CLARIFY MOTOR VEHICLE FRANCHISE LAWS.

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View NCGA Bill Details2021
House Bill 649 (Public) Filed Thursday, April 22, 2021
AN ACT TO REVISE AND CLARIFY THE LAWS GOVERNING NEW MOTOR VEHICLE DEALER FRANCHISES.
Intro. by B. Jones.

Status: Ref to the Com on Transportation, if favorable, Rules, Calendar, and Operations of the House (House action) (Apr 26 2021)
H 649

Bill Summaries:

  • Summary date: Apr 22 2021 - View Summary

    Identical to S 342, filed 3/24/21.

    Makes the following changes to GS 20-305(4), which makes it unlawful for any manufacturer, factory branch, distributor, or distributor branch, or any field representative, officer, agent, or any representative of the like, to prevent or refuse to approve the sale or transfer of ownership of a dealership, a change in management or principal operator of the dealership, a change in the use of an existing facility to provide for the sales or service of additional line-makers of new vehicles, or relocation of the dealership to another site within the market area, if the Commissioner of Motor Vehicles (Commissioner) has determined the objection to be unreasonable under the circumstances following a hearing on the matter. Makes technical and clarifying changes as well as organizational changes. Adds the following to the unlawful activity of a manufacturer identified in the provisions now organized as subdivision i. Makes it unlawful for a manufacturer to condition the approval of the sale or transfer of the ownership of a dealership by the sale of the business, stock transfer, or otherwise, or the transfer, sale, succession, or assignment of a dealer's franchise, or a change in the executive management or principal operator of the dealership upon the existing or proposed dealer's willingness to renovate, construct, or relocate the dealership facility, or to enroll in a facility program. Also makes it unlawful for a manufacturer to condition the approval of the sale or transfer of the ownership of a dealership by the sale of the business, stock transfer, or otherwise, or the transfer, sale, succession, or assignment of a dealer's franchise, or a change in the executive management or principal operator of the dealership, or a dealer's proposed relocation of the dealership facility, or a dealer's satisfaction of the terms of any incentive program or contest, upon the existing or proposed dealer's willingness to enter into a right of first refusal in favor of the manufacturer. 

    Makes the following changes to GS 20-305(7), which makes it unlawful for any manufacturer, factory branch, distributor, or distributor branch, or any field representative, officer, agent, or any representative of the like, to prevent or refuse to honor the succession to a dealership by a motor vehicle dealer's designated successor. Regarding the procedure for a manufacturer or distributor to object to an owner's appointment of a designated successor, allows the manufacturer or distributor to request personal and financial data that is reasonably necessary to determine the general business qualifications of the designated successor, in addition to the designated successor's financial ability. Makes conforming changes regarding the timing of the objection following notice of the designation and general information as to the designation's qualifications. Changes the burden of proof placed on the manufacturer or distributor at the evidentiary hearing to determine whether good cause exists for rejection of the owner's appointed designated successor, requires proving that the designated successor is not of good moral character or does not possess reasonable minimum general business experience (rather than alternative proving the successor does not meet the franchisor's existing written and reasonable standards and the uniformly applied minimum business experience standards in the market area considering the volume of sales and service of the new motor vehicle dealer). Makes a similar change to allow the manufacturer or distributor to request the designated successor to complete the application forms generally utilized by the manufacturer or distributor to review the successor's general business qualifications to establish a successor dealership (previously generally referred to the successor's qualifications). Adds a new provision to deem the failure or refusal of the designated successor to agree to any terms or provisions that are in addition to or that vary from the terms or provisions contained in the existing franchise between the parties not to be good cause for the manufacturer or distributor to object to the designated successor. Makes technical changes.

    Expands GS 20-305(18) to make it unlawful for any manufacturer, factory branch, distributor, or distributor branch, or any field representative, officer, agent, or any representative of the like, to prevent or attempt to prevent through the exercise of any contractual right of first refusal or otherwise, a dealer located in the State from purchasing, entering into an option to purchase, or complying with any subjective standards or asserting any legal or equitable rights relating to the franchise. 

    Amends GS 20-305(6) regarding a termination, cancellation or nonrenewal of a franchise. Adds a new provision to deem the establishment of a separate franchise that sells or distributes exclusively or primarily electric vehicles a change of an establishment plan or system of distribution, whereby a franchise is to continue in full force and operation notwithstanding the change. Current law requires the Division of Motor Vehicles (Division) to deny an application of a manufacturer, factory branch, distributor or distributor branch for a license or license renewal upon occurrence of a change in the established plan or system of distribution under the franchise unless the applicant offers to each motor vehicle dealer who is a party to the franchise that line-make, without any separate or additional fee or charge, a new franchise agreement substantially similar to the previous agreement or files an affidavit acknowledging its undertaking to assume and fulfill, without any separate or additional fee or charge to its dealers, the rights, duties, and obligations of its predecessor under the previous agreement (currently does not specify that the applicant cannot apply separate or additional fees or charge upon the occurrence of a change). Adds a new provision that requires the Division to deny renewal of a license that the Division failed to deny following a change until the applicant offers to each motor vehicle dealer who is a party to a franchise for that line-make a new franchise agreement on substantially the same provisions which were contained in the previous agreement. 

