A BILL TO BE ENTITLED
AN ACT to clarify the motor vehicle dealer franchise laws.
The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 20‑297.1 reads as rewritten:
"§ 20‑297.1.  Franchise‑related form agreements.
		(a)	All franchise‑related form agreements, as defined in this subdivision, offered to a motor vehicle dealer in this State shall provide that all terms and conditions in the agreement inconsistent with any of the laws or rules of this State are of no force and effect. For purposes of this section, the term "franchise‑related form agreements" means any and all identical or substantially similar form agreements relating to franchise offerings, letters of intent, franchise agreements, framework agreements, dealer agreements, sales and service agreements, performance agreements, facilities construction or improvement agreements, loan agreements, floor plan agreements, and agreements related to the financing of vehicles sold or leased by the dealer.
(b)	Notwithstanding the terms of any franchise or agreement, it shall be unlawful for any manufacturer, factory branch, distributor, or distributor branch, or any other person, corporation, or other entity that is owned, operated, or controlled by such manufacturer, factory branch, distributor, or distributor branch, to offer to a dealer, revise, modify, or replace a franchise‑related form agreement, as defined above in this section, which agreement, modification, or replacement may adversely affect or alter the rights, obligations, or liability of a motor vehicle dealer or may impair the sales, service obligations, investment, or profitability of any motor vehicle dealer located in this State, unless:
(1)	The manufacturer, factory branch, distributor, or distributor branch provides prior written notice by registered or certified mail to each affected dealer, the Commissioner, and the North Carolina Automobile Dealers Association, Inc., of the modification or replacement in the form and within the time frame set forth within this subsection and in subsection (d) of this section; and
(2)	If a protest is filed under this section, the Commissioner approves the modification or replacement.
(c)	The notice required by subdivision (b)(1) of this section shall:
(1)	Be given not later than the 60th day before the effective date of the modification or replacement;
(2)	Contain on its first page a conspicuous statement that reads: 'NOTICE TO DEALER:  YOU MAY BE ENTITLED TO FILE A PROTEST WITH THE COMMISSIONER OF THE NORTH CAROLINA DIVISION OF MOTOR VEHICLES, AND HAVE A HEARING IN WHICH YOU MAY PROTEST THE PROPOSED INITIAL OFFERING, MODIFICATION, OR REPLACEMENT OF CERTAIN FRANCHISE‑RELATED FORM AGREEMENTS UNDER THE TERMS OF THE MOTOR VEHICLE DEALERS AND MANUFACTURERS LICENSING LAW, IF YOU OPPOSE THIS ACTION'; and
(3)	Contain a separate letter or statement which identifies all substantive modifications or revisions and the reasons for each such modification or revision. 
(d)	A franchised dealer may file a protest with the Commissioner of the offering, modification, or replacement pursuant to this section not later than the latter of:
(1)	The 60th day after the date of the receipt of the notice; or
(2)	The time specified in the notice.
(e)	After a protest is filed, the Commissioner shall determine whether the manufacturer, factory branch, distributor, or distributor branch has established by a preponderance of the evidence that there is good cause for the proposed offering, modification, or replacement. The prior franchise‑related form agreement, if any, continues in effect until the Commissioner resolves the protest.
(f)	The Commissioner is authorized and directed to investigate and prevent violations of this section, including inconsistencies of any franchise‑related form agreement with the provisions of this Article.
(g)	Nothing contained in this section shall in any way limit a dealer's rights under any other provision of this Article or other applicable law."
SECTION 2.  G.S. 20‑305(5) reads as rewritten:
"§ 20‑305.  Coercing dealer to accept commodities not ordered; threatening to cancel franchise; preventing transfer of ownership; granting additional franchises; terminating franchises without good cause; preventing family succession.
