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First Substitute H.B. 312
5 AN ACT RELATING TO COMMERCE AND TRADE; AMENDING PROVISIONS OF THE
6 NEW AUTOMOBILE FRANCHISE ACT; AMENDING DEFINITIONS; AMENDING THE
7 BOARD'S AUTHORITY TO BE ADVISORY ONLY; SPECIFYING THE DUTIES OF THE
8 ADVISORY BOARD AND THE EXECUTIVE DIRECTOR; CHANGING THE
9 MEMBERSHIP ON THE ADVISORY BOARD; PROVIDING A SEVERABILITY CLAUSE;
10 AND MAKING TECHNICAL CORRECTIONS.
11 This act affects sections of Utah Code Annotated 1953 as follows:
13 13-14-102, as enacted by Chapter 277, Laws of Utah 1996
14 13-14-103, as enacted by Chapter 277, Laws of Utah 1996
15 13-14-104, as enacted by Chapter 277, Laws of Utah 1996
16 13-14-105, as enacted by Chapter 277, Laws of Utah 1996
17 13-14-106, as enacted by Chapter 277, Laws of Utah 1996
18 13-14-107, as enacted by Chapter 277, Laws of Utah 1996
19 13-14-201, as enacted by Chapter 277, Laws of Utah 1996
20 13-14-204, as enacted by Chapter 277, Laws of Utah 1996
21 13-14-205, as enacted by Chapter 277, Laws of Utah 1996
22 13-14-307, as enacted by Chapter 277, Laws of Utah 1996
23 Be it enacted by the Legislature of the state of Utah:
24 Section 1. Section 13-14-102 is amended to read:
25 13-14-102. Definitions.
26 As used in this chapter:
27 (1) "Board" means the Utah Motor Vehicle Franchise Advisory Board created in Section
2 (2) "Dealership" means a site or location in this state:
3 (a) at which a franchisee conducts the business of a new motor vehicle dealer; and
4 (b) that is identified as a new motor vehicle dealer's principal place of business for
5 licensing purposes under Section 41-3-204.
6 (3) "Department" means the Department of Commerce.
7 (4) "Executive director" means the executive director of the Department of Commerce.
8 (5) "Franchise" or "franchise agreement" means a written agreement, for a definite or
9 indefinite period, in which:
10 (a) a person grants to another person a license to use a trade name, trademark, service
11 mark, or related characteristic; and
12 (b) [
13 motor vehicle parts, and services related to the sale or lease of new motor vehicles at wholesale
14 or retail.
15 (6) "Franchisee" means a person to whom a new motor vehicle dealer franchise is issued.
16 (7) "Franchisor" means a person who grants a new motor vehicle franchise to another
17 person, and includes:
18 (a) the manufacturer or distributor that has issued the franchise;
19 (b) an intermediate distributor; and
20 (c) an agent, officer, or field or area representative of the franchisor.
21 (8) "Line-make" means the motor vehicles that are offered for sale, lease, or distribution
22 under a common name, trademark, service mark, or brand name of the franchisor, or manufacturer
23 of the motor vehicle.
24 (9) "Motor vehicle" means:
25 (a) a travel trailer as defined in Section 41-1a-102;
26 (b) a motor vehicle as defined in Section 41-3-102;
27 (c) a semitrailer as defined in Section 41-1a-102; and
28 (d) a trailer as defined in Section 41-1a-102.
29 (10) "New motor vehicle" has the same meaning as defined in Section 41-3-102.
30 (11) "New motor vehicle dealer" is a person who is licensed under Subsection
1 (12) "Recreational vehicle" has the same meaning as defined in Section 41-20-1 excluding
2 the term "truck camper."
3 (13) (a) "Relevant market area," except for recreational vehicles, means:
4 (i) the county in which a dealership is to be established or relocated; and
5 (ii) the area within a ten aeronautical miles radius from the site of the new or relocated
7 (b) "Relevant market area," [
8 (i) the county in which the dealership is to be established or relocated; and
9 (ii) the area within a 35 aeronautical miles radius of the new or relocated dealership.
