Enrolled HB 136: Relating to motor vehicle franchises, motor vehicle dealers, motor vehicle manufacturers, and motor vehicle distributors.
00Enrolled HB 136 01 Relating to motor vehicle franchises, motor vehicle dealers, motor vehicle manufacturers, and 02 motor vehicle distributors. 03 _______________ 04 * Section 1. The uncodified law of the State of Alaska is amended by adding a new section 05 to read: 06 LEGISLATIVE FINDINGS AND INTENT. (a) The legislature finds that 07 (1) the distribution and sale of motor vehicles in the state affects the general 08 economy of the state and the interests and welfare of the residents of the state; 09 (2) providing warranty service for new motor vehicles is a matter of 10 substantial concern to the residents of the state; 11 (3) the maintenance of fair competition among new motor vehicle dealers is in 12 the public interest; 13 (4) maintaining strong and sound new motor vehicle dealerships in the state is 14 essential to providing the consuming public with continuing and reliable services necessary
01 for their motor vehicles; and 02 (5) strong and sound new motor vehicle dealerships with active service 03 departments will provide stable employment opportunities to the residents of the state. 04 (b) The legislature declares that this Act is remedial, and, to the extent permitted by 05 the Constitution of the State of Alaska and the United States Constitution, it is the intent of 06 the legislature that the provisions of this Act apply to all franchise agreements between 07 manufacturers and new motor vehicle dealers. 08 * Sec. 2. AS 45.25.010 is amended to read: 09 Sec. 45.25.010. Applicability. AS 45.25.020 - 45.25.310 [AS 45.25.020 - 10 45.25.320] apply to franchise agreements [CONTRACTS] between a manufacturer 11 and its new motor vehicle dealers in this state. 12 * Sec. 3. AS 45.25.110(a) is amended to read: 13 (a) A manufacturer may not terminate a franchise agreement with a new 14 motor vehicle dealer unless 15 (1) the manufacturer has 16 (A) complied with [SATISFIED] the notice requirements of 17 this chapter; and 18 (B) shown that there is good cause for the termination of the 19 franchise agreement, and, if the reasons underlying the good cause can be 20 corrected by the new motor vehicle dealer, the new motor vehicle dealer has 21 failed for 120  days after delivery of the notice required by AS 45.25.120 22 to make the corrections; the circumstances identified under AS 45.25.120(a)(2) 23 for which a 15-day notice of termination is required do not qualify as reasons 24 for which correction is allowed under this subparagraph [PARAGRAPH]; or 25 (2) the new motor vehicle dealer has systematically engaged in fraud 26 against consumers or the manufacturer or in the operation of the new motor vehicle 27 dealership. 28 * Sec. 4. AS 45.25.110 is amended by adding a new subsection to read: 29 (d) A failure of a new motor vehicle dealer under (a) of this section that relates 30 to the performance of the new motor vehicle dealer in sales, service, or level of 31 customer satisfaction does not amount to good cause under this section if the new
01 motor vehicle dealer failed to comply and the failure to comply was caused by 02 (1) an insufficient supply of new motor vehicles; or 03 (2) market, economic, or other factors that exist within the new motor 04 vehicle dealer's relevant market area and that were beyond the control of the new 05 motor vehicle dealer. 06 * Sec. 5. AS 45.25.140(a) is amended to read: 07 (a) Upon the termination of a new motor vehicle dealer's franchise agreement 08 by the manufacturer or distributor, the manufacturer or distributor shall repurchase 09 from the new motor vehicle dealer at 10 (1) the new motor vehicle dealer's net acquisition cost, if the motor 11 vehicles have not been materially altered or damaged, all inventory consisting of 12 unsold new motor vehicles that are current models; 13 (2) the new motor vehicle dealer's net acquisition cost, new motor 14 vehicle [AND] models from the previous year that have been acquired from the 15 manufacturer within the past two [MODEL] years before receipt of the notice of 16 termination, but an adjustment based on mileage over 500 miles may be made; 17 (3) [(2)] the new motor vehicle dealer price listed in the current 18 manufacturer's parts catalog, less applicable allowances, new unused undamaged 19 parts in their original, unbroken packaging [, LISTED IN THE CURRENT PRICE 20 CATALOG] and acquired from the manufacturer or distributor; 21 (4) [(3)] fair market value, signs, equipment, and furnishings that bear 22 the manufacturer's [A] trademark or trade name, that have not been altered or 23 damaged, and that were required by the manufacturer or distributor within five years 24 preceding the notice of termination; 25 (5) [AND (4)] the new motor vehicle dealer's net acquisition cost, 26 special tools that have not been altered or materially damaged and that were 27 purchased from the manufacturer or distributor within three years preceding the date 28 of the termination; and 29 (6) the lesser of the fair market value or the depreciated value, all 30 manufacturer required computers, printers, and other electronic hardware, and 31 electronic software, except that, if the new motor vehicle dealer leases the
