Proposed Senate Committee Substitute, House Bill 403, Clarify Motor Vehicle Franchise Laws (2021)
Summary
A proposed Senate committee substitute for House Bill 403 in the General Assembly of North Carolina, Session 2021, with the short title Clarify Motor Vehicle Franchise Laws and the legend Committee Substitute Favorable 5/5/21. Its title reads An Act to Revise and Clarify the Laws Governing New Motor Vehicle Dealer Franchises. Section 1(a), under the heading Dealership Transfers/Right of First Refusal Clarification, rewrites a subdivision requiring that the franchisor be given at least 30 days' prior written notice of a proposed transfer, sale, assignment, relocation or change. Section 16 is a severability clause, and Section 17 makes Section 12 effective January 1, 2022 and the other listed sections effective when they become law.
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“Proposed Senate Committee Substitute, House Bill 403, Clarify Motor Vehicle Franchise Laws (2021).”
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GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2021
H D
HOUSE BILL 403
Committee Substitute Favorable 5/5/21
PROPOSED SENATE COMMITTEE SUBSTITUTE H403-CSBB-12 [v.10]
08/09/2021 02:05:31 PM
Short Title: Clarify Motor Vehicle Franchise Laws. (Public)
Sponsors:
Referred to:
March 25, 2021
1 A BILL TO BE ENTITLED
2 AN ACT TO REVISE AND CLARIFY THE LAWS GOVERNING NEW MOTOR VEHICLE
3 DEALER FRANCHISES.
4 The General Assembly of North Carolina enacts:
5
6 DEALERSHIP TRANSFERS/RIGHT OF FIRST REFUSAL CLARIFICATION
7 SECTION 1.(a) G.S. 20-305(4) reads as rewritten:
8 "(4) Notwithstanding the terms of any franchise agreement, to prevent or refuse to
9 approve the sale or transfer of the ownership of a dealership by the sale of the
10 business, stock transfer, or otherwise, or the transfer, sale or assignment of a
11 dealer franchise, or a change in the executive management or principal
12 operator of the dealership, change in use of an existing facility to provide for
13 the sales or service of one or more additional line-makes of new motor
14 vehicles, or relocation of the dealership to another site within the dealership's
15 relevant market area, if the Commissioner has determined, if requested in
16 writing by the dealer within 30 days after receipt of an objection to the
17 proposed transfer, sale, assignment, relocation, or change, and after a hearing
18 on the matter, that the failure to permit or honor the transfer, sale, assignment,
19 relocation, or change is unreasonable under the circumstances.
20 a. No franchise may be transferred, sold, assigned, relocated, or the
21 executive management or principal operators changed, or the use of an
22 existing facility changed, unless the franchisor has been given at least
23 30 days' prior written notice as to the of all of the following:
24 1. The proposed transferee's name and address, financial ability,
25 and qualifications of the proposed transferee, a copy of the
26 purchase agreement between the dealership and the proposed
27 transferee, the transferee.
28 2. The identity and qualifications of the persons proposed to be
29 involved in executive management or as principal operators,
30 and the operators.
31 3. The location and site plans of any proposed relocation or
32 change in use of a dealership facility.
33 b. The If the franchisor objects to the proposed transfer, sale, assignment,
34 relocation, or change, the franchisor shall send the dealership and the
35 proposed transferee notice of objection, by registered or certified mail,
*H403-CSBB-12*
General Assembly Of North Carolina Session 2021
1 return receipt requested, to the proposed transfer, sale, assignment,
2 relocation, or change within 30 days after receipt of notice from the
3 dealer, as provided in this section. The notice of objection shall state
4 in detail all factual and legal bases for the objection on the part of the
5 franchisor to the proposed transfer, sale, assignment, relocation, or
6 change that is specifically referenced in this subdivision. An objection
7 to a proposed transfer, sale, assignment, relocation, or change in the
8 executive management or principal operator of the dealership or
9 change in the use of the facility may only be premised upon the factual
10 and legal bases specifically referenced in this subdivision or
11 G.S. 20-305(11), as it relates to change in the use of a facility. A
12 manufacturer's notice of objection which is based upon factual or legal
13 issues that are not specifically referenced in this subdivision or
14 G.S. 20-305(11) with respect to a change in the use of an existing
15 facility as being issues upon which the Commissioner shall base his
16 determination shall not be effective to preserve the franchisor's right
17 to object to the proposed transfer sale, assignment, relocation, or
18 change, provided the dealership or proposed transferee has submitted
19 written notice, as required above, as to the proposed transferee's name
20 and address, financial ability, and qualifications of the proposed
21 transferee, a copy of the purchase agreement between the dealership
22 and the proposed transferee, the identity and qualifications of the
23 persons proposed to be involved in the executive management or as
24 principal operators, and the location and site plans of any proposed
25 relocation or change in the use of an existing facility.
26 c. Failure by the franchisor to send notice of objection within 30 days
27 shall constitute waiver by the franchisor of any right to object to the
28 proposed transfer, sale, assignment, relocation, or change. If the
29 franchisor requires additional information to complete its review, the
30 franchisor shall notify the dealership within 15 days after receipt of the
31 proposed transferee's name and address, financial ability, and
32 qualifications, a copy of the purchase agreement between the
33 dealership and the proposed transferee, the identity and qualifications
34 of the persons proposed to be involved in executive management or as
35 principal operators, and the location and site plans of any proposed
36 relocation or change in use of the dealership facility. notice to
37 franchisor under sub-subdivision a. of this subdivision. If the
38 franchisor fails to request additional information from the dealer or
39 proposed transferee within 15 days of receipt of this initial
40 information, the 30-day time period within which the franchisor may
41 provide notice of objection shall be deemed to run from the initial
42 receipt date. Otherwise, the 30-day time period within which the
43 franchisor may provide notice of objection shall run from the date the
44 franchisor has received the supplemental information requested from
45 the dealer or proposed transferee; provided, however, that failure by
46 the franchisor to send notice of objection within 60 days of the
47 franchisor's receipt of the initial information from the dealer shall
48 constitute waiver by the franchisor of any right to object to the
49 proposed transfer, sale, assignment, relocation, or change.
50 d. With respect to a proposed transfer of ownership, sale, or assignment,
51 the sole issue for determination by the Commissioner and the sole
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1 issue upon which the Commissioner shall hear or consider evidence is
2 whether, by reason of lack of good moral character, lack of general
3 business experience, or lack of financial ability, the proposed
4 transferee is unfit to own the dealership. For purposes of this
5 subdivision, the refusal by the manufacturer to accept a proposed
6 transferee who is of good moral character and who otherwise meets
7 the written, reasonable, and uniformly applied business experience and
8 financial requirements, if any, required by the manufacturer of owners
9 of its franchised automobile dealerships is presumed to demonstrate
10 the manufacturer's failure to prove that the proposed transferee is unfit
11 to own the dealership.
12 e. With respect to a proposed change in the executive management or
13 principal operator of the dealership, the sole issue for determination
14 by the Commissioner and the sole issue on which the Commissioner
15 shall hear or consider evidence shall be whether, by reason of lack of
16 training, lack of prior experience, poor past performance, or poor
17 character, the proposed candidate for a position within the executive
18 management or as principal operator of the dealership is unfit for the
19 position. For purposes of this subdivision, the refusal by the
20 manufacturer to accept a proposed candidate for executive
21 management or as principal operator who is of good moral character
22 and who otherwise meets the written, reasonable, and uniformly
23 applied standards or qualifications, if any, of the manufacturer relating
24 to the business experience and prior performance of executive
25 management required by the manufacturers of its dealers is presumed
26 to demonstrate the manufacturer's failure to prove the proposed
27 candidate for executive management or as principal operator is unfit
28 to serve the capacity.
