SB 1687 — MOTOR VEH FRANCHISE RIGHTS

SB1687 EngrossedEnrolled LRB100 07840 JLS 17909 b AN ACT concerning business.

SB1687 EngrossedEnrolled - 2 - LRB100 07840 JLS 17909 b The Legislature further finds that the regulation of motor vehicle manufacturers, distributors, wholesalers, factory branches, distributor branches and representatives, and dealers promotes the distribution of motor vehicles to the public and provides a system for servicing vehicles and for complying with manufacturer warranties so that consumers can keep their motor vehicles properly functioning and safe.

Beginning January 1, 2010, the term "motor vehicle" also includes any engine, transmission, or rear axle, regardless of whether it is attached to a vehicle chassis, that is manufactured for installation in any motor-driven vehicle with a gross vehicle weight rating of more than 16,000 pounds that is required to be SB1687 EngrossedEnrolled - 3 - LRB100 07840 JLS 17909 b registered under the Illinois Vehicle Code.

SB1687 EngrossedEnrolled - 4 - LRB100 07840 JLS 17909 b (i) "Franchise", an oral or written arrangement for a definite or indefinite period in which a manufacturer, distributor or wholesaler grants to a motor vehicle dealer a license to use a trade name, service mark, or related characteristic, and in which there is a community of interest in the marketing of motor vehicles or services related thereto at wholesale, retail, leasing or otherwise.

and an SB1687 EngrossedEnrolled - 5 - LRB100 07840 JLS 17909 b intentional failure to disclose a material fact.

(s) "Factory repurchase vehicle" means a motor vehicle of the current model year or a late model vehicle reacquired by SB1687 EngrossedEnrolled - 6 - LRB100 07840 JLS 17909 b the manufacturer under an existing agreement or otherwise from a fleet, lease or daily rental company or under any State or federal law or program relating to allegedly defective new motor vehicles, and offered for sale and resold by the manufacturer directly or at a factory authorized or sponsored auction.

(b) It shall be deemed a violation for any manufacturer, factory branch, factory representative, distributor or wholesaler, distributor branch, distributor representative or SB1687 EngrossedEnrolled - 7 - LRB100 07840 JLS 17909 b motor vehicle dealer to engage in any action with respect to a franchise which is arbitrary, in bad faith or unconscionable and which causes damage to any of the parties or to the public.

SB1687 EngrossedEnrolled - 8 - LRB100 07840 JLS 17909 b (d) It shall be deemed a violation for a manufacturer, a distributor, a wholesaler, a distributor branch or division, or officer, agent or other representative thereof:

(3) to refuse to deliver in reasonable quantities and within a reasonable time after receipt of dealer's order, to any motor vehicle dealer having a franchise or selling agreement for the retail sale of new motor vehicles sold or distributed by such manufacturer, distributor, wholesaler, distributor branch or division, factory branch or division or wholesale branch or division, any such motor vehicles as are covered by such franchise or selling agreement specifically publicly advertised in the State by such manufacturer, distributor, wholesaler, distributor branch SB1687 EngrossedEnrolled - 9 - LRB100 07840 JLS 17909 b or division, factory branch or division, or wholesale branch or division to be available for immediate delivery.

(5) to require a franchisee to participate in an SB1687 EngrossedEnrolled - 10 - LRB100 07840 JLS 17909 b advertising campaign or contest or any promotional campaign, or to purchase or lease any promotional materials, training materials, show room or other display decorations or materials at the expense of the franchisee;

(A) If a manufacturer, distributor, wholesaler, distributor branch or division, factory branch or division or wholesale branch or division intends to cancel or terminate a franchise or selling agreement or intends not to extend or renew a franchise or selling agreement on its expiration, it shall send a letter by certified mail, return receipt requested, to the affected franchisee at least 60 days before the SB1687 EngrossedEnrolled - 11 - LRB100 07840 JLS 17909 b effective date of the proposed action, or not later than 10 days before the proposed action when the reason for the action is based upon either of the following:

