BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 424|
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THIRD READING
Bill No: SB 424
Author: Padilla (D), et al
Amended: 4/2/09
Vote: 27 - Urgency
SENATE TRANSPORTATION & HOUSING COMM. : 10-0, 4/14/09
AYES: Lowenthal, Huff, Ashburn, DeSaulnier, Harman,
Hollingsworth, Kehoe, Pavley, Simitian, Wolk
NO VOTE RECORDED: Oropeza
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Vehicles: manufacturers and distributors
SOURCE : California New Car Dealers Association
DIGEST : This bill makes certain acts of vehicle
manufacturers or distributors illegal.
ANALYSIS : Existing law charges the Department of Motor
Vehicles (DMV) with licensing and regulating dealers,
manufacturers, and distributors of motor vehicles who
conduct business in California.
Existing provisions of the California Vehicle Code define a
"franchise" as a written agreement in which the franchisee
(dealer) is granted the right to sell new motor vehicles or
trailers as part of the franchisor's (manufacturer's)
distribution system. The dealer's business must be
substantially reliant on the manufacturer for the supply of
CONTINUED
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vehicles.
Existing law prescribes many aspects of the relationship
between new car dealers and vehicle manufacturers,
including making it illegal for a manufacturer to:
1. Fail to deliver adequate quantities in a timely fashion
to a dealer who has a franchise to sell new motor
vehicles made by that manufacturer.
2. Require a change in the executive management team,
capital structure, or ownership structure of a
dealership having a franchise with that manufacturer.
3. Deny a dealer the right of free association with another
dealer.
4. Compete with a dealer in the same line make.
5. Offer rebates through one dealership in an area, but not
all dealerships.
This bill makes it illegal for any manufacturer or
distributor to:
1. Prevent, or attempt to prevent, a vehicle dealer from
acquiring, adding, or maintaining a sales or service
operation for another line make of motor vehicles at a
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.
2. 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.
3. Require, by contract or otherwise, a dealer to make a
material alternation, expansion, or addition to any
facility, unless it is reasonable in light of all
existing circumstances, including economic conditions.
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4. Fail to pay a dealer within 90 days of termination,
cancellation, or nonrenewal of a franchise all of the
following:
A. The dealer cost for all new vehicles in the
dealer's inventory.
B. The dealer cost for all unused, undamaged, and
still packaged supplies, parts, and accessories
listed in the manufacturer's currents parts
catalogue.
C. The fair market value of each undamaged sign
owned by the dealer and bearing the common name,
trade name, or trademark of the manufacturer, if the
dealer had to buy the sign under an incentive
program of the manufacturer.
D. The fair market value of all special tools,
computer systems, and equipment that were required
as part of an incentive program of the manufacturer.
E. The dealer costs of returning these items for
repurchase by the manufacturer.
5. Fail to indemnify, upon demand, any existing or former
franchisee or his successors from damages, plus
reasonable attorneys fees and expenses, that result from
a claim made or asserted against a franchisee because
of:
A. The condition, characteristics, manufacture,
assembly, or design of any vehicle, parts,
accessories, tools, or combination thereof
manufactured by the manufacturer.
B. Service systems, procedures, or methods the
franchisor required or recommended that the
franchisee used, so long as the franchisee used them
properly.
C. Any act or omission of the manufacturer for
which the franchisee would have a claim under
applicable law or under the franchise without regard
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to a termination or expiration of that agreement.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 4/28/09)
California New Car Dealers Association (source)
California Conference of Machinists
California Motorcycle Dealers Association
California Recreational Vehicle Dealers Association
Long Beach Chamber of Commerce
Southland Motor Car Dealers Association
ARGUMENTS IN SUPPORT : The California New Car Dealers
Association states that while every state has laws
regulating the relationship between vehicle manufacturers
and franchised dealers, California has not updated its
rules for nearly a decade. They also point out that with
over 170 new car dealerships closed in the last 15 months,
this bill is needed 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 their control.
JA:nl 4/28/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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