Bill Text: CA AB2597 | 2009-2010 | Regular Session | Enrolled
Bill Title: Vehicles: manufacturers and distributors.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Vetoed) 2010-09-29 - Vetoed by Governor. [AB2597 Detail]
Download: California-2009-AB2597-Enrolled.html
BILL NUMBER: AB 2597 ENROLLED
BILL TEXT
PASSED THE SENATE AUGUST 26, 2010
PASSED THE ASSEMBLY AUGUST 30, 2010
AMENDED IN SENATE JULY 15, 2010
AMENDED IN ASSEMBLY JUNE 2, 2010
AMENDED IN ASSEMBLY APRIL 8, 2010
INTRODUCED BY Assembly Member Bill Berryhill
FEBRUARY 19, 2010
An act to amend Section 11713.3 of the Vehicle Code, relating to
vehicles.
LEGISLATIVE COUNSEL'S DIGEST
AB 2597, Bill Berryhill. Vehicles: manufacturers and distributors.
(1) Existing law generally requires a manufacturer branch,
remanufacturer, remanufacturer branch, distributor, distributor
branch, transporter, or dealer of vehicles to be licensed by the
Department of Motor Vehicles. Under existing law, it is unlawful for
a manufacturer, manufacturer branch, distributor, or distributor
branch to, among other things, dishonor a warranty, rebate, or other
incentive offered to the public or a dealer, as specified, or to
unfairly discriminate in favor of a dealership owned or controlled,
in whole or part, by a manufacturer or an entity that controls or is
controlled by a manufacturer or distributor.
This bill would additionally prohibit a manufacturer, manufacturer
branch, distributor, or distributor branch from unfairly
discriminating in favor of a motorsports dealer when acting as a
manufacturer, manufacturer branch, distributor, or distributor branch
of motorsports vehicles, and from requiring or attempting to require
a motorsports dealer to maintain a motorsports inventory in a
specified manner. The bill would also define a motorsports dealer for
these purposes.
(2) Under existing law, a violation of the above provisions
relating to occupational licensing and business regulations in the
Vehicle Code is a misdemeanor.
Because this bill would create a new crime, it would impose a
state-mandated local program.
(3) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 11713.3 of the Vehicle Code is amended to read:
11713.3. It is unlawful and a violation of this code for a
manufacturer, manufacturer branch, distributor, or distributor branch
licensed under this code to do any of the following:
(a) To refuse or fail to deliver in reasonable quantities and
within a reasonable time after receipt of an order from a dealer
having a franchise for the retail sale of a new vehicle sold or
distributed by the manufacturer or distributor a new vehicle or parts
or accessories to new vehicles as are covered by the franchise, if
the vehicle, parts, or accessories are publicly advertised as being
available for delivery or actually being delivered. This subdivision
is not violated, however, if the failure is caused by acts or causes
beyond the control of the manufacturer, manufacturer branch,
distributor, or distributor branch.
(b) To prevent or require, or attempt to prevent or require, by
contract or otherwise, a change in the capital structure of a
dealership or the means by or through which the dealer finances the
operation of the dealership, if the dealer at all times meets any
reasonable capital standards agreed to by the dealer and the
manufacturer or distributor, and if a change in capital structure
does not cause a change in the principal management or have the
effect of a sale of the franchise without the consent of the
manufacturer or distributor.
(c) To prevent or require, or attempt to prevent or require, a
dealer to change the executive management of a dealership, other than
the principal dealership operator or operators, if the franchise was
granted to the dealer in reliance upon the personal qualifications
of that person.
(d) (1) Except as provided in subdivision (t), to prevent or
require, or attempt to prevent or require, by contract or otherwise,
a dealer, or an officer, partner, or stockholder of a dealership, the
sale or transfer of any part of the interest of any of them to any
other person. No dealer, officer, partner, or stockholder shall,
however, have the right to sell, transfer, or assign the franchise,
or any right thereunder, without the consent of the manufacturer or
distributor except that the consent shall not be unreasonably
withheld.