(B) If a manufacturer, distributor, wholesaler, distributor branch or division, factory branch or division or wholesale branch or division intends to SB1687 EngrossedEnrolled - 12 - LRB100 07840 JLS 17909 b change substantially or modify the sales and service obligations or capital requirements of a motor vehicle dealer as a condition to extending or renewing the existing franchise or selling agreement of such motor vehicle dealer, it shall send a letter by certified mail, return receipt requested, to the affected franchisee at least 60 days before the date of expiration of the franchise or selling agreement.

SB1687 EngrossedEnrolled - 13 - LRB100 07840 JLS 17909 b The manufacturer shall have the burden of proof to establish that good cause exists to cancel or terminate, or fail to extend or renew the franchise or selling agreement of a motor vehicle dealer or franchisee, and to change substantially or modify the sales and service obligations or capital requirements of a motor vehicle dealer as a condition to extending or renewing the existing franchise or selling agreement.

SB1687 EngrossedEnrolled - 14 - LRB100 07840 JLS 17909 b (E) The manufacturer may not cancel or terminate, or fail to extend or renew a franchise or selling agreement or change or modify the obligations of the franchisee as a condition to offering a renewal, replacement, or succeeding franchise or selling agreement before the hearing process is concluded as prescribed by this Act, and thereafter, if the Board determines that the manufacturer has failed to meet its burden of proof and that good cause does not exist to allow the proposed action;

provided SB1687 EngrossedEnrolled - 15 - LRB100 07840 JLS 17909 b that, in order to provide an adequate defense, the manufacturer receives notice of the filing of a complaint, claim, or lawsuit within 60 days after the filing;

Any decision by a motor vehicle dealer to sell additional makes or lines at the motor vehicle dealer's facility shall be SB1687 EngrossedEnrolled - 16 - LRB100 07840 JLS 17909 b presumed to be reasonable, and the manufacturer shall have the burden to overcome that presumption.

(C) the price of any program, certified, or other SB1687 EngrossedEnrolled - 17 - LRB100 07840 JLS 17909 b used motor vehicle that the dealer is eligible to purchase from the manufacturer, distributor, or wholesaler;

If the dealer causes the vehicle to be registered and titled in this or any other state, and collects or causes to be collected any applicable sales or use tax to this State, a rebuttable presumption is established that the dealer did not have reason to know of the customer's intent to resell the SB1687 EngrossedEnrolled - 18 - LRB100 07840 JLS 17909 b vehicle;

or (12) to require a dealer to purchase goods or services to make improvements to the dealer's facilities from a vendor selected, identified, or designated by a manufacturer or one of its affiliates by agreement, program, incentive provision, or otherwise without making available to the dealer the option to obtain the goods or services of substantially similar quality and overall SB1687 EngrossedEnrolled - 19 - LRB100 07840 JLS 17909 b design from a vendor chosen by the dealer and approved by the manufacturer;

This paragraph (12) shall not be construed to allow a dealer or SB1687 EngrossedEnrolled - 20 - LRB100 07840 JLS 17909 b vendor to impair, infringe upon, or eliminate, directly or indirectly, the intellectual property rights of the manufacturer including, but not limited to, the manufacturer's intellectual property rights in any trademarks or trade dress, or other intellectual property interests owned or controlled by the manufacturer.

(2) to offer to sell or lease, or to sell or lease, any new motor vehicle to any motor vehicle dealer at a lower actual price therefor than the actual price offered to any other motor vehicle dealer for the same model vehicle similarly equipped or to utilize any device including, but not limited to, sales promotion plans or programs which result in such lesser actual price or fail to make available to any motor vehicle dealer any preferential SB1687 EngrossedEnrolled - 21 - LRB100 07840 JLS 17909 b pricing, incentive, rebate, finance rate, or low interest loan program offered to competing motor vehicle dealers in other contiguous states.

