BILL NUMBER: SB 424 CHAPTERED
BILL TEXT
CHAPTER 12
FILED WITH SECRETARY OF STATE JULY 2, 2009
APPROVED BY GOVERNOR JULY 2, 2009
PASSED THE SENATE JUNE 22, 2009
PASSED THE ASSEMBLY JUNE 18, 2009
AMENDED IN ASSEMBLY JUNE 15, 2009
AMENDED IN ASSEMBLY MAY 18, 2009
AMENDED IN ASSEMBLY MAY 12, 2009
AMENDED IN SENATE APRIL 2, 2009
INTRODUCED BY Senators Padilla, Florez, and Harman
(Coauthors: Assembly Members Eng, Fuentes, and Solorio)
FEBRUARY 26, 2009
An act to amend Section 11713.1 of, and to add Section 11713.13
to, the Vehicle Code, relating to vehicles, and declaring the urgency
thereof, to take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
SB 424, Padilla. Vehicles: manufacturers and distributors.
(1) Existing law makes it a violation of the Vehicle Code for the
holder of a vehicle dealer's license to commit specified actions,
including, among other things, to advertise for sale, sell, or
purchase for resale a new vehicle of a line-make for which the dealer
does not hold a franchise. Existing law also lists various
exceptions to this requirement.
This bill would expand the list of existing exceptions to also
include a vehicle acquired in the ordinary course of business as a
new vehicle by a dealer franchised to sell that vehicle if specified
conditions are met, including if the manufacturer or distributor of
the vehicle files a bankruptcy petition.
(2) Existing law generally requires a manufacturer, 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, among other things, dishonor a warranty,
rebate, or other incentive offered to the public or a dealer, as
specified, or to unfairly discriminate in favor of a dealership owned
or controlled, in whole or part, by a manufacturer or an entity that
controls or is controlled by a manufacturer or distributor.
This bill would prohibit a manufacturer, manufacturer branch,
distributor, or distributor branch from preventing, or attempting to
prevent, by contract or otherwise, a dealer from acquiring, adding,
or maintaining a sales or service operation for another line-make of
motor vehicles at the same or expanded facility at which the dealer
currently operates a dealership if the dealer complies with any
reasonable facilities and capital requirements of the manufacturer or
distributor or from requiring a dealer to establish or maintain
exclusive facilities, personnel, or display space if the imposition
of the requirement would be unreasonable in light of all existing
circumstances, including economic conditions. In any proceeding under
these provisions in which the reasonableness of a facility
requirement is an issue, the manufacturer or distributor would have
the burden of proof.
The bill would also prohibit additional specified unlawful acts by
a manufacturer, manufacturer branch, distributor, or distributor
branch against a dealer.
(3) Under existing law, a violation of the above provisions
relating to occupational licensing and business regulations in the
Vehicle Code is a misdemeanor.
Because this bill would create a new crime, it would impose a
state-mandated local program.
(4) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
(5) This bill would declare that it is to take effect immediately
as an urgency statute.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) The distribution, sale, and service of new motor vehicles in
the State of California vitally affects the general economy of this
state and the public welfare.
(b) The new motor vehicle franchise system, which operates within
a strictly defined and highly regulated statutory scheme, assures the
consuming public of a well-organized distribution system for the
availability and sale of new motor vehicles throughout the state;
provides a network of quality warranty, recall, and repair facilities
to maintain those vehicles; and creates a cost-effective method for
the state to police those systems through the licensing and
regulation of private sector franchisors and franchisees.
(c) Since January of 2008, over 170 new motor vehicle dealerships
have closed their doors in California. These closures have resulted
in job losses, diminished sales tax and other tax revenues, and a
reduction in the number of new motor vehicle dealerships that service
the consuming public.
(d) It is the intent of this act to ensure that facility
requirements imposed by franchisors are reasonable, that assistance
for dealers upon termination, nonrenewal, or cancellation of a
franchise is adequate, and that dealers are properly indemnified for
actions of auto manufacturers or distributors that are beyond the
control of dealers.
SEC. 2. Section 11713.1 of the Vehicle Code is amended to read:
11713.1. It is a violation of this code for the holder of a
dealer's license issued under this article to do any of the
following:
(a) Advertise a specific vehicle for sale without identifying the
vehicle by its model, model-year, and either its license number or
that portion of the vehicle identification number that distinguishes
the vehicle from all other vehicles of the same make, model, and
model-year. Model-year is not required to be advertised for current
model-year vehicles. Year models are no longer current when ensuing
year models are available for purchase at retail in California. Any
advertisement that offers for sale a class of new vehicles in a
dealer's inventory, consisting of five or more vehicles, that are all
of the same make, model, and model-year is not required to include
in the advertisement the vehicle identification numbers or license
numbers of those vehicles.