29 f. With respect to a proposed change in use of a dealership facility to
30 provide for the sales or service of one or more additional line-makes
31 of new motor vehicles, the sole issue for determination by the
32 Commissioner is whether the new motor vehicle dealer has a
33 reasonable line of credit for each make or line of motor vehicle and
34 remains in compliance with any reasonable capital standards and
35 facilities requirements of the manufacturer or distributor. The
36 reasonable facilities requirements of the manufacturer or distributor
37 shall not include any requirement that a new motor vehicle dealer
38 establish or maintain exclusive facilities, personnel, or display space.
39 g. With respect to a proposed relocation or other proposed change, the
40 issue for determination by the Commissioner is whether the proposed
41 relocation or other change is unreasonable under the circumstances.
42 For purposes of this subdivision, the refusal by the manufacturer to
43 agree to a proposed relocation which meets the written, reasonable,
44 and uniformly applied standards or criteria, if any, of the manufacturer
45 relating to dealer relocations is presumed to demonstrate that the
46 manufacturer's failure to prove the proposed relocation is unreasonable
47 under the circumstances.
48 h. The manufacturer shall have the burden of proof before the
49 Commissioner under this subdivision.
50 i. It is unlawful for a manufacturer to, in any way, condition its do any
51 of the following:
H403-CSBB-12 [v.10] House Bill 403 Page 3
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1 1. Condition its approval of a proposed transfer, sale, assignment,
2 change in the dealer's executive management, principal
3 operator, or appointment of a designated successor, on the
4 existing or proposed dealer's willingness to construct a new
5 facility, renovate the existing facility, acquire or refrain from
6 acquiring one or more line-makes of vehicles, separate or
7 divest one or more line-makes of vehicle, or establish or
8 maintain exclusive facilities, personnel, or display space.
9 2. It is unlawful for a manufacturer to, in any way, condition
10 Condition its approval of a proposed relocation on the existing
11 or proposed dealer's willingness to acquire or refrain from
12 acquiring one or more line-makes of vehicles, separate or
13 divest one or more line-makes of vehicle, or establish or
14 maintain exclusive facilities, personnel, or display space. The
15 opinion or determination of a franchisor that the continued
16 existence of one of its franchised dealers situated in this State
17 is not viable, or that the dealer holds or fails to hold licensing
18 rights for the sale of other line-makes of vehicles in a manner
19 consistent with the franchisor's existing or future distribution
20 or marketing plans, shall not constitute a lawful basis for the
21 franchisor to fail or refuse to approve a dealer's proposed
22 change in use of a dealership facility or relocation: provided,
23 however, that nothing contained in this subdivision shall be
24 deemed to prevent or prohibit a franchisor from failing to
25 approve a dealer's proposed relocation on grounds that the
26 specific site or facility proposed by the dealer is otherwise
27 unreasonable under the circumstances. Approval of a
28 relocation pursuant to this subdivision shall not in itself
29 constitute the franchisor's representation or assurance of the
30 dealer's viability at that location.
31 3. Condition, directly or indirectly, the approval of the sale or
32 transfer of the ownership of a dealership by the sale of the
33 business, stock transfer, or otherwise, or the transfer, sale,
34 succession, or assignment of a dealer's franchise, or a change
35 in the executive management or principal operator of the
36 dealership upon the existing or proposed dealer's willingness
37 to renovate, construct, or relocate the dealership facility, or to
38 enroll in a facility program; provided, however, that this
39 provision shall not apply to or affect the validity of an
40 ownership transfer or change in executive management or
41 principal operator of the dealership that occurred prior to July
42 1, 2021.This sub-sub-subdivision shall not be construed to
43 annul or impair an existing agreement regarding the
44 renovation, construction, or relocation of a dealership facility
45 that existed prior to the transfer, sale, succession, assignment
46 of the dealer's franchise, change in executive management or
47 change in principal operator. This sub-sub-subdivision does
48 not prevent a manufacturer or distributor from requiring
49 changes to a facility that are necessary in order to sell or service
50 a motor vehicle.
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1 4. Condition, directly or indirectly, the approval of the sale or
2 transfer of the ownership of a dealership by the sale of the
3 business, stock transfer, or otherwise, or the transfer, sale,
4 succession, or assignment of a dealer's franchise, or a change
5 in the executive management or principal operator of the
6 dealership, or a dealer's proposed relocation of the dealership
7 facility, or a dealer's satisfaction of the terms of any incentive
8 program or contest, upon the existing or proposed dealer's
9 willingness to enter into a right of first refusal in favor of the
10 manufacturer."
11 SECTION 1.(b) G.S. 20-305(7) reads as rewritten:
12 "(7) Notwithstanding the terms of any contract or agreement, to prevent or refuse
13 to honor the succession to a dealership, including the franchise, by a motor
14 vehicle dealer's designated successor as provided for under this subsection.
15 …
16 b. Any objections by a manufacturer or distributor to an owner's
17 appointment of a designated successor shall be asserted in accordance
18 with the following procedure:
19 …
20 3. The Commissioner shall endeavor to hold the evidentiary
21 hearing required under this sub-subdivision and render a
22 determination within 180 days after receipt of the written
23 request from the owner or designated successor. In
24 determining whether good cause exists for rejection of the
25 owner's appointed designated successor, the manufacturer or
26 distributor has the burden of proving that the designated
27 successor is a person who is not of good moral character or
28 does not meet the franchisor's existing written and reasonable
29 standards and, considering the volume of sales and service of
30 the new motor vehicle dealer, uniformly applied minimum
31 business experience standards in the market area.area for the
32 proposed principal operator of the dealership.
33 …
34 d. Within 60 days after the death or incapacity of the owner or principal
35 operator, a designated successor appointed in substantial compliance
36 with this section shall give the affected manufacturer or distributor
37 written notice of his or her succession to the position of owner or
38 principal operator of the new motor vehicle dealership; provided,
39 however, that the failure of the designated successor to give the
40 manufacturer or distributor written notice as provided above within 60
41 days of the death or incapacity of the owner or principal operator shall
42 not result in the waiver or termination of the designated successor's
43 right to succeed to the ownership of the new motor vehicle dealership
44 unless the manufacturer or distributor gives written notice of this
45 provision to either the designated successor or the deceased or
46 incapacitated owner's executor, administrator, guardian or other
47 fiduciary by certified or registered mail, return receipt requested, and
48 said written notice grants not less than 30 days time days within which
49 the designated successor may give the notice required hereunder,
50 provided the designated successor or the deceased or incapacitated
51 owner's executor, administrator, guardian or other fiduciary has given
H403-CSBB-12 [v.10] House Bill 403 Page 5
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1 the manufacturer reasonable notice of death or incapacity. Within 30
2 days of receipt of the notice by the manufacturer or distributor from
3 the designated successor provided in this sub-subdivision, the
4 manufacturer or distributor may request that the designated successor
5 complete the application forms generally utilized by the manufacturer
6 or distributor to review the designated successor's qualifications to
7 establish a successor dealership. Within 30 days of receipt of the
8 completed forms, the manufacturer or distributor shall send a letter by
9 certified or registered mail, return receipt requested, advising the
10 designated successor of facts and circumstances which have changed
11 since the manufacturer's or distributor's original approval of the
12 designated successor, and which have caused the manufacturer or
13 distributor to object to the designated successor. Upon receipt of such
14 notice, the designated successor may either designate an alternative
15 successor or may file a request for evidentiary hearing in accordance
16 with the procedures provided in sub-subdivisions b.2. –5. of this
17 subdivision. In any such hearing, the manufacturer or distributor shall
18 be limited to facts and circumstances which did not exist at the time
19 the designated successor was originally approved or evidence which
20 was originally requested to be produced by the designated successor
21 at the time of the original request and was fraudulent.
