A BILL TO BE ENTITLED
AN ACT to clarify the Motor Vehicle Dealers and Manufacturers Licensing Law.
The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 20‑286(11)a. is amended by adding a new sub‑sub‑subdivision to read:
"(11)	Motor vehicle dealer or dealer. –
a.	A person who does any of the following:
…
6.	Engages in the purchase, sale, lease, or exchange of motor vehicles by providing, either directly or indirectly, any computer or other communications facilities, hardware, or equipment at any location within this State that uses the computer or other communications facilities, hardware, or equipment for the purpose of transmitting applications, contracts, or orders for motor vehicles purchased or leased by retail purchasers or lessees located in this State."
SECTION 2.  G.S. 20‑287(a) reads as rewritten:
"(a)	License Required. – It shall be unlawful for any new motor vehicle dealer, used motor vehicle dealer, motor vehicle sales representative, manufacturer, factory branch, factory representative, distributor, distributor branch, distributor representative, or wholesaler to engage in business in this State without first obtaining a license as provided in this Article. If any motor vehicle dealer acts as a motor vehicle sales representative, the dealer shall obtain a motor vehicle sales representative's license in addition to a motor vehicle dealer's license. A sales representative may have only one license. The license shall show the name of the dealer or wholesaler employing the sales representative. The following license holders may operate as a motor vehicle dealer without obtaining a motor vehicle dealer's license or paying an additional fee: a manufacturer, a factory branch, a distributor, and a distributor branch. Any of these license holders who operates as a motor vehicle dealer, including a person who engages in the purchase, sale, lease, or exchange of motor vehicles by providing, either directly or indirectly, any computer or other communications facilities, hardware, or equipment at any location within this State that uses the computer or other communications facilities, hardware, or equipment for the purpose of transmitting applications, contracts, or orders for motor vehicles purchased or leased by retail purchasers or lessees located in this State, may sell motor vehicles at retail only at an established salesroom."
SECTION 3.  G.S. 20‑305 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 that 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 that 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, 2016.
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, 2016.
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.
…
(33)	To either (i) fail to reimburse a dealer located in this State in full for the actual cost of providing a loaner vehicle to any customer who is having a vehicle serviced at the dealership if the provision of such a loaner vehicle is required by the manufacturer or (ii) require a dealer to purchase, lease, or otherwise title one or more new motor vehicles for use as a loaner vehicle in order to participate in or qualify for any incentive program offered or sponsored by the manufacturer or distributor, or to otherwise receive any discounts, credits, rebates, or incentives of any kind that are calculated or paid on a per vehicle basis.
(34)	To require, coerce, or attempt to coerce any new motor vehicle dealer in this State to participate in any unreasonable training session, meeting, training program, or certification program for any purpose, including as a condition or a requirement of the manufacturer or distributor for the dealer to qualify for any incentive program offered or sponsored by the manufacturer or distributor, or to otherwise receive any discounts, credits, rebates, or incentives of any kind that are calculated or paid on a per vehicle basis. Examples of an unreasonable training session, meeting, training program, or certification program with respect to which a manufacturer is prohibited from requiring or coercing the dealer's participation include the following:
a.	Any training session, meeting, training program, or certification program including subject matter that is not expressly limited to specific information necessary to sell or service the models of vehicles the dealer is authorized to sell or service under the dealer's franchise with that manufacturer. 
b.	Any training session, meeting, training program, or certification program purporting to teach morale‑boosting, employee motivation, teamwork, or general principles of customer relations. 
c.	Any training session, meeting, training program, or certification program requiring the personal attendance of an owner or dealer principal of any dealership located in this State when it is reasonably possible for another member of the dealer's management to attend and later relate the subject matter of the training session, meeting, training program, or certification program to the dealership's owners or principal operator.
…
(44)	Nothwithstanding the terms, provisions, or conditions of any agreement or franchise, to require, coerce, or attempt to coerce any new motor vehicle dealer located in this State to refrain from prominently displaying in the dealer's showroom or elsewhere within the dealership facility, as determined in the sole discretion of the dealer, any honors, awards, photographs, displays, or other artifacts or memorabilia related to the dealership, dealer principal, or any of the owners, investors, officers, directors, or employees of the dealer.