(b) Advertise the total price of a vehicle without including all
costs to the purchaser at time of sale, except taxes, vehicle
registration fees, the California tire fee, as defined in Section
42885 of the Public Resources Code, emission testing fees not
exceeding fifty dollars ($50), actual fees charged for certificates
pursuant to Section 44060 of the Health and Safety Code, finance
charges, and any dealer document preparation charge. The dealer
document preparation charge shall not exceed fifty-five dollars
($55).
(c) (1) Exclude from an advertisement of a vehicle for sale that
there will be added to the advertised total price at the time of
sale, charges for sales tax, vehicle registration fees, the
California tire fee, the fee charged by the state for the issuance of
a certificate of compliance or noncompliance pursuant to a statute,
finance charges, and a dealer document preparation charge.
(2) The obligations imposed by paragraph (1) are satisfied by
adding to the advertisement a statement containing no abbreviations
and that is worded in substantially the following form: "Plus
government fees and taxes, any finance charges, any dealer document
preparation charge, and any emission testing charge."
(3) For purposes of paragraph (1), "advertisement" means an
advertisement in a newspaper, magazine, or direct mail publication
that is two or more columns in width or one column in width and more
than seven inches in length, or on a Web page of a dealer's Internet
Web site that displays the price of a vehicle offered for sale on the
Internet, as that term is defined in paragraph (6) of subdivision
(e) of Section 17538 of the Business and Professions Code.
(d) Represent the dealer document preparation charge or
certificate of compliance or noncompliance fee, as a governmental
fee.
(e) Fail to sell a vehicle to a person at the advertised total
price, exclusive of taxes, vehicle registration fees, the California
tire fee, the fee charged by the state for the issuance of a
certificate of compliance or noncompliance pursuant to a statute,
finance charges, mobilehome escrow fees, the amount of a city,
county, or city and county imposed fee or tax for a mobilehome, and a
dealer document preparation charge, which charges shall not exceed
fifty-five dollars ($55) for the document preparation charge and not
to exceed fifty dollars ($50) for emission testing plus the actual
fees charged for certificates pursuant to Section 44060 of the Health
and Safety Code, while the vehicle remains unsold, unless the
advertisement states the advertised total price is good only for a
specified time and the time has elapsed. Advertised vehicles shall be
sold at or below the advertised total price, with statutorily
permitted exclusions, regardless of whether the purchaser has
knowledge of the advertised total price.
(f) (1) Advertise for sale, sell, or purchase for resale a new
vehicle of a line-make for which the dealer does not hold a
franchise.
(2) This subdivision does not apply to a transaction involving the
following:
(A) A mobilehome.
(B) A recreational vehicle as defined in Section 18010 of the
Health and Safety Code.
(C) A commercial coach, as defined in Section 18001.8 of the
Health and Safety Code.
(D) An off-highway motor vehicle subject to identification as
defined in Section 38012.
(E) A manufactured home.
(F) A new vehicle that will be substantially altered or modified
by a converter prior to resale.
(G) A commercial vehicle with a gross vehicle weight rating of
more than 10,000 pounds.
(H) A vehicle purchased for export and exported outside the
territorial limits of the United States without being registered with
the department.
(I) A vehicle acquired in the ordinary course of business as a new
vehicle by a dealer franchised to sell that vehicle, if all of the
following apply:
(i) The manufacturer or distributor of the vehicle files a
bankruptcy petition.
(ii) The franchise agreement of the dealer is terminated,
canceled, or rejected by the manufacturer or distributor as part of
the bankruptcy proceedings and the termination, cancellation, or
rejection is not a result of the revocation by the department of the
dealer's license or the dealer's conviction of a crime.
(iii) The vehicle is held in the inventory of the dealer on the
date the bankruptcy petition is filed.
(iv) The vehicle is sold by the dealer within six months of the
date the bankruptcy petition is filed.
(3) Subparagraph (I) of paragraph (2) does not entitle a dealer
whose franchise agreement has been terminated, canceled, or rejected
to continue to perform warranty service repairs or continue to be
eligible to offer or receive consumer or dealer incentives offered by
the manufacturer or distributor.