22 …."
23 SECTION 1.(c) G.S. 20-305(18) reads as rewritten:
24 "(18) To prevent or attempt to prevent a dealer from receiving fair and reasonable
25 compensation for the value of the franchised business transferred in
26 accordance with G.S. 20-305(4) above, or to prevent or attempt to prevent,
27 through the exercise of any contractual right of first refusal refusal, option to
28 purchase, or otherwise, a dealer located in this State from transferring the
29 franchised business to such persons or other entities as the dealer shall
30 designate in accordance with G.S. 20-305(4). The opinion or determination of
31 a manufacturer that the existence or location of one of its franchised dealers
32 situated in this State is not viable or is not consistent with the manufacturer's
33 distribution or marketing forecast or plans shall not constitute a lawful basis
34 for the manufacturer to fail or refuse to approve a dealer's proposed transfer
35 of ownership submitted in accordance with G.S. 20-305(4), or "good cause"
36 for the termination, cancellation, or nonrenewal of the franchise under
37 G.S. 20-305(6) or grounds for the objection to an owner's designated
38 successor appointed pursuant to G.S. 20-305(7)."
39
40 ELECTRIC VEHICLES/FACILITATE SALES OF ELECTRIC VEHICLES
41 SECTION 2.(a) G.S. 20-305(6)g. reads as rewritten:
42 "g. A franchise shall continue in full force and operation notwithstanding
43 a change, in whole or in part, of an established plan or system of
44 distribution of the motor vehicles offered for sale under the franchise.
45 The appointment of a new manufacturer, factory branch, distributor,
46 or distributor branch for motor vehicles offered for sale under the
47 franchise agreement shall be deemed to be a change of an established
48 plan or system of distribution.
49 Upon the occurrence of the change, the Division shall deny an
50 application of a manufacturer, factory branch, distributor, or
51 distributor branch for a license or license renewal unless the applicant
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1 for a license as a manufacturer, factory branch, distributor, or
2 distributor branch offers to each motor vehicle dealer who is a party to
3 a franchise for that line make line make, without any separate or
4 additional fee or charge, a new franchise agreement containing
5 substantially the same provisions which were contained in the
6 previous franchise agreement or files an affidavit with the Division
7 acknowledging its undertaking to assume and fulfill fulfill, without
8 any separate or additional fee or charge to its dealers, the rights, duties,
9 and obligations of its predecessor under the previous franchise
10 agreement. Should the Division fail to deny an application following
11 the change, as required by this subsection, the Division shall then deny
12 any subsequent renewal of such license until such time as the
13 manufacturer, factory branch, distributor, or distributor branch offers
14 to each motor vehicle dealer who is a party to a franchise for that line
15 make a new franchise agreement on substantially the same provisions
16 which were contained in the previous franchise agreement."
17 SECTION 2.(b) G.S. 20-305(9) reads as rewritten:
18 "(9) To require, coerce, or attempt to coerce any new motor vehicle dealer in this
19 State to purchase or lease a specific dealer management computer system for
20 communication with the manufacturer, factory branch, distributor, or
21 distributor branch or any computer hardware or software used for any purpose
22 other than the maintenance or repair of motor vehicles, to participate
23 monetarily in an advertising campaign or contest, or to purchase unnecessary
24 or unreasonable quantities of any promotional materials, training materials,
25 training programs, showroom or other display decorations, materials,
26 computer equipment or programs, charging stations, or special tools at the
27 expense of the new motor vehicle dealer, provided that nothing in this
28 subsection shall preclude a manufacturer or distributor from including an
29 unitemized uniform charge in the base price of the new motor vehicle charged
30 to the dealer where such charge is attributable to advertising costs incurred or
31 to be incurred by the manufacturer or distributor in the ordinary courses of its
32 business.
33 Notwithstanding the terms or conditions of any franchise or other
34 agreement, policy, or incentive program, it is unlawful for any manufacturer
35 or distributor to require, coerce, or attempt to coerce any of its franchised
36 dealers in this State to purchase or lease any electric vehicle charging stations
37 at the dealer's expense unless the dealer has notified the manufacturer or
38 distributor of the dealer's intention to begin selling and servicing electric
39 vehicles manufactured or distributed by that manufacturer or distributor. If the
40 dealer is actually offering for sale to the public or providing warranty service
41 on electric vehicles manufactured or distributed by that manufacturer or
42 distributor, the dealer may not be required to purchase or lease, at the dealer's
43 expense: (a) more than the number of electric vehicle charging stations for use
44 by service technicians and customer education than would reasonably be
45 necessary for the dealer to perform these functions based on the dealer's
46 estimated sales and service volume during the following three-year period; or
47 (b) to make electric vehicle charging stations located at the dealership
48 available for use by the general public. Nothing in this subdivision shall
49 prohibit a manufacturer or distributor from establishing an incentive program
50 for its dealers within this State that provides financial assistance to dealers that
51 purchase or install electric charging stations; provided however that the
H403-CSBB-12 [v.10] House Bill 403 Page 7
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1 incentive compensation paid to the dealer for the dealer's purchase or lease
2 and installation of all charging stations is reasonable and the amount paid
3 separately reflects incentive compensation related to the charging stations.
4 Notwithstanding the terms or conditions of any franchise or other
5 agreement, policy, or incentive program, it is unlawful for any manufacturer
6 or distributor to require that any of its franchised dealers in this State purchase
7 or lease any diagnostic equipment or tool for the maintenance, servicing, or
8 repair of electric vehicles if the dealer has other diagnostic equipment or tools
9 available for servicing another brand or line make of vehicle manufactured or
10 distributed by that manufacturer or distributor that can perform the work to
11 the standards required by and which has been approved by the applicable
12 manufacturer or distributor; provided that approval by the manufacturer or
13 distributor shall not be unreasonably withheld.
14 Notwithstanding the terms or conditions of any franchise or other
15 agreement, a franchised dealer that sells fewer than 250 new motor vehicles
16 per year may request approval from the manufacturer to enter into a tool loaner
17 agreement with another dealer, in lieu of purchasing or leasing any special
18 tools required by any manufacturer, factory branch, distributor, or distributor
19 branch, provided, however, that all of the following conditions are satisfied:
20 …."
21 SECTION 2.(c) G.S. 20-286(10) reads as rewritten:
22 "(10) Motor vehicle. – Any motor propelled vehicle, regardless of the size and type
23 of motor or source of power, trailer or semitrailer, required to be registered
24 under the laws of this State. This term does not include mopeds, as that term
25 is defined in G.S. 20-4.01.
26 …."
27
28 REQUIREMENT TO PURCHASE PRE-OWNED VEHICLES
29 SECTION 3.(a) G.S. 20-305(9) reads as rewritten:
30 "(9) To require, coerce, or attempt to coerce any new motor vehicle dealer in this
31 State to purchase or lease a specific dealer management computer system for
32 communication with the manufacturer, factory branch, distributor, or
33 distributor branch or any computer hardware or software used for any purpose
34 other than the maintenance or repair of motor vehicles, to participate
35 monetarily in an advertising campaign or contest, to purchase off-lease or
36 other pre-owned vehicles, or to purchase unnecessary or unreasonable
37 quantities of any promotional materials, training materials, training programs,
38 showroom or other display decorations, materials, computer equipment or
39 programs, or special tools at the expense of the new motor vehicle dealer,
40 provided that nothing in this subsection shall preclude a manufacturer or
41 distributor from including an unitemized uniform charge in the base price of
42 the new motor vehicle charged to the dealer where such charge is attributable
43 to advertising costs incurred or to be incurred by the manufacturer or
44 distributor in the ordinary courses of its business.