    Adds the following new provisions to GS 20-305(9). Makes it unlawful for any manufacturer or distributor to require, coerce, or attempt to coerce any of its franchised dealers in the State to either (1) purchase or lease any electric vehicles charging stations at the dealer's expense unless the dealer is actually offering for sale to the public or providing warranty service on electric vehicles manufacturer or distributed by that manufacturer or distributor, or (2) purchase or lease more than one electric vehicle charging station per dealership location owned by the dealer at the dealer's expense. Additionally makes it unlawful for any manufacturer or distributor to require that any of its franchised dealers in the State purchase or lease any diagnostic equipment or tool for the maintenance, servicing, or repair of electric vehicles if the dealer has other such tools available and can perform the work to the applicable required standards of the manufacturer or distributor. Adds a new requirement for manufacturers and distributors having franchised dealers in the State that sell or service multiple brands of electric vehicles manufactured or distributed by the same manufacturer or distributor to design, manufacture and distribute diagnostic equipment, tools, and parts that can be used interchangeably with all brands of electric vehicles sold or distributed to their dealers in the State to the extent practicable.

    Changes the definition of motor vehicle set out in GS 20-286, applicable to Article 12, Motor Vehicle Dealers and Manufacturers Licensing Law. Expands the term to include any motor propelled vehicle, regardless of the size and type of motor, source of power, or mode of operation. 

    Further amends GS 20-205(9) to make it unlawful for any manufacturer, factory branch, distributor, or distributor branch, or any field representative, officer, agent, or any representative of the like, to require, coerce, or attempt to coerce any new motor vehicle dealer in the State to purchase off-lease or other pre-owned vehicles either as part of the franchise agreement or as a part of an incentive program.

    Expands GS 20-305(28) to make it unlawful for any manufacturer, factory branch, distributor, or distributor branch, or any field representative, officer, agent, or any representative of the like, to require, coerce, or attempt to coerce any new motor vehicle dealer to purchase, order, or accept any pre-owned or new motor vehicle as a precondition to purchasing, ordering, or receiving any other new motor vehicle(s) (currently limited to purchasing or ordering new motor vehicles as a precondition). 

    Makes a clarifying change to separate the prohibitions set forth in GS 20-305(12). Subdivision (12) now prohibits requiring, coercing, or attempting to coerce any new motor vehicle dealer to change location of the dealership, removing any further specifications. Enacts new subdivision (12a) to prohibit requiring, coercing, or attempting to coerce any new motor vehicle dealer to make any substantial alterations to the dealership premises or facilities when doing so would be unreasonable, or without written assurance of a sufficient supply of new motor vehicles to justify an expansion, in light of the current market and economic conditions. 

    Enacts new GS 20-205-(13) as follows. Makes it unlawful for manufacturer, factory branch, distributor, or distributor branch, or any field representative, officer, agent, or any representative of the like, to enter into any release or waiver of rights created under Article 12 with one of its franchised dealers in the state unless the release or waiver complies with six specified criteria, including that the release or waiver does not relate to nonreleasable or nonwaivable rights under the Article, the release or waiver is in no part prospective and is contained to a standalone document. Requires this subdivision to be strictly construed, with any release or waiver found in noncompliance deemed null and void. 

    Amends and adds to GS 20-305(14) regarding delaying, refusing, or failing to deliver motor vehicles or parts and accessories in reasonable quantities or as ordered pursuant to the franchise and advertised. Regarding sales objectives, requires every manufacturer, factory branch, distributor, or distributor branch to provide each of its franchised dealers with an adequate supply of vehicles in a fair, reasonable, and equitable manner based on each dealer's historical selling patter and planning potential (was, and reasonable sales standards as compared to other same line make dealers in the State). Adds the following new provisions. For a new motor vehicle dealer in the State who sold a total of 250 or fewer new motor vehicles manufactured or distributed by a particular manufacturer or distributor during the immediately preceding 12 calendar months, require the manufacturer or distributor to allocate to the dealer and deliver in a timely manner, monthly and on a model by model or series basis, no fewer than the number of new motor vehicles of each such model or series that dealer sold at retail during the immediately previous calendar month. Specifies that the dealer reserves the right to refuse to accept all or any portion of any allocation of vehicles made available pursuant to the new requirement. Adds an additional requirement for manufacturers, factory branches, distributors, and distributor branches to provide to each of its franchised dealers in the State the manufacturer's formula used for allocating motor vehicles, and the monthly summary of the number of motor vehicles allocated to each of the franchised dealers in the State by series, product line, and model. 