(g) Sell a park trailer, as specified in Section 18009.3 of the
Health and Safety Code, without disclosing in writing to the
purchaser that a park trailer is required to be moved by a
transporter or a licensed manufacturer or dealer under a permit
issued by the Department of Transportation or a local authority with
respect to highways under their respective jurisdictions.
(h) Advertise free merchandise, gifts, or services provided by a
dealer contingent on the purchase of a vehicle. "Free" includes
merchandise or services offered for sale at a price less than the
seller's cost of the merchandise or services.
(i) (1) Advertise vehicles, and related goods or services, at a
specified dealer price, with the intent not to supply reasonably
expectable demand, unless the advertisement discloses the number of
vehicles in stock at the advertised price. In addition, whether or
not there are sufficient vehicles in stock to supply a reasonably
expectable demand, when phrases such as "starting at," "from,"
"beginning as low as," or words of similar import are used in
reference to an advertised price, the advertisement shall disclose
the number of vehicles available at that advertised price.
(2) For purposes of this subdivision, in a newspaper advertisement
for a vehicle that is two model-years old or newer, the actual
phrase that states the number of vehicles in stock at the advertised
price shall be printed in a type size that is at least equal to
one-quarter of the type size, and in the same style and color of
type, used for the advertised price. However, in no case shall the
phrase be printed in less than 8-point type size, and the phrase
shall be disclosed immediately above, below, or beside the advertised
price without intervening words, pictures, marks, or symbols.
(3) The disclosure required by this subdivision is in addition to
any other disclosure required by this code or any regulation
regarding identifying vehicles advertised for sale.
(j) Use "rebate" or similar words, including, but not limited to,
"cash back," in advertising the sale of a vehicle unless the rebate
is expressed in a specific dollar amount and is in fact a rebate
offered by the vehicle manufacturer or distributor directly to the
retail purchaser of the vehicle or to the assignee of the retail
purchaser.
(k) Require a person to pay a higher price for a vehicle and
related goods or services for receiving advertised credit terms than
the cash price the same person would have to pay to purchase the same
vehicle and related goods or services. For the purpose of this
subdivision, "cash price" has the meaning as defined in subdivision
(e) of Section 2981 of the Civil Code.
( l ) Advertise a guaranteed trade-in allowance.
(m) Misrepresent the authority of a salesperson, representative,
or agent to negotiate the final terms of a transaction.
(n) (1) Use "invoice," "dealer's invoice," "wholesale price," or
similar terms that refer to a dealer's cost for a vehicle in an
advertisement for the sale of a vehicle or advertise that the selling
price of a vehicle is above, below, or at either of the following:
(A) The manufacturer's or distributor's invoice price to a dealer.
(B) A dealer's cost.
(2) This subdivision does not apply to either of the following:
(A) A communication occurring during face-to-face negotiations for
the purchase of a specific vehicle if the prospective purchaser
initiates a discussion of the vehicle's invoice price or the dealer's
cost for that vehicle.
(B) A communication between a dealer and a prospective commercial
purchaser that is not disseminated to the general public. For
purposes of this subparagraph, a "commercial purchaser" means a
dealer, lessor, lessor-retailer, manufacturer, remanufacturer,
distributor, financial institution, governmental entity, or person
who purchases 10 or more vehicles during a year.
(o) Violate a law prohibiting bait and switch advertising,
including, but not limited to, the guides against bait advertising
set forth in Part 238 (commencing with Section 238) of Title 16 of
the Code of Federal Regulations, as those regulations read on January
1, 1988.
(p) Make an untrue or misleading statement indicating that a
vehicle is equipped with all the factory-installed optional equipment
the manufacturer offers, including, but not limited to, a false
statement that a vehicle is "fully factory equipped."
(q) Affix on a new vehicle a supplemental price sticker containing
a price that represents the dealer's asking price that exceeds the
manufacturer's suggested retail price unless all of the following
occur:
(1) The supplemental sticker clearly and conspicuously discloses
in the largest print appearing on the sticker, other than the print
size used for the dealer's name, that the supplemental sticker price
is the dealer's asking price, or words of similar import, and that it
is not the manufacturer's suggested retail price.
(2) The supplemental sticker clearly and conspicuously discloses
the manufacturer's suggested retail price.
(3) The supplemental sticker lists each item that is not included
in the manufacturer's suggested retail price, and discloses the
additional price of each item. If the supplemental sticker price is
greater than the sum of the manufacturer's suggested retail price and
the price of the items added by the dealer, the supplemental sticker
price shall set forth that difference and describe it as "added
mark-up."