01 computers, printers, or other electronic hardware, or electronic software, the 02 manufacturer shall pay the new motor vehicle dealer the amount of money that is 03 required for the new motor vehicle dealer to terminate the lease under the lease 04 agreement. 05 * Sec. 6. AS 45.25.150(b) is amended to read: 06 (b) This section does not relieve a new motor vehicle dealer of the obligation 07 to mitigate 08 (1) damages under a lease, prevent a manufacturer from occupying and 09 using the new motor vehicle dealer's facilities while paying rent, or preclude a 10 manufacturer from negotiating a lease termination, sublease, or new lease; or 11 (2) the costs of the relocation, substantial alteration, and 12 remodeling of the new motor vehicle dealer's facilities for which payments are 13 required under (f) of this section. 14 * Sec. 7. AS 45.25.150 is amended by adding a new subsection to read: 15 (f) In addition to the payment required under AS 45.25.140 and (a) of this 16 section, upon termination of a franchise agreement by the manufacturer under this 17 chapter, the manufacturer shall, at the request and option of the new motor vehicle 18 dealer, pay the new motor vehicle dealer the new motor vehicle dealer's cost for a 19 relocation, substantial alteration, or remodeling of the new motor vehicle dealer's 20 facilities to the extent used for the manufacturer's franchise, if 21 (1) the manufacturer required the relocation, substantial alteration, or 22 remodeling of the new motor vehicle dealer's facilities for a continuation or renewal of 23 the franchise agreement; and 24 (2) the relocation, substantial alteration, or remodeling of the new 25 motor vehicle dealer's facilities was completed within three years before the 26 termination or is in process when the new motor vehicle dealer receives the notice of 27 termination. 28 * Sec. 8. AS 45.25.160 is repealed and reenacted to read: 29 Sec. 45.25.160. Prevention of or refusal to honor transfer of new motor 30 vehicle dealership ownership. (a) A manufacturer may not unreasonably prevent or 31 refuse to honor the transfer of ownership of a new motor vehicle dealership to a buyer
01 who is capable of being licensed as a new motor vehicle dealer in this state and who 02 meets the standards established by the manufacturer, if the standards are reasonable 03 and applied uniformly. 04 (b) Within 30 days after receipt of a written request from a new motor vehicle 05 dealer for transfer of the ownership of a new motor vehicle dealership, a manufacturer 06 may request, and the new motor vehicle dealer shall promptly provide, supplementary 07 information that is reasonably necessary for the manufacturer to determine whether the 08 manufacturer will approve the request for the transfer. If a manufacturer refuses to 09 approve the transfer, the manufacturer shall give written notice to the new motor 10 vehicle dealer of the refusal. The manufacturer shall give the notice to the new motor 11 vehicle dealer within 75 days after the date the manufacturer has received both the 12 written transfer request and supplementary information requested under this 13 subsection. The notice must state the specific grounds for the refusal to approve the 14 transfer. The manufacturer shall give the notice under this subsection by personal 15 service or certified mail with return receipt requested. If the manufacturer does not 16 give the notice within the time allowed under this subsection and does not exercise a 17 right of first refusal under (c) of this section, the request shall be considered approved. 18 (c) A manufacturer or distributor may exercise a contractual right of first 19 refusal with respect to the proposed sale or other transfer of the interest of the dealer in 20 a new motor vehicle dealership if 21 (1) the sale or other transfer is to a person who is not a family member 22 of an owner of the dealership, a managerial employee of the dealership owning 15 23 percent or more of the dealership, or a corporation, partnership, or other legal entity 24 owned by the existing owners of the dealership; in this paragraph, "family member" 25 means 26 (A) the spouse of an owner of the dealership; 27 (B) the child, stepchild, grandchild, brother, sister, or parent of 28 an owner of the dealership; or 29 (C) a spouse of a person identified in (B) of this paragraph; 30 (2) the manufacturer or distributor notifies the new motor vehicle 31 dealer in writing of the intent to exercise the right of first refusal; within 30 days after
