7 Kim Coleman
9 LONG TITLE
10 General Description:
11 This bill modifies provisions relating to new automobile franchises.
12 Highlighted Provisions:
13 This bill:
14 ▸ defines terms;
15 ▸ addresses the procedure by which a franchisor may establish or relocate a dealership
16 in the same line-make as an existing dealership in the relevant market area;
17 ▸ modifies the membership of the Utah Motor Vehicle Franchise Advisory Board;
18 ▸ provides that an affected municipality may participate in a hearing before the Utah
19 Motor Vehicle Franchise Advisory Board;
20 ▸ clarifies who may appeal a final decision of the executive director of the
21 Department of Commerce;
22 ▸ requires the Utah Motor Vehicle Franchise Advisory Board to submit an annual
23 report to the Business and Labor Interim Committee; and
24 ▸ makes technical and conforming changes.
25 Money Appropriated in this Bill:
27 Other Special Clauses:
29 Utah Code Sections Affected:
31 13-14-102, as last amended by Laws of Utah 2010, Chapter 33
32 13-14-103, as last amended by Laws of Utah 2010, Chapter 286
33 13-14-104, as last amended by Laws of Utah 2008, Chapters 362 and 382
34 13-14-302, as last amended by Laws of Utah 2011, Chapter 203
35 13-14-302.5, as enacted by Laws of Utah 2010, Chapter 41
36 13-14-304, as last amended by Laws of Utah 2008, Chapter 362
37 13-14-306, as last amended by Laws of Utah 2008, Chapter 362
39 13-14-310, Utah Code Annotated 1953
41 Be it enacted by the Legislature of the state of Utah:
42 Section 1. Section 13-14-102 is amended to read:
43 13-14-102. Definitions.
44 As used in this chapter:
45 (1) "Advisory board" or "board" means the Utah Motor Vehicle Franchise Advisory
46 Board created in Section 13-14-103.
47 (2) "Affected municipality" means an incorporated city or town:
48 (a) that is located in the notice area; and
49 (b) (i) within which a franchisor is proposing a new or relocated dealership that is
50 within the relevant market area of an existing dealership of the same line-make owned by
51 another franchisee; or
52 (ii) within which an existing dealership is located and a franchisor is proposing a new
53 or relocated dealership within the relevant market area of that existing dealership of the same
57 franchisor's suggested retail price of the new motor vehicle, as that price appears on the label
58 required by 15 U.S.C. Sec. 1232(f).
60 (a) at which a franchisee conducts the business of a new motor vehicle dealer; and
61 (b) that is identified as a new motor vehicle dealer's principal place of business for
62 licensing purposes under Section 41-3-204.
67 absence of a written agreement, then a course of dealing or a practice for a definite or indefinite
68 period, in which:
69 (i) a person grants to another person a license to use a trade name, trademark, service
70 mark, or related characteristic; and
71 (ii) a community of interest exists in the marketing of new motor vehicles, new motor
72 vehicle parts, and services related to the sale or lease of new motor vehicles at wholesale or
74 (b) "Franchise" or "franchise agreement" includes a sales and service agreement.
76 in writing or in practice, to purchase, sell, or offer for sale new motor vehicles manufactured,
77 produced, represented, or distributed by the franchisor.
79 or permits a franchisee to purchase, sell, or offer for sale new motor vehicles manufactured,
80 produced, assembled, represented, or distributed by the franchisor, and includes:
81 (a) the manufacturer, producer, assembler, or distributor of the new motor vehicles;
82 (b) an intermediate distributor; and
83 (c) an agent, officer, or field or area representative of the franchisor.
85 customer whose contact information was obtained from a franchisor's program, process, or
86 system designed to generate referrals for the purchase or lease of a new motor vehicle, or for
87 service work related to the franchisor's vehicles.