45 Notwithstanding the terms or conditions of any franchise or other
46 agreement, policy, or incentive program, it is unlawful for any manufacturer
47 or distributor to require, coerce, or attempt to coerce any of its franchised
48 dealers in this State to either (i) purchase or lease any electric vehicle charging
49 stations at the dealer's expense unless the dealer is actually offering for sale to
50 the public or providing warranty service on electric vehicles manufactured or
51 distributed by that manufacturer or distributor or (ii) purchase or lease, at the
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1 dealer's expense, more than one electric vehicle charging station per
2 dealership location owned by the dealer.
3 Notwithstanding the terms or conditions of any franchise or other
4 agreement, policy, or incentive program, it is unlawful for any manufacturer
5 or distributor to require that any of its franchised dealers in this State purchase
6 or lease any diagnostic equipment or tool for the maintenance, servicing or
7 repair of electric vehicles if the dealer has other diagnostic equipment or tools
8 available that can perform the work to the standards required by the applicable
9 manufacturer or distributor. To the extent practicable, manufacturers and
10 distributors having franchised dealers in this State that sell or service multiple
11 brands of electric vehicles manufactured or distributed by the same
12 manufacturer or distributor are required to design, manufacture and distribute
13 diagnostic equipment, tools and parts that can be used interchangeably with
14 all brands of electric vehicles sold or distributed to their dealers in this State.
15 Notwithstanding the terms or conditions of any franchise or other
16 agreement, a franchised dealer that sells fewer than 250 new motor vehicles
17 per year may request approval from the manufacturer to enter into a tool loaner
18 agreement with another dealer, in lieu of purchasing or leasing any special
19 tools required by any manufacturer, factory branch, distributor, or distributor
20 branch, provided, however, that all of the following conditions are satisfied:
21 …."
22 SECTION 3.(b) G.S. 20-305(28) reads as rewritten:
23 "(28) To require, coerce, or attempt to coerce any new motor vehicle dealer to
24 purchase or order any purchase, order, or accept any pre-owned or new motor
25 vehicle as a precondition to purchasing, ordering, or receiving any other new
26 motor vehicle or vehicles. Nothing herein shall prevent a manufacturer from
27 requiring that a new motor vehicle dealer fairly represent and inventory the
28 full line of current model year new motor vehicles which are covered by the
29 franchise agreement, provided that such inventory representation
30 requirements are not unreasonable under the circumstances."
31
32 CLARIFICATION OF DEALER'S RIGHT TO CONTROL LOCATION
33 SECTION 4. G.S. 20-305(12) reads as rewritten:
34 "(12) To require, coerce, or attempt to coerce any new motor vehicle dealer in this
35 State to change location of the dealership, or to make any substantial
36 alterations to the dealership premises or facilities, when to do so would be
37 unreasonable, or without written assurance of a sufficient supply of new motor
38 vehicles so as to justify such an expansion, expense, in light of the current
39 market and economic conditions. If a dealer is required by the manufacturer
40 or distributor to change the location of the dealership and has not sold its
41 existing dealership facility and real estate within the later of 180 days of listing
42 the property for sale or 90 days after the facility relocation, then, upon the
43 written request of the dealer, the manufacturer or distributor shall purchase
44 the dealer's existing dealership facility and real estate at its fair market value
45 as determined by an independent appraiser agreed upon by the dealer and the
46 manufacturer or distributor. If a manufacturer or distributor purchases a
47 dealership facility and real estate, then it shall be entitled to sole ownership,
48 possession, use, and control of any items, buildings, or property that were
49 included in the contract to purchase."
50
51 GRANDFATHER EXTENSION
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1 SECTION 5. G.S. 20-305(30) reads as rewritten:
2 "(30) To vary the price charged to any of its franchised new motor vehicle dealers
3 located in this State for new motor vehicles based on the dealer's purchase of
4 new facilities, supplies, tools, equipment, or other merchandise from the
5 manufacturer, the dealer's relocation, remodeling, repair, or renovation of
6 existing dealerships or construction of a new facility, the dealer's participation
7 in training programs sponsored, endorsed, or recommended by the
8 manufacturer, whether or not the dealer is dualed with one or more other line
9 makes of new motor vehicles, or the dealer's sales penetration. Except as
10 provided in this subdivision, it shall be unlawful for any manufacturer, factory
11 branch, distributor, or distributor branch, or any field representative, officer,
12 agent, or any representative whatsoever of any of them to vary the price
13 charged to any of its franchised new motor vehicle dealers located in this State
14 for new motor vehicles based on the dealer's sales volume, the dealer's level
15 of sales or customer service satisfaction, the dealer's purchase of advertising
16 materials, signage, nondiagnostic computer hardware or software,
17 communications devices, or furnishings, or the dealer's participation in used
18 motor vehicle inspection or certification programs sponsored or endorsed by
19 the manufacturer.
20 The price of the vehicle, for purposes of this subdivision shall include the
21 manufacturer's use of rebates, credits, or other consideration that has the effect
22 of causing a variance in the price of new motor vehicles offered to its
23 franchised dealers located in the State.
24 Notwithstanding the foregoing, nothing in this subdivision shall be
25 deemed to preclude a manufacturer from establishing sales contests or
26 promotions that provide or award dealers or consumers rebates or incentives;
27 provided, however, that the manufacturer complies with all of the following
28 conditions:
29 a. With respect to manufacturer to consumer rebates and incentives, the
30 manufacturer's criteria for determining eligibility shall:
31 1. Permit all of the manufacturer's franchised new motor vehicle
32 dealers in this State to offer the rebate or incentive; and
33 2. Be uniformly applied and administered to all eligible
34 consumers.
35 b. With respect to manufacturer to dealer rebates and incentives, the
36 rebate or incentive program shall:
37 1. Be based solely on the dealer's actual or reasonably anticipated
38 sales volume or on a uniform per vehicle sold or leased basis;
39 2. Be uniformly available, applied, and administered to all of the
40 manufacturer's franchised new motor vehicle dealers in this
41 State; and
42 3. Provide that any of the manufacturer's franchised new motor
43 vehicle dealers in this State may, upon written request, obtain
44 the method or formula used by the manufacturer in establishing
45 the sales volumes for receiving the rebates or incentives and
46 the specific calculations for determining the required sales
47 volumes of the inquiring dealer and any of the manufacturer's
48 other franchised new motor vehicle dealers located within 75
49 miles of the inquiring dealer.
50 Nothing contained in this subdivision shall prohibit a manufacturer from
51 providing assistance or encouragement to a franchised dealer to remodel,
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1 renovate, recondition, or relocate the dealer's existing facilities, provided that
2 this assistance, encouragement, or rewards are not determined on a per vehicle
3 basis.
4 It is unlawful for any manufacturer to charge or include the cost of any
5 program or policy prohibited under this subdivision in the price of new motor
6 vehicles that the manufacturer sells to its franchised dealers or purchasers
7 located in this State.
8 In the event that as of October 1, 1999, a manufacturer was operating a
9 program that varied the price charged to its franchised dealers in this State in
10 a manner that would violate this subdivision, or had in effect a documented
11 policy that had been conveyed to its franchised dealers in this State and that
12 varied the price charged to its franchised dealers in this State in a manner that
13 would violate this subdivision, it shall be lawful for that program or policy,
14 including amendments to that program or policy that are consistent with the
15 purpose and provisions of the existing program or policy, or a program or
16 policy similar thereto implemented after October 1, 1999, to continue in effect
17 as to the manufacturer's franchised dealers located in this State until June 30,
18 2022.2025.
