BILL NUMBER: AB 2291	CHAPTERED  09/20/06

	CHAPTER  353
	FILED WITH SECRETARY OF STATE  SEPTEMBER 20, 2006
	APPROVED BY GOVERNOR  SEPTEMBER 20, 2006
	PASSED THE ASSEMBLY  AUGUST 29, 2006
	PASSED THE SENATE  AUGUST 24, 2006
	AMENDED IN SENATE  AUGUST 14, 2006
	AMENDED IN SENATE  AUGUST 7, 2006
	AMENDED IN ASSEMBLY  MAY 31, 2006
	AMENDED IN ASSEMBLY  APRIL 17, 2006

INTRODUCED BY   Assembly Member Evans

                        FEBRUARY 22, 2006

   An act to amend Section 11713.3 of, and to add Section 11713.25
to, the Vehicle Code, relating to vehicles.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2291, Evans  Vehicles: dealer: data security.
   (1) Existing law prohibits any motor vehicle manufacturer,
manufacturer branch, distributor, or distributor branch that is
licensed under the Vehicle Code from engaging in certain conduct
involving a dealer having a franchise for the sale of new vehicles or
vehicle parts including prohibiting those manufacturers, branches,
and distributors from competing with a dealer, as specified, or
engaging in unfair discrimination in favor of any dealership owned or
controlled by those entities.
   This bill would additionally prohibit a motor vehicle
manufacturer, manufacturer branch, distributor, or distributor branch
from accessing, modifying, or extracting information from a
confidential dealer computer record, as specified, or using
electronic, contractual, or using other means to prevent or interfere
with the lawful efforts of a dealer to comply with specified data
security and privacy laws, to ensure that the accessed data is within
the scope of consent, or to monitor data accessed from the dealer's
computer system. The bill would provide that these prohibitions do
not limit a duty that a dealer may have to safeguard the security and
privacy of records maintained by the dealer.
   Because a violation of these provisions would be a crime, the bill
would impose a state-mandated local program.
   (2) Existing law regulates the handling of customer records and
requires that a business take all reasonable steps to destroy a
customer's records in its custody or control when they are no longer
to be retained. Existing law requires a person or business that owns
or licenses computerized data that includes personal information, as
defined, to disclose any breach of the security of its system, as
specified.
   This bill would prohibit a computer vendor from accessing,
modifying, or extracting information from a confidential dealer
computer record, as defined, or personally identifiable consumer
data, as defined, from a dealer without 1st obtaining an express
written consent from the dealer and without maintaining specified
safeguards to protect the information. The bill would prohibit
requiring a dealer, as a condition of doing or continuing to do
business, to give express consent, except under specified
circumstances.
   Since a violation of the Vehicle Code is a crime, by proscribing
certain activities related to a confidential dealer computer record
or personally identifiable consumer data, this bill would create a
new crime, thereby imposing 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 any
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 any new vehicle sold or
distributed by the manufacturer or distributor, any 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, any 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,
any dealer, or any officer, partner, or stockholder of any
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 any 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 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 any claim or defense by the dealer.
   (f) To obtain money, goods, services, or any other benefit from
any other 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 any
person from liability to be imposed by this article or to require any
controversy between a dealer and a manufacturer, distributor, or
representative, to be referred to any 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 each such 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 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 by a dealer thereof, any 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 any refunds or other types of inducements to any
person for the purchase of new motor vehicles of a certain line-make
to be sold to the state or any political subdivision thereof 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 any 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 any entity that
controls or is controlled by, a manufacturer, branch, or distributor,
shall not, however, 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 any
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 any 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) Every 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) Every 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 any 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 shall 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 any owner thereof to sell, transfer, or
assign to the franchisor, or to any nominee of the franchisor, all or
any material part of the franchised business or of the assets
thereof 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 thereof
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.
Nothing contained in this paragraph limits 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 any
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 any real
property on which the franchisee's operations are conducted. The
proposed transferee shall provide the franchisor 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 any franchisee or dealer that is owned or
controlled, in whole or part, by a manufacturer, branch, or
distributor of any of the following:
   (i) Any vehicle that is not made available to each franchisee
pursuant to a reasonable allocation formula that is applied
uniformly, and any 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) Any 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) Any information obtained from a franchisee by the
manufacturer, branch, or distributor concerning the business affairs
or operations of any 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 any
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) Nothing in this subdivision shall be interpreted to 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) 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.  Section 11713.25 is added to the Vehicle Code, to read:
     11713.25. (a) A computer vendor shall not do any of the
following:
   (1) Access, modify, or extract information from a confidential
dealer computer record or personally identifiable consumer data from
a dealer without first obtaining express written consent from the
dealer and without maintaining administrative, technical, and
physical safeguards to protect the security, confidentiality, and
integrity of the information.
   (2) (A) Except as provided in subparagraph (B), require a dealer
as a condition of doing or continuing to do business, to give express
consent to perform the activities specified in paragraph (1).
   (B) Express consent may be required as a condition of doing or
continuing to do business if the consent is limited to permitting
access to personally identifiable consumer data to the extent
necessary to do any of the following:
   (i) To protect against, or prevent actual or potential fraud,
unauthorized transactions, claims, or other liability, or to protect
against breaches of confidentiality or security of consumer records.