89 (a) for other than a recreational vehicle, the motor vehicles that are offered for sale,
90 lease, or distribution under a common name, trademark, service mark, or brand name of the
91 franchisor; or
92 (b) for a recreational vehicle, a specific series of recreational vehicle product that:
93 (i) is identified by a common series trade name or trademark;
94 (ii) is targeted to a particular market segment, as determined by decor, features,
95 equipment, size, weight, and price range;
96 (iii) has a length and floor plan that distinguish the recreational vehicle from other
97 recreational vehicles with substantially the same decor, features, equipment, size, weight, and
99 (iv) belongs to a single, distinct classification of recreational vehicle product type
100 having a substantial degree of commonality in the construction of the chassis, frame, and body;
102 (v) a franchise agreement authorizes a dealer to sell.
105 temporary dwelling for travel, recreational, or vacation use.
107 (i) a travel trailer;
108 (ii) except as provided in Subsection [
109 Section 41-3-102;
110 (iii) a semitrailer as defined in Section 41-1a-102;
111 (iv) a trailer as defined in Section 41-1a-102; and
112 (v) a recreational vehicle.
113 (b) "Motor vehicle" does not include:
114 (i) a motorcycle as defined in Section 41-1a-102;
115 (ii) an off-highway vehicle as defined in Section 41-3-102; and
116 (iii) a small trailer as defined in Section 41-3-102.
118 (15) that has never been titled or registered and has been driven less than 7,500 miles, unless
119 the motor vehicle is a trailer, travel trailer, or semitrailer, in which case the mileage limit does
120 not apply.
122 41-3-202(1)(a) to sell new motor vehicles.
124 all reliable forms of electronic communication unless expressly prohibited by statute or rule.
125 (19) "Notice area" means the geographic area that is:
126 (a) within a radius of at least six miles and no more than 10 miles from the site of an
127 existing dealership; and
128 (b) located within a county with a population of at least 225,000.
129 (20) "Primary market area" means:
130 (a) for an existing dealership, the geographic area established by the franchisor that the
131 existing dealership is intended to serve; or
132 (b) for a new or relocated dealership, the geographic area proposed by the franchisor
133 that the new or relocated dealership is intended to serve.
135 primarily designed as a temporary dwelling for travel, recreational, or vacation use, that is
136 either self-propelled or pulled by another vehicle.
137 (b) "Recreational vehicle" includes:
138 (i) a travel trailer;
139 (ii) a camping trailer;
140 (iii) a motor home;
141 (iv) a fifth wheel trailer; and
142 (v) a van.
147 (i) as applied to an existing dealership that is located in a county with a population of
148 less than 225,000:
149 (A) the county in which the existing dealership is located; and
150 (B) the area within a 15-mile radius of the existing dealership; or
151 (ii) as applied to an existing dealership that is located in a county with a population of
152 225,000 or more, the area within a 10-mile radius of the existing dealership.
153 (b) "Relevant market area," with respect to recreational vehicles, means:
154 (i) the county in which the dealership is to be established or relocated; and
155 (ii) the area within a 35-mile radius from the site of the [
158 interest in a franchise, with or without consideration, including a bequest, inheritance, gift,
159 exchange, lease, or license.
161 includes any reliable form of communication.
163 regardless of [
165 (a) controlling in any way the use and development of the premises upon which a
166 franchisee's business operations are located;
167 (b) requiring a franchisee to establish or maintain an exclusive dealership facility on
168 the premises upon which the franchisee's business operations are located; or
169 (c) restricting the ability of the franchisee or, if the franchisee leases the dealership
170 premises, the franchisee's lessor to transfer, sell, lease, develop, redevelop, or change the use of
171 some or all of the dealership premises, whether by sublease, lease, collateral pledge of lease,
172 right of first refusal to purchase or lease, option to purchase or lease, or any similar
175 vehicle without motive power, designed as a temporary dwelling for travel, recreational, or
176 vacation use that does not require a special highway movement permit when drawn by a
177 self-propelled motor vehicle.
179 include all reliable forms of electronic communication.
