BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 2597|
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THIRD READING
Bill No: AB 2597
Author: Bill Berryhill (R)
Amended: 7/15/10 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 3-1, 6/29/10
AYES: Corbett, Hancock, Leno
NOES: Harman
NO VOTE RECORDED: Walters
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 68-4, 6/3/10 - See last page for vote
SUBJECT : Vehicles: manufacturers and distributors
SOURCE : California Motorcycle Dealers Association
DIGEST : This bill prohibits a manufacturer, manufacturer
branch, distributor, or distributor branch from unfairly
discriminating in favor of a motorsports dealer when acting
as a manufacturer, manufacturer branch, distributor, or
distributor branch of motorsports vehicles, and from
requiring or attempting to require a motorsports dealer to
maintain a motorsports inventory in a specified manner.
This bill also defines a "motorsports dealer" for these
purposes.
ANALYSIS : Existing law, Section 11713.3 of the Vehicle
Code, makes it unlawful for a vehicle manufacturer or
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distributor to take specified actions against a vehicle
dealer or franchisee, including:
1. Failing to pay a dealer within a reasonable time
following receipt of a valid claim by the dealer, for a
payment agreed to be made by the manufacturer or
distributor to the dealer because a new vehicle from a
prior model year is in the dealer's inventory at the
time of introduction of new model vehicles (subdivision
(i)).
2. Offering refunds or other types of inducements to a
person for the purchase of a new motor vehicle of a
certain line-make to be sold in a market area without
making the same offer to all other dealers in the same
line-make within the relevant market area (subdivision
(k)).
3. Competing with a dealer in the same line-make operating
under a franchise agreement from the manufacturer or
distributor in the relevant market area (subdivision
(o)).
4. Unfairly discriminating among its franchisees with
respect to warranty reimbursement or authority granted
to its franchisees to make warranty adjustments with
retail customers (subdivision (p)).
5. 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, including the
referral of prospective customers to that owned or
controlled dealership unless the prospective customer
lives in that dealership's assigned area of
responsibility or requests the referral to that
dealership (subdivision (u)).
Existing law makes a violation of Section 11713.3
punishable as a misdemeanor. Any unlawful act may also be
the basis for an unfair competition claim. (Section 17200
of the Business and Professions Code)
This bill, applicable only to motorsports vehicles, would
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make it unlawful for a motorsports vehicle manufacturer or
distributor to do any of the following:
1. Unfairly discriminate in favor of a motorsports dealer
in any of the following manner:
A. Furnishing to a motorsports dealer a vehicle,
part, or accessory that is not made available to all
dealers at the same actual price and pursuant to a
reasonable allocation formula applied uniformly and
not based on the inventory size or purchasing history
or volume of the dealer, or that is not made
available to all dealers on comparable financing and
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 would not constitute unfair
discrimination.
B. Referring a prospective customer to a motorsports
dealer unless the prospective customer resides in the
area of responsibility assigned to that dealer or the
prospective customer requests to be referred to that
dealer.
2. Require or attempt to require a motorsports dealer to
maintain a motorsports vehicle inventory in excess of a
reasonable minimum requirement not to exceed a 60-day
supply based on the rate of sales of the dealer for the
preceding 90 days.
This bill defines a "motorsports vehicle" to mean a
motorcycle, motor-driven cycle, motorized scooter,
motorized bicycle, all-terrain vehicle, or a snowmobile.
This bill defines a "motorsports dealer" as a person
licensed to engage in the sale of more than one type of
motorsports vehicle that is manufactured by the same
company or by a subsidiary of the same company.
This bill provides that a motorsports dealer that is
engaged in more than one active franchise agreement, except
for those franchise agreements from a subsidiary of the
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same parent company, shall not be considered to be a
multiline motorsports dealer if those franchise agreements
cover one type of motorsports vehicle.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 8/3/10)
California Motorcycle Dealers Association (source)
OPPOSITION : (Verified 8/3/10)
Bombardier Recreational Products; Motorcycle Industry
Council
ARGUMENTS IN SUPPORT : According to the author, "Many
major motorcycle manufacturers (OEMs) will calculate the
quota of vehicles [on] a dealer-by-dealer basis. The
favored terms are scaled into tiers that provide
increasingly favorable terms, i.e., Gold, Silver, and
Bronze. If a dealer purchases the quota of vehicles that
the OEM has arbitrarily set for the dealership, then the
dealer is eligible to receive more favored terms. If a
dealer refuses to take the quota (which they may feel is
not reasonable for sales in their market area), then that
dealer will not receive favorable terms and its consumers
will not receive the retail rebate. These are types of
'stair step incentives,' but are particularly troubling
because they are based not only on a successful retail
sale, but also on wholesale purchase requirements."
The bill's sponsor, the California Motorcycle Dealers
Association, further contends:
"Motorcycle manufacturers, taking advantage of the vast
disparity in economic and bargaining power between
dealers and manufacturers, often offer favored dealers
better terms and conditions when they sell them
motorcycles, parts and accessories. Good public policy,
and basic fairness, dictates that all dealers must be
treated similarly to be able to compete on a level
playing field.
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"All of the job losses in California's motorcycle
industry, estimated at between 30 and 40% of what used to
be a $3 billion industry in this state, can not be blamed
on the OEMs' discriminatory inventory allocation,
favoritism and dumping practices, but it is estimated
that hundreds of jobs may be reclaimed if the funds
currently used to pay high flooring bills for unneeded
inventory were available for new, or re-hire, employees'
pay."
ARGUMENTS IN OPPOSITION : The Motorcycle Industry Council
(MIC) expresses concerns that a similar Montana law was
found to violate the Contracts Clause of the United States
Constitution, that government intervention into these
contractual agreements creates an increasingly complicated
and difficult business environment, that this bill would
not permit OEMs to offer greater support for a dealer that
wants to take on greater risk and grow its business, and
that by eliminating incentives based upon date of purchase,
this bill would eliminate the dealer's opportunity to take
advantage of OEM overstock situations. MIC further
contends that their incentive programs are optional -
dealers are under no obligation to participate, that if
this bill were enacted, OEMs would likely quit offering
promotional programs in California in order to avoid
potential violations of the law, and that this bill would
place the burden entirely on the OEM for warehousing all
products. Bombardier Recreational Products, in opposition,
further asserts that the recent amendments applying the
bill to dealers who carry more than one type of motorsports
vehicle would create an uneven playing field.
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Bass, Beall, Bill
Berryhill, Blakeslee, Block, Blumenfield, Bradford,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Conway, Coto, Davis, De La Torre, De Leon,
DeVore, Eng, Evans, Feuer, Fong, Fuentes, Furutani,
Gaines, Galgiani, Gilmore, Hagman, Hall, Harkey, Hayashi,
Hernandez, Hill, Huber, Huffman, Jeffries, Jones, Knight,
Lieu, Logue, Bonnie Lowenthal, Ma, Mendoza, Miller,
Monning, Nava, Nestande, Nielsen, V. Manuel Perez,
Portantino, Ruskin, Salas, Saldana, Skinner, Smyth,
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Solorio, Swanson, Torlakson, Torres, Torrico, Tran,
Villines, Yamada, John A. Perez
NOES: Emmerson, Fletcher, Niello, Silva
NO VOTE RECORDED: Arambula, Tom Berryhill, Cook, Fuller,
Garrick, Norby, Audra Strickland, Vacancy
RJG:mw 8/3/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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