19 In the event that as of June 30, 2001, a manufacturer was operating a
20 program that varied the price charged to its franchised dealers in this State in
21 a manner that would violate this subdivision, or had in effect a documented
22 policy that had been conveyed to its franchised dealers in this State and that
23 varied the price charged to its franchised dealers in this State in a manner that
24 would violate this subdivision, and the program or policy was implemented in
25 this State subsequent to October 1, 1999, and prior to June 30, 2001, and
26 provided that the program or policy is in compliance with this subdivision as
27 it existed as of June 30, 2001, it shall be lawful for that program or policy,
28 including amendments to that program or policy that comply with this
29 subdivision as it existed as of June 30, 2001, to continue in effect as to the
30 manufacturer's franchised dealers located in this State until June 30,
31 2022.2025.
32 Any manufacturer shall be required to pay or otherwise compensate any
33 franchise dealer who has earned the right to receive payment or other
34 compensation under a program in accordance with the manufacturer's
35 program or policy.
36 The provisions of this subdivision shall not be applicable to multiple or
37 repeated sales of new motor vehicles made by a new motor vehicle dealer to
38 a single purchaser under a bona fide fleet sales policy of a manufacturer,
39 factory branch, distributor, or distributor branch."
40
41 VEHICLE ALLOCATION/APPEAL PROCESS
42 SECTION 6. G.S. 20-305(14) reads as rewritten:
43 "(14) To delay, refuse, or fail to deliver motor vehicles or motor vehicle parts or
44 accessories in reasonable quantities relative to the new motor vehicle dealer's
45 facilities and sales potential in the new motor vehicle dealer's market area as
46 determined in accordance with reasonably applied economic principles, or
47 within a reasonable time, after receipt of an order from a dealer having a
48 franchise for the retail sale of any new motor vehicle sold or distributed by the
49 manufacturer or distributor, any new vehicle, parts or accessories to new
50 vehicles as are covered by such franchise, and such vehicles, parts or
51 accessories as are publicly advertised as being available or actually being
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1 delivered. The delivery to another dealer of a motor vehicle of the same model
2 and similarly equipped as the vehicle ordered by a motor vehicle dealer who
3 has not received delivery thereof, but who has placed his written order for the
4 vehicle prior to the order of the dealer receiving the vehicle, shall be evidence
5 of a delayed delivery of, or refusal to deliver, a new motor vehicle to a motor
6 vehicle dealer within a reasonable time, without cause. Additionally, except
7 as may be required by any consent decree of the Commissioner or other order
8 of the Commissioner or court of competent jurisdiction, any sales objectives
9 which a manufacturer, factory branch, distributor, or distributor branch
10 establishes for any of its franchised dealers in this State must be reasonable,
11 and every manufacturer, factory branch, distributor, or distributor branch must
12 allocate its products within this State in a manner that does all of the following:
13 a. Provides each of its franchised dealers in this State an adequate supply
14 of vehicles by series, product line, and model in a fair, reasonable, and
15 equitable manner based on each dealer's historical selling pattern and
16 reasonable sales standards as compared to other same line-make
17 dealers in the State.
18 …
19 f. Provides each of its franchised dealers in this State a process for a
20 dealer to appeal the dealer's vehicle allocation should the dealer
21 believe it was not allocated or did not receive vehicle inventory in a
22 manner that complies with both this subdivision and the
23 manufacturer's or distributor's uniformly applied allocation formula.
24 Participation in the appeal process does not waive or impair any rights,
25 claims or defenses available to the dealer, manufacturer or distributor
26 under applicable law. All in-person meetings, mediations, or other
27 proceedings related to the appeal process shall be conducted in this
28 State unless otherwise agreed to by the parties.
29 This subsection subdivision is not violated, however, if such failure is caused
30 solely by the occurrence of temporary international, national, or regional
31 product shortages resulting from natural disasters, unavailability of parts,
32 labor strikes, product recalls, and other factors and events beyond the control
33 of the manufacturer that temporarily reduce a manufacturer's product supply.
34 The willful or malicious maintenance, creation, or alteration of a vehicle
35 allocation process or formula by a manufacturer, factory branch, distributor,
36 or distributor branch that is in any part designed or intended to force or coerce
37 a dealer in this State to close or sell the dealer's franchise, cause the dealer
38 financial distress, or to relocate, update, or renovate the dealer's existing
39 dealership facility shall constitute an unfair and deceptive trade practice under
40 G.S. 75-1.1."
41
42 LOANER/RENTAL CAR REIMBURSEMENT
43 SECTION 7. G.S. 20-305(33) reads as rewritten:
44 "(33) To fail to reimburse a dealer located in this State in full for the actual cost cost,
45 including applicable taxes and third-party fees, of providing a loaner or rental
46 vehicle to any customer who is having a vehicle serviced at the dealership if
47 the provision of such a loaner or rental vehicle is required by the manufacturer.
48 It is unlawful for a manufacturer to fail to reimburse the dealer in full as
49 provided above (i) whether or not the dealer provides the customer with a
50 model vehicle similar to the vehicle the customer brought in for service, in the
51 event the dealer does not have a similar model loaner or rental vehicle
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1 available, or (ii) if the provision of a rental or loaner vehicle to a customer is
2 required or approved by the manufacturer or distributor and further provided
3 that all or any portion of the time the dealer has provided the customer with a
4 loaner or rental vehicle is due to the unavailability of one or more parts sold
5 or distributed by the manufacturer or through a supplier designated or
6 approved by the manufacturer."
7
8 FACILITY EXPENDITURES
9 SECTION 8. G.S. 20-305(50) reads as rewritten:
10 "(50) To require, coerce, or attempt to coerce any new motor vehicle dealer located
11 in this State to change location of its dealership, or to make any substantial
12 alterations to its dealership premises or facilities, if the dealer (i) has changed
13 the location of its dealership or made substantial alterations to its dealership
14 premises or facilities within the preceding 10 years at a cost of more than two
15 hundred fifty thousand dollars ($250,000), indexed to the Consumer Price
16 Index, over this 10-year period, and (ii) the change in location or alteration
17 was made toward compliance with a facility initiative or facility program that
18 was sponsored or supported by the manufacturer, factory branch, distributor,
19 or distributor branch, with the approval of the manufacturer, factory branch,
20 distributor, or distributor branch. If a manufacturer, factory branch,
21 distributor, or distributor branch offers incentives, or other payments under a
22 program that are in any part conditioned on a dealer's construction of a new
23 facility, facility improvements, or installation of signs or other image
24 elements, a dealer that constructed a new facility, made facility improvements,
25 or installed signs or other image elements required by or approved by the
26 manufacturer that were completed at a cost of more than two hundred fifty
27 thousand dollars ($250,000), indexed to the Consumer Price Index, within the
28 preceding 10 years shall be deemed to be in compliance with any applicable
29 facility requirements included in the manufacturer's program, and the dealer
30 shall be entitled to receive all such incentives or other payments awardable
31 under the program. If, during the 10-year period, the manufacturer revises or
32 discontinues an existing program, standard, or policy or establishes a new
33 program, standard, or policy or other benefit relating to construction or
34 substantial alteration of a dealership, a motor vehicle dealer that completed
35 construction or alteration of a dealership at a cost of more than two hundred
36 fifty thousand dollars ($250,000) as part of a prior program, standard, or
37 policy and elects not to participate in the new or revised program, standard, or
38 policy shall not be entitled to the benefits under the new or revised program
39 but shall remain entitled to all benefits under the prior program, standard, or
40 policy according to the terms of the prior program, standard, or policy. If the
41 prior program, standard, or policy under which the dealer completed a
42 construction or alteration does not contain a specific period of time during
43 which the manufacturer or distributor must provide payments or benefits to a
44 dealer, then the manufacturer or distributor may not deny the dealer payment
45 or benefits under the terms of that prior program, as it existed when the dealer
46 began to perform under the prior program, for the balance of the 10-year term,
47 regardless of whether the manufacturer's or distributor's program, standard, or
48 policy has been revised or discontinued. For any dealer that did not change
49 the location of its dealership or make substantial alterations to its dealership
50 premises or facilities within the preceding 10 years at a cost of more than two
51 hundred fifty thousand dollars ($250,000), indexed to the Consumer Price
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1 Index, the dealer's obligation to change location of its dealership, or to make
2 any substantial alteration to its dealership premises or facilities, at the request
3 of a manufacturer, factory branch, distributor, or distributor branch, or to
4 satisfy a requirement or condition of an incentive program sponsored by a
5 manufacturer, factory branch, distributor, or distributor branch, shall be
6 governed by the applicable provisions of subdivisions (4), (11), (12), (25),
7 (30), (32), and (42) of this section. This section shall not apply to any facility
8 or premises improvement or alteration that is voluntarily agreed to by the new
9 motor vehicle dealer and for which the dealer receives facilities-related
10 compensation from the manufacturer or distributor for the facility
11 improvement or alteration equivalent to at least a majority of the cost incurred
12 by the dealer for the facility improvement or alteration."