180 Section 2. Section 13-14-103 is amended to read:
181 13-14-103. Utah Motor Vehicle Franchise Advisory Board -- Creation --
182 Appointment of members -- Alternate members -- Chair -- Quorum -- Conflict of interest.
183 (1) There is created within the department the Utah Motor Vehicle Franchise Advisory
184 Board that consists of:
185 (a) the executive director or the executive director's designee; and
186 (b) [
187 the governor as follows:
188 (i) one recreational motor vehicle franchisee;
189 (ii) three new motor vehicle franchisees from different congressional districts in the
190 state; [
191 (iii) [
192 department pursuant to Section 13-14-105;
194 franchisee; [
197 (v) one representative of the Utah League of Cities and Towns.
198 (2) (a) The executive director shall appoint, with the concurrence of the governor,
200 described in Subsections (1)(b)(i)[
201 motor vehicle franchisee alternate [
202 may be from any congressional district.
203 (b) An alternate shall take the place of a regular advisory board member from the same
204 designation at a meeting of the advisory board where that regular advisory board member is
205 absent or otherwise disqualified from participating in the advisory board meeting.
206 (3) (a) (i) Members of the advisory board appointed under Subsections (1)(b) and (2)
207 are appointed for a term of four years.
208 (ii) No specific term applies to the executive director or the executive director's
210 (b) The executive director may adjust the term of members who were appointed to the
211 advisory board prior to July 1, 2001, by extending the unexpired term of a member for up to
212 two additional years in order to insure that approximately half of the members are appointed
213 every two years.
214 (c) In the event of a vacancy on the advisory board of a member appointed under
215 Subsection (1)(b) or (2), the executive director with the concurrence of the governor, shall
216 appoint an individual to complete the unexpired term of the member whose office is vacant.
217 (d) A member may not be appointed to more than two consecutive terms.
218 (4) (a) The executive director or the executive director's designee is the chair of the
219 advisory board.
220 (b) The department shall keep a record of all hearings, proceedings, transactions,
221 communications, and recommendations of the advisory board.
222 (5) (a) Four or more members of the advisory board constitute a quorum for the
223 transaction of business.
224 (b) The action of a majority of a quorum present is considered the action of the
225 advisory board.
226 (6) (a) A member of the advisory board may not participate as a board member in a
227 proceeding or hearing:
228 (i) involving the member's licensed business or employer; or
229 (ii) when a member, a member's business or family, or employer has a pecuniary
230 interest in the outcome or other conflict of interest concerning an issue before the advisory
232 (b) If a member of the advisory board is disqualified under Subsection (6)(a), the
233 executive director shall select the appropriate alternate member to act on the issue before the
234 advisory board as provided in Subsection (2).
235 (7) Except for the executive director or the executive director's designee, an individual
236 may not be appointed or serve on the advisory board while holding any other elective or
237 appointive state or federal office.
238 (8) A member may not receive compensation or benefits for the member's service, but
239 may receive per diem and travel expenses in accordance with:
240 (a) Section 63A-3-106;
241 (b) Section 63A-3-107; and
242 (c) rules made by the Division of Finance pursuant to Sections 63A-3-106 and
244 (9) The department shall provide necessary staff support to the advisory board.
245 Section 3. Section 13-14-104 is amended to read:
246 13-14-104. Powers and duties of the advisory board and the executive director.
247 (1) (a) Except as provided in Subsection 13-14-106(3), the advisory board shall make
248 recommendations to the executive director on the administration and enforcement of this
249 chapter, including adjudicative and rulemaking proceedings.
250 (b) The executive director shall:
251 (i) consider the advisory board's recommendations; and
252 (ii) issue any rules or final [
253 (2) The executive director, in consultation with the advisory board, shall make rules for
254 the administration of this chapter in accordance with Title 63G, Chapter 3, Utah Administrative
255 Rulemaking Act.
256 (3) (a) An adjudicative proceeding under this chapter shall be conducted in accordance
257 with Title 63G, Chapter 4, Administrative Procedures Act.
258 (b) In an adjudicative proceeding under this chapter, any order issued by the executive
260 (i) shall comply with Section 63G-4-208, whether the proceeding is a formal or an
261 informal adjudicative proceeding under Title 63G, Chapter 4, Administrative Procedures Act;
263 (ii) if the order modifies or rejects a finding of fact in a recommendation from the
264 advisory board, shall be made on the basis of information learned from the executive director's:
265 (A) personal attendance at the hearing; or
266 (B) review of the record developed at the hearing.
