BILL ANALYSIS                                                                                                                                                                                                    Ķ



                                                                  AB 1732
                                                                  Page  1

          Date of Hearing:   April 22, 2014

              ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER  
                                     PROTECTION
                               Susan A. Bonilla, Chair
                    AB 1732 (Stone) - As Amended:  April 10, 2014
           
          SUBJECT  :   Vehicles: manufacturers, distributors, and dealers.

           SUMMARY  :   Prohibits a licensed vehicle manufacturer,  
          transporter or dealer from advertising a vehicle's prior use or  
          ownership history in an inaccurate manner, and prohibits  
          licensed vehicle dealers from advertising two conflicting rebate  
          deductions or advertising using the word 'rebate' unless the  
          rebate is directly offered by an affiliated finance company,  
          regulated utility or government entity.   Specifically,  this  
          bill  :  

          1)Prohibits a licensed vehicle manufacturer, transporter or  
            dealer from advertising a vehicle's prior use or ownership  
            history in an inaccurate manner. 

          2)Prohibits a licensed dealer from using the word "rebate" or  
            similar words, including, but not limited to, "cash back," in  
            advertising the sale of a vehicle unless the rebate is offered  
            directly to the retail purchaser by a finance company  
            affiliated with a vehicle manufacturer or distributor, a  
            regulated utility, or a government entity, as specified.

          3)Prohibits a licensed dealer from advertising a rebate  
            deduction that conflicts with another advertised rebate  
            deduction. 

          4)Declares that no reimbursement is required pursuant to 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, changes the penalty for a crime or  
            infraction, or changes the definition of a crime.

          5)Makes other technical or clarifying changes. 

           EXISTING LAW  

          1)Prohibits any person from acting as a dealer, remanufacturer,  








                                                                  AB 1732
                                                                  Page  2

            manufacturer, or transporter, as specified, without having  
            first been issued a license or temporary permit, as specified.  
             (Vehicle Code (VC) Section 11700)

          2)Requires every manufacturer, manufacturer branch,  
            remanufacturer, remanufacturer branch, distributor,  
            distributor branch, transporter, or dealer of vehicles of a  
            type subject to registration, or snowmobiles, motorcycles,  
            all-terrain vehicles, or trailers of a type subject to  
            identification, to be licensed, as specified. (VH 11701)

          3)Imposes various requirements and restrictions on persons  
            holding a vehicle dealer's license, including restrictions on  
            the manner that vehicles are advertised for sale. (VH 11713)



          4)Prohibits a holder of a license from, among other things,  
            making or disseminating any statement which is untrue or  
            misleading and which is known, or which by the reasonable  
            exercise of case should be known to be untrue or misleading,  
            as specified. (VC 11713(a))

          5)Establishes the Car Buyer's Bill of Rights and prohibits a car  
            dealer from selling or advertising for sale a used car as  
            "certified" if any of the following apply: 

             a)   The dealer knows or should have known that the odometer  
               has been rolled back or altered to show fewer miles than  
               actually driven; 

             b)   The dealer knows or should have known that the vehicle  
               was reacquired by the vehicle's manufacturer or a dealer  
               pursuant to state or federal warranty laws; 

             c)   The title to the vehicle has been inscribed with the  
               notation "Lemon Law Buyback," "manufacturer repurchase,"  
               "salvage," "junk," "nonrepairable," "flood," or similar  
               title designation required by this state or another state; 

             d)   The vehicle has sustained damage in an impact, fire, or  
               flood, that after repair and prior to sale substantially  
               impairs the use or safety of the vehicle; 

             e)   The dealer knows or should have known that the vehicle  








                                                                  AB 1732
                                                                  Page  3

               has sustained frame damage; 

             f)   The dealer disclaims any warranties of merchantability  
               on the vehicle; 

             g)   The vehicle is sold "AS IS"; or, 

             h)   The term "certified" or any similar descriptive term is  
               used in any manner that is untrue or misleading or that  
               would cause any advertisement to be in violation of the  
               provisions prohibiting a car dealer from scheming not sell  
               a vehicle or service at a price other than advertised in  
               accordance with the Vehicle Code, or the unfair competition  
               laws contained in the Business and Professions Code.   
               (Civil Code Section 11713.18.)

