BILL NUMBER: SB 642 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY JUNE 30, 2011
AMENDED IN ASSEMBLY JUNE 7, 2011
INTRODUCED BY Senator Padilla
FEBRUARY 18, 2011
An act to amend Sections 3050.7 and 11713.3 of the Vehicle Code,
relating to vehicles.
LEGISLATIVE COUNSEL'S DIGEST
SB 642, as amended, Padilla. Vehicles: manufacturers and
distributors.
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 engage in specified activity. Violation of this law is
a crime.
This bill would provide that it is unlawful for a manufacturer,
manufacturer branch, distributor, or distributor branch, directly or
indirectly through an affiliate, to engage in this specified
activity.
Under existing law, it is unlawful for a manufacturer,
manufacturer branch, distributor, or distributor branch to require a
dealer to prospectively assent to a release, assignment, novation,
waiver, or estoppel that would relieve a person from liability, among
other things.
This bill would delete this prohibition and instead would prohibit
a manufacturer, manufacturer branch, distributor, or distributor
branch from obtaining or enforcing against a dealer an agreement
that, among other things, modifies or disclaims any duty or
obligation of a manufacturer, manufacturer branch, distributor,
distributor branch, or representative, or a right or privilege of a
dealer. The bill would also provide that such an agreement would be
unenforceable and that these provisions do not affect the
enforceability of any stipulated order or other order of the board
, or of certain provisions in other contracts or prohibit
a specified voluntary agreement
agreements .
Existing law prohibits a manufacturer, manufacturer branch,
distributor, or distributor branch from competing with a dealer in
the same line-make operating under an agreement or franchise from a
manufacturer or distributor in the relevant market area, with
exceptions in limited circumstances, including those circumstances
where the manufacturer or distributor owns or operates a dealership
for a temporary period, not to exceed one year.
This bill would specify that the above exception applies only at
the location of a former dealership of the same line-make that has
been out of operation for less than 6 months.
Existing law requires a manufacturer, branch, and distributor
branch that owns or operates a dealership for a temporary period, to
give written notice to the New Motor Vehicle Board each time it
acquires or divests itself of an ownership interest.
This bill would also require a manufacturer, branch, and
distributor branch to provide the notice each time it changes an
ownership interest.
Existing law requires a manufacturer, branch, and distributor that
owns an interest in a dealer, as part of a bona fide dealer
development program, to give written notice to the board, annually of
the name and location of each dealer in which it has an ownership
interest.
This bill would also require the manufacturer, branch, and
distributor to give notice regarding the name of the bona fide dealer
development owner or owners, and the ownership interests of each
owner expressed as a percentage.
Existing law prohibits a manufacturer, manufacturer branch,
distributor, or distributor branch from unfairly discriminating in
favor of any dealership owned or controlled, in whole or in part, by
a manufacturer or distributor or an entity that controls or is
controlled by the manufacturer or distributor. Existing law describes
unfair discrimination as, among other things, the furnishing to any
franchisee or dealer that is owned or controlled, in whole or part,
by a manufacturer, branch, or distributor of certain things,
including furnishing a vehicle that is not made available to each
franchisee, as provided.
This bill would also include furnishing sales or service
incentives, among other things, that are not made available to all
California franchisees of the same line-make on an equivalent basis,
as unfair discrimination.
This bill would also prohibit a manufacturer, manufacturer branch,
distributor, or distributor branch from unfairly discriminating
against a franchisee selling a service contract or debt cancellation
agreement, among other things, as provided. The bill would describe
unfair discrimination as express or implied statements that the
dealer is under an obligation to exclusively sell or offer to sell
service contracts, among other things. By creating a new crime, the
bill would impose a state-mandated local program.
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.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) The distribution, sale, and service of new motor vehicles in
this state vitally affects the state's general economy and the public
welfare.
(b) The new motor vehicle franchise system, which operates within
a strictly defined and highly regulated statutory scheme,
assures ensures consumers of a well-organized
distribution system for the availability and sale of new motor
vehicles throughout the state; provides a network of quality warranty
and repair facilities to maintain those vehicles; and creates a
cost-effective method for the state to police those systems through
the licensing and regulation of private sector franchisors and
franchisees.
(c) It is the intent of the Legislature, in acting
enacting this act to prohibit franchisors from
avoiding state franchise protection laws, to ensure fair competition
among new motor vehicle dealer franchisees that are independently
owned and those owned by their franchisors, and to clarify that the
existing prohibition against franchisor ownership of a dealership
located within a 10-mile radius of a nonfranchisor-owned dealership
of the same line-make is subject only to certain limited exceptions
that may not be used to justify any improper purpose, including the
operation of a dealership by a sophisticated investor or operator
posing as a dealer development candidate.
