Pub. 1 2019-2020 Issue 1

17 repair orders as required under the methodology to determine the retail reimbursement rate or enter into a voluntary agreement with a manufacturer so long as the reimbursement rates adequately and fairly compensate the dealer and their employees for warranty work. Factory-Mandated Facility Upgrades and Digital Service Vendors Manufacturers far too often require dealers to perform fa- cility improvements on dealerships and require the use of specific vendors for digital services, like websites, social media and dealer management systems. Every few years manufacturers change their color or design of their brand image and require dealers to make the corresponding changes to their dealership facilities, at the dealer’s cost. This bill specifies that a required facility improvement is not reasonable if the dealer has modified their facility in the last 10 years at a cost of over $250,000. This is the same 10-year standard as a dozen other states. Like manufacturer action on facility improvement vendors, manufacturers are now mandating the selection of spe- cific website and other digital service vendors. This lack of choice stifles a dealer’s ability to have up to date web- sites and forces all dealers to use one specific vendor to the detriment of consumers and California-based soft- ware companies. This bill simply grants dealers the ability to choose their own digital vendor while also ensuring vendors meet manufacturer standards. Brand Spin-off Requirements Several manufacturers have recently decided to take an existing line of vehicles from one franchise and spin those vehicles off into another brand. A manufacturer has informed their dealers that they will be required to repair a new line of vehicles sold by the manufacturer’s affili- ate, but the dealers won’t be able to sell or lease these vehicles. This bill prevents a manufacturer from requiring a dealer to repair vehicles that the dealer cannot sell. Meanwhile, other manufacturers are establishing a new line of vehicles under the franchise’s name but limiting which dealers can have access to these new vehicles. This bill clarifies that manufacturers cannot refuse or fail to deliver in reasonable quantities and within a reason- able amount of time a new vehicle to a dealer. This important change will ensure that California’s new car dealers continue to have access to new zero-emission vehicles, thereby helping our state reach its greenhouse gas reduction goals. Protests at the New Motor Vehicle Board The New Motor Vehicle Board is a quasi-judicial body set up specifically to hear franchise disputes between new motor vehicle dealers and manufacturers. This bill does two significant things at the New Motor Vehicle Board (Board). First, the bill extends for an additional five years the ability for a dealer association to bring a protest on a manufacturer’s export prohibition policy to the Board, which expired on January 1, 2019. This association stand- ing was originally authorized in Assembly Bill 1178 (Katcho Achadjian, Republican, Statutes of 2015). In the three years since enactment, CNCDA has used this new author- ity once in a protest against Jaguar-Land Rover of North America. The Board ruled in the association’s favor, find- ing that the export prohibition policy on its face violated California law. Second, manufacturers measure dealer performance under a franchise agreement or incentive program based upon standards established solely by the manufacturer that must be reasonable in light of all existing circum- stances. While the Board currently has the authority to hear protests regarding incentive claim disapprovals, the Board lacks the express authority to review the underly- ing performance standards. This bill also clarifies that the Board can hear protests by a dealer relating to a manu- facturer’s performance standards. As a compromise with the automakers, this new authority will expire in five years on January 1, 2025. Other Franchise Protections This bill also provides additional protections for dealers regarding non-factory service contracts, indemnifica- tion and customer service bulletins and campaigns. Specifically, this bill clarifies that treating dealers differ- ently when providing access to financing for consumers because the service contact was not a factory service contract is strictly prohibited. This bill strengthens indemnification by prohibiting automakers from requiring a dealer to indemnify the manufacturer or affiliate for any program or requirement imposed on the dealer. Finally, this bill also prevents manufacturers from restricting or discouraging dealers from checking about the eligibility of customer service bulletins and campaigns. As we move forward with this effort in 2019, we want to thank Assemblywoman Reyes and her Chief of Staff, Mark Farouk, for their stewardship and tireless efforts through- out this process. As you’ve read, the franchise fight is not over and CNCDA needs your help. Please attend this year’s Dealer Day on March 27 th and express to your legislator how important the franchise bill is to you, your employees and your communities. 3 If you have any questions regarding the franchise bill and CNCDA’s ef- forts, please contact Cliff Costa at ccosta@cncda.org or 916-441-2599.