267 (4) The executive director's decision under this section shall be made available to the
269 Section 4. Section 13-14-302 is amended to read:
270 13-14-302. Issuance of additional franchises -- Relocation of existing franchisees.
271 (1) Except as provided in Subsection (6), a franchisor shall provide the notice and
272 documentation required under Subsection (2) if the franchisor seeks to:
273 (a) enter into a franchise agreement establishing a motor vehicle dealership within a
274 relevant market area where the same line-make is represented by another franchisee; or
275 (b) relocate an existing motor vehicle franchisee.
276 (2) In determining whether a new or relocated dealership is within a relevant market
277 area where the same line-make is represented by an existing dealership, the relevant market
278 area is measured from the closest property boundary line of the existing dealership to the
279 closest property boundary line of the new or relocated dealership.
281 before taking the action, the franchisor shall, in writing, notify the advisory board, the clerk of
282 each affected municipality, and each franchisee in that line-make in the relevant market area.
283 (b) The notice required by Subsection [
284 (i) specify the intended action described under Subsection (1);
285 (ii) specify the good cause on which it intends to rely for the action; and
286 (iii) be delivered by registered or certified mail or by any form of reliable delivery
287 through which receipt is verifiable.
289 to the advisory board, each affected municipality, and each franchisee in that line-make in the
290 relevant market area the following documents relating to the notice described under Subsection
292 (i) (A) any aggregate economic data and all existing reports, analyses, or opinions
293 based on the aggregate economic data that were relied on by the franchisor in reaching the
294 decision to proceed with the action described in the notice; and
295 (B) the aggregate economic data under Subsection [
296 (I) motor vehicle registration data;
297 (II) market penetration data; and
298 (III) demographic data;
299 (ii) written documentation that the franchisor has in [
300 it intends to rely on in establishing good cause under Section 13-14-306 relating to the notice;
301 (iii) a statement that describes in reasonable detail how the establishment of a new
302 franchisee or the relocation of an existing franchisee will affect the amount of business
303 transacted by other franchisees of the same line-make in the relevant market area, as compared
304 to business available to the franchisees; and
305 (iv) a statement that describes in reasonable detail how the establishment of a new
306 franchisee or the relocation of an existing franchisee will be beneficial or injurious to the
307 public welfare or public interest.
308 (b) The franchisor shall provide the documents described under Subsection [
309 with the notice required under Subsection [
310 (c) The franchisor is not required to disclose any documents under Subsection [
311 (4)(a) if:
312 (i) the documents would be privileged under the Utah Rules of Evidence;
313 (ii) the documents contain confidential proprietary information;
314 (iii) the documents are subject to federal or state privacy laws;
315 (iv) the documents are correspondence between the franchisor and existing franchisees
316 in that line-make in the relevant market area; or
317 (v) the franchisor reasonably believes that disclosure of the documents would violate:
318 (A) the privacy of another franchisee; or
319 (B) Section 13-14-201.
321 any franchisee that is required to receive notice under Subsection [
322 advisory board the establishment or relocation of the dealership.
323 (b) [
324 department shall inform the franchisor that:
325 (i) a timely protest has been filed;
326 (ii) a hearing is required;
327 (iii) the franchisor may not establish or relocate the proposed dealership until the
328 advisory board has held a hearing; and
329 (iv) the franchisor may not establish or relocate a proposed dealership if the executive
330 director determines that there is not good cause for permitting the establishment or relocation
331 of the dealership.
333 consolidated to expedite the disposition of the issue.
335 successor dealer to a location that is:
336 (a) within the same county and less than two [
337 location of the existing or successor franchisee's dealership; or
338 (b) further away from a dealership of a franchisee of the same line-make.
