Relates to automobile manufacturers and unfair practices by franchisors

Summary of specific provisions

Section 1 amends subdivision 5 of section 415 of the vehicle and traffic law by adding a new paragraph b-2 to clarify the extent of the interest that a franchisor, including a manufacturer or distributor and other listed entities, may have in an automobile dealer.

Section 2 amends paragraph f of Subdivision 7 of section 415 of the vehicle and traffic law to clarify the intent of Chapter 490 of the Laws of 2008, which afforded a key protection to the automobile dealer industry and its consumers by preventing deleterious competitive effects that would result from the operation of manufacturer owned dealership businesses, Specifically, section two provides that the commissioner of the department of motor vehicles shall not issue an automobile dealer registration to a franchisor, including a manufacturer or distributor and other listed entities, or an entity controlled by such an entity, except in the limited circumstances that are currently permitted.

Section 3 amends subdivision 1 of section 463 of the vehicle and traffic law by adding a new paragraph e to allow dealers to sell extended service contracts of their choice and not necessarily those offered by a franchisor.

Section 4 makes a technical change to paragraph b of subdivision 2 of section 463 of the vehicle and traffic law.

Section 5 amends paragraph c of subdivision 2 of section 463 of the vehicle and traffic law by adding new subparagraphs 2, 3 and 4 to prohibit franchisors from forcing dealers to perform repeated facility upgrades or rejecting materials or services that are chosen by dealers that are substantially similar to those required by franchisors for construction or upgrade projects.

Section 5 also adds a new subparagraph 5 under paragraph c of subdivision 2 of section 463 that prohibits a franchisor from requiring a dealer to operate dealership facilities that are exclusive to a particular line make, unless such a restriction is justified by current and reasonably expected future economic conditions in the area of the dealership.

Section 5 also adds a new subparagraph 6 under paragraph c of subdivision 2 of section 463 that would prohibit a franchisor from requiring a site control provision that would survive or continue after the termination of a dealership if the termination is due to the discontinuation of the line-make.

Section 6 amends paragraph o of subdivision 2 of Section 463 of the vehicle and traffic law to require franchisors to repurchase signage and other items upon termination; reimbursement of facilities upgrades occurring within three years of a termination without cause; and reimbursement for liability on Dealer Management System contracts in the event of a termination.

Section 7 amends paragraph z of subdivision 2 of section 463 of the vehicle and traffic law to require notice prior to assessing charge-backs for exported vehicles.

Section 8 amends subdivision 2 of section 463 of the vehicle and traffic law is amended by adding, a new paragraph ii to require franchisors to give credit to dealers, for inventory allocation purposes, for sales of new motor vehicles to persons from areas outside a franchisees assigned sales territory.

Section 9 amends subdivision 2 of section 463 by adding new paragraphs jj and kk to require fair vehicle allocations, disclosure, upon request, to dealers of the franchisor's vehicle allocation methodology and transparency of the actual allocations to dealers.

Section 10 amends subdivision 1 of section 465 of the vehicle and traffic law to address issues that arose with the warranty reimbursement provision of the law since its amendment in 2008.

Section 11 amends subdivisions 3 of section 465 of the vehicle and traffic law to require franchisors to provide dealers with either a system or a process that provides a franchised motor vehicle dealer particularized information where the dealer may have been making errors in warranty and sales submissions if the franchisor intends to audit the same.

Section 12 amends subdivisions 4. 6 and 7 of section 465 of the vehicle and traffic law to include sales and marketing payments into existing chargeback protections.

Section 13 provides that if any provision of the bill is determined to be invalid that such determination shall not invalidate the remainder of the bill.

Justification

In 1983, the state Legislature passed the Franchised Motor Vehicle Dealer Act (Chapter 815). In passing the Act, the Legislature found that the distribution of motor vehicles within the state vitally affects its general economy and therefore it is necessary to regulate motor vehicle manufacturers, distributors and factory or distributor representatives. The Act has been amended several times since 1983, including comprehensive amendments in 2008. The provisions of this bill are necessary to clarify the intent of the 2008 Act, add to it several provisions that have become necessary following restructuring efforts by several automobile manufacturers' as a result of the Automotive industry crisis of 2008-2010, and to further minimize the possibility of arbitrary or unfair demands in the franchisor-franchisee relationship so as to maintain the health and vitality of the retail automobile industry.

Prior legislative history

New Legislation.

Fiscal implications

None.

Effective date

Immediately.