BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2013-2014 Regular Session
AB 1732 (Stone)
As Amended June 15, 2014
Hearing Date: June 24, 2014
Fiscal: Yes
Urgency: No
TH
SUBJECT
Vehicles: Manufacturers, Distributors, and Dealers
DESCRIPTION
Existing law requires vehicle manufacturers, distributors, and
dealers to withdraw in writing an advertisement of a vehicle
that has been sold or withdrawn from sale within 48 hours, and
prohibits these entities from using "rebate" or similar words in
advertisements unless the advertised rebate is expressed in a
specified dollar amount and is in fact a rebate offered by the
vehicle manufacturer or distributor.
This bill would remove the requirement that the withdrawal of
the advertisement be in writing, require only authorized
advertisements to be withdrawn, and provide an exception to the
48 hour withdrawal requirement if the advertisement includes an
expiration date that occurs less than 48 hours after the sale or
withdrawal from sale, or the print advertisement is amended to
conspicuously denote that the vehicle has been sold. This bill
would also expand the authorized use of the word "rebate" to
allow advertisement of rebates offered by a finance company
affiliated with a vehicle manufacturer or distributor, a
regulated utility, or a governmental entity. This bill would
also prohibit the advertisement of a vehicle's prior use or
ownership history in an inaccurate manner.
BACKGROUND
Since 1959, California has regulated the advertising practices
of vehicle manufacturers, distributors, and dealers. These
regulations serve to increase transparency in automobile sales,
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protect consumers from deceptive advertising and sales
practices, and to foster an open market that allows for the free
flow of information. Over the past 50 years, the Legislature
has periodically modified its regulations governing vehicle
advertising in response to changes in industry practices. This
bill would enact three such modifications.
First, this bill would revise the existing 48 hour withdraw
requirement to apply only to "authorized" advertisements, would
eliminate the requirement that withdrawals be in writing, and
would not require withdrawal in cases where an advertisement
includes an expiration date that occurs within 48 hours of a
vehicle's sale or conspicuously denotes when the vehicle has
been sold. This change responds to the practice of third-party
Internet Web sites replicating dealer or manufacturer
advertisements without prior authorization, and a concern that
dealers or manufacturers may be held responsible for advertising
practices that are outside the scope of their control.
This bill would also modify restrictions on the use of
advertised vehicle rebates. Under current law, a rebate may
only be advertised if it is offered by a manufacturer or
distributor directly. The vehicle marketing industry has
diversified somewhat since this restriction originally took
effect. A host of affiliated entities now offer (or would like
to offer) rebates on vehicles beyond just manufacturers and
dealers, including affiliated vehicle finance companies,
regulated utilities, and governmental agencies. This bill would
authorize these related rebates to be advertised as part of a
dealer's or manufacturer's advertisement. However, this bill
would provide that the same advertisement may not advertise
rebates that are mutually exclusive or that conflict with one
another.
Finally, this bill would expressly provide that the
advertisement of a vehicle's prior use and ownership history
must be accurate.
CHANGES TO EXISTING LAW
Existing law protects consumers and competitors against
unlawful, unfair or fraudulent business acts or practices and
unfair, deceptive, untrue, or misleading advertising. (Bus. &
Prof. Code Sec. 17200 et seq.)
Existing law makes it unlawful for any person, firm, corporation
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or association, or any employee thereof, to make or disseminate
before the public in this state, in any newspaper or other
publication or in any other manner or means whatever, any
statement concerning personal property which is untrue or
misleading, and which is known, or which by the exercise of
reasonable care should be known, to be untrue or misleading.
(Bus. & Prof. Code Sec. 17500 et seq.)
Existing law prohibits any person from acting as a vehicle
dealer, remanufacturer, manufacturer, or transporter, as
specified, without having first been issued a license or
temporary permit, as specified. (Veh. Code Sec. 11700.)