10 (14) "Sale, transfer, or assignment" means any disposition of a franchise or an interest in
11 a franchise, with or without consideration, including a bequest, inheritance, gift, exchange, lease,
12 or license.
13 Section 2. Section 13-14-103 is amended to read:
14 13-14-103. Utah Motor Vehicle Franchise Advisory Board -- Creation --
15 Appointment of members -- Chair -- Quorum -- Conflict of interest.
16 (1) There is created [
17 Advisory Board that consists of:
18 (a) the executive director or the executive director's designee;
19 (b) six members appointed by the executive director, with the concurrence of the governor
20 as follows:
24 three congressional districts of the state as the districts were constituted on January 1, 1996, no
25 more than one of which shall be located in the same congressional district; and
27 (iii) three members representing motor vehicle franchisors registered by the department
28 pursuant to Section 13-14-105, or three members of the general public, none of whom shall be
29 related to any franchisee, or any combination of these representatives under this subsection.
30 (2) (a) In accordance with Subsection (1), the executive director shall appoint three of the
31 initial members of the advisory board to one-year terms and three of the initial members of the
1 advisory board to two-year terms. No more than two of the members appointed to two-year terms
2 shall be franchisees.
3 (b) At the expiration of the initial terms under Subsection (2)(a), the executive director
4 shall appoint a member to a term of two years.
5 (c) In the event of a vacancy on the advisory board, the executive director with the
6 concurrence of the governor, shall appoint an individual to complete the unexpired term of the
7 member whose office is vacant.
8 (d) A member may not be appointed to more than two consecutive terms.
9 (3) (a) The executive director or the executive director's designee shall be the chair of the
10 advisory board.
11 (b) The department shall keep a record of all hearings, proceedings, transactions,
12 communications, and [
13 (4) [
14 transaction of business. The action of a majority of the members of the advisory board is
15 considered the action of the advisory board.
16 (5) (a) A member of the advisory board may not participate as a board member [
18 (i) involving the member's licensed business or employer; or
19 (ii) when a member, [
20 interest in the outcome or other conflict of interest concerning an issue before the advisory board.
21 (b) If a member of the advisory board is disqualified under Subsection (5)(a), the [
22 executive director shall select a replacement to act on the issue before the advisory board.
23 (6) Except for the executive director or the executive director's designee, an individual
24 may not be appointed or serve on the advisory board while holding any other elective or appointive
25 state or federal office.
26 (7) The members of the advisory board shall serve without compensation.
27 (8) The department shall provide necessary staff support to the advisory board.
28 Section 3. Section 13-14-104 is amended to read:
29 13-14-104. Powers and duties of the advisory board.
30 The advisory board has the [
31 recommendations on the administration and enforcement of this chapter and shall:
1 (1) [
2 46a, Utah Administrative Rulemaking Act, concerning administrative proceedings before the
3 advisory board; and
4 (2) conduct adjudicative proceedings required by this chapter in accordance with Title 63,
5 Chapter 46b, Administrative Procedures Act, for the purpose of making recommendations to the
6 executive director.
7 Section 4. Section 13-14-105 is amended to read:
8 13-14-105. Registration -- Fees.
9 (1) A franchisee or franchisor doing business in this state shall:
10 (a) annually register or renew its registration with the department in a manner established
11 by the department in collaboration with the advisory board; and
12 (b) pay an annual registration fee in an amount determined by the department in
13 accordance with Sections 13-1-2 and 63-38-3.2.
14 (2) The department, in collaboration with the advisory board, shall register or renew the
15 registration of a franchisee or franchisor if the franchisee or franchisor complies with this chapter
16 and rules made by the department under this chapter.
17 (3) A franchisee or franchisor registered under this section shall comply with this chapter
18 and any rules made by the department under this chapter including any amendments to this chapter
19 or the rules made after a franchisee or franchisor enter into a franchise agreement.
20 (4) The fee imposed under Subsection (1)(b) shall be collected by the department and
21 deposited into the Commerce Service Fund.
22 (5) Notwithstanding Subsection (1), an agent, officer, or field or area representative of a
23 franchisor does not need to be registered under this section if the franchisor is registered under this
25 Section 5. Section 13-14-106 is amended to read:
26 13-14-106. Administrative enforcement.
