BILL ANALYSIS Ó
SB 155
Page 1
Date of Hearing: June 17, 2013
ASSEMBLY COMMITTEE ON TRANSPORTATION
Bonnie Lowenthal, Chair
SB 155 (Padilla) - As Amended: June 10, 2013
SENATE VOTE : 36-0
SUBJECT : Vehicles: Motor vehicle manufacturers and
distributors
SUMMARY : Modifies the relationship between motor vehicle
dealers and manufacturers by, among other things, making changes
regarding the use of flat-rate time schedules for warranty
reimbursement, warranty and incentive claims, audits, protest
rights, export policies, performance standards, and facility
improvements. Specifically, this bill :
1)Makes various findings and declarations relative to the
distribution, sale, and repair of new vehicles and the
relationship between the franchisors and franchisees.
2)States the intent of this bill to ensure that: new motor
vehicle dealers are treated fairly by their franchisors; are
reasonably compensated for performing warranty repairs; are
not subject to adverse action when vehicles are exported
without their knowledge; that performance standards take into
account local market conditions; and dealers are allowed to
obtain required goods or services through vendors of their
choosing.
3)Allows the New Motor Vehicle Board (NMVB), the use of a
nationally recognized flat-rate labor guide as the basis for
the amount of time necessary for a warranty repair.
4)Revises existing prohibitions regarding audits, warranty and
incentive claims, and the dealer's protest rights, as
specified.
5)Prohibits a manufacturer or distributor from taking or
threatening to take any adverse action against a dealer
pursuant to an export or sale-for-resale prohibition for
reasons as specified.
6)Provides that a required alteration, expansion, or addition
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will not be deemed reasonable if it requires that the dealer
purchase goods or services from a specific vendor when
substantially similar goods or services are available from
another vendor.
7)Prohibits manufacturers from establishing a performance
standard unless it is reasonable, as specified, and the
manufacturer provides all information about the standard
within 30 days of the dealer's request.
EXISTING LAW :
1)Charges the California Department of Motor Vehicles (DMV) with
licensing and regulating dealers, manufacturers, and
distributors of motor vehicles who conduct business in
California.
2)Establishes the NMVB in the DMV, and requires it to hear and
decide certain protests presented by a motor vehicle
franchisee.
3)Prescribes procedures to be followed by franchisors,
franchisees, and NMVB regarding claims for warranty
reimbursement or incentive compensation. Requires every
franchisor (manufacturer) to fulfill every warranty agreement
and adequately and fairly compensate each franchisee (dealer)
for labor and parts used to fulfill the warranty. A copy of
the warranty reimbursement schedule or formula must be filed
with NMVB, and the schedule or formula is required to be
reasonable with respect to the time and compensation.
Requires all claims made by franchisees to be either approved
or disapproved within 30 days after receipt by the franchiser.
When any claim is disapproved, the franchisee who submits it
shall be notified in writing, and, each notice shall state the
specific grounds upon which the disapproval is based.
4)Authorizes franchisors to conduct audits of franchisee
warranty records and incentive records on a reasonable basis,
and authorizes a franchisor to audit the franchisee's
incentive records for 18 months, and warranty records for 12
months, after a claim is paid or credit issued. Prohibits the
disapproval of franchisee claims except for good cause, as
specified, and requires that a notice of disapproval state the
specific grounds upon which the disapproval is based.
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5)Provides a franchisee one year from receipt of the notice of
disapproval of an incentive compensation payment to appeal the
disapproval to the franchisor and file a protest with the
NMVB.
6)Makes it unlawful for a vehicle manufacturer or distributor to
take specified actions against a vehicle dealer or franchisee.
7)Makes it unlawful for a manufacturer or distributor to
require, by contract or otherwise, a dealer to make a material
alteration, expansion, or addition to any dealership facility,
unless the required alteration, expansion, or addition is
reasonable in light of all existing circumstances. In any
proceeding in which a required facility alteration, expansion,
or addition is an issue, the manufacturer or distributor would
have the burden of proving the reasonableness of the
requirement.
FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS : NMVB is a program within DMV which operates in a
quasi-judicial capacity to resolve disputes between franchise
vehicle dealers and manufacturers/distributors of new motor
vehicles and specified motorsports vehicles. Under existing
law, the NMVB may only take action on disputes when "a protest
is presented to the "NMVB" by a franchisee."
The Legislature recently updated motor vehicle franchise laws
(see Prior Legislation below), to address motor vehicle
(automobiles, motorcycles, motor homes) manufacturer
(franchisor) issues with motor vehicle dealers (franchisee).
This bill represents the latest attempt to address issues
between the manufacturers/distributors and the dealers relative
to warranty claims/payments/appeals, franchisor incentive
program claims and audits, vehicle export policies, and
performance standards, and the use of local versus
manufacturer-specified vendors for the purchase of goods or
services. While the car dealers are sponsoring this bill, this
bill reflects an agreement still to be finalized between the
dealers' representatives and the representatives of motor
vehicle manufacturers.
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The sponsor of this bill, the California New Car Dealers
Association, expresses that "Today's dealers are facing an
unprecedented level of cost-shifting by manufacturers related to
warranty and franchisor incentive program claims and audits,
punitive export policies, unreasonable performance standards,
and the lack of flexibility to "Buy California" when upgrading
facilities." Further, the association believes that the bill
levels the playing field by restoring the proper competitive
balance between dealers and their manufacturers so that
independent franchised dealers can continue to service the needs
of their communities and customers.
The Association of Global Automakers and the Alliance of
Automobile Manufacturers, writing in opposition to the bill,
state their objections as follows:
1)Use of third party guides : The use of a third party time
guide by the NMVB for reviewing the fairness and adequacy of a
warranty repair reimbursement schedule without language
ensuring that those guides/times be based on actual time
studies performed by publisher.
2)Dealer Audit Restrictions : The 9-month audit time period is
considered too brief. Many of their companies administer
yearly objective-based audit programs throughout the United
States. They are, however, prepared to accept a 12-month
audit period.
3)Facility Improvements : They oppose language that impinges on
the manufacturer's control of its intellectual property rights
by preventing manufacturers from approving the alternative
vendor to be used for producing copyrighted and trademarked
material. They have provided language, consistent with
franchise law in other states, that would provide an exception
to the local source allowance in cases where the facility
improvement allows the manufacturer to comply with a
requirement of state health and safety laws to effectively
sell, service or display an advanced technology, low- or
zero-emissions vehicle.
4)Performance Standards : They have proposed language clarifying
that the burden of proof in a termination proceeding is with
the manufacturer only in the circumstance that a majority of
dealers of the same line-make are claiming a performance
standard, sales objective or program for measuring dealership
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sales, service, or customer service performance is
unreasonable and the claims have been merged into a single
proceeding.
Prior legislation : SB 642 (Padilla), Chapter 342, Statutes of
2011, modified and expanded the existing statutory framework
regulating the relationship between vehicle manufacturers and
their franchised dealers. Essentially, it prohibited
manufacturers from obtaining self-termination waivers from
dealers. SB 642 was not considered by this committee.
SB 424 (Padilla), Chapter 12, Statutes of 2009, regulated
actions that vehicle manufacturers could take with regard to
their franchised dealers, and allowed franchisees that have
contracts terminated because of a manufacturer's or
distributor's bankruptcy to continue to sell new cars in their
inventory for up to six months. That bill passed this committee
on a 9-0 vote.
Double referral : This bill is also referred to the Assembly
Judiciary Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
California New Car Dealers Association (sponsor)
California Motorcycle Dealers Association
Opposition
Alliance of Automobile Manufacturers
Association of Global Automakers
Analysis Prepared by : Ed Imai / TRANS. / (916) 319-2093