HCS HB 2198 -- MOTOR VEHICLE FRANCHISE PRACTICES ACT

SPONSOR:  Wasson (Parson)

COMMITTEE ACTION:  Voted "do pass" by the Special Committee on
Professional Registration and Licensing by a vote of 13 to 0.

This substitute changes the laws regarding the Motor Vehicle
Franchise Practices Act.  In its main provisions, the substitute:

(1)  Specifies that the public policy of the state is to provide
for fair and impartial regulation of individuals engaged in the
manufacturing, distribution, importation, or selling of motor
vehicles and to protect the public interest in the purchase and
trade of motor vehicles;

(2)  Requires all franchise licenses and license renewals after
August 28, 2010, to be bound by the provisions of the act and
prohibits any franchise agreement made, entered, modified, or
renewed after that date from avoiding or violating the
requirements of the act;

(3)  Requires the provisions of the act to apply to each
franchise that a franchisor, manufacturer, importer, or
distributor has with a franchisee and all agreements between a
franchisee and a common entity or any person controlled by a
franchisor;

(4)  Increases the distance requirements of a relevant market
area when locating or relocating dealerships.  Franchisors must
give written notice to a franchisee of the opening of any new
dealership in the relevant market area selling vehicles of the
same line-make.  Franchisees may bring an action before the
Administrative Hearing Commission within 30 days of the notice to
determine if there is good cause to allow the competition.  The
substitute revises the circumstances that the commission will
take into consideration when determining good cause;

(5)  Requires a reopened or replaced franchise to be offered to
the former owner if a dealership reopens within two miles of its
former location;

(6)  Requires a franchisor to be licensed and to annually renew
his or her license with the Department of Revenue;

(7)  Regulates the offering of franchises by successor
manufacturers and specifies certain criteria that must be met
before a new franchise may be offered or sold if a manufacturer
previously canceled or otherwise ended a franchise agreement;

(8)  Allows for the filing of a complaint instead of an
application for a hearing before the commission regarding a
violation of the act.  When a proceeding is pending before the
commission, a demand for mediation must be filed which will stay
further action by the commission.  If mediation is unsuccessful,
the commission must issue its order terminating the stay;

(9)  Specifies that the actions listed in Section 407.825, RSMo,
whether committed directly or indirectly through an agent,
employee, affiliate, common entity, representative, or
franchisor-controlled entity will be considered an unlawful
practice;

(10)  Revises existing unlawful practices and establishes
additional unlawful practice violations including:

(a)  Engaging in certain specified restraint of trade actions
such as conditioning the offer of a franchise on a site control
agreement or agreement for exclusive use;

(b)  Terminating a franchise agreement without specified notice
regarding unsatisfactory sales or service performance;

(c)  Conditioning the retention of a franchise agreement on
certain specified control requirements over the franchisee's
business;

(d)  Causing warranties to fail to be performed;

(e)  Interfering with or withholding contracted services;

(f)  Requiring installment financing with a particular financial
institution;

(g)  Requiring changes in a franchisee's location without good
cause;

(h)  Allowing an unauthorized person to perform warranty service
with certain exceptions;

(i)  Discriminating in the models of the same line-make offered
to franchisees;

(j)  Failing to make available the offering of bonuses or
rebates;

(k)  Conditioning a franchise agreement on facility improvements
unless reasonably required by the technology of a motor vehicle;

(l)  Entering into site control agreements unless voluntarily
accepted by the franchisee;

(m)  Failing to offer rebates, dealer incentives, interest rate
reductions, finance terms for the same line-make, and various
cash incentives and promotional items;

(n)  Discriminating unreasonably between franchisees in any
program providing assistance including sales and marketing help;

(o)  Failing to provide notice of a choice of law provision
specified in the act;

(p)  Interfering with the delivery of motor vehicle parts;

(q)  Using data concerning franchisees to discriminate against
them in various specified ways;

(r)  Refusing to sell or deliver motor vehicles;

(s)  Requiring the use of customer information obtained from the
franchisee and requiring a franchisee to make a customer purchase
additional products from the franchisor;

(t)  Establishing unfair performance standards for franchisees;

(u)  Implementing any plan for delivery of parts that is
inequitable; and

(v)  Violating any other provision of the act that adversely
impacts a franchisee;

(11)  Establishes deadlines and other rules for submitting claims
concerning products purchased by the franchisee under Section
407.828;

(12)  Requires franchisors to indemnify and hold harmless a
franchisee for damage to a vehicle occurring prior to delivery
that was not disclosed in writing to the franchisee prior to the
delivery of the vehicle;

(13)  Requires franchisors to give 90 days' notice of any
modification that substantially and adversely affects the
franchisee's rights, obligations, investments, or return on
investments; and

(14)  Specifies the right to appeal judgments of the commission
in court and allows actual damages, court costs, and punitive
damages to be recovered for a violation of the provisions of the
act.  Mediation is non-binding, and Missouri law will govern all
disputes brought pursuant to the act.

PROPONENTS:  Supporters say that the bill will give a dealer an
avenue to address a grievance with a manufacturer.  Dealers feel
with the changes in the business environment, certain rules of
practice need to be revised.  The bill allows dealers to make
certain decisions which will help them through tough economic
times.  In many cases, a dealer feels that a manufacturer is
trying to control how a dealer operates his or her business.

Testifying for the bill were Representative Parson; Missouri
Automobile Dealers Association; and Mike Kehoe.

OPPONENTS:  Those who oppose the bill say there are many issues
that need to be addressed and the manufacturer's opposition is
based on the termination process.  The circumstances relating to
a dealer termination are based on certain actions and are
different for each manufacturer.  Manufacturers believe the bill
is an attempt to micro manage the manufacturer/dealer contracts.
There is no other industry in the country receiving this type of
treatment.  Manufacturers realize there are problems facing the
automobile dealers at this time but rewriting the franchise act
is not the answer.

Testifying against the bill were Ford Motor Company; General
Motors Company LLC; and Alliance of Automobile Manufacturers.

Missouri House of Representatives
95th General Assembly, 2nd Regular Session
Last Updated September 14, 2010 at 3:13 pm