AN
ACT Relating to a prohibition on unfair competition by motor vehicle dealers
and manufacturers; and adding a new section to chapter 46.96 RCW.
BE IT
ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW
SECTION. Sec. 1. A
new section is added to chapter 46.96 RCW to read as follows:
(1)
Notwithstanding the terms of a franchise agreement, a manufacturer,
distributor, factory branch, or factory representative, or an agent, officer,
parent company, wholly or partially owned subsidiary, affiliated entity, or
other person controlled by or under common control with a manufacturer,
distributor, factory branch, or factory representative, shall not:
(a)
Discriminate between new motor vehicle dealers by selling or offering to sell a
like vehicle to one dealer at a lower actual price than the actual price
offered to another dealer for the same model similarly equipped;
(b)
Discriminate between new motor vehicle dealers by selling or offering to sell
parts or accessories to one dealer at a lower actual price than the actual
price offered to another dealer;
(c)
Discriminate between new motor vehicle dealers by using a promotion plan, marketing
plan, or other similar device that results in a lower actual price on vehicles,
parts, or accessories being charged to one dealer over another dealer;
(d)
Discriminate between new motor vehicle dealers by adopting a method, or
changing an existing method, for the allocation, scheduling, or delivery of new
motor vehicles, parts, or accessories to its dealers that is not fair,
reasonable, and equitable. Upon the request of a dealer, a manufacturer,
distributor, factory branch, or factory representative shall disclose in
writing to the dealer the method by which new motor vehicles, parts, and
accessories are allocated, scheduled, or delivered to its dealers handling the
same line or make of vehicles;
(e)
Give preferential treatment to some new motor vehicle dealers over others by
refusing or failing to deliver, in reasonable quantities and within a
reasonable time after receipt of an order, to a dealer holding a franchise for
a line or make of motor vehicles sold or distributed by the manufacturer, distributor,
factory branch, or factory representative, a new vehicle, parts, or
accessories, if the vehicle, parts, or accessories are being delivered to other
dealers, or require a dealer to purchase unreasonable advertising displays or
other materials, or unreasonably require a dealer to remodel or renovate
existing facilities as a prerequisite to receiving a model or series of
vehicles;
(f)
Compete with a new motor vehicle dealer by acting in the capacity of a new
motor vehicle dealer, or by owning, operating, or controlling, whether directly
or indirectly, a motor vehicle dealership in this state. It is not, however, a
violation of this subsection for:
(i)
A manufacturer, distributor, factory branch, or factory representative to own
or operate a dealership for a temporary period, not to exceed two years, during
the transition from one owner of the dealership to another where the dealership
was previously owned by a franchised dealer and is currently for sale to any
qualified independent person at a fair and reasonable price. The temporary
operation may be extended for one twelve-month period on petition of the
temporary operator to the department. The matter will be handled as an
adjudicative proceeding under chapter 34.05 RCW. A dealer who is a franchisee
of the petitioning manufacturer or distributor may intervene and participate in
a proceeding under this subsection (1)(f)(i). The temporary operator has the
burden of proof to show justification for the extension and a good faith effort
to sell the dealership to an independent person at a fair and reasonable price;
(ii)
A manufacturer, distributor, factory branch, or factory representative to own
or operate a dealership in conjunction with an independent person in a bona
fide business relationship for the purpose of broadening the diversity of its
dealer body and enhancing opportunities for qualified persons who are part of a
group who have historically been underrepresented in its dealer body, or other
qualified persons who lack the resources to purchase a dealership outright, and
where the independent person: (A) Has made a significant, bona fide capital
investment in the dealership that is subject to loss; (B) has an ownership
interest in the dealership; and (C) operates the dealership under a bona fide
written agreement with the manufacturer, distributor, factory branch, or
factory representative under which he or she will acquire all of the ownership
interest in the dealership within a reasonable period of time and under
reasonable terms and conditions. The manufacturer, distributor, factory
branch, or factory representative has the burden of proof of establishing that
the acquisition of the dealership by the independent person was made within a
reasonable period of time and under reasonable terms and conditions;
(iii)
A manufacturer, distributor, factory branch, or factory representative to own
or operate a dealership in conjunction with an independent person in a bona
fide business relationship where the independent person: (A) Has made a significant,
bona fide capital investment in the dealership that is subject to loss; (B) has
an ownership interest in the dealership; and (C) operates the dealership under
a bona fide written agreement with the manufacturer, distributor, factory
branch, or factory representative under which he or she will acquire all of the
ownership interest in the dealership within a reasonable period of time and
under reasonable terms and conditions. The manufacturer, distributor, factory
