notice
2 delivered 30 days before the extension request is filed with
3 the board to all the same line-make dealers within a 10-mile
4 radius of the manufacturer or distributor owned, operated or
5 controlled dealer. An application for an extension is subject
6 to protest by a dealer of the same line-make who is within
7 the 10-mile radius of the manufacturer or distributor owned,
8 operated or controlled dealer.
9 (4) For the purpose of broadening the diversity of its
10 dealer body and enhancing opportunities for qualified persons
11 who are part of a group who have historically been
12 underrepresented in its dealer body, or other qualified
13 persons who lack the resources to purchase a dealer outright,
14 but for no other purpose, a manufacturer or distributor may
15 temporarily own an interest in a dealer if the manufacturer's
16 or distributor's participation in the dealer is in a bona
17 fide relationship with a franchised dealer who:
18 (i) Has made a significant investment in the dealer,
19 subject to loss.
20 (ii) Has an ownership interest in the dealer.
21 (iii) Operates the dealer under a written agreement
22 to acquire full ownership of the dealer within a
23 reasonable time and under reasonable terms and
24 conditions.
25 (5) A manufacturer or distributor shall not unfairly
26 discriminate or compete in terms of any sales, service or
27 operational activities with a new vehicle dealer of the same
28 line-make when a manufacturer or distributor operates a new
29 vehicle dealer under this subsection.
30 (d) Applicability.--Subsections (b)(11) through (17) and (c)
20000S1315B1693 - 20 -
1 shall not apply to manufacturers, distributors or dealers of
2 manufactured housing, motorcycles or recreational vehicles.
3 Section 16. Manufacturer right of first refusal.
4 [A] (a) General rule.--Except as provided for in subsection
5 (b), a manufacturer or distributor shall be permitted to enact a
6 right of first refusal to acquire the new vehicle dealer's
7 assets or ownership in the event of a proposed change of all or
8 substantially all ownership or transfer of all or substantially
9 all dealership assets if all of the following requirements are
10 met:
11 (1) To exercise its right of first refusal, the
12 manufacturer or distributor must notify the dealer in writing
13 within the 60-day or 75-day time limitations established
14 under section 12(b)(5).
15 (2) The exercise of the right of first refusal will
16 result in the dealer and dealer's owners receiving the same
17 or greater consideration as they have contracted to receive
18 in connection with the proposed change of all or
19 substantially all ownership or transfer of all or
20 substantially all dealership assets.
21 (3) The proposed change of all or substantially all
22 ownership or transfer of all or substantially all dealership
23 assets does not involve the transfer of assets or the
24 transfer or issuance of stock by the dealer or one or more
25 dealer owners to a designated family member or members, the
26 spouse, child or grandchild, spouse of a child or grandchild,
27 brother, sister or parent of the dealer owner, of one or more
28 dealer owners or to a qualified manager or to a partnership
29 or corporation controlled by such persons.
30 (4) The manufacturer or distributor agrees to pay the
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1 reasonable expenses, including reasonable attorney fees which
2 do not exceed the usual, customary and reasonable fees
3 charged for similar work done for other clients, incurred by
4 the proposed new owner and transferee prior to the
5 manufacturer's or distributor's exercise of its right of
6 first refusal in negotiating and implementing the contract
7 for the proposed change of all or substantially all ownership
8 or transfer of all or substantially all dealership assets.
9 Notwithstanding the foregoing, no payment of such expenses
10 and attorney fees shall be required if the dealer has not
11 submitted or caused to be submitted an accounting of those
12 expenses within 20 days of the dealer's receipt of the
13 manufacturer's or distributor's written request for such an
14 accounting. Such an accounting may be requested by a
15 manufacturer or distributor before exercising its right of
16 first refusal.
17 (b) Automobile or truck manufacturers.--An automobile or
18 truck manufacturer or distributor shall not be permitted to
19 include a right of first refusal in its franchise which allows
20 the manufacturer or distributor to acquire all, or substantially
21 all, of the vehicle dealer's assets or ownership interest in the
22 event of a proposed change of all, or substantially all, of the
23 ownership interest in the dealer or the transfer of all, or
24 substantially, all of the assets of the dealer.
25 Section 27. Limitations on establishing or relocating dealers.
26 (a) Additional or relocation of new vehicle dealers.--
27 (1) In the event that a manufacturer seeks to enter into
28 a franchise establishing an additional new vehicle dealer or
29 relocating an existing new vehicle dealer within or into a
30 relevant market area where the same line-make is then
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1 represented, the manufacturer shall in writing first notify
2 the board and each new vehicle dealer in such line-make in
3 the relevant market area of the intention to establish an
4 additional dealer or to relocate an existing dealer within or
5 into that market area. Within 20 days after the end of any
6 appeal procedure provided by the manufacturer, any such new
7 vehicle dealer may file with the board a protest to the
8 establishing or relocating of the new vehicle dealer. When
9 such a protest is filed, the board shall inform the
10 manufacturer that a timely protest has been filed, and that
11 the manufacturer shall not establish the proposed new vehicle
12 dealer or relocate the new vehicle dealer until the board has
13 held a hearing, nor thereafter, if the board has determined
14 that there is good cause for not permitting the addition or
15 relocation of such new vehicle dealer.