(r) Advertise an underselling claim, including, but not limited
to, "we have the lowest prices" or "we will beat any dealer's price,"
unless the dealer has conducted a recent survey showing that the
dealer sells its vehicles at lower prices than another licensee in
its trade area and maintains records to adequately substantiate the
claims. The substantiating records shall be made available to the
department upon request.
(s) (1) Advertise an incentive offered by the manufacturer or
distributor if the dealer is required to contribute to the cost of
the incentive as a condition of participating in the incentive
program, unless the dealer discloses in a clear and conspicuous
manner that dealer participation may affect consumer cost.
(2) For purposes of this subdivision, "incentive" means anything
of value offered to induce people to purchase a vehicle, including,
but not limited to, discounts, savings claims, rebates, below-market
finance rates, and free merchandise or services.
(t) Display or offer for sale a used vehicle unless there is
affixed to the vehicle the Federal Trade Commission's Buyer's Guide
as required by Part 455 of Title 16 of the Code of Federal
Regulations.
(u) Fail to disclose in writing to the franchisor of a new motor
vehicle dealer the name of the purchaser, date of sale, and the
vehicle identification number of each new motor vehicle sold of the
line-make of that franchisor, or intentionally submit to that
franchisor a false name for the purchaser or false date for the date
of sale.
(v) Enter into a contract for the retail sale of a motor vehicle
unless the contract clearly and conspicuously discloses whether the
vehicle is being sold as a new vehicle or a used vehicle, as defined
in this code.
(w) Use a simulated check, as defined in subdivision (a) of
Section 22433 of the Business and Professions Code, in an
advertisement for the sale or lease of a vehicle.
(x) Fail to disclose, in a clear and conspicuous manner in at
least 10-point boldface type on the face of a contract for the retail
sale of a new motor vehicle that this transaction is, or is not,
subject to a fee received by an autobroker from the selling new motor
vehicle dealer, and the name of the autobroker, if applicable.
(y) As used in this section, "make" and "model" have the same
meaning as is provided in Section 565.3 of Title 49 of the Code of
Federal Regulations.
SEC. 3. Section 11713.13 is added to the Vehicle Code, to read:
11713.13. It is unlawful and a violation of this code for any
manufacturer, manufacturer branch, distributor, or distributor branch
licensed under this code to do, directly or indirectly through an
affiliate, any of the following:
(a) Prevent, or attempt to prevent, by contract or otherwise, a
dealer from acquiring, adding, or maintaining a sales or service
operation for another line make of motor vehicles at the same or
expanded facility at which the dealer currently operates a dealership
if the dealer complies with any reasonable facilities and capital
requirements of the manufacturer or distributor.
(b) Require a dealer to establish or maintain exclusive
facilities, personnel, or display space if the imposition of the
requirement would be unreasonable in light of all existing
circumstances, including economic conditions. In any proceeding under
this subdivision or subdivision (a) in which the reasonableness of a
facility or capital requirement is an issue, the manufacturer or
distributor shall have the burden of proof.
(c) 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, including economic
conditions. In any proceeding in which a required facility
alteration, expansion, or addition is an issue, the manufacturer or
distributor shall have the burden of proof.
(d) (1) Fail to pay to a dealer, within 90 days of termination,
cancellation, or nonrenewal of a franchise, all of the following:
(A) The dealer cost, plus any charges made by the manufacturer or
distributor for vehicle distribution or delivery and the cost of any
dealer-installed original equipment accessories, less any amount
invoiced to the vehicle and paid by the manufacturer or distributor
to the dealer, for all new and undamaged vehicles with less than 500
miles in the dealer's inventory that were acquired by the dealer from
the manufacturer, distributor, or another new motor vehicle dealer
franchised to sell vehicles of the same line-make, in the ordinary
course of business, within 18 months of termination, cancellation, or
nonrenewal of the franchise.
(B) The dealer cost for all unused and undamaged supplies, parts,
and accessories listed in the manufacturer's current parts catalog
and in their original packaging, except that sheet metal may be
packaged in a comparable substitute for the original package.
(C) The fair market value of each undamaged sign owned by the
motor vehicle dealer and bearing a common name, trade name, or
trademark of the manufacturer or distributor if acquisition of the
sign was required or made a condition of participation in an
incentive program by the manufacturer or distributor.
(D) The fair market value of all special tools, computer systems,
and equipment that were required or made a condition of participation
in an incentive program by the manufacturer or distributor that are
in usable condition, excluding normal wear and tear.
