FINAL BILL REPORT

HB 1645

PARTIAL VETO

                                  C 415 L 89

BYRepresentatives Walk, Prince, Zellinsky, Ballard, R. Fisher, R. Meyers and Chandler

Regulating the relationship between motor vehicle dealers and manufacturers.

House Committe on Transportation

Senate Committee on Transportation

SYNOPSIS AS ENACTED

BACKGROUND:

Washington State New Car/Truck Franchisees assert that inequities exist in the contractual relationships with their manufacturers.  Examples of these inequities include the manufacturers denying the rights of:  (1)  transferability (selling, transferring, or exchanging the dealership to a qualified person of the dealer's choice);  and (2)  survivorship (willing the dealership to a qualified person, chosen by the dealer);

In addition, the dealers assert that the manufacturers' right to terminate a franchisee without proving good cause and acting in good faith allows the manufacturers to dictate all franchise provisions with no negotiations.

Dealers also express concern about "packing"  or siting a new dealership of the same line of cars and trucks between two existing dealerships, or placing a new same line dealership across the street.

SUMMARY:

The relationship between motor vehicle dealers (franchisees) and manufacturers is re-defined.  "Good faith" and "good cause" are defined for the purposes of determining if actions taken by the franchisee or manufacturer are justified.

Provisions are established for an administrative hearing on whether actions (termination, cancellation, or non-renewal) taken by the manufacturer are justified.  Provision is made for a "stay" on termination and assignment actions by the manufacturer until the hearing process is completed.  An appeal may be made to superior court, but following a superior court ruling any stay must be lifted.

In the case of a relevant market area protest, an arbitration process is used in lieu of an administrative law judge hearing.  Any appeal of the arbitration process to the superior court shall be based solely on the character of the arbitrators and not on the finding of facts.  In the case of a relevant market area protest, a stay is limited to 120 days instead of all the way through the superior court appeal process.

Criteria of a qualified person for purposes of survivorship and assignability are established.  When a dealership is transferred through the survivorship or assignability provisions to an unqualified person, the manufacturer has the right to demand a qualified, experienced manager be hired.

Prior notification of an affected franchisee by the manufacturer for termination, cancellation, or non-renewal, or for locating a new dealership within the franchisee's "relevant market area" is required.

The bill establishes a "relevant market area" around franchisee dealerships.  While the relevant market area applies to other franchise provisions (i.e. you must sell so many cars in your relevant market area), it is generally applied to the siting of a new or relocation of an existing franchisee.  The relevant market area parameters are 10 miles in counties of 400,000 plus, and 15 miles in counties under 400,000 population, or an area described in the franchise agreement, whichever is greater.

The provisions of this legislation are applicable to franchises in effect at the time it becomes law.

VOTES ON FINAL PASSAGE:

      House 95   0

      Senate    47     0 (Senate amended)

      House 97   0 (House concurred)

EFFECTIVE:May 13, 1989

Partial Veto Summary:  Sections allowing creation of geographic "relevant market areas" were vetoed.  The Governor felt the language interferes with the competitive nature of the market and may adversely affect the consuming public.  He remains convinced that the public does not benefit from this type of market interference.  (See VETO MESSAGE)