HOUSE BILL REPORT

EHB 1645

As Amended by the Senate

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

Regulating the relationship between motor vehicle dealers and manufacturers.

House Committe on Transportation

Majority Report:  Do pass.  (26)

      Signed by Representatives Walk, Chair; Baugher, Vice Chair; Schmidt, Ranking Republican Member; Wood, Assistant Ranking Republican Member; Betrozoff, Cantwell, Cooper, G. Fisher, R. Fisher, Gallagher, Hankins, Haugen, Heavey, Jones, Kremen, R. Meyers, Nelson, Patrick, Prentice, Prince, Smith, D. Sommers, Todd, Walker, S. Wilson and Zellinsky.

House Staff:Brad Lovaas (786-7307)

AS PASSED HOUSE MARCH 10, 1989

BACKGROUND:

This bill does not set up franchisee provisions.  It does establish statutory definitions of "good faith" and "good cause" for determining if actions taken by the franchisee or manufacturer were justified.

It establishes provisions for an administrative hearing on whether actions (termination, cancellation, non-renewal or siting of a new dealership) taken by the manufacturer were justified.  It provides that the protesting party put up security to cover the costs of the hearing.  It provides for a "stay" on any action 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 shall be lifted.

It does set out the criteria of a qualified person for purposes of survivorship and transferability.

If enacted, this bill would require prior notification of the affected franchisee by the manufacturers for termination, cancellation, non-renewal, or for locating of a new dealership within the franchisee "relevant market area."

The bill establishes a "relevant market area" around franchisee dealerships.  While the relevant market (10 miles) 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 (15 miles in counties of 400,000 plus, and 30 miles in counties under 400,000 population, or an area described in the franchise agreement, whichever is greater).

SUMMARY:

Washington State New Car/Truck Franchisees assert that there exists inequities 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, the dealer chooses);  2)  survivorship (willing the dealership to a qualified person, the dealer chooses);

In addition, to asserting that the manufacturers are withholding the rights of transferability and survivorship, 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.  Which amounts to a take-it or leave-it contract, or be terminated situation for the dealers.

The bill also addresses the question of "packing"; for example, siting a new dealership of the same line of cars and trucks in between two existing dealerships, or placing a new same line dealership right across the street.

The relevant market area provisions are mandated in 38 other states, but vary widely in their application.  The other provisions are mandated in at least 30 states with the termination, cancellation, or non-renewal provision in place in 46 states.  The survivorship provision is in place in 30 states, and the transferability provisions are in place in 38 states.

EFFECT OF SENATE AMENDMENTS:  Language was added that when a dealership is transferred through the survivorship or assignability provisions to an unqualified person, that the manufacturer has the right to demand that a qualified, experienced manager be hired.

The relevant market area distances are reduced from 30 miles in counties of less than 400,000 population to 15 miles, and reduced from 15 miles in counties of more than 400,000 population to 10 miles.

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

The provisions of this legislation are applicable to all franchisees in effect at the time of legislation becoming law.

Fiscal Note:      Requested February 8, 1989.

Effective Date:The bill contains an emergency clause and takes effect immediately.

House Committee ‑ Testified For:    Jim Boldt, Washington State Auto Dealers; Janet Cunningham, Washington State Auto Dealers; Janet Linn, Washington State Auto Dealers; Richard Boyles, Washington State Auto Dealers.

House Committee - Testified Against:      Robert Ogden, General Motors; Dennis Helfman, General Motors; Jim Dimond, Chrysler Corporation.

House Committee - Testimony For:    The lack of statutory provisions has threatened the livelihood of local dealerships.

House Committee - Testimony Against:      The market area is too broad.

VOTE ON FINAL PASSAGE:

      Yeas 95; Absent 1; Excused 2

Absent:     Representative Rayburn

Excused:    Representatives Bowman and Hankins