27 (1) [
28 the [
29 made under this chapter, [
31 (a) issue a cease and desist order; and
1 (b) [
2 (2) The executive director shall comply with Title 63, Chapter 46b, Administrative
3 Procedures Act, and shall consult with the advisory board prior to any order or assessment of fine.
6 (i) the gravity of the violation;
7 (ii) any history of previous violations; and
8 (iii) any attempt made by the person to retaliate against another person for seeking relief
9 under this chapter or other federal or state law relating to the motor vehicle industry.
10 (b) In addition to any other action permitted under Subsection (1), the department may file
11 an action with a court seeking to enforce the executive director's order [
12 the [
15 (4) Any person aggrieved by an adverse determination by the executive director may either
16 seek reconsideration of the order pursuant to Section 63-46b-13 of the Administrative Procedures
17 Act or seek judicial review of the order.
18 Section 6. Section 13-14-107 is amended to read:
19 13-14-107. Administrative hearings.
20 (1) (a) A person may [
22 63, Chapter 46b, Administrative Procedures Act to:
23 (i) remedy a violation of this chapter; or
24 (ii) obtain approval of an act regulated by this chapter.
25 (b) A person shall [
26 executive director and the advisory board by filing [
28 (2) (a) The advisory board shall conduct all adjudicative proceedings in accordance with
29 Title 63, Chapter 46b, Administrative Procedures Act, with a quorum of the advisory board
30 members in attendance.
31 (b) An order or decision issued by the [
2 (c) Any hearing under this chapter shall be conducted as an informal proceeding unless
3 otherwise designated as a formal proceeding pursuant to the provisions of Title 63, Chapter 46b,
4 Administrative Procedures Act.
5 (3) The advisory board shall apportion in a fair and equitable manner between the parties
6 any costs of the adjudicative proceeding, including reasonable attorney's fees subject to final
7 approval by a court.
8 Section 7. Section 13-14-201 is amended to read:
9 13-14-201. Prohibited Acts by Franchisors -- Disclosures.
10 (1) A franchisor may not in this state:
11 (a) require a franchisee to order or accept delivery of any new motor vehicle, part,
12 accessory, equipment, or other item not otherwise required by law that is not voluntarily ordered
13 by the franchisee;
14 (b) require a franchisee to participate monetarily in any advertising campaign or contest,
15 or purchase any promotional materials, display devises, or display decorations or materials;
16 (c) require a franchisee to change the capital structure of the franchisee's dealership or the
17 means by or through which the franchisee finances the operation of the franchisee's dealership,
18 if the dealership at all times meets reasonable capital standards determined by and applied in a
19 nondiscriminatory manner by the franchisor;
20 (d) require a franchisee to refrain from participating in the management of, investment in,
21 or acquisition of any other line of new motor vehicles or related products, if:
22 (i) the franchisee maintains a reasonable line of credit for each make or line of vehicles;
24 (ii) complies with reasonable capital and facilities requirements of the franchisor;
25 (e) require a franchisee to prospectively agree to a release, assignment, novation, waiver,
26 or estoppel that would:
27 (i) relieve a franchisor from any liability imposed by this chapter; or
28 (ii) require any controversy between the franchisee and a franchisor to be referred to a third
29 party if the decision by the third party would be binding;
30 (f) require a franchisee to change the location of the principal place of business of the
31 franchisee's dealership or make any substantial alterations to the dealership premises, if the change
1 or alterations would be unreasonable;
2 (g) coerce or attempt to coerce a franchisee to join, contribute to, or affiliate with an
3 advertising association;
4 (h) require, coerce, or attempt to coerce a franchisee to enter into an agreement with the
5 franchisor or do any other act that is unfair or prejudicial to the franchisee, by threatening to cancel
6 a franchise agreement or other contractual agreement or understanding existing between the
7 franchisor and franchisee;
8 (i) adopt, change, establish, modify, or implement a plan or system for the allocation,
9 scheduling, or delivery of new motor vehicles, parts, or accessories to its franchisees so that the
10 plan or system is not fair, reasonable, and equitable;
11 (j) increase the price of any new motor vehicle that the franchisee has ordered from the
12 franchisor and for which there exists at the time of the order a bona fide sale to a retail purchaser
