SB 0838 Motor Vehicle Franchise Practices Act Revisions
LR Number:S3057.16P Fiscal Note:3057-16
Last Action:05/01/96 - Voted Do NOT Pass H Motor Vehicle Committee
Title:SS#2/SCS/SB 838
Effective Date:August 28, 1996
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Current Bill Summary

SS/SCS/SB 838 - This act, known as the Motor Vehicle Franchise Practices Act, prohibits the following practices by motor vehicle franchisors:

1) Upon termination of the franchise, failure by the franchisor to pay reasonable compensation to the franchisee;

2) Preventing or refusing to honor the transfer of a franchise through succession or devise. Notice must be given to the franchisor if a franchise is to be transferred by succession and the franchisor may request certain background information to ensure the financial viability of the transferee;

3) Coercing, threatening, intimidating, or requiring a franchisee to waive, limit or disclaim any right a franchisee has under this act; and

4) Initiating any prohibited act in this section on the grounds that such franchisor advised the franchisee in advance that the franchisor would discontinue any franchise agreement at the time of a transfer of such franchise.

PROHIBITED PRACTICES AMENDED - Two prohibited practices are amended under this act:

1) Termination or cancellation of a franchise is prohibited unless the franchisee substantially defaults on its obligations. Under current law, only failure to renew a franchise is unlawful unless a franchisee substantially defaults; and

2) Preventing any sale or transfer of a franchise is prohibited. However, if a franchise specifically grants the franchisor the power to disapprove a transfer, such franchisor may only disapprove such transfer if the interest to be transferred is 50% or more of the franchise and the transferee fails to meet normal franchisee standards such as capitalization and integrity. If the franchisor has the right of first refusal on a proposed transfer, such franchisor may only exercise this right if certain conditions are met.

Recreational motor vehicle franchisees and franchisors are exempt from this section.

SECTION 407.822: PROCEDURAL PROVISIONS - Any party seeking relief under the provisions of this act may file an application with the Administrative Hearing Commission (AHC). The AHC shall issue a final decision within 120 days of the application. Such final decision is subject to judicial review.

The main determination that the AHC will make in a hearing is whether the franchisor has good cause for an act or proposed act that is unlawful under Section 407.825, RSMo. The franchisor has the burden of proving good cause by a preponderance of the evidence. The AHC shall look at various factors relating to the franchisor's behavior, the franchisee's behavior, and surrounding circumstances relative to the proposed act.

When a franchisor initiates an act pursuant to Section 407.825, RSMo, the franchisor shall provide the franchisee with notice 60 days prior to the effective date of the act. The franchisor may provide shorter notice if the franchisee acts without the consent of the franchisor or has violated the law. Notice shall include particular grounds that support the franchisor's intended action and shall inform the franchisee of his right to a hearing before the AHC. Notice shall contain more specific information if the proposed act is the establishment of a new franchisee.

MISCELLANEOUS PROVISIONS - When a dealership is established or relocated in St. Louis City, the choice of the new location shall take into account accessibility to minority populations.

The Motor Vehicle Commission shall ensure that the community of dealer franchises reflects an adequate fraction of minority- owned businesses.

No franchisee shall use any false, deceptive or misleading advertising.