(4) to prevent or attempt to prevent by contract or otherwise any motor vehicle dealer or franchisee from changing the executive management control of the motor vehicle dealer or franchisee unless the franchiser, having the burden of proof, proves that such change of executive management will result in executive management control by a person or persons who are not of good moral character or who do not meet the franchiser's existing and, with consideration given to the volume of sales and service of the dealership, uniformly applied minimum business SB1687 EngrossedEnrolled - 22 - LRB100 07840 JLS 17909 b experience standards in the market area.

(6) to refuse to give effect to or prevent or attempt to prevent by contract or otherwise any motor vehicle dealer or any officer, partner or stockholder of any motor vehicle dealer from selling or transferring any part of the SB1687 EngrossedEnrolled - 23 - LRB100 07840 JLS 17909 b interest of any of them to any other person or persons or party or parties unless such sale or transfer is to a transferee who would not otherwise qualify for a new motor vehicle dealers license under the "The Illinois Vehicle Code" or unless the franchiser, having the burden of proof, proves that such sale or transfer is to a person or party who is not of good moral character or does not meet the franchiser's existing and reasonable capital standards and, with consideration given to the volume of sales and service of the dealership, uniformly applied minimum business experience standards in the market area.

(A) If the manufacturer intends to refuse to approve the sale or transfer of all or a part of the interest, then it shall, within 60 days from receipt of the completed application forms generally utilized by a manufacturer to conduct its review and a copy of all agreements regarding the proposed transfer, send a letter by certified mail, return receipt requested, advising the franchisee of any refusal to approve the sale or transfer of all or part of the interest and shall state that the dealer only has 30 days from the receipt of the notice to file with the Motor Vehicle SB1687 EngrossedEnrolled - 24 - LRB100 07840 JLS 17909 b Review Board a written protest against the proposed action.

The manufacturer shall not refuse to approve the sale or transfer by a dealer or an officer, partner, or stockholder of a franchise or any part of the interest to any person or persons before the hearing process is concluded as prescribed SB1687 EngrossedEnrolled - 25 - LRB100 07840 JLS 17909 b by this Act, and thereafter if the Board determines that the manufacturer has failed to meet its burden of proof and that good cause does not exist to refuse to approve the sale or transfer to the transferee.

(8) to grant an additional franchise in the relevant market area of an existing franchise of the same line make or to relocate an existing motor vehicle dealership within or into a relevant market area of an existing franchise of SB1687 EngrossedEnrolled - 26 - LRB100 07840 JLS 17909 b the same line make.

Unless the parties agree upon the grant or establishment of the additional or relocated franchise within 30 days from the date the notice was received by the existing franchisee of the same line make or any person entitled to receive such notice, the franchisee or other person may file with the Board a written protest against the grant or establishment of the SB1687 EngrossedEnrolled - 27 - LRB100 07840 JLS 17909 b proposed additional or relocated franchise.

SB1687 EngrossedEnrolled - 28 - LRB100 07840 JLS 17909 b The determination whether good cause exists for allowing the grant or establishment of an additional franchise or relocated existing franchise, shall be made by the Board under subsection (c) of Section 12 of this Act.

The reopening of a motor vehicle dealership that has not been in operation for 18 months or more shall be deemed the grant of an SB1687 EngrossedEnrolled - 29 - LRB100 07840 JLS 17909 b additional franchise or selling agreement.

(9) to require a motor vehicle dealer to assent to a release, assignment, novation, waiver or estoppel which would relieve any person from liability imposed by this SB1687 EngrossedEnrolled - 30 - LRB100 07840 JLS 17909 b Act;

Notwithstanding the foregoing, in the event the motor SB1687 EngrossedEnrolled - 31 - LRB100 07840 JLS 17909 b vehicle dealer or franchisee and manufacturer have duly executed an agreement concerning succession rights prior to the dealer's death or incapacitation, the agreement shall be observed.