It shall be unlawful for any manufacturer, factory branch, distributor, or distributor branch, or any field representative, officer, agent, or any representative whatsoever of any of them:
…
(5)	To enter into a franchise establishing an additional new motor vehicle dealer or relocating an existing new motor vehicle dealer into a relevant market area where the same line make is then represented without first notifying in writing the Commissioner and each new motor vehicle dealer in that line make in the relevant market area of the intention to establish an additional dealer or to relocate an existing dealer within or into that market area. Within 30 days of receiving such notice or within 30 days after the end of any appeal procedure provided by the manufacturer, any new motor vehicle dealer may file with the Commissioner a protest to the establishing or relocating of the new motor vehicle dealer. When a protest is filed, the Commissioner shall promptly inform the manufacturer that a timely protest has been filed, and that the manufacturer shall not establish or relocate the proposed new motor vehicle dealer until the Commissioner has held a hearing and has determined that there is good cause for permitting the addition or relocation of such new motor vehicle dealer.
a.	This section does not apply:
1.	To the relocation of an existing new motor vehicle dealer within that dealer's relevant market area, provided that the relocation not be at a site within 10 miles of a licensed new motor vehicle dealer for the same line make of motor vehicle. If this sub‑subdivision is applicable, only dealers trading in the same line‑make of vehicle that are located within the 10‑mile radius shall be entitled to notice from the manufacturer and have the protest rights afforded under this section; or
2.	If the proposed additional new motor vehicle dealer is to be established at or within two miles of a location at which a former licensed new motor vehicle dealer for the same line make of new motor vehicle had ceased operating within the previous two years;
3.	To the relocation of an existing new motor vehicle dealer within two miles of the existing site of the new motor vehicle dealership if the franchise has been operating on a regular basis from the existing site for a minimum of three years immediately preceding the relocation;
4.	To the relocation of an existing new motor vehicle dealer if the proposed site of the relocated new motor vehicle dealership is further away from all other new motor vehicle dealers of the same line make in that relevant market or
5.	To the relocation of an existing new motor vehicle dealer to a location within 4.5 miles of the existing site of the new motor vehicle dealership if the line make has been operating on a regular basis from the existing site for a minimum of 50 years immediately preceding the relocation, provided that the relocation site not be located within four miles of another licensed new motor vehicle dealer for the same line make of motor vehicle."
SECTION 3.  G.S. 20‑305(30) reads as rewritten:
"§ 20‑305.  Coercing dealer to accept commodities not ordered; threatening to cancel franchise; preventing transfer of ownership; granting additional franchises; terminating franchises without good cause; preventing family succession.
It shall be unlawful for any manufacturer, factory branch, distributor, or distributor branch, or any field representative, officer, agent, or any representative whatsoever of any of them:
…
(30)	To vary the price charged to any of its franchised new motor vehicle dealers located in this State for new motor vehicles based on the dealer's purchase of new facilities, supplies, tools, equipment, or other merchandise from the manufacturer, the dealer's relocation, remodeling, repair, or renovation of existing dealerships or construction of a new facility, the dealer's participation in training programs sponsored, endorsed, or recommended by the manufacturer, whether or not the dealer is dualed with one or more other line makes of new motor vehicles, or the dealer's sales penetration. Except as provided in this subdivision, it shall be unlawful for any manufacturer, factory branch, distributor, or distributor branch, or any field representative, officer, agent, or any representative whatsoever of any of them to vary the price charged to any of its franchised new motor vehicle dealers located in this State for new motor vehicles based on the dealer's sales volume, the dealer's level of sales or customer service satisfaction, the dealer's purchase of advertising materials, signage, nondiagnostic computer hardware or software, communications devices, or furnishings, or the dealer's participation in used motor vehicle inspection or certification programs sponsored or endorsed by the manufacturer.
		The price of the vehicle, for purposes of this subdivision shall include the manufacturer's use of rebates, credits, or other consideration which has the effect of causing a variance in the price of new motor vehicles offered to its franchised dealers located in the State.