13
14 WARRANTY REQUIREMENTS
15 SECTION 9. G.S. 20-305.1 reads as rewritten:
16 "§ 20-305.1. Automobile dealer warranty and recall obligations.
17 (a) Each motor vehicle manufacturer, factory branch, distributor or distributor branch,
18 shall specify in writing to each of its motor vehicle dealers licensed in this State the dealer's
19 obligations for preparation, delivery, warranty, manufacturer-sponsored maintenance programs,
20 manufacturer extended warranty, parts exchange programs, and recall service on its products.
21 The disclosure required under this subsection shall include the schedule of compensation to be
22 paid the dealers for parts, work, and service in connection with preparation, delivery, warranty,
23 and recall service, and the time allowances for the performance of the work and service. In no
24 event shall the schedule of compensation fail to include reasonable compensation for diagnostic
25 work work, shipping, if required by the manufacturer or distributor, and for battery disposal or
26 other disposal charges and all other associated fees that were actually incurred by the dealer, and
27 associated administrative requirements as well as repair service and labor. Time allowances for
28 the performance of preparation, delivery, warranty, and recall work and service shall be
29 reasonable and adequate for the work to be performed. The compensation paid under this section
30 shall be reasonable, provided, however, that under no circumstances shall the reasonable
31 compensation under this section for warranty and recall service be in an amount less than the
32 dealer's current retail labor rate and the amount charged to retail customers for the manufacturer's
33 or distributor's original parts for nonwarranty work of like kind, provided the amount is
34 competitive with the retail rates charged for parts and labor by other franchised dealers of the
35 same line-make located within the dealer's market. If there is no other same line-make dealer
36 located in the dealer's market or if all other same line-make dealers in the dealer's market are
37 owned or operated by the same entities or individuals as the dealership being compared, the retail
38 rates charged for parts and labor by other franchised dealers located in the dealer's market that
39 sell competing line-make motor vehicles as the dealer may be considered when determining
40 whether the dealer's rates are competitive.
41 (a1) The retail rate customarily charged by the dealer for parts and labor may be
42 established at the election of the dealer by the dealer submitting to the manufacturer or distributor
43 100 sequential nonwarranty customer-paid service repair orders which contain warranty-like
44 parts, or 60 consecutive days of nonwarranty customer-paid service repair orders which contain
45 warranty-like parts, whichever is less, covering repairs made no more than 180 days before the
46 submission and declaring the average percentage markup. The average of the parts markup rate
47 and the average labor rate shall both be presumed to be reasonable, however, a manufacturer or
48 distributor may, not later than 30 days after submission, rebut that presumption by reasonably
49 substantiating that the rate is unfair and unreasonable in light of the retail rates charged for parts
50 and labor by all other franchised motor vehicle dealers located in the dealer's market relevant
51 market area offering the same line-make vehicles. In the event there are no other franchised
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1 dealers offering the same line-make of vehicle in the dealer's market, relevant market area, the
2 manufacturer or distributor may compare the dealer's retail rate for parts and labor with the retail
3 rates charged for parts and labor by other same segment franchised dealers who are selling
4 competing line-makes of vehicles within the dealer's market. relevant market area. In the event
5 there is also no other same segment franchise dealer who is selling a competing line-make of
6 vehicle within the dealer's relevant market area, the manufacturer or distributor may then
7 compare the dealer's retail rate for parts and labor with the retail rates charged for parts and labor
8 by other same line-make dealers or same-segment franchised dealers who are selling competing
9 line-makes of vehicles that are located within the relevant market area of the franchised dealer
10 who is located in closest proximity, measured by straight-line distance, to the dealer, provided
11 they are not all owned, operated or controlled by the subject dealer. For the purposes of this
12 section, the term "relevant market area" shall have the same meaning as set forth in
13 G.S. 20-286(13b). The retail rate and the average labor rate shall go into effect 30 days following
14 the manufacturer's approval, but in no event later than 60 days following the declaration, subject
15 to audit of the submitted repair orders by the manufacturer or distributor and a rebuttal of the
16 declared rate as described above. If the declared rate is rebutted, the manufacturer or distributor
17 shall propose an adjustment of the average percentage markup based on that rebuttal not later
18 than 30 days after such audit, but in no event later than 60 days after submission. If the dealer
19 does not agree with the proposed average percentage markup, the dealer may file a protest with
20 the Commissioner not later than 30 days after receipt of that proposal by the manufacturer or
21 distributor. If such a protest is filed, the Commissioner shall inform the manufacturer or
22 distributor that a timely protest has been filed and that a hearing will be held on such protest. In
23 any hearing held pursuant to this subsection, the manufacturer or distributor shall have the burden
24 of proving by a preponderance of the evidence that the rate declared by the dealer was
25 unreasonable as described in this subsection and that the proposed adjustment of the average
26 percentage markup is reasonable pursuant to the provisions of this subsection. If the dealer
27 prevails at a protest hearing, the dealer's proposed rate, affirmed at the hearing, shall be effective
28 as of 60 days after the date of the dealer's initial submission of the customer-paid service orders
29 to the manufacturer or distributor. If the manufacturer or distributor prevails at a protest hearing,
30 the rate proposed by the manufacturer or distributor, that was affirmed at the hearing, shall be
31 effective beginning 30 days following issuance of the final order.