Existing law prohibits the holder of a license from, among other
things, making or disseminating any statement which is untrue or
misleading and which is known, or which by the reasonable
exercise of case should be known to be untrue or misleading, as
specified. (Veh. Code Sec. 11713(a).)
Existing law prohibits the holder of a license from advertising
or offering for sale or exchange in any manner, any vehicle not
actually for sale at the premises of the dealer or available to
the dealer directly from the manufacturer or distributor of the
vehicle at the time of the advertisement or offer. (Veh. Code
Sec. 11713(b).)
Existing law prohibits the holder of a license from failing,
within 48 hours, in writing to withdraw any advertisement of a
vehicle that has been sold or withdrawn from sale. (Veh. Code
Sec. 11713(c).)
Existing law prohibits the holder of a license from using
"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. (Veh. Code Sec. 11713.1(j).)
Existing law authorizes the holder of a license to advertise a
vehicle sales price that includes a deduction for a rebate
provided that the advertisement clearly and conspicuously
discloses, in close proximity to the amount advertised, the
price of the vehicle before the rebate deduction and the amount
of the rebate, each so identified. (Veh. Code Sec. 11713.16(e).)
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This bill would prohibit the holder of a license from failing,
within 48 hours, to withdraw an authorized advertisement of a
vehicle that has been sold or withdrawn from sale, unless the
advertisement includes an expiration date that occurs less than
48 hours after the sale or withdrawal from sale, or the print
advertisement is amended to conspicuously denote that the
vehicle has been sold.
This bill would authorize the use of "rebate" or similar words
in an advertisement if the rebate is offered by a finance
company affiliated with a vehicle manufacturer or distributor, a
regulated utility, or a governmental entity.
This bill would provide that a dealer may not advertise a rebate
deduction that conflicts with another advertised rebate
deduction.
This bill would prohibit the holder of a license from
advertising the prior use or ownership history of a vehicle in
an inaccurate manner.
COMMENT
1. Stated need for the bill
The author writes:
AB 1732 seeks to modernize California's advertising laws to
better protect consumers and promote fair and open markets for
the sale of all vehicles. California's advertising laws were
created to allow consumers to have a complete understanding of
their obligations when making a purchase decision on a vehicle
and to accurately compare advertisements from different
dealers. This bill seeks to clarify and update current laws
to reflect industry's best [practices in three ways]:
Rebate Source Advertising : Current law limits a
dealer's ability to only advertise a rebate from a
manufacturer[,] even though . . . government agencies and
finance companies [offer] their own rebates and request
dealers to advertise these rebates to members of the
public. AB 1732 allows dealers to advertise governmental
and other rebates to consumers, such as Cash for Clunkers
and the Clean Vehicle Rebate Program.
Rebate Advertising : The interaction between [Business
and Professions] Code Sections 17200 and 17500 and the
dealer advertising laws about how to advertise rebates
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(Vehicle Code Section 11713.16(e)) has caused confusion for
dealers and law enforcement. AB 1732 clarifies an already
commonly held belief that a rebate must not be advertised
if it conflicts with another advertised rebate.
Vehicle's Prior Use Disclosures : Current regulations
state that express advertisements of a vehicle's prior use
or ownership history must be accurate. This regulation is
often unknown to dealers and to help ensure compliance AB
1732 codifies this regulation.
2. Consumer protection
The Legislature has long considered consumer protection to be a
matter of high importance. State law is replete with statutes
aimed at protecting California consumers from unfair, dishonest,
or harmful market practices. For example, the Consumers Legal
Remedies Act was enacted "to protect the statute's beneficiaries
from deceptive and unfair business practices," and to provide
aggrieved consumers with "strong remedial provisions for
violations of the statute." (Am. Online, Inc. v. Superior Court
(2001) 90 Cal.App.4th 1, 11.) Similarly, for over 70 years,
California's Unfair Practices Act (Bus. & Prof. Code Sec. 17000
et seq.) has protected California consumers from "unlawful,
unfair or fraudulent business act[s] or practice[s]." (Bus. &
Prof. Code Sec. 17200.)