    Expands GS 20-305(33), making it unlawful for any manufacturer, factory branch, distributor, or distributor branch, or any field representative, officer, agent, or any representative of the like, to fail to reimburse a dealer located in the State in full for the actual cost of providing a loaner or rental vehicle to any customer who is having a vehicle serviced at the dealership if required by the manufacturer (previously only referred to loaner vehicles). Specifies that the actual costs includes applicable taxes and third-party fees. Expands the provisions to include situations where the manufacturer has represented or indicated to the customer that a loaner or rental vehicle will be provided or that the customer is entitled to such. Adds the following prohibitions. Makes it unlawful for a manufacturer to fail to reimburse the dealer in full as provided by the subdivision whether or not the dealer provides the customer with a motor vehicle similar to the customer's vehicle brought in for service if the dealer does not have a similar model loaner or rental available, or in the event all or some of the time the dealer has provided the loaner or rental is due to the unavailability of one or more parts. 

    Adds the following to the provisions of GS 20-305(50) which prohibits requiring, coercing, or attempting to coerce the relocation of certain new motor vehicle dealerships. Provides that if a manufacturer, factory branch, distributor, or distributor branch offers incentives or other payments under a program that are in any part conditioned on a dealer's construction of a new facility, facility improvements, or installation of signs or other image elements, a dealer that constructed a new facility, made facility improvements, or installed signs or other image elements required or approved by the manufacturer that were completed at a cost of more than $250,000 within the preceding 10 years is deemed to be in compliance with the manufacturer's new or successor program requirements and entitled to receive all incentive or other payments awardable under the new or successor program. Removes the governance of a change in location from the cross-referenced provisions. 

    Adds to the information each motor vehicle manufacturer, factory branch, distributor or distributor branch must specify in writing to each of its licensed motor vehicle dealers pursuant to GS 20-305.1 to include the dealer's manufacturer-sponsored maintenance programs, manufacturer extended warranty, goodwill repairs, and parts exchange programs. Adds to the items to be included in the accompanying schedule of compensation to include reasonable compensation for battery disposal or other disposal charges and shipping and all other associated fees. Changes the requirements for rebutting the presumption of customary parts markup and labor rates by using rates charges by all other franchise motor vehicle dealers located in the dealer's city to town offering the same line-make vehicles, or if none exist, other same segment franchised dealers who are selling competing line-makers of vehicles within the dealer's city or town (previously referred to the dealer's market). Extends the period within which only one audit can be conducted for the following from 12 to 24 months, excluding audits for cause: for warranty or recall parts or service compensation or compensation for used motor vehicle recalls, and for sales incentives, service incentives, rebates, or other forms of incentive compensation. Changes the definition given for audits conducted for cause to include an audit based on the fact that the dealer cannot reasonably substantiate the claim either in accordance with the manufacturer's reasonable written procedures or by other reasonable means; no longer includes that the dealer's claims submissions violate reasonable claims documentation or other requirements of the applicable manufacturer, factory branch, distributor, or distributor branch. Requires a manufacturer to fully compensate a dealer for warranty or recall work and make any chargeback to the dealer's account based on the dealer's failure to comply with the manufacturer's documentation procedure(s) so long as the dealer has documented by other reasonable means. No longer allows the manufacturer to not provide compensation or chargeback when the dealer has failed to comply with the same claim documentation procedure in the previous 12 months and the manufacturer provided a written warning to the dealer in the same period. Adds audits and auditor compensation governed by subsection (b4) to the provisions of the statute of which can be petitioned and heard by the Commissioner in the event of a dispute pursuant to the provisions of subsection (c).

    Expands the definition of motor vehicle dealer under GS 20-286, applicable to Article 12, to include a person who for commission, money or value leases or offers for subscription five or more motor vehicles within any 12 consecutive months, or (2) engages in the business of leasing or offering for subscription new motor vehicles or new or used motor vehicles, or used motor vehicles only (whether or not owned by the person) and sells five or more motor vehicles within any 12 consecutive months. 

    Adds to the provisions of GS 20-305(20) regarding the confidentiality of business, financial, or personal information of new motor vehicle dealers. Prohibits a manufacturer from requiring, or including in any incentive program, a requirement that any of its motor vehicle dealers in the State provide either a financial statement more than once per calendar quarter, or an exclusive financial statement for a franchise when the dealer company operates more than one franchise. 

    Includes a severability clause.