SB 724 Modifies provisions of the Motor Vehicle Franchise Practices Act
Sponsor: Griesheimer
LR Number: 4163S.01I Fiscal Note: 4163-01N.ORG
Committee: Commerce, Consumer Protection, Energy and the Environment
Last Action: 2/16/2010 - Voted Do Pass S Commerce, Consumer Protection, Energy and the Environment Committee Journal Page:
Title: Calendar Position:
Effective Date: August 28, 2010

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SB 724 - This act modifies the Motor Vehicle Franchise Practices (MVFP) Act.

SECTION 407.812 - APPLICABILITY OF ACT

All motor vehicle franchise licenses and license renewals shall be issued under the modified MVFP act and all franchise agreements involving such licensed franchisors shall be subject to the modified provisions, or future provisions, regardless of the franchise's date of inception.

SECTION 407.813 - TRUST FUNDS

The act designates various types of funds or compensation sources received by either the franchisee (car dealer) or franchisor (carmaker) as trust funds to be held for the purposes described.

SECTION 407.815 - DEFINITIONS

The act modifies several existing definitions and adds multiple new definitions.

SECTION 407.817 - ISSUING NEW FRANCHISES

The act modifies what is considered to be the relevant market area for a proposed new dealership or relocation of a dealership by including the areas identified in any existing franchise agreements for dealers of the same line-make.

Before a carmaker can issue a new franchise, existing law requires the carmaker to provide written notification to existing dealers of the same line-make in the affected market area. The act specifies what information must be contained in the notification.

Existing law exempts from the notification requirement a car dealership that has been closed within the previous year, if the dealership reopens within two miles of its former location. The act adds the criteria that the dealer franchise must be offered to the previous franchise owner.

Existing law requires the Administrative Hearing Commission (AHC) to take into account various factors into any decision it makes regarding determinations of whether it is prudent for a new dealer franchise to be located in a certain area. The act adds as factors the size of investments and financial obligations of existing similar car dealerships in the area and potential damage they may suffer as a result of the new or relocated dealership. The AHC must also compare the public benefit of increased competition to such potential damage.

SECTION 407.818 - DESIGNATION OF AREA OF RESPONSIBILITY

Any business entity seeking to issue a franchise to sell or lease vehicles in the state must be licensed under Chapter 301, RSMo. Within 30 days of this act's passage, any such licensed entity must designate in writing the "area of responsibility" for each of its franchises and must provide a copy of such to each car dealer franchise as well as the Department of Revenue. The business entity must also provide a copy of each of its franchise agreements to the Department of Revenue.

SECTION 407.819 - SUCCESSOR CARMAKERS

For a period of 5 years after a successor carmaker takes over the business operations of another carmaker, the successor carmaker shall not offer a franchise in the relevant market area, unless it first offers the franchise to a car dealer that had its franchise ended in the market area by the predecessor carmaker.

SECTION 407.822 - FRANCHISOR-FRANCHISEE PROVISIONS

Existing law allows any party seeking relief under the MVFP act to file an application for a hearing through the AHC. Instead of applying for a hearing, the act allows any party to file a complaint. The AHC must send a copy of the complaint to the party against whom the relief is sought. The act shortens the timeframe from 30 to 20 days, in which the respondent must file a response to the complaint.

Under existing law, carmakers must give at least 15 days notice for the termination of a franchise under certain circumstances. The act modifies the criteria for some of these circumstances: adding that an unauthorized transfer of ownership "must comprise more than 50% ownership"; any material misrepresentation by a car dealer must "substantially and adversely affect" the carmaker; certain bankruptcy proceedings "not vacated within 20 days"; and when a car dealer has not ceased an unlawful practice after having received a written 30-day warning from the carmaker.

The act shortens from 60 to 30 days, the time period in which a carmaker must provide notice to disapprove a sale or transfer of ownership by a car dealer or disapprove a designated family successor in ownership of a car dealer.

The act modifies and adds requirements to the required notice to be sent to car dealers from a carmaker under certain circumstances: modifying the window of time that it informs the car dealer that it has in which to file a complaint with the AHC (increases from 20 to 30 days) and informing the car dealer of its right to demand nonbinding mediation.

The act allows a car dealer to seek damages and legal costs from a carmaker in any legal proceeding against the carmaker in which the car dealer prevails.

The act allows a car dealer to make a written demand for mediation to its franchisor for any violation of the MVFP act. The act specifies procedures for the mediation process.

SECTION 407.825 - UNLAWFUL PRACTICES

Current law contains 18 practices considered to be unlawful for a carmaker to perform with regard to a franchisee. The act specifies that these practices are also considered unlawful if they are performed indirectly by a carmaker through any agent, affiliate, common entity or representative of the carmaker. The act makes numerous modifications to the existing unlawful practices and adds 27 additional unlawful practices. The 27 additional unlawful practices include provisions pertaining to: conditioning the awarding of a franchise to a car dealer's willingness to enter into a site control or exclusive use agreement; coercing or requiring a franchise to take actions that would cause it financial harm; discriminating between franchises of the same line-make; withholding or delaying services or payments to a franchise that the franchisor has agreed to provide; or establishing performance standards or plans that are unreasonable or unfair.

SECTION 407.828 - FRANCHISOR COMPENSATION TO FRANCHISEE PROCEDURES

The act modifies provisions pertaining to preparation, delivery and warranty service provided by a car dealer. The act requires the schedule of compensation developed by the franchisor to be submitted to the Department of Revenue. Franchisees must not be required to submit claims for payment any earlier than 90 days after the work was performed. Claims for payment must be paid by the franchisor within 15 days of their receipt. The act lists requirements for how the franchisee calculates its retail rate for parts, service, and labor. The act lists audit and documentation requirements.

SECTION 407.831 - INDEMNIFICATION

Franchisors must indemnify and hold harmless their franchisees from liability in the event a consumer files a lawsuit for the purchase of a damaged vehicle, when such vehicle was damaged prior to delivery of the vehicle to the car dealer and such damage was not disclosed in writing to the car dealer.

SECTION 407.833 - MODIFICATIONS TO FRANCHISES

Franchisors must give at least 90 days written notice of any proposed franchise modification that substantially and adversely affects the franchisee's right, obligations, or finances unless the modification is required by law. The act lists procedures in case of a dispute.

SECTION 407.835 - COURT ACTIONS

Franchisees may recover litigation expenses and are entitled to recover up to 3 times the amount of actual damages that a court finds they have sustained due to a violation of the MVFP act by a franchisor. Franchisors shall have the burden of proof that they acted in compliance with the MVFP act.

The act is similar to TAT/SS/SCS/HCS/HB 2198 (2010).

ERIKA JAQUES