           FISCAL EFFECT  :   Unknown

           COMMENTS  :   

           1)Purpose of this bill  .  This bill would make three minor  
            changes to vehicle advertising law: an expansion of the rebate  
            types a dealer may advertise, a codification of an existing  
            regulatory ban on misrepresentation of a used vehicle's  
            history, and an explicit ban on advertising two conflicting  
            rebates together.  This bill is sponsored by the California  
            New Car Dealers Association.

           2)Author's statement  .  According to the author, "AB 1732 seeks  
            to modernize California's advertising laws to better protect  
            consumers and promote fair and open markets for the sale of  
            all vehicles.  California's advertising laws were created to  
            allow consumers to have a complete understanding of their  
            obligations when making a purchase decision on a vehicle and  
            to accurately compare advertisements from different dealers.   
            This bill seeks to clarify and update current laws to reflect  
            industry's best practices." 

           3)Changes to vehicle advertising law  .  According to the sponsor,  
            this bill is intended to work three distinct changes in  
            vehicle advertising law.

          First, this bill would alter the requirement that dealers only  
            advertise manufacturer or distributor's rebates by authorizing  
            car dealers to advertise rebates offered by a finance company  








                                                                  AB 1732
                                                                  Page  4

            affiliated with the manufacturer or distributor, a regulated  
            utility or a government entity as well.  This change is  
            intended to permit dealers to advertise other rebate programs  
            such as the 'Clean Vehicle Rebate Program' or 'Cash for  
            Clunkers'.

          Second, this bill would codify existing regulations that overtly  
            require that express advertisements of a vehicle's prior use  
            or ownership history must be accurate.  The sponsor states  
            that this particular regulation is largely unknown and that  
            its codification would help ensure compliance. 

          Third, this bill would clarify that a dealer may not advertise a  
            rebate deduction if it conflicts with another advertised  
            deduction. The sponsor states that this change is necessary  
            because of confusion among dealers and law enforcement as to  
            how a conflicting rebate would be enforced.   

           4)Arguments in support  .  The California New Car Dealers  
            Association (CNCDA) write, "California's vehicle advertising  
            laws were created to allow consumers to have a complete  
            understanding of their obligations when making a vehicle  
            purchase or lease decision and to accurately compare  
            advertisements from different dealers.  These laws have not  
            been updated since 2002 and over the past decade advertising  
            on the Internet has exploded.  Digital advertising now  
            eclipses both television and print advertising, exceeding 36  
            percent of all dealership ads, and representing over $330  
            million in direct contributions to California's economy. 

          AB 1732 is an effort to clarify and modernize various dealer  
            advertising laws?We have been working with the Department of  
            Motor Vehicles, law enforcement entities and other  
            stakeholders to clarify the rules for the 21st Century and AB  
            1732 reflects those stakeholder discussions and the industry's  
            best practices". 

           5)Related legislation  . SB 686 (Jackson) of 2013 would prohibit a  
            vehicle dealer from selling, leasing, renting, loaning, or  
            otherwise transferring ownership of a used vehicle if the  
            dealer knows or should have known that the vehicle is subject  
            to an manufacturer's safety recall, and place similar  
            restrictions on the sale or transfer of ownership of a used  
            vehicle by a rental car company that is also a licensed  
            dealer.  This bill is currently pending in this Committee. 








                                                                  AB 1732
                                                                  Page  5


           6)Previous legislation  .  AB 964 (Bonta) of 2013 would amend the  
            existing Car Buyer's Bill of Rights to prohibit the  
            advertising or selling of a used vehicle as "certified" if the  
            dealer knows or should have known that the vehicle is subject  
            to a manufacturer's safety recall.  This bill died on the  
            inactive file in the Assembly. 

            AB 68 (Montaņez), Chapter 128, Statutes of 2005, enacts the  
            Car Buyer's Bill of Rights, provided that a car dealer may not  
            advertise of sell as "certified" a used or pre-owned motor  
            vehicle, as defined, unless specified conditions are  
            satisfied, and further provided that vehicles sold as  
            "certified" may not be sold "as is," or if the dealer has  
            disclaimed any warranties.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          California New Car Dealers Association (sponsor)

           Opposition 
           
          None on file. 
           
          Analysis Prepared by  :    Hank Dempsey / B.,P. & C.P. / (916)  
          319-3301