branch, or factory representative has the burden of proof of establishing that
the acquisition of the dealership by the independent person was made within a
reasonable period of time and under reasonable terms and conditions. The
number of dealerships operated under this subsection (1)(f)(iii) may not exceed
four percent rounded up to the nearest whole number of a manufacturer's total
of new motor vehicle dealer franchises in this state;
(iv)
A truck manufacturer to own, operate, or control a new motor vehicle dealership
that sells only trucks of that manufacturer's line make with a gross vehicle
weight rating of 12,500 pounds or more, and the truck manufacturer has been
continuously engaged in the retail sale of the trucks at least since January 1,
1993; or
(v)
A manufacturer to own, operate, or control a new motor vehicle dealership
trading exclusively in a single line make of the manufacturer if (A) the
manufacturer does not own, directly or indirectly, in the aggregate, in excess
of forty-five percent of the total ownership interest in the dealership, (B) at
the time the manufacturer first acquires ownership or assumes operation or
control of any such dealership, the distance between any dealership thus owned,
operated, or controlled and the nearest new motor vehicle dealership trading in
the same line make of vehicle and in which the manufacturer has no ownership or
control is not less than fifteen miles and complies with the applicable
provisions in the relevant market area sections of this chapter, (C) all of the
manufacturer's franchise agreements confer rights on the dealer of that line
make to develop and operate within a defined geographic territory or area, as
many dealership facilities as the dealer and the manufacturer agree are
appropriate, and (D) as of January 1, 2000, the manufacturer had no more than
four new motor vehicle dealers of that manufacturer's line make in this state,
and at least half of those dealers owned and operated two or more dealership
facilities in the geographic territory or area covered by their franchise
agreements with the manufacturer;
(g)
Compete with a new motor vehicle dealer by owning, operating, or controlling,
whether directly or indirectly, a service facility in this state for the repair
or maintenance of motor vehicles under the manufacturer's new car warranty and
extended warranty. Nothing in this subsection (1)(g), however, prohibits a
manufacturer, distributor, factory branch, or factory representative from
owning or operating a service facility for the purpose of providing or
performing maintenance, repair, or service work on motor vehicles that are
owned by the manufacturer, distributor, factory branch, or factory
representative;
(h)
Use confidential or proprietary information obtained from a new motor vehicle
dealer to unfairly compete with the dealer. For purposes of this subsection
(1)(h), "confidential or proprietary information" means trade secrets
as defined in RCW 19.108.010, business plans, marketing plans or strategies,
customer lists, contracts, sales data, revenues, or other financial
information.
(2)
Subsection (1)(a), (b), and (c) of this section do not apply to sales to a
motor vehicle dealer: (a) For resale to a federal, state, or local government
agency; (b) where the vehicles will be sold or donated for use in a program of
driver's education; (c) where the sale is made under a manufacturer's bona fide
promotional program offering sales incentives or rebates; (d) where the sale of
parts or accessories is under a manufacturer's bona fide quantity discount
program; or (e) where the sale is made under a manufacturer's bona fide fleet
vehicle discount program. For purposes of this subsection, "fleet"
means a group of fifteen or more new motor vehicles purchased or leased by a
dealer at one time under a single purchase or lease agreement for use as part
of a fleet, and where the dealer has been assigned a fleet identifier code by
the department of licensing.
(3)
The following definitions apply to this section:
(a)
"Actual price" means the price to be paid by the dealer less any
incentive paid by the manufacturer, distributor, factory branch, or factory
representative, whether paid to the dealer or the ultimate purchaser of the
vehicle.
(b)
"Control" or "controlling" means (i) the possession of,
title to, or control of ten percent or more of the voting equity interest in a
person, whether directly or indirectly through a fiduciary, agent, or other
intermediary, or (ii) the possession, direct or indirect, of the power to
direct or cause the direction of the management or policies of a person,
whether through the ownership of voting securities, through director control,
by contract, or otherwise, except as expressly provided under the franchise
agreement.
(c)
"Motor vehicles" does not include trucks that are 14,001 pounds gross
vehicle weight and above or recreational vehicles as defined in RCW 43.22.335.
(d)
"Operate" means to manage a dealership, whether directly or
indirectly.
(e)
"Own" or "ownership" means to hold the beneficial ownership
of one percent or more of any class of equity interest in a dealership, whether
the interest is that of a shareholder, partner, limited liability company
member, or otherwise. To hold an ownership interest means to have possession
of, title to, or control of the ownership interest, whether directly or
indirectly through a fiduciary, agent, or other intermediary.
(4)
A violation of this section is deemed to affect the public interest and
constitutes an unlawful and unfair practice under chapter 19.86 RCW. A person
aggrieved by an alleged violation of this section may petition the department
to have the matter handled as an adjudicative proceeding under chapter 34.05
RCW.