(E) The dealer costs of handling, packing, loading, and
transporting any items or inventory for repurchase by the
manufacturer or distributor.
(2) This subdivision does not apply to a franchisor of a dealer of
new recreational vehicles, as defined in subdivision (a) of Section
18010 of the Health and Safety Code.
(3) This subdivision does not apply to a termination that is
implemented as a result of the sale of substantially all of the
inventory and fixed assets or stock of a franchised dealership if the
dealership continues to operate as a franchisee of the same
line-make.
(e) (1) (A) Fail to pay to a dealer of new recreational vehicles,
as defined in subdivision (a) of Section 18010 of the Health and
Safety Code, within 90 days of termination, cancellation, or
nonrenewal of a franchise for a recreational vehicle line-make, as
defined in Section 3072.5, the dealer cost, plus any charges made by
the manufacturer or distributor for vehicle distribution or delivery
and the cost of any dealer-installed original equipment accessories,
less any amount invoiced to the vehicle and paid by the manufacturer
or distributor to the dealer, for a new recreational vehicle when the
termination, cancellation, or nonrenewal is initiated by a
recreational vehicle manufacturer. This paragraph only applies to new
and unused recreational vehicles that do not currently have or have
had in the past, material damage, as defined in Section 9990, and
that the dealer acquired from the manufacturer, distributor, or
another new motor vehicle dealer franchised to sell recreational
vehicles of the same line-make in the ordinary course of business
within 12 months of the termination, cancellation, or nonrenewal of
the franchise.
(B) For those recreational vehicles with odometers, paragraph (1)
shall apply to only those vehicles that have no more than 1,500 miles
on the odometer, in addition to the number of miles incurred while
delivering the vehicle from the manufacturer's facility that produced
the vehicle for delivery to the dealer's retail location.
(C) Damaged recreational vehicles shall be repurchased by the
manufacturer provided there is an offset in value for damages, except
recreational vehicles that have or had material damage, as defined
in Section 9990, may be repurchased at the manufacturer's option
provided there is an offset in value for damages.
(2) Fail to pay to a dealer of new recreational vehicles, as
defined in subdivision (a) of Section 18010 of the Health and Safety
Code, within 90 days of termination, cancellation, or nonrenewal of a
franchise, all of the following:
(A) The dealer cost for all unused and undamaged supplies, parts,
and accessories listed in the manufacturer's current parts catalog
and in their original packaging, except that sheet metal may be
packaged in a comparable substitute for the original package.
(B) The fair market value of each undamaged sign owned by the
motor vehicle dealer and bearing a common name, trade name, or
trademark of the manufacturer or distributor if acquisition of the
sign was required or made a condition of participation in an
incentive program by the manufacturer or distributor.
(C) The fair market value of all special tools, computer systems,
and equipment that were required or made a condition of participation
in an incentive program by the manufacturer or distributor that are
in usable condition, excluding normal wear and tear.
(D) The dealer costs of handling, packing, loading, and
transporting any items or inventory for repurchase by the
manufacturer or distributor.
(f) (1) Fail, upon demand, to indemnify any existing or former
franchisee and the franchisee's successors and assigns from any and
all damages sustained and attorney's fees and other expenses
reasonably incurred by the franchisee that result from or relate to
any claim made or asserted by a third party against the franchisee to
the extent the claim results from any of the following:
(A) The condition, characteristics, manufacture, assembly, or
design of any vehicle, parts, accessories, tools, or equipment, or
the selection or combination of parts or components manufactured or
distributed by the manufacturer or distributor.
(B) Service systems, procedures, or methods the franchisor
required or recommended the franchisee to use if the franchisee
properly uses the system, procedure, or method.
(C) Improper use or disclosure by a manufacturer or distributor of
nonpublic personal information obtained from a franchisee concerning
any consumer, customer, or employee of the franchisee.
(D) Any act or omission of the manufacturer or distributor for
which the franchisee would have a claim for contribution or indemnity
under applicable law or under the franchise, irrespective of and
without regard to any prior termination or expiration of the
franchise.
(2) This subdivision does not limit, in any way, the existing
rights, remedies, or recourses available to any person who purchases
or leases vehicles at retail.
SEC. 4. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of 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, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.
SEC. 5. This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect. The facts constituting the necessity are:
In order to permit, as soon as possible, franchised new motor
vehicle dealers flexibility to configure their dealership facilities
in a manner that will permit them to remain in business and continue
to service the needs of their communities, it is necessary that this
act take effect immediately.