01 receipt of a written request from a new motor vehicle dealer for transfer of the 02 ownership of a new motor vehicle dealership, a manufacturer or distributor may 03 request, and the new motor vehicle dealer shall promptly provide, related information 04 generally used by a manufacturer or distributor to conduct its review of a proposed 05 intent to exercise the right of first refusal and supplementary information that is 06 reasonably necessary for the manufacturer or distributor to determine whether the 07 manufacturer or distributor will exercise the right of first refusal; if the manufacturer 08 or distributor decides to exercise the right of first refusal, the manufacturer or 09 distributor shall give written notice to the new motor vehicle dealer of the decision 10 within 75 days after receiving the completed transfer request, related information, and 11 requested supplementary information; the manufacturer or distributor shall give the 12 notice under this paragraph by personal service or certified mail with return receipt 13 requested; if the manufacturer or distributor fails to notify the dealer within the 75-day 14 period that the manufacturer or distributor will exercise the right of first refusal, the 15 manufacturer or distributor may not exercise the right of first refusal; 16 (3) the exercise of the right of first refusal provides to the new motor 17 vehicle dealer the same compensation as, or greater compensation than, the new motor 18 vehicle dealer had negotiated to receive from the proposed buyer or other transferee; 19 and 20 (4) the manufacturer or distributor agrees to pay the reasonable 21 expenses, including reasonable attorney and accountant fees that do not exceed the 22 usual, customary, and reasonable fees charged for similar work done in the state for 23 other clients, incurred before the manufacturer or distributor exercised its right of first 24 refusal by the proposed buyer or transferee to negotiate and implement the terms of 25 the contract for the sale or transfer. 26 * Sec. 9. AS 45.25.180(d) is amended to read: 27 (d) When determining whether good cause exists for establishing or relocating 28 an additional new motor vehicle dealer for the same line make, the superior court shall 29 consider the existing circumstances, including 30 (1) whether the establishment of an additional franchise or relocation 31 of the existing new motor vehicle dealer appears to be warranted by economic and
01 marketing conditions, including anticipated future changes; 02 (2) the retail sales and service business transacted by the protesting 03 new motor vehicle dealer and other new motor vehicle dealers of the same line make 04 with a place of business in the relevant market area to be served by the additional 05 franchise or proposed new location of an existing new motor vehicle dealer during the 06 three-year period immediately preceding the notice; 07 (3) the investment necessarily made and obligations incurred by the 08 protesting new motor vehicle dealer to perform the protesting new motor vehicle 09 dealer's obligations under existing franchise agreements; 10 (4) the permanency of the investment of the protesting new motor 11 vehicle dealer; [AND] 12 (5) whether it is beneficial or injurious to the public welfare for an 13 additional franchise to be established or for the existing new motor vehicle dealer to 14 be relocated; 15 (6) whether the manufacturer has denied the manufacturer's 16 existing new motor vehicle dealer of the same line make the opportunity for 17 reasonable growth, market expansion, or relocation; and 18 (7) whether the proposed relocation is farther away from the 19 protesting new motor vehicle dealer. 20 * Sec. 10. AS 45.25.180 is amended by adding a new subsection to read: 21 (f) Under this section, a manufacturer has the burden of proving that good 22 cause exists for permitting the proposed establishment or relocation of a new motor 23 vehicle dealer that the manufacturer has proposed, and the new motor vehicle dealer 24 has the burden of proving that good cause exists for permitting the proposed 25 establishment or relocation of a new motor vehicle dealer that the new motor vehicle 26 dealer has proposed. 27 * Sec. 11. AS 45.25.190 is amended to read: 28 Sec. 45.25.190. Arbitration. In a controversy between a manufacturer and a 29 new motor vehicle dealer under AS 45.25.010 - 45.25.310 [AS 45.25.010 - 45.25.320], 30 neither the manufacturer nor the new motor vehicle dealer is required to submit the 31 controversy to arbitration. If both the manufacturer and the new motor vehicle dealer