13 if the order was made prior to the franchisee's receipt of an official written price increase
15 (k) fail to indemnify and hold harmless its franchisee against any judgment for damages
16 or settlement approved in writing by the franchisor:
17 (i) including court costs and attorneys' fees arising out of actions, claims, or proceedings
18 including those based on:
19 (A) strict liability;
20 (B) negligence;
21 (C) misrepresentation;
22 (D) express or implied warranty;
23 (E) revocation as described in Section 70A-2-608; or
24 (F) rejection as described in Section 70A-2-602; and
25 (ii) to the extent the judgment or settlement relates to alleged defective or negligent actions
26 by the franchisor;
27 (l) threaten or coerce a franchisee to waive or forbear its right to protest the establishment
28 or relocation of a same line-make franchisee in the relevant market area of the affected franchisee;
29 (m) fail to ship monthly to a franchisee, if ordered by the franchisee, the number of new
30 motor vehicles of each make, series, and model needed by the franchisee to achieve a percentage
31 of total new vehicle sales of each make, series, and model equitably related to the total new vehicle
1 production or importation being achieved nationally at the time of the order by each make, series,
2 and model covered under the franchise agreement;
3 (n) require or otherwise coerce a franchisee to under-utilize the franchisee's existing
5 (o) fail to include in any franchise agreement the following language or language to the
6 effect that: "If any provision in this agreement contravenes the laws or regulations of any state or
7 other jurisdiction where this agreement is to be performed, or provided for by such laws or
8 regulations, the provision is considered to be modified to conform to such laws or regulations, and
9 all other terms and provisions shall remain in full force.";
10 (p) engage in the distribution, sale, offer for sale, or lease of a new motor vehicle to
11 purchasers who acquire the vehicle in this state except through a franchisee with whom the
12 franchisor has established a written franchise agreement, if the franchisor's trade name, trademark,
13 service mark, or related characteristic is an integral element in the distribution, sale, offer for sale,
14 or lease; [
15 (q) engage in the distribution or sale of a recreational vehicle which is manufactured,
16 rented, sold, or offered for sale in this state without being constructed in accordance with the
17 standards set by the American National Standards Institute for recreational vehicles and evidenced
18 by a seal or plate attached to the vehicle; or
20 vehicles, except warranty service repairs:
21 (i) by a franchisee with whom the franchisor has entered into a franchise agreement for
22 the sale and service of the franchisor's motor vehicles; or
23 (ii) on owned motor vehicles by a person or government entity who has purchased new
24 motor vehicles pursuant to a franchisor's or manufacturer's fleet discount program.
25 (2) Notwithstanding Subsection (1)[
26 to perform warranty service repairs on motor vehicles if the warranty services is for a franchisor
27 of recreational vehicles.
28 (3) Subsection (1)(a) does not prevent the franchisor from requiring that a franchisee carry
29 a reasonable inventory of:
30 (a) new motor vehicle models offered for sale by the franchisor; and
31 (b) parts to service the repair of the new motor vehicles.
1 (4) Subsection (1)(d) does not prevent a franchisor from:
2 (a) requiring that a franchisee maintain separate sales personnel or display space; or
3 (b) refusing to permit a combination of new motor vehicle lines, if justified by reasonable
4 business considerations.
5 (5) Upon the written request of any franchisee, a franchisor shall disclose in writing to the
6 franchisee the basis on which new motor vehicles, parts, and accessories are allocated, scheduled,
7 and delivered among the franchisor's dealers of the same line-make.
8 Section 8. Section 13-14-204 is amended to read:
9 13-14-204. Franchisor's obligations related to service -- Franchisor audits -- Time
11 (1) Each franchisor shall specify in writing to each of its franchisees licensed as a new
12 motor vehicle dealer in this state:
13 (a) the franchisee's obligations for new motor vehicle preparation, delivery, and warranty
14 service on its products;
15 (b) the schedule of compensation to be paid to the franchisee for parts, work, and service;
17 (c) the time allowance for the performance of work and service.
18 (2) (a) The schedule of compensation described in Subsection (1) shall include reasonable
19 compensation for diagnostic work, as well as repair service, parts, and labor.