		Notwithstanding the foregoing, nothing in this subdivision shall be deemed to preclude a manufacturer from establishing sales contests or promotions which provide or award dealers or consumers rebates or incentives; provided, however, that the manufacturer complies with all of the following conditions:
a.	With respect to manufacturer to consumer rebates and incentives, the manufacturer's criteria for determining eligibility shall:
1.	Permit all of the manufacturer's franchised new motor vehicle dealers in this State to offer the rebate or incentive; and
2.	Be uniformly applied and administered to all eligible consumers.
b.	With respect to manufacturer to dealer rebates and incentives, the rebate or incentive program shall:
1.	Be based solely on the dealer's actual or reasonably anticipated sales volume or on a uniform per vehicle sold or leased basis;
2.	Be uniformly available, applied, and administered to all of the manufacturer's franchised new motor vehicle dealers in this State; and
3.	Provide that any of the manufacturer's franchised new motor vehicle dealers in this State may, upon written request, obtain the method or formula used by the manufacturer in establishing the sales volumes for receiving the rebates or incentives and the specific calculations for determining the required sales volumes of the inquiring dealer and any of the manufacturer's other franchised new motor vehicle dealers located within 75 miles of the inquiring dealer.
		Nothing contained in this subdivision shall prohibit a manufacturer from providing assistance or encouragement to a franchised dealer to remodel, renovate, recondition, or relocate the dealer's existing facilities, provided that this assistance, encouragement, or rewards are not determined on a per vehicle basis.
		It is unlawful for any manufacturer to charge or include the cost of any program or policy prohibited under this subdivision in the price of new motor vehicles that the manufacturer sells to its franchised dealers or purchasers located in this State.
		In the event that as of October 1, 1999, a manufacturer was operating a program that varied the price charged to its franchised dealers in this State in a manner that would violate this subdivision, or had in effect a documented policy that had been conveyed to its franchised dealers in this State and that varied the price charged to its franchised dealers in this State in a manner that would violate this subdivision, it shall be lawful for that program or policy, including amendments to that program or policy that are consistent with the purpose and provisions of the existing program or policy, or a program or policy similar thereto implemented after October 1, 1999, to continue in effect as to the manufacturer's franchised dealers located in this State until June 30, 2010.
		In the event that as of June 30, 2001, a manufacturer was operating a program that varied the price charged to its franchised dealers in this State in a manner that would violate this subdivision, or had in effect a documented policy that had been conveyed to its franchised dealers in this State and that varied the price charged to its franchised dealers in this State in a manner that would violate this subdivision, and the program or policy was implemented in this State subsequent to October 1, 1999, and prior to June 30, 2001, and provided that the program or policy is in compliance with this subdivision as it existed as of June 30, 2001, it shall be lawful for that program or policy, including amendments to that program or policy that comply with this subdivision as it existed as of June 30, 2001, to continue in effect as to the manufacturer's franchised dealers located in this State until June 30, 2010.
		Any manufacturer shall be required to pay or otherwise compensate any franchise dealer who has earned the right to receive payment or other compensation under a program in accordance with the manufacturer's program or policy.
		The provisions of this subdivision shall not be applicable to multiple or repeated sales of new motor vehicles made by a new motor vehicle dealer to a single purchaser under a bona fide fleet sales policy of a manufacturer, factory branch, distributor, or distributor branch."
SECTION 4.  G.S. 20‑305 is amended by adding a new subdivision to read:
"§ 20‑305.  Coercing dealer to accept commodities not ordered; threatening to cancel franchise; preventing transfer of ownership; granting additional franchises; terminating franchises without good cause; preventing family succession.
