Analysis: Senate Bill 153Makes the Following Changes to the Dealer Bill of Rights

Synopsis

Senate Bill 153 amends the Dealer Bill of Rights (RSA 357-C) to further protect New Hampshire consumers and franchised car, truck and motorcycle dealers.

Background

During the past 14 months, 14 franchise dealers closed their doors in New Hampshire. Many of those dealers were neither fairly nor timely compensated by the manufacturer for their operations including the remaining inventory of vehicles and parts. With the difficult economic outlook, it is likely that additional franchised dealers will close and possible that an auto manufacturer will be sold, declare bankruptcy, close or discontinue a line make.

Automobile manufacturers control nearly every aspect of a dealer’s livelihood. At the beginning of the relationship, a dealer must sign a unilateral contract drafted by the manufacturer and must do so without any negotiation. During the relationship, the factory exercises further control through of allocation of vehicles, pricing of vehicles, and various other methods. Like all other states, New Hampshire has a Dealer Bill of Rights (DBR) which provides some balance to this one-sided relationship.

Analysis: Senate Bill 153makes the following changes to the Dealer Bill of Rights:

Protects the public and dealers when a manufacturer ends a line make or closes its doors. Currently, a manufacturer must repurchase certain items such as parts and vehicles) onlyupon terminating a dealer. This bill applies the repurchase provisions where factory closes its doors or ends production of a line make. The bill also expands assistance to include certain situations like where a dealer had to buy or build a facility to get a franchise or was required to order certain equipment or service contracts. To protect the public, the dealers are allowed to continue servicing vehicles and receiving necessary parts. (Sections 12 & 13)
Protects dealers who voluntarily exit the business. Currently, a manufacturer must repurchase certain items such as parts and vehicles) only upon terminating a dealer. This bill ensures that a dealer who voluntarily exits the business receives the same fair and timely assistance. (Section 13)
In contracts between dealers and manufacturer finance companies, SB153 limits certain clauses. Over the past few years, captive finance companies (those owned or operated by manufacturers) have aggressively put extraordinary and unfair burdens on dealers who use their contracts. For example, dealer completely guarantees the credit application is 100% accurate, dealer waives all defenses, and dealer must buy back the contract for even minor breaches by the customer. This bill would eliminate or greatly restrict such clauses. This is similar to North Carolina law. (Section 8)
Models warranty reimbursement law to follow majority of states.Over 30 other states, including Maine, require manufacturers to reimburse dealers for parts used in warranty repairs equal to the retail rate or MSRP. The current reimbursement rate by most manufacturers does not adequately compensate dealers. This brings NH in line with the majority of states. The bill also limits warranty audits after a termination. (Section 5)
Ends manufacturer penalties against dealerstied to exports. NH dealers have been financially penalized when a vehicle they sold has been later exported – even up to a year later. Florida just passed similar legislation. This simply provides that if the vehicle is registered or titled in any state, no penalty can be levied. (Section 7)
Prohibits unfair contractual clauses by manufacturers, including:
Forcing dealers to spend thousands to millions of dollars to obtain a new vehicle model
Forcing dealers to order unwanted inventory just to obtain a popular vehicle model
Forcing dealers into pre-dispute binding arbitration or into waiving jury trials
Charging NH dealers different prices for the same vehicles or using incentive programs that result in a price difference. (Section 4)

Includes component manufacturers (i.e. heavy duty truck engine manufacturers) within the law. Currently, manufacturers of engines and transmissions that are put into heavy duty trucks fall outside the law. This ends the current patchwork protection for consumers and dealers. Several other states provide similar protections. (Sections 2 & 3).
If a manufacturer/distributor seeks to establish a new dealership, the bill modifies a dealer’s relevant market area to be at least 15 miles from the boundary of the dealership.This is similar to a number of other states. This also provides dealers 45 days (currently 15) to file a protest against a new point. (Section 14 & 16)

Comments:

The New Hampshire Automobile Dealers Association representing 500 members involved in the motor vehicle business supports SB 153. For further information, please contact either Pete McNamara or Dan Bennettof NHADA at 224-2369 or Jim Demers of the Demers Groupat 228-1498.

Version 1/29/2009