340 (a) relocation of an existing franchisee's dealership in excess of two [
341 miles from [
342 additional franchise in the line-make of the relocating franchise;
343 (b) the reopening in a relevant market area of a dealership that has not been in
344 operation for one year or more is considered the establishment of an additional motor vehicle
345 dealership; and
346 (c) (i) except as provided in Subsection [
347 temporary additional place of business by a recreational vehicle franchisee is considered the
348 establishment of an additional motor vehicle dealership; and
349 (ii) the establishment of a temporary additional place of business by a recreational
350 vehicle franchisee is not considered the establishment of an additional motor vehicle dealership
351 if the recreational vehicle franchisee is participating in a trade show where three or more
352 recreational vehicle dealers are participating.
353 Section 5. Section 13-14-302.5 is amended to read:
354 13-14-302.5. Application of new franchise process with respect to certain
355 terminated franchises.
356 (1) As used in this section:
357 (a) "Covered franchisee":
358 (i) means a person who was a franchisee under a pre-bankruptcy franchise; and
359 (ii) is a "covered dealership," as that term is defined in the federal franchise arbitration
361 (b) "Covered franchisor":
362 (i) means a person who was a franchisor under a pre-bankruptcy franchise; and
363 (ii) is a "covered manufacturer," as that term is defined in the federal franchise
364 arbitration law.
365 (c) "Federal franchise arbitration law" means Section 747 of the Consolidated
366 Appropriations Act of 2010, Pub. L. No. 111-117.
367 (d) "New franchisor":
368 (i) means a person who is a franchisor of the same line-make as the franchisor under a
369 pre-bankruptcy franchise that has become a terminated franchise; and
370 (ii) is a "covered manufacturer," as that term is defined in the federal franchise
371 arbitration law.
372 (e) "Pre-bankruptcy franchise" means a franchise in effect as of October 3, 2008.
373 (f) "Reinstated franchise" means:
374 (i) a terminated franchise that a reinstatement order determines should be reinstated,
375 renewed, continued, assigned, or assumed; or
376 (ii) a franchise that a reinstatement order otherwise determines should be reestablished
377 in or added to the dealer network of a new franchisor in the geographic area where the covered
378 franchisee was located before October 3, 2008.
379 (g) "Reinstated franchisee" means a covered franchisee:
380 (i) whose franchise became a terminated franchise with less than 90 days' notice prior
381 to termination; and
382 (ii) that becomes entitled to a reinstated franchise under a reinstatement order.
383 (h) "Reinstatement order" means an arbitrator's written determination:
384 (i) in an arbitration proceeding held under the federal franchise arbitration law; and
385 (ii) (A) that a terminated franchise should be reinstated, renewed, continued, assigned,
386 or assumed; or
387 (B) that a covered franchisee should otherwise be reestablished as a franchisee in or
388 added to the dealer network of a new franchisor in the geographic area where the covered
389 franchisee was located before October 3, 2008.
390 (i) "Terminated franchise" means a covered franchisee's pre-bankruptcy franchise that
391 was terminated or not continued or renewed as a result of a bankruptcy proceeding involving a
392 covered franchisor as the bankruptcy debtor.
393 (2) The process under Sections 13-14-302, 13-14-304, and 13-14-306 for the issuance
394 of a franchise, including Subsections 13-14-302[
395 relating to a protest by another franchisee in the line-make in the relevant market area against
396 the establishment or relocation of a franchise, does not apply to a reinstated franchise or
397 reinstated franchisee.
398 Section 6. Section 13-14-304 is amended to read:
399 13-14-304. Hearing regarding termination, relocation, or establishment of
401 (1) (a) Within 10 days [
402 an application from a franchisee under Subsection 13-14-301(3) challenging [
403 right to terminate or not continue a franchise, or an application under Section 13-14-302
404 challenging the establishment or relocation of a franchise, the executive director shall:
405 (i) enter an order designating the time and place for the hearing; and
406 (ii) send a copy of the order by certified or registered mail, with return receipt
407 requested, or by any form of reliable delivery through which receipt is verifiable to:
408 (A) the applicant;
409 (B) the franchisor; and
410 (C) if the application involves the establishment of a new franchise or the relocation of
411 an existing dealership, [
412 the relevant market area engaged in the business of offering to sell or lease the same line-make.