(45)	Nothwithstanding the terms, provisions, or conditions of any agreement or franchise, to discriminate against a new motor vehicle dealer located in this State for selling or offering for sale a service contract, debt cancellation agreement, maintenance agreement, or similar product not approved, endorsed, sponsored, or offered by the manufacturer, distributor, affiliate, or captive finance source. For purposes of this subdivision, discrimination includes any of the following:
a.	Requiring, coercing, or attempting to coerce a dealer to exclusively sell or offer for sale service contracts, debt cancellation agreements, or similar products approved, endorsed, sponsored, or offered by the manufacturer, distributor, affiliate, or captive finance source.
b.	Taking or threatening to take any adverse action against a dealer (i) who sells or offers for sale any service contracts, debt cancellation agreements, maintenance agreements, or similar products that have not been approved, endorsed, sponsored, or offered by the manufacturer, distributor, affiliate or captive finance source or (ii) who fails to sell or offer for sale service contracts, debt cancellation agreements, maintenance agreements, or similar products approved, endorsed, sponsored, or offered by the manufacturer, distributor, affiliate, or captive finance source.
c.	Measuring a dealer's performance under a franchise in any part based upon the dealer's sale of service contracts, debt cancellation agreements, or similar products approved, endorsed, sponsored, or offered by the manufacturer, distributor, affiliate, or captive finance source.
d.	Requiring a dealer to promote the sale of service contracts, debt cancellation agreements, or similar products approved, endorsed, sponsored, or offered by the manufacturer, distributor, affiliate, or captive finance source.
e.	Considering the dealer's sale of service contracts, debt cancellation agreements, or similar products approved, endorsed, sponsored, or offered by the manufacturer, distributor, affiliate, or captive finance source in determining any of the following:
1.	The dealer's eligibility to purchase any vehicles, parts, or other products or services from the manufacturer or distributor.
2.	The volume of vehicles or other parts or services the dealer shall be eligible to purchase from the manufacturer or distributor.
3.	The price or prices of any vehicles, parts, or other products or services that the dealer shall be eligible to purchase from the manufacturer or distributor.
4.	The availability or amount of any vehicle discount, credit, special pricing, rebate, or sales or service incentive the dealer shall be eligible to receive from the manufacturer, distributor, affiliate, or captive finance source.
		For purposes of this subdivision, discrimination does not include, and nothing shall prohibit a manufacturer, distributor, affiliate, or captive finance source from, offering discounts, rebates, or other incentives to dealers who voluntarily sell or offer for sale service contracts, debt cancellation agreements, or similar products approved, endorsed, sponsored, or offered by the manufacturer, distributor, affiliate, or captive finance source; provided, however, that such discounts, rebates, or other incentives are based solely on the sales volume of the service contracts, debt cancellation agreements, or similar products sold by the dealer and do not provide vehicle sales or service incentives.
(46)	To require, coerce, or attempt to coerce a dealer located in this State to purchase goods or services of any nature from a vendor selected, identified, or designated by a manufacturer, distributor, affiliate, or captive finance source. For purposes of this subdivision, unlawful coercion includes any requirement of a manufacturer, distributor, affiliate, or captive finance source that a dealer use a specific vendor or group of vendors as a condition to receive any discount, credit, rebate, or sales incentive. When a manufacturer, distributor, affiliate, or captive finance source recommends or designates to a dealer a specific vendor or group of vendors, the manufacturer, distributor, affiliate, or captive finance source shall contemporaneously and conspicuously also disclose to the dealer the option to obtain the goods or services of substantially similar kind and quality from a vendor selected by the dealer. For purposes of this subdivision, the term "goods" does not include moveable displays, brochures, and promotional materials containing material subject to the intellectual property rights of a manufacturer or distributor, or special tools as reasonably required by the manufacturer, or parts to be used in repairs under warranty obligations of a manufacturer or distributor. If the manufacturer, distributor, affiliate, or captive finance source claims that a vendor chosen by the dealer cannot supply goods and services of substantially similar kind and quality, the manufacturer or distributor may file a protest with the Commissioner. When a protest is filed, the Commissioner shall promptly inform the dealer that a protest has been filed. The Commissioner shall conduct a hearing on the merits of the protest within 90 days following the dealer's filing of a response to the protest. The manufacturer, distributor, affiliate, or captive finance source shall bear the burden of proving that the goods or services chosen by the dealer are not of substantially similar kind and quality to those required by the manufacturer.
(47)	To fail to provide to a dealer, if the goods or services to be supplied to the dealer by a vendor selected, identified, or designated by the manufacturer or distributor are signs or other franchisor image elements to be purchased or leased to the dealer, the right to purchase or lease the signs or other franchisor image elements of like kind and quality from a vendor selected by the dealer. If the vendor selected by the manufacturer or distributor is the only available vendor, the dealer must be given the opportunity to purchase the signs or other franchisor image elements at a price substantially similar to the capitalized lease costs thereof. This subdivision shall not be construed to allow a dealer to impair or eliminate the intellectual property rights of the manufacturer or distributor, or to permit a dealer to erect or maintain signs that do not conform to the reasonable intellectual property usage guidelines of the manufacturer or distributor.