32 …
33 (b) Notwithstanding the terms of any franchise agreement, it is unlawful for any motor
34 vehicle manufacturer, factory branch, distributor, or distributor branch to fail to perform any of
35 its warranty or recall obligations with respect to a motor vehicle, to fail to fully compensate its
36 motor vehicle dealers licensed in this State for a qualifying used motor vehicle pursuant to
37 subsections (i) and (j) of this section or warranty and recall parts other than parts used to repair
38 the living facilities of recreational vehicles, including motor homes, travel trailers, fifth-wheel
39 trailers, camping trailers, and truck campers as defined in G.S. 20-4.01(32b), at the prevailing
40 retail rate according to the factors in subsection (a) of this section, or, in service in accordance
41 with the schedule of compensation provided the dealer pursuant to subsection (a) of this section,
42 or to otherwise recover all or any portion of its costs for compensating its motor vehicle dealers
43 licensed in this State for warranty or recall parts and service or for payments for a qualifying
44 used motor vehicle pursuant to subsections (i) and (j) of this section either by reduction in the
45 amount due to the dealer, or by separate charge, surcharge, or other imposition, and to fail to
46 indemnify and hold harmless its franchised dealers licensed in this State against any judgment
47 for damages or settlements agreed to by the manufacturer, including, but not limited to, court
48 costs and reasonable attorneys' fees of the motor vehicle dealer, arising out of complaints, claims
49 or lawsuits including, but not limited to, strict liability, negligence, misrepresentation, express or
50 implied warranty, or recision or revocation of acceptance of the sale of a motor vehicle as defined
51 in G.S. 25-2-608, to the extent that the judgment or settlement relates to the alleged defective or
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1 negligent manufacture, assembly or design of new motor vehicles, parts or accessories or other
2 functions by the manufacturer, factory branch, distributor or distributor branch, beyond the
3 control of the dealer. Any audit, other than an audit conducted for cause, for warranty or recall
4 parts or service compensation, or compensation for a qualifying used motor vehicle in accordance
5 with subsections (i) and (j) of this section may only be conducted one time within any 12-month
6 period and shall only be for the 12-month period immediately following the date of the payment
7 of the claim by the manufacturer, factory branch, distributor, or distributor branch. Any audit,
8 other than an audit conducted for cause, for sales incentives, service incentives, rebates, or other
9 forms of incentive compensation may only be conducted one time within any 12-month period
10 and shall only be for the 12-month period immediately following the date of the payment of the
11 claim by the manufacturer, factory branch, distributor, or distributor branch pursuant to a sales
12 incentives program, service incentives program, rebate program, or other form of incentive
13 compensation program. Provided, however, these limitations shall not be effective in the case of
14 fraudulent claims. For purposes of this subsection, the term "audit conducted for cause" is defined
15 as an audit based on any of the following: (i) statistical evidence that the dealer's claims are
16 unreasonably high in comparison to other dealers similarly situated or the dealer's claim history,
17 (ii) that the dealer's claims submissions violate reasonable claims documentation or other
18 requirements of the applicable manufacturer, factory branch, distributor, or distributor branch,
19 (iii) a follow up to an earlier audit in which the dealer was notified of a claim documentation
20 procedure violation that occurred within the prior 12-month period, provided the audit and any
21 chargeback are in compliance with subdivision (b1) or (b2) of this section and are limited in
22 scope to just the specific violation determined previously, or (iv) reasonable evidence of
23 malfeasance or fraud. In the event a manufacturer, factory branch, distributor, or distributor
24 branch elects to perform an audit conducted for cause, the manufacturer, factory branch,
25 distributor, or distributor branch, simultaneously with providing the affected dealer with written
26 notice of the audit, shall further be required to explain in detail in the notice the data or other
27 foundation upon which the cause is based.
28 …
29 (c) In the event there is a dispute between the manufacturer, factory branch, distributor,
30 or distributor branch, and the dealer with respect to any matter referred to in subsection (a), (b),
31 (b1), (b2), (b3), (b4), (d), or (i) of this section, either party may petition the Commissioner in
32 writing, within 30 days after either party has given written notice of the dispute to the other, for
33 a hearing on the subject and the decision of the Commissioner shall be binding on the parties,
34 subject to rights of judicial review and appeal as provided in Chapter 150B of the General
35 Statutes; provided, however, that nothing contained herein shall give the Commissioner any
36 authority as to the content of any manufacturer's or distributor's warranty. Upon the filing of a
37 petition before the Commissioner under this subsection, any chargeback to or any payment
38 required of a dealer by a manufacturer relating to warranty or recall parts or service
39 compensation, or to sales incentives, service incentives, rebates, other forms of incentive
40 compensation, or the withholding or chargeback of other compensation or support that a dealer
41 would otherwise be eligible to receive, shall be stayed during the pendency of the determination
42 by the Commissioner.
43 …."
44
45 CLARIFY DEFINITION OF MOTOR VEHICLE DEALER
46 SECTION 10. G.S. 20-286(11)a. reads as rewritten:
47 "a. A person who does any of the following:
48 1. For commission, money, or other thing of value, buys, sells,
49 leases at retail, or exchanges, whether outright or on
50 conditional sale, bailment lease, chattel mortgage, or
51 otherwise, five or more motor vehicles within any 12
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1 consecutive months, regardless of who owns the motor
2 vehicles.
3 2. On behalf of another and for commission, money, or other
4 thing of value, arranges, offers, attempts to solicit, or attempts
5 to negotiate the sale, purchase, or exchange of an interest in
6 five or more motor vehicles within any 12 consecutive months,
7 regardless of who owns the motor vehicles.
8 3. Engages, wholly or in part, in the business of selling selling,
9 leasing at retail, new motor vehicles or new or used motor
10 vehicles, or used motor vehicles only, whether or not the motor
11 vehicles are owned by that person, and sells five or more motor
12 vehicles within any 12 consecutive months.
13 4. Offers to sell, displays, or permits the display for sale for any
14 form of compensation five or more motor vehicles within any
15 12 consecutive months.
16 5. Primarily engages in the leasing or renting of motor vehicles
17 to others and sells or offers to sell those vehicles at retail.
18 6. For commission, money, or other thing of value, or on behalf
19 of another person sharing 10% or more common ownership,
20 offers new vehicles as part of a subscription program. This
21 sub-sub-subdivision shall not apply to any person providing a
22 vehicle subscription or monthly rental program on or after
23 January 1, 2025."
24
25 DEALERSHIP FINANCIAL STATEMENTS
26 SECTION 11. G.S. 20-305(20) reads as rewritten:
27 "(20) To release to any outside party, except under subpoena or as otherwise
28 required by law or in an administrative, judicial or arbitration proceeding
29 involving the manufacturer or new motor vehicle dealer, any confidential
30 business, financial, or personal information which may be from time to time
31 provided by the new motor vehicle dealer to the manufacturer, without the
32 express written consent of the new motor vehicle dealer. A manufacturer shall
33 not require, or include in any incentive program, a requirement that any of its
34 motor vehicle dealers in this State provide an exclusive financial statement for
35 a franchise or line make when the dealer company operates more than one
36 franchise or sells more than one line make."
37
38 DEALER MANUFACTURER PARTNERSHIP FOR ONLINE SALES
39 SECTION 12. G.S. 20-305 is amended by adding a new subdivision to read:
40 "(53) Notwithstanding the terms of any franchise or agreement, or the terms of any
41 program or policy, to do any of the following if it has any franchised dealers
42 in this State and if it permits retail customers the option of reserving or
43 requesting to purchase or lease a vehicle directly from such manufacturer or
44 distributor:
45 a. Fail to assign any retail vehicle reservation or request to purchase or
46 lease received by the manufacturer or distributor from a resident of
47 this State to the franchised dealer authorized to sell that make and
48 model which is designated by the customer, or if none is designated,
49 to its franchised dealer authorized to sell that make and model located
50 in closest proximity to the customer's location, provided that if the
51 customer does not purchase or lease the vehicle from that dealer within
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1 10 days of the vehicle being assigned to the dealer, or if the customer
2 requests that the transaction be assigned to another dealer, then the
3 manufacturer or distributor may assign the transaction to another
4 franchised dealer authorized to sell that make and model.