It shall be unlawful for any manufacturer, factory branch, distributor, or distributor branch, or any field representative, officer, agent, or any representative whatsoever of any of them:
…
"(41)	Notwithstanding the terms, provisions, or conditions of any agreement or franchise, to require any of its franchised dealers located in this State to agree to any terms, conditions, or requirements that are unreasonable or onerous in order for any such dealer to floor plan any of the dealer's inventory, finance the sale or lease of any motor vehicles purchased or leased by any of the dealer's customers, finance the acquisition, construction, or renovation of any of the dealer's property or facilities, or to be able to participate in, or otherwise, directly or indirectly, obtain the benefits of any incentive program offered by or through any financial source that is, directly or indirectly, owned, operated, or controlled by such manufacturer, factory branch, distributor, or distributor branch ("captive finance source"). Such unreasonable or onerous terms, conditions, or requirements include, but are not limited to, those which provide that:
a.	The dealer grant such captive finance source a power of attorney to do anything on behalf of the dealer other than sign the dealer’s name on any check, draft, or other instrument received in payment or proceeds under any contract for the sale or lease of a motor vehicle that is made payable to the dealer but which is properly payable to the captive finance source;
b.	The dealer warrant or guaranty the veracity, accuracy, or sufficiency of any representation made or information provided by a customer of the dealer in the course of applying for credit, including, but not limited to, any representations made about the actual identity of the person or persons seeking credit;
c.	The dealer indemnify or hold harmless the captive finance source for settlements, judgments, damages, litigation expenses, or other costs or expenses incurred by such captive finance source other than those settlements, judgments, damages, litigation expenses, or other costs or expenses incurred which have either:
1.	Been agreed to by the dealer in writing subsequent to the making of demand, filing of a claim, or commencement of an administrative or judicial proceeding by or on behalf of one or more purchasers or lessees of a motor vehicle; or
2.	Arisen from a claim, demand, or commencement of an administrative or judicial proceeding by or on behalf of one or more purchasers or lessees of a motor vehicle against the captive finance source that: (i) is directly based upon or is alleged to be directly based upon the conduct of the dealer; and (ii) in which the conduct of the dealer forming the basis of said claim, demand, or administrative or judicial proceeding violates the specific terms of the agreement between the dealer and the captive finance source.
d.	The dealer repurchase, pay off, or guaranty any contract for the sale or lease of a motor vehicle unless such repurchase or guaranty by the dealer has either been:
1.	Agreed to by the dealer in writing subsequent to the making of demand, filing of a claim, or commencement of an administrative or judicial proceeding by or on behalf of one or more purchasers or lessees of a motor vehicle; or 
2.	Judicially or administratively determined (i) to arise from a successful claim against the captive finance source, (ii) that arose as a direct result of the conduct of the dealer, and (iii) that such conduct violates the specific terms of the agreement between the dealer and the captive finance source, or gives rise to the dealer's indemnification obligations under its agreement with the captive finance source.
e.	The dealer waives any defenses that may be available to it under its agreements with the captive finance source or under any applicable laws;
f.	The dealer settles or contributes any of its own funds or financial resources toward the settlement of any multiparty or class  action litigation without obtaining the dealer's voluntary and written consent subsequent to the filing of such litigation; 
g.	The dealer contributes to any reserve or contingency account established or maintained by the captive finance source in any amount or on any basis other than the reasonable expected cost of future finance reserve chargebacks to the dealer’s account; or
h.	The dealer be required to repossess or otherwise gain possession of a motor vehicle at the request of or on behalf of the captive finance source.
Any clause or provision in any franchise or agreement between a dealer and a manufacturer, factory branch, distributor, or distributor branch, or between a dealer and any captive finance source, that is in violation of or that is inconsistent with any of the provisions of this subdivision shall be voidable at anytime at the election of the dealer."
SECTION 5. Chapter 20 of the General Statutes is amended by adding a new section to read:
"§ 20‑305.7.  Unlawful equipment leases, contracts for computer services, and access to dealership information. 
(a)	It shall be unlawful for any person, corporation, or other entity to enter into a contract or agreement with a motor vehicle dealer located in this State that provides for or relates to the lease of computer‑related equipment or computer‑related services which contains any terms or conditions that are unreasonable or onerous to the dealer. For purposes of this subdivision, the term "computer‑related equipment" is defined as computers, servers, network and digital communications equipment, routers, switches, terminal servers, printers, software, or other computer‑related programs, equipment, forms, or supplies. For purposes of this section, the term "computer‑related services" is defined as repair, maintenance, or update services performed on computer‑related equipment. Such unreasonable or onerous terms or conditions include, but are not limited to, the following:
(1)	Terms or conditions that prohibit a dealer from terminating the contract or agreement within five years from the initial commencement date of the agreement or that require the dealer to pay an unreasonable amount of consideration in order to terminate the agreement within five years from the initial commencement date of the agreement.
(2)	Terms or conditions that extend the term of the contract or agreement in excess of three years beyond the initial term of the agreement, or that require the dealer to pay an unreasonable amount of consideration in order to terminate the agreement within three years beyond the initial term of the agreement.