(2) (A) For the transferring franchisee to fail, prior to the
sale, transfer, or assignment of a franchisee or the sale,
assignment, or transfer of all, or substantially all, of the assets
of the franchised business or a controlling interest in the
franchised business to another person, to notify the manufacturer or
distributor of the franchisee's decision to sell, transfer, or assign
the franchise. The notice shall be in writing and shall include all
of the following:
(i) The proposed transferee's name and address.
(ii) A copy of all of the agreements relating to the sale,
assignment, or transfer of the franchised business or its assets.
(iii) The proposed transferee's application for approval to become
the successor franchisee. The application shall include forms and
related information generally utilized by the manufacturer or
distributor in reviewing prospective franchisees if those forms are
readily made available to existing franchisees. As soon as
practicable after receipt of the proposed transferee's application,
the manufacturer or distributor shall notify the franchisee and the
proposed transferee of any information needed to make the application
complete.
(B) For the manufacturer or distributor, to fail, on or before 60
days after the receipt of all of the information required pursuant to
subparagraph (A), or as extended by a written agreement between the
manufacturer or distributor and the franchisee, to notify the
franchisee of the approval or the disapproval of the sale, transfer,
or assignment of the franchise. The notice shall be in writing and
shall be personally served or sent by certified mail, return receipt
requested, or by guaranteed overnight delivery service that provides
verification of delivery and shall be directed to the franchisee. Any
proposed sale, assignment, or transfer shall be deemed approved,
unless disapproved by the franchisor in the manner provided by this
subdivision. If the proposed sale, assignment, or transfer is
disapproved, the franchisor shall include in the notice of
disapproval a statement setting forth the reasons for the
disapproval.
(3) In an action in which the manufacturer's or distributor's
withholding of consent under this subdivision or subdivision (e) is
an issue, whether the withholding of consent was unreasonable is a
question of fact requiring the consideration of all the existing
circumstances.
(e) To prevent, or attempt to prevent, a dealer from receiving
fair and reasonable compensation for the value of the franchised
business. There shall be no transfer or assignment of the dealer's
franchise without the consent of the manufacturer or distributor,
which consent shall not be unreasonably withheld or conditioned upon
the release, assignment, novation, waiver, estoppel, or modification
of a claim or defense by the dealer.
(f) To obtain money, goods, services, or any other benefit from a
person with whom the dealer does business, on account of, or in
relation to, the transaction between the dealer and that other
person, other than for compensation for services rendered, unless the
benefit is promptly accounted for, and transmitted to, the dealer.
(g) To require a dealer to prospectively assent to a release,
assignment, novation, waiver, or estoppel that would relieve a person
from liability to be imposed by this article or to require a
controversy between a dealer and a manufacturer, distributor, or
representative, to be referred to a person other than the board, if
the referral would be binding on the dealer. This subdivision does
not, however, prohibit arbitration before an independent arbitrator.
(h) To increase prices of motor vehicles that the dealer had
ordered for private retail consumers prior to the dealer's receipt of
the written official price increase notification. A sales contract
signed by a private retail consumer is evidence of this order. In the
event of manufacturer price reductions, the amount of the reduction
received by a dealer shall be passed on to the private retail
consumer by the dealer if the retail price was negotiated on the
basis of the previous higher price to the dealer. Price reductions
apply to all vehicles in the dealer's inventory that were subject to
the price reduction. Price differences applicable to new model or
series motor vehicles at the time of the introduction of the new
models or series shall not be considered a price increase or price
decrease. This subdivision does not apply to price changes caused by
either of the following:
(1) The addition to a motor vehicle of required or optional
equipment pursuant to state or federal law.
(2) Revaluation of the United States dollar in the case of a
foreign-make vehicle.
(i) To fail to pay to a dealer, within a reasonable time following
receipt of a valid claim made by the dealer, a payment agreed to be
made by the manufacturer or distributor to the dealer by reason of
the fact that a new vehicle of a prior year model is in the dealer's
inventory at the time of introduction of new model vehicles.