01 agree to submit a controversy under AS 45.25.010 - 45.25.310 [AS 45.25.010 - 02 45.25.320] to arbitration, the arbitration shall be conducted under AS 09.43.010 - 03 09.43.180 (Uniform Arbitration Act) or AS 09.43.300 - 09.43.595 (Revised Uniform 04 Arbitration Act), as applicable, the manufacturer and the new motor vehicle dealer 05 shall each select one arbitrator, and both the manufacturer and the new motor vehicle 06 dealer shall select the third arbitrator. 07 * Sec. 12. AS 45.25 is amended by adding new sections to article 2 to read: 08 Sec. 45.25.200. Payment and approval of claims. (a) A manufacturer shall 09 pay a new motor vehicle dealer for all warranty work. The manufacturer may not deny 10 a claim for warranty work to resolve a condition discovered and properly repaired by 11 the dealer during the course of a separate repair, if the dealer provides the required 12 documentation demonstrating the need for the repair. A manufacturer shall pay the 13 new motor vehicle dealer for the approved warranty repairs in accordance with the 14 schedule of compensation that applies to the repairs when the new motor vehicle 15 dealer makes the repairs. 16 (b) A new motor vehicle dealer shall submit a claim for warranty work to the 17 manufacturer within 90 days after the new motor vehicle dealer completes the work on 18 the new motor vehicle. The new motor vehicle dealer shall submit the claim in the 19 manner that the manufacturer requires. 20 (c) Within 30 days after the manufacturer receives a claim from a new motor 21 vehicle dealer under (b) of this section, the manufacturer shall approve or disapprove 22 the claim in writing or electronically. If a manufacturer does not disapprove a claim as 23 required by this subsection, the claim is considered approved. The manufacturer shall 24 pay the claim within 30 days after the approval of the claim. 25 (d) If a manufacturer disapproves a claim that the new motor vehicle dealer 26 submits under (b) of this section, a manufacturer shall notify the new motor vehicle 27 dealer in writing or electronically and shall state the reasons for disapproving the 28 claim. A new motor vehicle dealer may correct and resubmit the claim within 30 days 29 after the new motor vehicle dealer receives the written or electronic notice that the 30 manufacturer disapproved the claim. 31 (e) A manufacturer may not initiate or conduct an audit to determine the
01 validity of paid claims for new motor vehicle dealer warranty work unless the 02 manufacturer initiates the audit within one year after the payment of the claim. The 03 manufacturer may not perform more than one audit in a calendar year to determine the 04 validity of paid claims for new motor vehicle dealer warranty work. 05 (f) A manufacturer may not initiate or conduct an audit to determine the 06 validity of paid incentive claims unless the manufacturer initiates the audit within one 07 year after the payment of the claim or the conclusion of the incentive program, 08 whichever event occurs later. The manufacturer may not perform more than one audit 09 in a calendar year to determine the validity of paid incentive claims. 10 (g) Notwithstanding the limitations under (e) and (f) of this section, if a 11 manufacturer reasonably suspects fraud, the manufacturer may audit a dealer for 12 fraudulent claims during any period in which an action for fraud may be commenced 13 under applicable state law. 14 Sec. 45.25.210. Rates for warranty and other work. (a) A manufacturer shall 15 provide each of its new motor vehicle dealers with the schedule of compensation that 16 the manufacturer shall pay to the new motor vehicle dealer for warranty work that the 17 manufacturer requires the new motor vehicle dealer to perform for the manufacturer's 18 products. 19 (b) The schedule of compensation must include compensation for parts and 20 labor and must comply with this section. The compensation for parts must include the 21 average retail percentage markup that the new motor vehicle dealer charges. 