BILL NUMBER: AB 2597 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Bill Berryhill
FEBRUARY 19, 2010
An act to amend Section 11713.3 of the Vehicle Code, relating to
vehicles.
LEGISLATIVE COUNSEL'S DIGEST
AB 2597, as introduced, Bill Berryhill. 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 certain conduct.
This bill would make technical, nonsubstantive changes in those
provisions.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
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 for a 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
a new vehicle sold or distributed by the manufacturer or
distributor, any 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, any 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 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 a dealer, or any
an officer, partner, or stockholder of any
a 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,
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 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 the
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 a claim or defense by the
dealer.
(f) To obtain money, goods, services, or any other benefit from
any other 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) To require a dealer to prospectively assent to a release,
assignment, novation, waiver, or estoppel that would relieve
any a person from liability to be imposed by
this article or to require any a
controversy between a dealer and a manufacturer, distributor, or
representative, to be referred to any a
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
this 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 the 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 made by a dealer
thereof, any the dealer, 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, 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 a person for the
purchase of new motor vehicles of a certain line-make to be sold to
the state or any a political
subdivision thereof 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 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 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 any
an entity that controls or is controlled
by, by a manufacturer, branch, or
distributor, shall not, however, not 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 a 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 a
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 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 or
divests itself of an ownership interest.
(B) Every 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.
(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
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
does 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 of a franchise to sell, transfer, or
assign to the franchisor, or to any a
nominee of the franchisor, all or any a
material part of the franchised business or of the assets
thereof of that 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
thereof of that 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.
Nothing contained in this This
paragraph limits 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
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, 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
with a written itemization of those expenses,
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 a
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 A vehicle that is not made
available to each franchisee pursuant to a reasonable allocation
formula that is applied uniformly, and any 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) Any 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) Any information Information
obtained from a franchisee by the manufacturer, branch, or
distributor concerning the business affairs or operations of
any 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
any a 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 This subdivision
shall be interpreted to 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) 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.