(j) To deny the widow or heirs designated by a deceased owner of a
dealership the opportunity to participate in the ownership of the
dealership or successor dealership under a valid franchise for a
reasonable time after the death of the owner.
(k) To offer refunds or other types of inducements to a person for
the purchase of new motor vehicles of a certain line-make to be sold
to the state or a political subdivision of the state without making
the same offer to all other dealers in the same line-make within the
relevant market area.
( l ) To modify, replace, enter into, relocate,
terminate, or refuse to renew a franchise in violation of Article 4
(commencing with Section 3060) of Chapter 6 of Division 2.
(m) To employ a person as a representative who has not been
licensed pursuant to Article 3 (commencing with Section 11900) of
Chapter 4 of Division 5.
(n) To deny any dealer the right of free association with any
other dealer for a lawful purpose.
(o) (1) To compete with a dealer in the same line-make operating
under an agreement or franchise from a manufacturer or distributor in
the relevant market area.
(2) A manufacturer, branch, or distributor or an entity that
controls or is controlled by a manufacturer, branch, or distributor,
shall not be deemed to be competing in the following limited
circumstances:
(A) Owning or operating a dealership for a temporary period, not
to exceed one year. However, after a showing of good cause by a
manufacturer, branch, or distributor that it needs additional time to
operate a dealership in preparation for sale to a successor
independent franchisee, the board may extend the time period. The
board shall extend the time period until December 31, 2002, for a
manufacturer that meets all of the following requirements:
(i) The manufacturer has no more than 25 franchisees in the state
and those franchisees collectively operate dealership facilities in
at least 15 counties of the state.
(ii) All of the dealership facilities operated by the manufacturer'
s franchisees in the state trade exclusively in the manufacturer's
line-make.
(iii) No fewer than one-half of the manufacturer's franchisees in
the state own and operate two or more dealership facilities in their
assigned areas of responsibility.
(iv) The manufacturer holds a temporary ownership interest in no
more than two dealerships in the state that are located in the
relevant market area of any other franchisee of the same line-make
not owned, in whole or part, by the manufacturer.
(B) Owning an interest in a dealer as part of a bona fide dealer
development program that satisfies all of the following requirements:
(i) The sole purpose of the program is to make franchises
available to persons lacking capital, training, business experience,
or other qualities ordinarily required of prospective franchisees and
the dealer development candidate is an individual who is unable to
acquire the franchise without assistance of the program.
(ii) The dealer development candidate has made a significant
investment subject to loss in the franchised business of the dealer.
(iii) The program requires the dealer development candidate to
manage the day-to-day operations and business affairs of the dealer
and to acquire, within a reasonable time and on reasonable terms and
conditions, beneficial ownership and control of a majority interest
in the dealer and disassociation of a direct or indirect ownership or
control by the manufacturer, branch, or distributor.
(C) Owning a wholly owned subsidiary corporation of a distributor
that sells motor vehicles at retail, if, for at least three years
prior to January 1, 1973, the subsidiary corporation has been a
wholly owned subsidiary of the distributor and engaged in the sale of
vehicles at retail.
(3) (A) A manufacturer, branch, and distributor that owns or
operates a dealership in the manner described in subparagraph (A) of
paragraph (2) shall give written notice to the board, within 10 days,
each time it commences or terminates operation of a dealership and
each time it acquires or divests itself of an ownership interest.
(B) A manufacturer, branch, and distributor that owns an interest
in a dealer in the manner described in subparagraph (B) of paragraph
(2) shall give written notice to the board, annually, of the name and
location of each dealer in which it has an ownership interest.
(p) To unfairly discriminate among its franchisees with respect to
warranty reimbursement or authority granted to its franchisees to
make warranty adjustments with retail customers.
(q) To sell vehicles to persons not licensed under this chapter
for resale.
(r) To fail to affix an identification number to a park trailer,
as described in Section 18009.3 of the Health and Safety Code, that
is manufactured on or after January 1, 1987, and that does not
clearly identify the unit as a park trailer to the department. The
configuration of the identification number shall be approved by the
department.
