BILL NUMBER: SB 1178 CHAPTERED 09/27/99 CHAPTER 523 FILED WITH SECRETARY OF STATE SEPTEMBER 27, 1999 APPROVED BY GOVERNOR SEPTEMBER 27, 1999 PASSED THE SENATE AUGUST 31, 1999 PASSED THE ASSEMBLY AUGUST 23, 1999 AMENDED IN ASSEMBLY JULY 7, 1999 AMENDED IN SENATE MAY 6, 1999 INTRODUCED BY Senator Figueroa FEBRUARY 26, 1999 An act to amend Sections 21140.2, 21140.3, and 21148 of the Business and Professions Code, relating to petroleum franchises. LEGISLATIVE COUNSEL'S DIGEST SB 1178, Figueroa. Petroleum franchises: franchise dealers fair practices. Existing law prohibits a petroleum franchisor from requiring a franchisee to purchase only those tires, batteries, and other automotive accessories sold by the franchisor. This bill would include motor oil within that prohibition. Existing law provides that a violation of the franchise dealers fair practices provisions by a franchisor's executive, representative, or agent is subject to a civil penalty of up to $50,000. This bill would increase that penalty amount to an amount of up to $100,000. Existing law prohibits a franchisor from withholding consent to sale, transfer, or assignment of the franchise unless the franchisor demonstrates any of certain criteria. This bill would require the franchisor to demonstrate that criteria in writing to the franchisee within 45 days of receiving the application, or required paperwork, from the buyer. It specifies as certain additional criteria a prohibition on withholding consent to a sale, transfer, or assignment of the franchise for the purpose of diminishing the market value of the franchise, or a sale, transfer, or assignment to another person because that other person is of foreign origin or is non-English speaking as long as the prospective franchisee is able to adequately communicate with the franchisor and the appropriate federal, state, and local governmental agencies concerning matters of management, operations, environmental compliance, and public safety. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 21140.2 of the Business and Professions Code is amended to read: 21140.2. From the effective date of this section it shall be illegal for any franchisor by any action to require a franchisee to purchase only those tires, batteries, motor oil, and other automotive accessories sold by the franchisor. A franchised retail gasoline dealer may sell any tires, batteries, motor oil, and other automotive accessories as may be available to him or her for retail sale. SEC. 2. Section 21140.3 of the Business and Professions Code is amended to read: 21140.3. The franchisor's executive officer, representative, or agent of the franchisor who negotiates any contract in violation of this chapter or who otherwise coerces a franchisee in violation of this chapter shall be subject to a civil penalty of up to one hundred thousand dollars ($100,000) for each offense. That penalty, reasonable attorney fees and costs of the suit shall be assessed and recovered in a civil action brought by the Attorney General or by any district attorney, county counsel, or city attorney in any court of competent jurisdiction. If brought by a district attorney or county counsel, the entire amount of the penalty shall be paid to the treasurer of the county in which the judgment was entered. If brought by the Attorney General, one-half of the penalty, attorney fees, and costs of the suit shall be paid to the treasurer of the county where the action was brought and one-half shall be paid to the State Treasurer. If brought by a city attorney, one-half of the penalty, attorney fees, and costs of the suit shall be paid to the treasurer of the county and one-half to the city. SEC. 3. Section 21148 of the Business and Professions Code is amended to read: 21148. (a) Notwithstanding the terms of any franchise, a franchisor may not withhold its consent to the sale, transfer, or assignment of the franchise by the franchisee to another person unless the franchisor demonstrates in writing to the franchisee within 45 days of receiving the application, or required paperwork, from the potential buyer any of the following: (1) The proposed purchaser of the franchise has less business experience and training than that normally required by the franchisor of prospective franchisees. (2) The proposed purchaser of the franchise has less financial resources than that normally required by the franchisor of prospective franchisees. (3) The proposed purchaser of the franchise does not satisfy the then-current uniformly applied requirements, if any, of the franchisor applicable to prospective franchisees. (4) The proposed purchaser of the franchise operates a franchise under an agreement with a franchisor other than the franchisor to whom the sale, transfer, or assignment is proposed, if the then-current uniformly applied requirements, if any, of the franchisor precludes prospective franchisees from operating a franchise under an agreement with another franchisor. (5) The franchisee has not offered in writing to sell, transfer, or assign the franchise to the franchisor on terms and conditions which are the same as those of the sale, transfer, or assignment of the franchise to the proposed purchaser; and the franchisee has not allowed the franchisor at least 30 days in which to either accept or decline the franchisee's written offer, prior to the sale, transfer, or assignment of the franchise to the proposed purchaser. (b) Notwithstanding the terms of any franchise, a franchisor may not withhold its consent to the sale, transfer, or assignment of the franchise by the franchisee to another person for the purposes of diminishing the market value of the franchise. (c) Notwithstanding the terms of any franchise, a franchisor may not withhold its consent to the sale, transfer, or assignment of the franchise by the franchisee to another person because that other person is of foreign origin or is non-English speaking as long as the prospective franchisee is able to adequately communicate with the franchisor and the appropriate federal, state, and local governmental agencies concerning matters of management, operations, environmental compliance, and public safety. (d) If the franchisor consents to the sale, transfer, or assignment of the franchise to a prospective purchaser, the franchisor may require the franchisee to pay a transfer fee to the franchisor, provided the amount of the fee is reasonable when compared to the sale price of the franchise and provided the fee is not required in an effort to frustrate the proposed sale.