Consumer protection in the field of vehicle sales and
advertising is no less a matter of fundamental public policy.
The Legislature has enacted a series of laws designed to protect
consumers from unfair and misleading vehicle transactions,
including the Song-Beverly Consumer Warranty Act (Civ. Code Sec.
1790 et seq.); California's Lemon Law (Civ. Code Secs. 1793.2,
1793.22) and Lemon-Law Buyback Law (Civ. Code Sec. 1793.23); the
Anti-Lemon Laundering Law (Civ. Code Sec. 1793.24); the
Rees-Levering Motor Vehicle Sales and Finance Act (Civ. Code
Sec. 2981 et seq.); and the Vehicle Leasing Act (Civ. Code Sec.
2985.7 et seq.). Existing provisions in the Vehicle Code
regulating how licensed vehicle dealers, manufacturers, and
distributors can advertise automobiles and other vehicles also
help ensure that California's consumers are not subjected to
false or misleading advertising.
This bill would make mostly minor adjustments to existing
vehicle advertising regulations without sacrificing consumer
protection. It would authorize as part of a vehicle
advertisement the advertisement of rebates offered by affiliated
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finance companies, by regulated utilities, and by governmental
entities, while providing that inconsistent rebates may not be
advertised together. Arguably, allowing these rebates to be
advertised with the sale price of a vehicle gives consumers a
better understanding of the potential true cost of a vehicle,
and allows for more informed decisionmaking in the marketplace.
This bill would also clarify existing law by explicitly
prohibiting dealers and manufacturers from advertising the prior
use or ownership history of a vehicle in an inaccurate manner, a
practice which is already unlawful.
However, some stakeholders have expressed concern over the
provision of this bill that would relax requirements to withdraw
advertisements for vehicles that have been sold or are no longer
for sale. As amended on June 15, this new language may
introduce ambiguity as to what advertisements are subject to the
withdrawal requirement, as well as how withdrawal is to be
accomplished. To address these concerns and in order to
maintain a proper balance between consumer protection and the
ease with which car dealers can conduct business, the author
offers the following amendments to strike the June 15th
amendments to this part of the bill, thus, reverting back to
existing law.
Author's Amendments :
On page 3, line 30, following "withdraw" insert: "in writing"
On page 3, line 30, strike "authorized"
On page 3, strike lines 32 through 35, and insert: "sale."
Support : AAA Northern California, Nevada, and Utah; Automobile
Club of Southern California
Opposition : None Known
HISTORY
Source : California New Car Dealers Association
Related Pending Legislation :
SB 686 (Jackson) would prohibit a vehicle dealer from selling,
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leasing, renting, loaning, or otherwise transferring ownership
of a used vehicle if the dealer knows or should have known that
the vehicle is subject to a manufacturer's safety recall. This
bill is pending in the Assembly Committee on Business,
Professions and Consumer Protection.
Prior Legislation :
AB 964 (Bonta, 2013) would have prohibited the advertising or
selling of a used vehicle as "certified" when a dealer knows or
should have known that the vehicle is subject to a
manufacturer's safety recall. This bill died on the Inactive
File in the Assembly.
AB 753 (Monning, 2011) would have expressly prohibited a rental
car company from renting a vehicle that is subject to a recall
notice unless the vehicle has been repaired as specified in the
notice. This bill died in the Senate Committee on
Appropriations.
AB 68 (Montanez, Ch. 128, Stats. 2005) provided that a car
dealer may not advertise or sell as "certified" a used or
pre-owned motor vehicle unless specified conditions are
satisfied.
Prior Vote :
Assembly Floor (Ayes 73, Noes 0)
Assembly Committee on Appropriations (Ayes 17, Noes 0)
Assembly Committee on Business, Professions and Consumer
Protection (Ayes 14, Noes 0)
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