(s) To dishonor a warranty, rebate, or other incentive offered to
the public or a dealer in connection with the retail sale of a new
motor vehicle, based solely upon the fact that an autobroker arranged
or negotiated the sale. This subdivision does not prohibit the
disallowance of that rebate or incentive if the purchaser or dealer
is ineligible to receive the rebate or incentive pursuant to any
other term or condition of a rebate or incentive program.
(t) To exercise a right of first refusal or any other right
requiring a franchisee or owner of a franchise to sell, transfer, or
assign to the franchisor, or to a nominee of the franchisor, all or a
material part of the franchised business or of the assets of that
business unless all of the following requirements are met:
(1) The franchise authorizes the franchisor to exercise a right of
first refusal to acquire the franchised business or assets of that
business in the event of a proposed sale, transfer, or assignment.
(2) The franchisor gives written notice of its exercise of the
right of first refusal no later than 45 days after the franchisor
receives all of the information required pursuant to subparagraph (A)
of paragraph (2) of subdivision (d).
(3) The sale, transfer, or assignment being proposed relates to
not less than all or substantially all of the assets of the
franchised business or to a controlling interest in the franchised
business.
(4) The proposed transferee is neither a family member of an owner
of the franchised business, nor a managerial employee of the
franchisee owning 15 percent or more of the franchised business, nor
a corporation, partnership, or other legal entity owned by the
existing owners of the franchised business. For purposes of this
paragraph, a "family member" means the spouse of an owner of the
franchised business, the child, grandchild, brother, sister, or
parent of an owner, or a spouse of one of those family members. This
paragraph does not limit the rights of the franchisor to disapprove a
proposed transferee as provided in subdivision (d).
(5) Upon the franchisor's exercise of the right of first refusal,
the consideration paid by the franchisor to the franchisee and owners
of the franchised business shall equal or exceed all consideration
that each of them were to have received under the terms of, or in
connection with, the proposed sale, assignment, or transfer, and the
franchisor shall comply with all the terms and conditions of the
agreement or agreements to sell, transfer, or assign the franchised
business.
(6) The franchisor shall reimburse the proposed transferee for
expenses paid or incurred by the proposed transferee in evaluating,
investigating, and negotiating the proposed transfer to the extent
those expenses do not exceed the usual, customary, and reasonable
fees charged for similar work done in the area in which the
franchised business is located. These expenses include, but are not
limited to, legal and accounting expenses and expenses incurred for
title reports and environmental or other investigations of real
property on which the franchisee's operations are conducted. The
proposed transferee shall provide the franchisor with a written
itemization of those expenses and a copy of all nonprivileged reports
and studies for which expenses were incurred, if any, within 30 days
of the proposed transferee's receipt of a written request from the
franchisor for that accounting. The franchisor shall make payment
within 30 days of exercising the right of first refusal.
(u) (1) To unfairly discriminate in favor of any dealership owned
or controlled, in whole or part, by a manufacturer or distributor or
an entity that controls or is controlled by the manufacturer or
distributor. Unfair discrimination includes, but is not limited to,
the following:
(A) The furnishing to a franchisee or dealer that is owned or
controlled, in whole or part, by a manufacturer, branch, or
distributor of any of the following:
(i) A vehicle that is not made available to each franchisee
pursuant to a reasonable allocation formula that is applied
uniformly, and a part or accessory that is not made available to all
franchisees on an equal basis when there is no reasonable allocation
formula that is applied uniformly.
(ii) A vehicle, part, or accessory that is not made available to
each franchisee on comparable delivery terms, including the time of
delivery after the placement of an order. Differences in delivery
terms due to geographic distances or other factors beyond the control
of the manufacturer, branch, or distributor shall not constitute
unfair competition.