5 b. Prohibit a retail customer that has reserved or requested to purchase or
6 lease a vehicle directly from the manufacturer or distributor from
7 negotiating the final purchase price of the vehicle directly with the
8 dealer if the dealer is authorized to sell that make and model and to
9 agree on a final price for a new motor vehicle which varies from the
10 MSRP established by the manufacturer or distributor.
11 c. Prohibit a retail customer that has reserved or requested to purchase or
12 lease a vehicle directly from the manufacturer or distributor from using
13 any vehicle financing or leasing source available from or through the
14 dealer to whom the customer's vehicle reservation or request to
15 purchase or lease has been assigned or to prohibit a franchised dealer
16 in this State from offering and negotiating directly with the customer
17 the terms of vehicle financing or leasing through all sources available
18 to the dealer.
19 d. Prohibit a retail customer that has reserved or requested to purchase or
20 lease a vehicle directly from the manufacturer or distributor from
21 purchasing on terms negotiated or agreed to directly between the
22 customer and the dealer to whom the customer's reservation or request
23 to purchase or lease has been assigned, any service contract, extended
24 warranty, vehicle maintenance contract, or guaranteed asset protection
25 (GAP) agreement, or any other vehicle-related products and services
26 offered by the dealer, provided that a manufacturer, distributor, or
27 captive finance source shall not be required to finance any such
28 product or service that is not offered or supported by the manufacturer
29 or distributor.
30 e. Prohibit a retail customer that has reserved or requested to purchase or
31 lease a vehicle directly from the manufacturer or distributor and the
32 dealer to whom the customer's reservation or request to purchase or
33 lease has been assigned from directly negotiating the trade-in value the
34 customer will receive, or to prohibit the dealer from conducting an
35 on-site inspection of the condition of a trade-in vehicle before the
36 dealer becomes contractually obligated to accept the trade-in value
37 negotiated.
38 f. Use a third party to accomplish what would otherwise be prohibited
39 by this subsection.
40 Nothing contained in this subdivision shall: (i) Require that a manufacturer or
41 distributor allocate or supply additional or supplemental inventory to a franchised
42 dealer located in this State in order to satisfy a retail customer's vehicle reservation or
43 request submitted directly to the manufacturer or distributor as provided in this
44 section; (ii) Apply to the generation of sales leads; provided however that for
45 purposes of this subdivision the term "sales leads" shall not include any reservation
46 or request to purchase or lease a vehicle submitted directly by a customer or potential
47 customer to a manufacturer or distributor; or (iii) Apply to a reservation or request to
48 purchase or lease a vehicle directly from the manufacturer or distributor received from
49 customer that is a resident of this State if the customer designates a dealer outside of
50 this State to be assigned the reservation or request to purchase or lease, or if the dealer
51 located in closest proximity to the customer's location is in another state and the
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1 manufacturer or distributor assigns the reservation or request to purchase or lease to
2 that dealer."
3
4 ELECTRONIC SIGNATURES
5 SECTION 13. G.S. 20-305 is amended by adding a new subdivision to read:
6 "(54) To prohibit or to in any way unreasonably limit or restrict a dealer from using
7 electronic signature technology that conforms to Article 40 of Chapter 66 of
8 the General Statutes to facilitate or execute loaner, demonstrator, rental, and
9 test drive agreements and forms."
10
11 CLARIFY VEHICLE INSPECTION REQUIREMENT FOR AFFILIATE DEALER
12 SECTION 14. G.S. 20-183.4C reads as rewritten:
13 "§ 20-183.4C. When a vehicle must be inspected; 10-day temporary license plate.
14 (a) Inspection. – A vehicle that is subject to a safety inspection, an emissions inspection,
15 or both must be inspected as follows:
16 (1) A Except as otherwise provided in this subdivision, a new vehicle must be
17 inspected before it is delivered to a purchaser at retail in this State. Upon
18 purchase, a receipt approved by the Division must be provided to the new
19 owner certifying compliance. An inspection is not required if the vehicle was
20 previously inspected by an affiliated dealership, or between dealerships
21 having common or interrelated ownership, and the inspection occurred either
22 within 180 days from the date of sale or within 300 miles from the mileage
23 recorded at the date of sale.
24 …
25 (2) A Except as otherwise provided in this subdivision, a used vehicle must be
26 inspected before it is offered for sale at retail in this State by a dealer. Upon
27 purchase, a receipt approved by the Division must be provided to the new
28 owner certifying compliance. An inspection is not required if the vehicle was
29 previously inspected by an affiliated dealership, or between dealerships
30 having common or interrelated ownership, and the inspection occurred either
31 within 180 days from the date of sale or within 300 miles from the mileage
32 recorded at the date of sale."
33
34 PERMIT LIMITED OFF-PREMISES SALES ACTIVITIES
35 SECTION 15. G.S. 20-292 reads as rewritten:
36 "§ 20-292. Dealers may display motor vehicles for sale at retail only at established
37 salesrooms.
38 (a) A new or used motor vehicle dealer may display a motor vehicle for sale at retail only
39 at the dealer's established salesroom, unless the display is of a motor vehicle that meets any of
40 the following descriptions:
41 (1) Contains the dealer's name or other sales information and is used by the dealer
42 as a "demonstrator" for transportation purposes.
43 (2) Is displayed at a trade show or exhibit at which no selling activities relating to
44 the vehicle take place. place and contains the dealer's name and business
45 location.
46 (3) Is displayed at the home or place of business of a customer at the request or
47 with the permission or consent of the customer.
48 (b) Nothing contained in this section or in any other provision contained in Article 12 of
49 this Chapter shall be deemed to prohibit or restrict a new or used motor vehicle dealer or an
50 employee, agent or contractee of a new or used motor vehicle dealer from doing any of the
51 following:
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General Assembly Of North Carolina Session 2021
1 (1) Delivering a motor vehicle purchased or leased by a customer to the
2 customer's home or place of business or having a customer execute forms and
3 other documents relating to vehicle purchase, lease, titling, registration,
4 financing, insurance and other products and services provided to the customer
5 by or through the dealer that are presented to a customer at the customer's
6 home or place of business by any employee or authorized agent of the dealer;
7 provided, however, that all such forms and other documents have been fully
8 agreed to and were fully completed in advance of their presentation to the
9 customer, no additional negotiations or modifications related to the content of
10 any of these forms or other documents take place, and no modifications are
11 made to the content of any of these forms and other documents other than the
12 correction of clerical or typographical errors.
13 (2) Having any employee or authorized agent of the dealer explain vehicle
14 operation, features, care, and warranties to the customer at the time the
15 customer's vehicle is delivered.
16 (3) Retrieving from the customer's home or place of business a motor vehicle that
17 has been sold by the customer to the dealer.
18 (c) This section does not apply to recreational vehicles, house trailers, or boat, animal,
19 camping, or other utility trailers."
20
21 SEVERABILITY CLAUSE
22 SECTION 16. If any section or provision of this act is declared unconstitutional or
23 invalid by the courts, it does not affect the validity of this act as a whole or any part other than
24 the part so declared to be unconstitutional or invalid.
25
26 EFFECTIVE DATE
27 SECTION 17. Sections 1 through 11 and Sections 13 through 16 of this act are
28 effective when they become law and apply to all current and future franchises and other
29 agreements in existence between any new motor vehicle dealer located in this State and a
30 manufacturer or distributor as of the effective date of this act. Section 12 of this act is effective
31 January 1, 2022, and applies as of that date to all existing and future programs and policies of all
32 manufacturers and distributors having any franchised dealers in this State. Except as otherwise
33 provided, the remainder of this act is effective when it becomes law.
Page 20 House Bill 403 H403-CSBB-12 [v.10]
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