413 (b) A copy of an order mailed under Subsection (1)(a) shall be addressed to the
414 franchisee at the place where the franchisee's business is conducted.
415 (2) [
416 in the application may intervene as a party to the hearing, whether or not that person receives
418 (3) Any person, including an affected municipality, may appear and testify on the
419 question of the public interest in the termination or noncontinuation of a franchise or in the
420 establishment of an additional franchise.
421 (4) (a) (i) Any hearing ordered under Subsection (1) shall be conducted no later than
423 (ii) A final decision on the challenge shall be made by the executive director no later
424 than [
425 (b) Failure to comply with the time requirements of Subsection (4)(a) is considered a
426 determination that the franchisor acted with good cause or, in the case of a protest of a
427 proposed establishment or relocation of a dealer, that good cause exists for permitting the
428 proposed additional or relocated new motor vehicle dealer, unless:
429 (i) the delay is caused by acts of the franchisor or the additional or relocating
430 franchisee; or
431 (ii) the delay is waived by the parties.
432 (5) The franchisor has the burden of proof to establish by a preponderance of the
433 evidence that under the provisions of this chapter it should be granted permission to:
434 (a) terminate or not continue the franchise;
435 (b) enter into a franchise agreement establishing an additional franchise; or
436 (c) relocate the dealership of an existing franchisee.
437 (6) Any party to the hearing may appeal the executive director's final decision in
438 accordance with Title 63G, Chapter 4, Administrative Procedures Act, including the franchisor,
439 an existing franchisee of the same line-make whose relevant market area includes the site of the
440 proposed dealership, or an affected municipality.
441 Section 7. Section 13-14-306 is amended to read:
442 13-14-306. Evidence to be considered in determining cause to relocate or
443 establish a new franchised dealership.
444 In determining whether a franchisor has established good cause for relocating an
445 existing franchisee or establishing a new franchised dealership for the same line-make in a
446 given relevant market area, the advisory board and the executive director shall consider:
447 (1) the amount of business transacted by other franchisees of the same line-make in
448 that relevant market area, as compared to business available to the franchisees;
449 (2) the investment necessarily made and obligations incurred by other franchisees of
450 the same line-make in that relevant market area in the performance of their part of their
451 franchisee agreements;
452 (3) the permanency of the existing and proposed investment;
453 (4) whether it is injurious or beneficial to the public welfare or public interest for an
454 additional franchise to be established[
455 (a) the impact on any affected municipality;
456 (b) population growth trends in any affected municipality;
457 (c) the number of dealerships in the primary market area of the new or relocated
458 dealership compared to the number of dealerships in each primary market area adjacent to the
459 new or relocated dealership's primary market area; and
460 (d) how the new or relocated dealership would impact the distance and time that an
461 individual in the new or relocated dealership's primary market area would have to travel to
462 access a dealership in the same line-make as the new or relocated dealership.
463 (5) whether the franchisees of the same line-make in that relevant market area are
464 providing adequate service to consumers for the motor vehicles of the line-make, which shall
465 include the adequacy of:
466 (a) the motor vehicle sale and service facilities;
467 (b) equipment;
468 (c) supply of vehicle parts; and
469 (d) qualified service personnel; and
470 (6) whether the relocation or establishment would cause any material negative
471 economic effect on a dealer of the same line-make in the relevant market area.
472 Section 8. Section 13-14-310 is enacted to read:
473 13-14-310. Reporting requirement.
474 By November 30 of each year, the advisory board shall submit an annual report to the
475 Business and Labor Interim Committee that, for the 12 months before the day on which the
476 report is submitted, describes:
477 (1) the number of applications for a new or relocated dealership that the advisory board
478 received; and
479 (2) for each application described in Subsection (1):
480 (a) the number of protests that the advisory board received;
481 (b) whether the advisory board conducted a hearing;
482 (c) if the advisory board conducted a hearing, the disposition of the hearing; and
483 (d) the basis for any disposition described in Subsection (2)(c).