20 (b) Time allowances described in Subsection (1) for the diagnosis and performance of
21 warranty work and service shall be reasonable and adequate for the work to be performed.
22 (3) (a) In the determination of what constitutes reasonable compensation under this
23 section, the principal factor to be considered is the prevailing wage rates being paid by franchisees
24 in the relevant market area in which the franchisee is doing business.
25 (b) Compensation of the franchisee for warranty service work may not be less than the
26 amount charged by the franchisee for like parts and service to retail or fleet customers, if the
27 amounts are reasonable. In the case of a recreational vehicle franchisee, reimbursement for parts
28 used in the performance of warranty repairs, including those parts separately warranted directly
29 to the consumer by a recreational vehicle parts supplier, may not be less than the franchisee's cost
30 plus twenty percent h [
lilac-February 27, 1997
3 1a SHALL BE THAT SAME PRICE PAID BY A FRANCHISEE TO A FRANCHISOR OR SUPPLIER FOR THE
31b PART WHEN THE PART IS PURCHASED FOR A NON-WARRANTY REPAIR. h
lilac-February 27, 1997
1 (4) A franchisor may not fail to:
2 (a) perform any warranty obligation;
3 (b) include in written notices of franchisor's recalls to new motor vehicle owners and
4 franchisees the expected date by which necessary parts and equipment will be available to
5 franchisees for the correction of the defects; or
6 (c) compensate any of the franchisees for repairs effected by the recall.
7 (5) If a franchisor disallows a franchisee's claim for a defective part, alleging that the part
8 is not defective, the franchisor at its option shall:
9 (a) return the part to the franchisee at the franchisor's expense; or
10 (b) pay the franchisee the cost of the part.
11 (6) (a) A claim made by a franchisee pursuant to this section for labor and parts shall be
12 paid within 30 days after its approval.
13 (b) A claim shall be either approved or disapproved by the franchisor within 30 days after
14 receipt of the claim on a form generally used by the franchisor and containing the generally
15 required information. Any claim not specifically disapproved of in writing within 30 days after
16 the receipt of the form is considered to be approved and payment shall be made within 30 days.
17 (7) Warranty service audits of franchisee records may be conducted by the franchisor on
18 a reasonable basis.
19 (8) A franchisee's claim for warranty compensation may not be denied except for good
20 cause such as performance of nonwarranty repairs, lack of material documentation, fraud, or
22 (9) (a) Any charge backs for warranty parts or service compensation and service incentives
23 shall only be enforceable for the 12-month period immediately following the date the payment for
24 warranty reimbursement was made by the franchisor.
25 (b) Except as provided in Subsection (9)(c), all charge backs levied by a franchisor for
26 sales compensation or sales incentives arising out of the sale or lease of a motor vehicle sold by
27 a franchisee shall be compensable only if written notice of the charge back is received by the
28 franchisee within 24 months immediately following the date when payment for the sales
29 compensation was made by the franchisor.
30 (c) The time limitations of this Subsection (9) do not preclude charge backs for any
31 fraudulent claim that was previously paid.
1 Section 9. Section 13-14-205 is amended to read:
2 13-14-205. Liability for damages to motor vehicles in transit -- Disclosure required.
3 (1) (a) A franchisee is solely liable for damage to a new motor vehicle after delivery by
4 and acceptance from the carrier.
5 (b) A delivery receipt or bill of lading, or similar document, signed by a franchisee is
6 evidence of a franchisee's acceptance of a new motor vehicle.
7 (2) A franchisor is liable for all damage to a motor vehicle before delivery to and
8 acceptance by the franchisee, including that time in which the vehicle is in the control of a carrier
9 or transporter.
10 (3) (a) A franchisor shall disclose to the franchisee any repairs made prior to delivery,
11 except a recreational vehicle franchisor h [
11a recreational vehicle
12 franchisee any repair made to the vehicle prior to delivery h ONLY h if:
13 (i) the cost of the repair exceeds 3% of the manufacturer's wholesale price, as measured
14 by retail repair costs; or
15 (ii) the repair is to the exterior sidewalls or roof of the vehicle, and repairs total over $500.
