Chrysler Group in 2011 settled a complaint over Motor Village, a factory-owned dealership in Los Angeles, being operated near other Chrysler stores.
The California legislature will take its first step toward possibly enacting a new franchise bill when AB 2107, backed by the California New Car Dealers Association, is heard by the Assembly Transportation Committee on Monday, April 23.
The bill contains a wide range of provisions designed to enhance California’s franchise laws, particularly regarding what the association calls “inappropriate treatment of dealers by manufacturers.” It specifically contains provisions that could be seen as responding to actions in recent years by General Motors, Fiat Chrysler, Hyundai and Genesis, and Volvo and its Lynk & CO affiliate.
“Restoring balance to the relationship between manufacturers and dealers is the chief purpose of AB 2107,” said association Chairman Taz Harvey of Dublin Mazda in a statement.
Here are some of the provisions in the omnibus bill, which is sponsored by Assemblymember Eloise Reyes, D-San Bernardino.
Dealer-factory competition. Cur- rently, an automaker cannot compete against a dealer within a relevant market area, a rule that most recently tripped up Chrysler Group. In November 2011, Chrysler Group agreed to pay as much as $955,000 to settle a complaint by the California Department of Motor Vehicles that the company improperly operated a showcase factory-owned dealership, Motor Village, in downtown Los Angeles within 10 miles of several other Chrysler dealerships. The proposed bill would expand that relevant market area statewide.
Spinoffs and affiliates. This provision appears to be a response to Lynk & CO and Genesis. It specifies that a dealer who sold a vehicle to a customer can continue to provide service, parts and accessories for the vehicle as long as the dealer maintains the same franchise. It also restricts the automaker’s ability to force dealers to repair a vehicle that the dealer is not allowed to sell or lease.
Warranty reimbursements. It sets up a process for determining warranty-work pay based on retail rates for parts and labor, and defines how the factory can respond to a request for retail rates including notification guidelines and a timeline. It also establishes protections for dealers pursuing this newly established retail reimbursement on warranty process from adverse actions and penalties from the automaker, including assessing surcharges, limiting vehicle or parts allocations and conducting audits.
Performance standards and incentives. The bill states that any factory incentive program in which the dealership has to pay any money to participate is not a valid incentive program. It also prohibits any performance standard that measures a dealership’s customer retail sales in the service department.
Facilities mandates. It requires a 15-year standstill between new facilities mandates, meaning that a factory cannot require changes in buildings just 12 years, say, after a previous mandate. It also expands existing Buy California provisions to signs, thereby prohibiting the automaker from requiring the use of a specific out-of-state vendor if local vendors are available.
Subscription services. It would require any automaker’s subscription service to go through its dealers.
Nonfactory service contracts. The bill clarifies that treating dealers differently when providing financing or advancing money because the dealer sold a nonapproved product is prohibited.
Other. It restricts the automaker’s ability to select specific vendors for a dealer’s digital services including websites, data management systems and advertising. It also adds new protections for dealers relating to the factory’s ability to exercise a right of first refusal when selling a franchise.