SEC. 2. Section 3050.7 of the Vehicle Code is amended to read:
3050.7. (a) The board may adopt stipulated decisions and orders,
without a hearing pursuant to Section 3066, to resolve one or more
issues raised by a protest or petition filed with the board. Whenever
the parties to a protest or petition submit a proposed stipulated
decision and proposed order of the board, a copy of the proposed
stipulated decision and order shall be transmitted by the executive
director of the board to each member of the board. The proposed
stipulated decision and order shall be deemed to be adopted by the
board unless a member of the board notifies the executive director of
the board of an objection thereto within 10 days after that board
member has received a copy of the proposed stipulated decision and
order.
(b) If the board adopts a stipulated decision and order to resolve
a protest filed pursuant to Section 3060 in which the parties
stipulate that good cause exists for the termination of the franchise
of the protestant, and the order provides for a conditional or
unconditional termination of the franchise of the protestant,
paragraph (2) of subdivision (a) of Section 3060, which requires a
hearing to determine whether good cause exists for termination of the
franchise, is inapplicable to the proceedings. If the stipulated
decision and order provides for an unconditional termination of the
franchise, the franchise may be terminated without further
proceedings by the board. If the stipulated decision and order
provides for the termination of the franchise, conditioned upon the
failure of a party to comply with specified conditions, the franchise
may be terminated upon a determination, according to the terms of
the stipulated decision and order, that the conditions have not been
met. If the stipulated decision and order provides for the
termination of the franchise conditioned upon the occurrence of
specified conditions, the franchise may be terminated upon a
determination, according to the terms of the stipulated decision and
order, that the stipulated conditions have occurred.
SEC. 3. 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 pursuant to this code to do, directly or indirectly through
an affiliate, 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
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 a part of the interest of any of them to another
person. A dealer, officer, partner, or stockholder shall not,
however, have the right to sell, transfer, or assign the franchise,
or a 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 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. A
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 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 not be a 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 another 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) (1) To Except as provided in paragraph
(3), to obtain from a dealer or enforce against a dealer an
agreement, provision, release, assignment, novation, waiver, or
estoppel that does any of the following:
(A) Modifies or disclaims a duty or obligation of a manufacturer,
manufacturer branch, distributor, distributor branch, or
representative, or a right or privilege of a dealer, pursuant to
Chapter 4 (commencing with Section 11700) of Division 5 or Chapter 6
(commencing with Section 3000) of Division 2.
(B) Limits or constrains the right of a dealer to file, pursue, or
submit evidence in connection with a protest before the board.
(C) Provides for the termination of a franchise by a dealer.
(C) Requires a dealer to terminate a franchise.
(D) Requires a controversy between a manufacturer, manufacturer
branch, distributor, distributor branch, or representative and a
dealer to be referred to a person for a binding determination.
However, this subparagraph does not prohibit arbitration before an
independent arbitrator.
(2) An agreement, provision, release, assignment, novation,
waiver, or estoppel prohibited by this subdivision shall be
unenforceable and void whether entered into before or during the term
of a franchise. This subdivision shall not limit or restrict the
terms upon which parties to a protest before the board, civil action,
or other proceeding can settle or resolve the protest or other
claim, or stipulate to evidentiary or procedural matters during the
course of a protest, civil action, or other proceeding.
unenforceable and void.
(3) This subdivision does not do any of the following:
(A) Limit or restrict the terms upon which parties to a protest
before the board, civil action, or other proceeding can settle or
resolve, or stipulate to evidentiary or procedural matters during the
course of, a protest, civil action, or other proceeding.
(A)
(B) Affect the enforceability of any stipulated order
or other order entered into by the board.
(C) Affect the enforceability of any provision in a contract if
the provision is not prohibited under this subdivision or any other
law.
(D) Affect the enforceability of a provision in any contract
entered into on or before December 31, 2011.
(B)
(E) Prohibit a dealer from waiving its right to file a
protest pursuant to Section 3065.1 if the waiver agreement is
entered into after a franchisor incentive program claim has
been disapproved by the fra nchisor and the
waiver is voluntarily given as part of an agreement to settle that
claim.
(C)
(F) Prohibit a voluntary agreement supported by
substantial valuable consideration,
other than granting or renewing a franchise, that does both of the
following:
(i) Provides that a dealer establish or maintain exclusive
facilities, personnel, or display space or provides that a dealer
make a material alteration, expansion, or addition to a dealership
facility.
(ii) Contains no waiver or other provision prohibited by
subparagraph (A), (B), (C) or (D) of paragraph (1).
(G) Prohibit an agreement separate from the franchise agreement
that implements a dealer's election to terminate the franchise if the
agreement is conditioned only on a specified time for termination or
payment of consideration to the dealer.
(H) (i) Prohibit a voluntary waiver agreement, supported by
valuable consideration, other than the consideration of renewing a
franchise, to waive the right of a dealer to file a protest under
Section 3062 for the proposed establishment or relocation of a
specific proposed dealership, if the waiver agreement provides all of
the following:
(I) The approximate address at which the proposed dealership will
be located.