(3)	Terms or conditions that allow a manufacturer, factory branch, distributor, or distributor branch, or any third party acting on their behalf to access or obtain data from, or write data to, a dealer's computer system or network that does not enable the dealer to: 
a.	Maintain the security, integrity, and confidentiality of the customer and  dealership information collected or generated by the dealer;
b.	Monitor the specific data accessed from or written to the dealer's computer system or network by the manufacturer, factory branch, distributor, or distributor branch, or any third party acting on their behalf; and
c.	Comply with any applicable state and federal laws and any rules or regulations promulgated thereunder.
Any clause or provision in any contract or agreement between a dealer and any person, corporation, or other entity, that is in violation of or that is inconsistent with any of the provisions of this section shall be voidable at any time at the election of the dealer.
(b)	Notwithstanding the terms of any franchise or agreement, it shall be unlawful for any manufacturer, factory branch, distributor, or distributor branch to access or obtain data from or write data to a dealer's computer system or network, or require or coerce a dealer to utilize any computer‑related equipment, computer‑related services, network design, communication system, third‑party provider, third‑party vendor, or other means of accessing, exchanging, or transferring data relating to the dealer or the dealer's customers or transferring data from any manufacturer, factory branch, distributor, or distributor branch to a dealer's computer system or network, that does not enable the dealer to: 
(1)	Maintain the security, integrity, and confidentiality of the customer and  dealership information collected or generated by the dealer;
(2)	Monitor the specific data accessed from or written to the dealer's computer system or network by the manufacturer, factory branch, distributor, or distributor branch; and
(3)	Comply with any applicable state and federal laws and any rules or regulations promulgated thereunder.
(c)	It shall be unlawful for any vendor of computer‑related equipment or computer‑related services or any third party acting on behalf of any vendor of computer‑related equipment, vendor of computer‑related services, manufacturer, factory branch, distributor, or distributor branch to either:
(1)	Provide access to any customer or dealership information collected, received, or generated by the dealer without first obtaining the dealer's explicit written consent in an agreement between the dealer and all entities accessing or handling this customer or dealership information. Such consent must be in written form and contain the original signature of the dealer or the dealer's authorized representative and reference by name and provide authorization for the specific vendor of computer‑related equipment, vendor of computer‑related services, or third party to whom such consent is given and describe the scope of the consent given. No vendor of computer‑related equipment, computer‑related services, or any third party acting on behalf of any vendor of computer‑related equipment, vendor of computer‑related services, manufacturer, factory branch, distributor, or distributor branch shall have any right to obtain, utilize, copy, view, or modify information stored in or traversing computer‑related equipment owned or utilized by a dealer without first obtaining this explicit written consent.
(2)	Notwithstanding the terms of any contract, agreement, or consent, access or obtain data from or write data to a dealer's computer system or network that does not enable the dealer to:
a.	Maintain the security, integrity, and confidentiality of the customer and dealership information collected or generated by the dealer;
b.	Monitor the specific data accessed from or written to the dealer's computer system or network by the vendor of computer‑related equipment or computer-related services, or the manufacturer, factory branch, distributor, or distributor branch; and
c.	Comply with any applicable state and federal laws and any rules or regulations promulgated thereunder."
SECTION 6.  G.S. 20‑308.2 is amended by adding a new subsection to read:
"(e)	The provisions of this Article shall apply to all written or oral agreements between any manufacturer, factory branch, distributor, or distributor branch and any other person, corporation, or other entity that is owned, operated, or controlled by such manufacturer, factory branch, distributor, or distributor branch, on the one part, and any franchised motor vehicle dealer located in this State, on the other part, including, but not limited to: franchise offerings, letters of intent, franchise agreements, sales and service agreements, performance agreements, side agreements, sales of goods, services, or advertising, leases or mortgages of real or personal property, promises to pay, security interests, pledges, insurance contracts, advertising contracts, construction or installation contracts, servicing contracts, and all other such agreements that contemplate or require commercial or business activities in this State in which a manufacturer, factory branch, distributor, or distributor branch has any direct or indirect interest."
SECTION 7.  This act is effective when it becomes law.