(iii) Information obtained from a franchisee by the manufacturer,
branch, or distributor concerning the business affairs or operations
of a franchisee in which the manufacturer, branch, or distributor
does not have an ownership interest. The information includes, but is
not limited to, information contained in financial statements and
operating reports, the name, address, or other personal information
or buying, leasing, or service behavior of a dealer customer, and any
other information which, if provided to a franchisee or dealer owned
or controlled by a manufacturer or distributor, would give that
franchisee or dealer a competitive advantage. This clause does not
apply if the information is provided pursuant to a subpoena or court
order, or to aggregated information made available to all
franchisees.
(B) Referring a prospective purchaser or lessee to a dealer in
which a manufacturer, branch, or distributor has an ownership
interest, unless the prospective purchaser or lessee resides in the
area of responsibility assigned to that dealer or the prospective
purchaser or lessee requests to be referred to that dealer.
(2) This subdivision does not prohibit a franchisor from granting
a franchise to prospective franchisees or assisting those franchisees
during the course of the franchise relationship as part of a program
or programs to make franchises available to persons lacking capital,
training, business experience, or other qualifications ordinarily
required of prospective franchisees.
(v) (1) To access, modify, or extract information from a
confidential dealer computer record, as defined in Section 11713.25,
without obtaining the prior written consent of the dealer and without
maintaining administrative, technical, and physical safeguards to
protect the security, confidentiality, and integrity of the
information.
(2) Paragraph (1) does not limit a duty that a dealer may have to
safeguard the security and privacy of records maintained by the
dealer.
(w) (1) To use electronic, contractual, or other means to prevent
or interfere with any of the following:
(A) The lawful efforts of a dealer to comply with federal and
state data security and privacy laws.
(B) The ability of a dealer to do either of the following:
(i) Ensure that specific data accessed from the dealer's computer
system is within the scope of consent specified in subdivision (v).
(ii) Monitor specific data accessed from or written to the dealer'
s computer system.
(2) Paragraph (1) does not limit a duty that a dealer may have to
safeguard the security and privacy of records maintained by the
dealer.
(x) (1) To unfairly discriminate in favor of a motorsports dealer
when acting as a manufacturer, manufacturer branch, distributor, or
distributor branch of motorsports vehicles. Unfair discrimination
includes all of the following:
(A) Furnishing to a motorsports dealer any of the following:
(i) A vehicle, part, or accessory that is not made available to
all motorsports dealers at the same actual price and pursuant to a
reasonable allocation formula applied uniformly and not based on the
motorsports inventory size or purchasing history or volume of the
dealer.
(ii) A vehicle, part, or accessory that is not made available to
all motorsports dealers on comparable financing and delivery terms,
including the time of delivery after the placement of an order.
Differences in delivery terms due to geographic distances or other
factors beyond the control of the manufacturer, branch, or
distributor shall not constitute unfair discrimination.
(B) Referring a prospective purchaser or lessee to a motorsports
dealer unless the prospective purchaser or lessee resides in the area
of responsibility assigned to that motorsports dealer or the
prospective purchaser or lessee requests to be referred to that
motorsports dealer.
(2) To require or attempt to require a motorsports dealer to
maintain a motorsports vehicle inventory in excess of a reasonable
minimum requirement not to exceed a 60-day supply based on the rate
of sales of the motorsports dealer for the preceding 90 days.
(3) For purposes of this subdivision, a "motorsports vehicle"
means a motorcycle, motor-driven cycle, motorized scooter, motorized
bicycle, all-terrain vehicle, or a snowmobile.
(4) For purposes of this subdivision, a "motorsports dealer" means
a person licensed pursuant to this article to engage in the sale of
more than one type of motorsports vehicle, as defined in paragraph
(4) that is manufactured by the same company or by a subsidiary of
the same company.
(5) A motorsports dealer engaged in more than one active franchise
agreement, except for those franchise agreements from a subsidiary
of the same parent company, shall not be considered to be a multiline
motorsports dealer if those franchise agreements cover one type of
motorsports vehicle.
(y) As used in this section, "area of responsibility" is a
geographic area specified in a franchise that is used by the
franchisor for the purpose of evaluating the franchisee's performance
of its sales and service obligations.
SEC. 2. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.