22 (c) Unless otherwise agreed to by the manufacturer and the new motor vehicle 23 dealer, the rates in the schedule of compensation may not be less than the rates that the 24 new motor vehicle dealer charges retail customers for similar nonwarranty service 25 work. 26 (d) To establish the retail percentage markup, the new motor vehicle dealer 27 shall submit to the manufacturer 100 sequential chronologically issued retail service 28 repair orders paid by customers for warranty-like repairs, or 90 consecutive days of 29 retail service repair orders paid by customers for warranty-like repairs, whichever 30 number of retail service repair orders is less. The retail service repair orders that the 31 new motor vehicle dealer submits must cover retail repairs that the new motor vehicle
01 dealer made less than 180 days before the new motor vehicle dealer submits them to 02 the manufacturer. 03 (e) A manufacturer may not require a new motor vehicle dealer to establish 04 the retail percentage markup by a method other than the method required by (d) of this 05 section. When establishing the retail percentage markup, a manufacturer may not 06 require the new motor vehicle dealer to provide information that is unduly 07 burdensome or time consuming to provide, including part-by-part or transaction-by- 08 transaction calculations. 09 (f) A manufacturer may not include in the calculation of the rates in the 10 schedule of compensation 11 (1) repairs for manufacturer special events, manufacturer specials, or 12 manufacturer promotional discounts; 13 (2) parts sold at wholesale; 14 (3) routine maintenance not covered under warranty, including the 15 replacement of fluids, filters, and belts, unless the new motor vehicle dealer provides 16 the routine maintenance in the course of making a repair; 17 (4) nuts, bolts, fasteners, and similar items that do not have an 18 individual part number; 19 (5) tires, batteries, and light bulbs; 20 (6) vehicle reconditioning; and 21 (7) repair orders for motor vehicle body repairs if an insurer pays for 22 the repairs. 23 (g) The retail percentage markup calculated under (d) of this section may not 24 take effect more than 30 days after the manufacturer approves the dealer's proposed 25 rate, or after the manufacturer is considered to have approved the dealer's proposed 26 rate under this section. If a manufacturer does not disapprove the dealer's proposed 27 rate within 30 days after the new motor vehicle dealer submits the rate application, 28 then the dealer's proposed rate shall be considered approved. 29 (h) A manufacturer may disapprove a rate proposed by the new motor vehicle 30 dealer under this section if the manufacturer demonstrates that the proposed rate is 31 materially miscalculated or unreasonable compared to other similarly situated new
01 motor vehicle dealers in this state. 02 (i) A new motor vehicle dealer may not receive more than one rate increase 03 under this section in a calendar year. 04 Sec. 45.25.220. Performance and reimbursement of certain repairs. (a) 05 Except as provided in (b) of this section, if a new motor vehicle needs repairs that are 06 covered under a manufacturer's warranty, and if the new motor vehicle is located in a 07 remote location, the manufacturer shall make reasonable efforts to arrange for the new 08 motor vehicle to be repaired in the remote location. 09 (b) If a manufacturer determines that repairs cannot reasonably be made in a 10 remote location within the manufacturer's guidelines, the manufacturer may arrange, at 11 no cost to the owner of the new motor vehicle, to ship the new motor vehicle to a 12 repair facility outside of the remote location and to return the new motor vehicle to the 13 remote location after the repairs are completed. 14 (c) A manufacturer may direct a new motor vehicle dealer of the manufacturer 15 to refer customers of the new motor vehicle dealer to the manufacturer if the new 16 motor vehicles of the customers are located in remote locations and need repairs. 17 (d) This section does not prohibit a manufacturer from allowing a new motor 18 vehicle dealer to subcontract warranty work for a specific new motor vehicle that is 19 located in a remote location. If the manufacturer allows the new motor vehicle dealer 20 to subcontract the warranty work, the manufacturer shall compensate the new motor 21 vehicle dealer for the subcontracted warranty work paid for by the new motor vehicle 22 dealer. 23 (e) In this section, "remote location" means a location that is not accessible by 24 road or that is more than 100 road miles from a new motor vehicle dealer that is 25 authorized to perform warranty work on new motor vehicles. 26 Sec. 45.25.230. Preparation and service before delivery. A manufacturer 27 and a distributor shall provide in writing the following information to their new motor 28 vehicle dealers about new motor vehicles and other products received from the 29 manufacturer or distributor: 30 (1) the specific obligations of the new motor vehicle dealer to prepare 31 and service new motor vehicles and products before delivery of the new motor
