SENATE BILL REPORT

                   SB 6220

              As Reported By Senate Committee On:

Commerce, Trade, Housing & Financial Institutions, February 1, 2000

Title:  An act relating to a prohibition on unfair competition by motor vehicle dealers and manufacturers.

Brief Description:  Prohibiting unfair competition by motor vehicle dealers and manufacturers.

Sponsors:  Senators Prentice, Winsley, Deccio and Rasmussen.

Brief History:

Committee Activity:  Commerce, Trade, Housing & Financial Institutions:  1/20/2000, 2/1/2000 [DPS].

SENATE COMMITTEE ON COMMERCE, TRADE, HOUSING & FINANCIAL INSTITUTIONS

Majority Report:  That Substitute Senate Bill No. 6220 be substituted therefor, and the substitute bill do pass.

  Signed by Senators Prentice, Chair; Shin, Vice Chair; Benton, Deccio, Gardner, Hale, Heavey, Rasmussen, T. Sheldon and Winsley.

Staff:  Elizabeth Mitchell (786-7430)

Background:  There are approximately 350 new motor vehicle dealerships in the state of Washington.  None of these dealerships are currently owned by manufacturers.

Recently, some motor vehicle manufacturers have indicated an interest in purchasing dealerships.  There is concern that dealers who do not agree to sell their dealership to manufacturers may not be treated fairly, and that the increase in manufacturer-owned dealerships may result in decreased consumer choice.

Summary of Substitute Bill:  A motor vehicle manufacturer, distributor, factory branch, factory representative, or any persons acting on behalf of these entities is prohibited from giving preferential treatment to any new motor vehicle dealers.  Preferential treatment is defined as:  offering to sell vehicles, parts, or accessories at a lower price to one dealer than another; or having a different method or schedule of delivering vehicles, parts or accessories to one dealer than another.  Preferential treatment does not include sales incentives, rebates, or fleet discounts.

Manufacturers, distributors, and factory branches or representatives are prohibited from owning, operating, or controlling a new motor vehicle dealership with some exceptions.  Exceptions include:  when the dealership is operated during the transition from one owner to the next or in conjunction with an independent person as part of a dealer development program; and when a manufacturer does not own more than 45 percent of the total ownership interest in the dealership and meets specified criteria for duration of ownership.  The terms "own," "operate," and "control" are specified.

A motor vehicle manufacturer, distributor, factory branch, or factory representative is prohibited from operating a service facility for the repair or maintenance of motor vehicles, with limited  exceptions, and these entities are also prohibited from selling or offering to sell a new motor vehicle to a consumer in this state except through a dealer.  A new motor vehicle sold and delivered to a consumer in this state is deemed to have been sold in this state for tax and warranty purposes.

Substitute Bill Compared to Original Bill:  Discrimination language does not apply to sales incentives, rebates, or fleet discounts.  A dealer development program may continue for a "reasonable period of time" instead of five years.  A new motor vehicle sold and delivered to a consumer in this state is deemed to have been sold in this state for tax and warranty purposes.  A recreational vehicle is not considered a motor vehicle for the purposes of this section.

Appropriation:  None.

Fiscal Note:  Not requested.

Effective Date:  Ninety days after adjournment of session in which bill is passed.

Testimony For:  Competition with manufacturers would be unfair due to the large amount of information manufacturers would have about dealers.  Manufacturer-owned dealerships would have serious consequences in rural districts.

Testimony Against:  The price discrimination language in the bill is too broad and would prohibit rebates and fleet discounts.  No restrictions should be placed on internet sales.

Testified:  PRO:  Tom Lane, Jim Boldt, Rod Parr, Tom Sparling, Pam Nelson, Ed Fitzpatrick, Chris Marr, Washington State Auto Dealers Association; Tony Meinhardt, Washington State RV Dealers Association; Mark Webster, IAAW; CON:  Mark Logan, Auto Solutions; Gary Garnder, Washington Association of Internet Service Providers; Steve Buckner, Jim McDonald, Alliance of Automobile Manufacturers.