(II) The planning potential used to establish the proposed
dealership's facility, personnel, and capital requirements
(III) An approximation of projected vehicle and parts sales, and
number of vehicles to be serviced at the proposed dealership
(IV) Whether the franchisor or affiliate will hold an ownership
interest in the proposed dealership or real property of the proposed
dealership, and the approximate percentage of any franchisor or
affiliate ownership interest in the proposed dealership.
(V) The line-makes to be operated at the proposed dealership.
(VI) If known at the time the wavier agreement is executed, the
identity of the dealer who will operate the proposed dealership.
(VII) The date the waiver agreement is to expire, which may not be
more than 30 months after the date of execution of the waiver
agreement.
(ii) Notwithstanding the provisions of a waiver agreement entered
into pursuant to the provisions of this subparagraph, a dealer may
file a protest under Section 3062 if any of the information provided
pursuant to clause (i) has become materially inaccurate since the
waiver agreement was executed. Any determination of the
enforceability of a waiver agreement shall be determined by the board
and the franchisor shall have the burden of proof.
(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 the 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, 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 a dealer the right of free association with another
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, 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 at the location of a former dealership of the same
line-make that has been out of operation for less than six months.
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.
(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) 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, changes, 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, the
name of the bona fide dealer development owner or owners, and the
ownership interests of each owner expressed as a percentage.
(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 a person not licensed pursuant to 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 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 other right requiring
a franchisee or an owner of the 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 the
franchised 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 the
franchised 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 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 a dealership owned or
controlled, in whole or in 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 in 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
other information that, 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.
(iv) Sales or service incentives, discounts, or promotional
programs that are not made available to all California franchises of
the same line-make on an equivalent basis.
(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 against a franchisee selling a
service contract, debt cancellation agreement, maintenance agreement,
or similar product not approved, endorsed, sponsored, or offered by
the manufacturer, manufacturer branch, distributor, or distributor
branch or affiliate. For purposes of this subdivision, unfair
discrimination includes, but is not limited to, any of the following:
(A) Express or implied statements that the dealer is under an
obligation to exclusively sell or offer to sell service contracts,
debt cancellation agreements, or similar products approved, endorsed,
sponsored, or offered by the manufacturer, manufacturer branch,
distributor, or distributor branch or affiliate.
(B) Express or implied statements that selling or offering to sell
service contracts, debt cancellation agreements, maintenance
agreements, or similar products not approved, endorsed, sponsored, or
offered by the manufacturer, manufacturer branch, distributor, or
distributor branch or affiliate, or the failure to sell or offer to
sell service contracts, debt cancellation agreements, maintenance
agreements, or similar products approved, endorsed, sponsored, or
offered by the manufacturer, manufacturer branch, distributor, or
distributor branch or affiliate will have any negative consequences
for the dealer.
(C) Measuring a dealer's performance under a franchise agreement
based upon the sale of service contracts, debt cancellation
agreements, or similar products approved, endorsed, sponsored, or
offered by the manufacturer, manufacturer branch, distributor, or
distributor branch or affiliate.
(D) Requiring a dealer to actively promote the sale of service
contracts, debt cancellation agreements, or similar products
approved, endorsed, sponsored, or offered by the manufacturer,
manufacturer branch, distributor, or distributor branch or affiliate.
(E) Conditioning access to vehicles or parts, or vehicle sales or
service incentives upon the sale of service contracts, debt
cancellation agreements, or similar products approved, endorsed,
sponsored, or offered by the manufacturer, manufacturer branch,
distributor, or distributor branch or affiliate.
(2) Unfair discrimination does not include, and nothing shall
prohibit a manufacturer from, offering an incentive program to
vehicle dealers who voluntarily sell or offer to sell service
contracts, debt cancellation agreements, or similar products
approved, endorsed, sponsored, or offered by the manufacturer,
manufacturer branch, distributor, or distributor branch or affiliate,
if the program does not provide vehicle sales or service incentives.
(3) This subdivision does not prohibit a manufacturer,
manufacturer branch, distributor, or distributor branch from
requiring a franchisee that sells a used vehicle as "certified" under
a certified used vehicle program established by the manufacturer,
manufacturer branch, distributor, or distributor branch to provide a
service contract approved, endorsed, sponsored, or offered by the
manufacturer, manufacturer branch, distributor, or distributor
branch.
(4) Unfair discrimination does not include, and nothing shall
prohibit a franchisor from requiring a franchisee to provide, the
following notice prior to the sale of the service contract if the
service contract is not provided or backed by the franchisor and the
vehicle is of the franchised line-make:
"Service Contract Disclosure
The service contract you are purchasing is not provided or backed by
the manufacturer of the vehicle you are purchasing. The manufacturer
of the vehicle is not responsible for claims or repairs under this
service contract.
_____________________
Signature of Purchaser"
(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. 4. 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.