16 [(1)] (2) The notice required by this subsection shall
17 include the following information:
18 (i) The location of the proposed additional or
19 relocating new vehicle dealer.
20 (ii) An explanation of the appeal procedure provided
21 by the manufacturer or distributor, if any, to the
22 establishment of the proposed additional new vehicle
23 dealer or relocation of the new vehicle dealer.
24 (iii) An explanation of the existing new vehicle
25 dealer's rights to file a protest with the board to the
26 establishment of the proposed new vehicle dealer or the
27 relocation of the new vehicle dealer.
28 [(2)] (3) Under this subsection, relocating an existing
29 new vehicle dealer shall include any instance where an
30 existing dealer sells or otherwise transfers all or
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1 substantially all of its business to a new owner and the new
2 owner, who has been approved by the manufacturer or
3 distributor to enter into a franchise agreement, seeks to
4 relocate the ongoing, operating dealership franchise from its
5 current licensed address to a site within the relevant market
6 area of the existing dealer which is not within five miles of
7 another licensed new vehicle dealer for the same line-make of
8 vehicle as set forth in subsection (b)(1).
9 (4) (i) Where an automobile or truck manufacturer or
10 distributor seeks to enter into an agreement or franchise
11 establishing an additional vehicle service or parts
12 facility or seeks to relocate an existing vehicle service
13 or parts facility within or into a radius of five miles
14 surrounding where an existing new vehicle dealer, vehicle
15 service or parts facility of the same line-make is then
16 represented, the automobile or truck manufacturer shall
17 in writing first notify the board and each affected new
18 vehicle dealer, vehicle service or parts facility of such
19 line-make of the intention to establish an additional
20 vehicle service or parts facility or to relocate an
21 existing vehicle service or parts facility within or into
22 the affected market areas.
23 (ii) The notice required by subparagraph (i) shall
24 include the following information:
25 (A) The location of the proposed additional or
26 relocating vehicle service or parts facility.
27 (B) An explanation of the appeal procedure
28 provided by the automobile or truck manufacturer or
29 distributor, if any, to the establishment of the
30 proposed additional vehicle service or parts facility
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1 or relocation of the vehicle service or parts
2 facility.
3 (C) An explanation of the existing new vehicle
4 dealer's or vehicle service or parts facility's
5 rights to file a protest with the board to the
6 establishment of the proposed vehicle service or
7 parts facility or the relocation of the vehicle
8 service or parts facility.
9 (iii) Within 20 days after the end of any appeal
10 procedure provided by the automobile or truck
11 manufacturer, any such new vehicle dealer, vehicle
12 service or parts facility may file with the board a
13 protest to the establishment or relocation of the vehicle
14 service or parts facility.
15 (iv) When such a protest is filed, the board shall
16 inform the automobile or truck manufacturer that a timely
17 protest has been filed, and that the automobile or truck
18 manufacturer shall not establish the proposed vehicle
19 service or parts facility or relocate the vehicle service
20 or parts facility until the board has held a hearing, nor
21 thereafter, if the board has determined that there is
22 good cause for not permitting the addition or relocation
23 of such vehicle service or parts facility.
24 (v) In determining whether good cause exists to
25 allow for the establishment or relocation of a vehicle
26 service or parts facility, the board shall consider the
27 same type of circumstances as established in subsection
28 (c).
29 (b) Nonapplicability of section.--This section does not
30 apply:
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1 (1) To the relocation of an existing dealer within that
2 dealer's relevant market area, provided that the relocation
3 not be at a site within five miles of a licensed new vehicle
4 dealer for the same line-make of vehicles.
5 (2) If the proposed new vehicle dealer is to be
6 established at or within two miles of a location at which a
7 former licensed new vehicle dealer for the same line-make of
8 new vehicle had ceased operating within the previous two
9 years. For purposes of this section, a former vehicle dealer
10 shall have ceased operations on the date on which the
11 franchise or agreement shall have been finally terminated.
12 (3) To the relocation of an existing dealer to a site
13 that is further away from the nearest dealer of the same
14 line-make.
15 (4) To manufactured housing or recreational vehicle
16 dealers.
17 (c) Board to consider existing circumstances.--In
18 determining whether good cause has been established for not
19 entering into or relocating an additional new vehicle dealer for
20 the same line-make, the board shall take into consideration the
21 existing circumstances, including, but not limited to:
22 (1) Permanency of the investment of both the existing
23 and proposed new vehicle dealers.
24 (2) Growth or decline in population and new vehicle
25 registrations in the relevant market area.
26 (3) Effect on the consuming public in the relevant
27 market area.
28 (4) Whether it is injurious or beneficial to the public
29 welfare for an additional new vehicle dealer to be
30 established.
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1 (5) Whether the new vehicle dealers of the same line-
2 make in that relevant market area are providing adequate
3 competition and convenient customer care for the vehicles of
4 the line-make in the market area which shall include the
5 adequacy of vehicle sales and service facilities, equipment,
6 supply of vehicle parts and qualified service personnel.
7 (6) Whether the establishment of an additional new
8 vehicle dealer would increase competition and whether such
9 increased competition would be in the public interest.
10 (7) The effect the denial of relocation will have on a
11 relocating dealer.
12 Section 5. This act shall take effect in 60 days.
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