16 (b) Replacement of h [
17 structural integrity, including
18 components, instrument panels, h APPLIANCES, FURNITURE, h and components h OTHER THAN
18a BUILT-IN CABINETRY h contained in the vehicle's living quarters, is not
19 considered a repair under this subsection if the component replaced has been replaced with original
20 manufacturers parts and materials.
21 (4) Notwithstanding Subsections (1), (2), and (3), the franchisee is liable for damage to
22 a new motor vehicle after delivery to the carrier or transporter if the franchisee selected:
23 (a) the method and mode of transportation; and
24 (b) the carrier or transporter.
25 Section 10. Section 13-14-307 is amended to read:
26 13-14-307. Franchisors' repurchase obligations upon termination or
27 noncontinuation of franchise.
28 (1) Upon the termination or noncontinuation of a franchise by the franchisor, the
29 franchisor shall pay the franchisee:
30 (a) the franchisee's cost of new, undamaged, and unsold motor vehicles in the franchisee's
31 inventory acquired from the franchisor or another franchisee of the same line-make representing
lilac-February 27, 1997
1 both the current model year at the time of termination or noncontinuation and the immediately
2 prior model year vehicles[
3 months immediately preceding the date of termination or noncontinuation shall be h [
3a REPURCHASED h .
4 (i) plus any charges made by the franchisor, for distribution, delivery, or taxes;
5 (ii) plus the franchisee's cost of any accessories added on the vehicle, except only those
6 recreational vehicle accessories that are listed in the franchisor's wholesale product literature as
7 options for that vehicle shall be repurchased; and
8 (iii) less all allowances paid or credited to the franchisee by the franchisor;
9 (b) the franchisee's cost of new and undamaged motor vehicles in the franchisee's
10 inventory of demonstrator vehicles, reduced by 1% for each 1000 miles registered on the
11 demonstrator vehicle's odometer[
12 2% for each 1,000 miles registered on the odometer of demonstrator self-propelled recreational
13 vehicles, exclusive of miles incurred in delivery of the vehicle, and the cost of demonstrator
14 nonself-propelled recreational vehicles shall be reduced by 10% of the franchisee's vehicle cost.
15 (i) plus any charges made by the franchisor for distribution, delivery, or taxes;
16 (ii) plus the franchisee's cost of any accessories added on the vehicles, except only those
17 recreational vehicle accessories that are listed in the franchisor's wholesale product literature as
18 options for that vehicle shall be repurchased; and
19 (iii) less all allowances paid or credited to the franchisee by the franchisor;
20 (c) the cost of all new, undamaged, and unsold supplies, parts, and accessories as set forth
21 in the franchisor's catalog at the time of termination or noncontinuation for the supplies, parts, and
22 accessories, less all allowances paid or credited to the franchisee by the franchisor;
23 (d) the fair market value, but not less than the franchisee's depreciated acquisition cost of
24 each undamaged sign owned by the franchisee that bears a common name, trade name, or
25 trademark of the franchisor if acquisition of the sign was recommended or required by the
27 franchisor is only responsible for its pro-rata portion of the sign;
28 (e) the fair market value, but not less than the franchisee's depreciated acquisition cost of
29 all special tools, equipment, and furnishings acquired from the franchisor or sources approved by
30 the franchisor that were recommended or required by the franchisor and are in good and usable
31 condition; and
lilac-February 27, 1997
1 (f) the cost of transporting, handling, packing, and loading motor vehicles, supplies, parts,
2 accessories, signs, special tools, equipment, and furnishings.
3 (2) The franchisor shall pay the franchisee the amounts specified in Subsection (1) within
4 90 days after the tender of the property to the franchisor if the franchisee:
5 (a) has clear title to the property; and
6 (b) is in a position to convey title to the franchisor.
7 (3) If repurchased inventory, equipment, or demonstrator vehicles are subject to a security
8 interest, the franchisor may make payment jointly to the franchisee and to the holder of the security
10 Section 11. Severability clause.
11 If any provision of this act, or the application of any provision to any person or
12 circumstance, is held invalid, the remainder of this act is given effect without the invalid provision
13 or application.
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