   (ii) To comply with institutional risk control or to resolve
consumer disputes or inquiries.
   (iii) To comply with federal, state, or local laws, rules, and
other applicable legal requirements, including lawful requirements of
a law enforcement or governmental agency.
   (iv) To comply with lawful requirements of a self-regulatory
organization or as necessary to perform an investigation on a matter
related to public safety.
   (v) To comply with a properly authorized civil, criminal, or
regulatory investigation, or subpoena or summons by federal, state,
or local authorities.
   (vi) To make other use of personally identifiable consumer data
with the express written consent of the consumer that has not been
revoked by the consumer.
   (3) Use electronic, contractual, or other means to prevent or
interfere with the lawful efforts of a dealer to comply with federal
and state data security and privacy laws and to maintain the
security, integrity, and confidentiality of confidential dealer
computer records, including, but not limited to, the ability of a
dealer to monitor specific data accessed from or written to the
dealer computer system. Waiver of this subdivision or purported
consents authorizing the activities proscribed by the subdivision is
void.
   (b) A dealer shall have the right to prospectively revoke an
express consent by providing a 10-day written notice to the computer
vendor to whom the consent was provided or on any shorter period of
notice agreed to by the computer vendor and the dealer. An agreement
that requires a dealer to waive its right to prospectively revoke an
express consent is void.
   (c) For the purposes of this section, the following terms mean as
follows:
   (1) "Confidential dealer computer record" means a computer record
residing on the dealer's computer system that contains, in whole or
in part, any personally identifiable consumer data, or the dealer's
financial or other proprietary data.
   (2) "Computer vendor" means a person, other than a manufacturer,
manufacturer branch, distributor, or distributor branch, who in the
ordinary course of that person's business configured, sold, leased,
licensed, maintained, or otherwise made available to a dealer, a
dealer computer system.
   (3) "Dealer computer system" means a computer system or
computerized application primarily designed for use by and sold to a
motor vehicle dealer that, by ownership, lease, license, or
otherwise, is used by and in the ordinary course of business of a
dealer.
   (4) "Express consent" means the unrevoked written consent signed
by a dealer that specifically describes the data that may be
accessed, the means by which it may be accessed, the purpose for
which it may be used, and the person or class of persons to whom it
may be disclosed.
   (5) "Personally identifiable consumer data" means information that
is any of the following:
   (A) Information of the type specified in subparagraph (A) of
paragraph (6) of subdivision (e) of Section 1798.83 of the Civil
Code.
   (B) Information that is nonpublic personal information as defined
in Section 313.3(n)(1) of Title 16 of the Code of Federal
Regulations.
   (C) Information that is nonpublic personal information as defined
in subdivision (a) of Section 4052 of the Financial Code.
   (d) This section does not limit a duty that a dealer may have to
safeguard the security and privacy of records maintained by the
dealer.
  SEC. 3.  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.