Within 30 days from the date the notice was received by the designated successor or any other SB1687 EngrossedEnrolled - 32 - LRB100 07840 JLS 17909 b person entitled to notice, the designee or other person may file with the Board a written protest against the proposed action.

(B) No manufacturer shall impose any conditions upon honoring the succession and continuing the SB1687 EngrossedEnrolled - 33 - LRB100 07840 JLS 17909 b existing franchise agreement with the designated successor other than that the franchisee has designated a successor to the ownership or management control under the succession provisions of the franchise, or that the designated successor is of good moral character or meets the reasonable capital standards and, with consideration given to the volume of sales and service of the dealership, uniformly applied minimum business experience standards in the market area;

However, SB1687 EngrossedEnrolled - 34 - LRB100 07840 JLS 17909 b nothing herein shall be construed to prevent a franchiser from implementing affirmative action programs providing business opportunities for minorities, or from complying with applicable federal, State or local law;

(A) notifies the dealer in writing that it intends to exercise its right to acquire the franchise not SB1687 EngrossedEnrolled - 35 - LRB100 07840 JLS 17909 b later than 60 days after the manufacturer's or distributor's receipt of a notice of the proposed transfer from the dealer and all information and documents reasonably and customarily required by the manufacturer or distributor supporting the proposed transfer;

(D) reimburses the proposed transferee for all reasonable expenses incurred in evaluating, investigating, and negotiating the transfer of the SB1687 EngrossedEnrolled - 36 - LRB100 07840 JLS 17909 b dealership prior to the manufacturer's or distributor's exercise of its right of first refusal or other right to acquire the dealership.

For the purpose of this paragraph, "proposed SB1687 EngrossedEnrolled - 37 - LRB100 07840 JLS 17909 b transferee" means the person to whom the franchise would have been transferred to, or was proposed to be transferred to, had the right of first refusal or other right to acquire the franchise not been exercised by the manufacturer or distributor.

(2) the investment in a motor vehicle franchisee by a manufacturer, distributor, or wholesaler if the investment is for the sole purpose of enabling a partner or shareholder in that motor vehicle franchisee to acquire an interest in that motor vehicle franchisee and that partner or shareholder is not otherwise employed by or associated with the manufacturer, distributor, or wholesaler and SB1687 EngrossedEnrolled - 38 - LRB100 07840 JLS 17909 b would not otherwise have the requisite capital investment funds to invest in the motor vehicle franchisee, and has the right to purchase the entire equity interest of the manufacturer, distributor, or wholesaler in the motor vehicle franchisee within a reasonable period of time not to exceed 5 years;

(D) to further avoid any acts or practices, the effect of which may be to lessen or eliminate competition, the manufacturer provides to dealers on substantially equal terms access to all support for SB1687 EngrossedEnrolled - 39 - LRB100 07840 JLS 17909 b completing repairs, including, but not limited to, parts and assemblies, training, and technical service bulletins, and other information concerning repairs that the manufacturer provides to facilities that are owned, operated, or controlled by the manufacturer;

(g) Notwithstanding the terms, provisions, or conditions of any agreement or waiver, it shall be deemed a violation for a manufacturer, a distributor, a wholesaler, a distributor branch or division, a factory branch or division, or a wholesale branch or division, or officer, agent or other representative thereof, to directly or indirectly condition the awarding of a franchise to a prospective new motor vehicle dealer, the addition of a line make or franchise to an existing dealer, the renewal of a franchise of an existing dealer, the approval of the relocation of an existing dealer's facility, or the approval of the sale or transfer of the ownership of a SB1687 EngrossedEnrolled - 40 - LRB100 07840 JLS 17909 b franchise on the willingness of a dealer, proposed new dealer, or owner of an interest in the dealership facility to enter into a site control agreement or exclusive use agreement unless separate and reasonable consideration was offered and accepted for that agreement.