01 vehicles and products to buyers; 02 (2) the compensation that the manufacturer or distributor will pay the 03 dealer for performing the preparation and service obligations described in (1) of this 04 section; and 05 (3) the amount of time that the manufacturer or distributor will allow 06 the new motor vehicle dealer for performing the preparation and service obligations 07 described in (1) of this section. 08 * Sec. 13. AS 45.25.300 is repealed and reenacted to read: 09 Sec. 45.25.300. Unfair practices. A manufacturer may not 10 (1) require, coerce, or attempt to coerce a new motor vehicle dealer to 11 change the location of the new motor vehicle dealership or to make any substantial 12 alterations to the new motor vehicle dealership premises or facilities if the alterations 13 would be unreasonable or if there is not expected to be a sufficient supply of new 14 motor vehicles to justify the change of location or the alterations because of market 15 and economic conditions; this paragraph does not apply to alterations that are 16 necessary to comply with health or safety laws; in this paragraph, "substantial 17 alterations" does not include erecting signs subject to the manufacturer's intellectual 18 property rights, doing interior painting that is necessary to keep a new motor vehicle 19 dealer facility in an attractive condition, or performing routine maintenance; 20 (2) require a new motor vehicle dealer to purchase or include in 21 inventory a predetermined number or percentage of certified pre-owned motor 22 vehicles or lease return motor vehicles; 23 (3) except because of reasons beyond the manufacturer's control, 24 refuse or fail to deliver or offer for sale in reasonable quantities to a new motor vehicle 25 dealer holding a franchise for a line make of new motor vehicles sold or distributed by 26 the manufacturer a new motor vehicle, part, or accessory, if the new motor vehicle, 27 part, or accessory is being delivered to other new motor vehicle dealers; this paragraph 28 does not apply to limited edition or limited release vehicle parts or accessories; 29 (4) require a new motor vehicle dealer to purchase unreasonable 30 advertising displays or other materials or an unreasonable number of signs; 31 (5) require a new motor vehicle dealer to order or accept delivery of a
01 new motor vehicle, part, accessory, piece of equipment, promotional material, display 02 device, display decoration, or other item that is not otherwise required by law and that 03 the new motor vehicle dealer does not voluntarily order; this paragraph does not apply 04 to safety and emissions recall campaign parts or to a motor vehicle feature, part, 05 accessory, or other component required by federal law, the law of this state, or local 06 law; 07 (6) coerce, attempt to coerce, or require a new motor vehicle dealer to 08 (A) join, contribute money to, or affiliate with an advertising 09 association; or 10 (B) participate monetarily in an advertising campaign; or 11 (7) increase the price of a new motor vehicle that the new motor 12 vehicle dealer has ordered from the manufacturer and for which there exists at the time 13 of the order a bona fide sale to a retail or fleet purchaser if the dealer submitted the 14 order to the manufacturer before the manufacturer provided the new motor vehicle 15 dealer with an official written price increase notification. 16 * Sec. 14. AS 45.25.990(19) is repealed and reenacted to read: 17 (19) "terminate" includes 18 (A) canceling or not renewing; 19 (B) a manufacturer discontinuing the sale and distribution of a 20 new motor vehicle line make covered by a franchise; 21 * Sec. 15. AS 45.25.990 is amended by adding new paragraphs to read: 22 (22) "schedule of compensation" means a schedule of compensation 23 established under AS 45.25.210; 24 (23) "warranty work" 25 (A) means repairs that are covered under a manufacturer's 26 warranty or a recall; 27 (B) means work that the manufacturer in good will directs be 28 performed and reimbursed by the manufacturer but that is not covered by the 29 manufacturer's warranty or a recall; 30 (C) does not mean work under a separate service contract. 31 * Sec. 16. AS 45.25.320 is repealed.