(48)	To unreasonably interfere with a dealer's independence in staffing the dealership by engaging in any of the following conduct: (i) requiring, coercing, or attempting to coerce a dealer located in this State to employ, appoint, or designate an individual to serve full‑time or exclusively in any specific capacity, role, or job function at the dealership, other than the employment or appointment of a full‑time general manager; (ii) requiring a dealer to employ, appoint, or designate an individual to serve full‑time or exclusively in any specific capacity, role, or job function at the dealership, other than the employment or appointment of a full‑time general manager, in order to participate in or qualify for any incentive program offered or sponsored by the manufacturer or distributor or to otherwise receive any discounts, credits, rebates, or incentives of any kind that are calculated or paid on a per vehicle basis; or (iii) requiring that the dealer obtain the approval of the manufacturer or distributor prior to employing or appointing any individual in any capacity, role, or job function at the dealership, other than the employment or appointment of a full‑time general manager. Except as expressly provided above, nothing contained in this subdivision shall be deemed to prevent or prohibit a manufacturer or distributor from requiring that a dealer employ a reasonable number of trained employees to sell and service the factory's vehicles."
SECTION 4.  G.S. 20‑305.2 is amended by adding a new subsection to read:
"(e)	For purposes of this section, an unfair method of competition includes any warranty or nonwarranty fix, repair, update, or adjustment made or provided directly by a manufacturer or distributor to any motor vehicle located within this State without the direct participation of a dealer franchised by the manufacturer or distributor and without such dealer receiving reasonable compensation for such fix, repair, update, or adjustment as provided in G.S. 20‑305.1."
SECTION 5.  G.S. 20‑305.7 reads as rewritten:
"§ 20‑305.7.  Protecting dealership data and consent to access dealership information.
…
(f)	The following definitions apply to this section:
(1)	"Dealer management computer system" – A computer hardware and software system that is owned or leased by the dealer, including a dealer's use of Web applications, software, or hardware, whether located at the dealership or provided at a remote location and that provides access to customer records and transactions by a motor vehicle dealer located in this State and that allows such motor vehicle dealer timely information in order to sell vehicles, parts or services through such motor vehicle dealership.
(2)	"Dealer management computer system vendor" – A seller or reseller of dealer management computer systems, a person that sells computer software for use on dealer management computer systems, or a person who services or maintains dealer management computer systems, but only to the extent that each of the sellers, resellers, or other persons listed in this subdivision are engaged in such activities.
(3)	"Security breach" – An incident of unauthorized access to and acquisition of records or data containing dealership or dealership customer information where unauthorized use of the dealership or dealership customer information has occurred or is reasonably likely to occur or that creates a material risk of harm to a dealership or a dealership's customer. Any incident of unauthorized access to and acquisition of records or data containing dealership or dealership customer information, or any incident of disclosure of dealership customer information to one or more third parties which shall not have been specifically authorized by the dealer or customer, shall constitute a security breach.
(g1)	Notwithstanding any of the terms or provisions contained in this section or in any consent, authorization, release, novation, franchise, or other contract or agreement, whenever any manufacturer, factory branch, distributor, distributor branch, dealer management computer system vendor, or any third party acting on behalf of or through, or approved, referred, endorsed, authorized, certified, granted preferred status, or recommended by, any manufacturer, factory branch, distributor, distributor branch, or dealer management computer system vendor requires that a new motor vehicle dealer provide any dealer, consumer, or customer data or information through direct access to a dealer's computer system, the dealer is not required to provide, and may not be required to consent to provide in any written agreement, such direct access to its computer system. The dealer may instead provide the same dealer, consumer, or customer data or information specified by the requesting party by timely obtaining and pushing or otherwise furnishing the requested data to the requesting party in a widely accepted file format such as comma delimited; provided that, when a dealer would otherwise be required to provide direct access to its computer system under the terms of a consent, authorization, release, novation, franchise, or other contract or agreement, a dealer that elects to provide data or information through other means may be charged a reasonable initial set‑up fee and a reasonable processing fee based on the actual incremental costs incurred by the party requesting the data for establishing and implementing the process for the dealer. Any term or provision contained in any consent, authorization, release, novation, franchise, or other contract or agreement which is inconsistent with any term or provision contained in this subsection shall be voidable at the option of the dealer.
(g2)	Notwithstanding the terms or conditions of any consent, authorization, release, novation, franchise, or other contract or agreement, every manufacturer, factory branch, distributor, distributor branch, dealer management computer system vendor, or any third party acting on behalf of or through any manufacturer, factory branch, distributor, distributor branch, or dealer management computer system vendor, having electronic access to consumer or customer data or other information in a computer system utilized by a new motor vehicle dealer, or who has otherwise been provided consumer or customer data or information by the dealer, shall fully indemnify and hold harmless any dealer from whom it has acquired such consumer or customer data or other information from all damages, costs, and expenses incurred by such dealer, including, but not limited to, judgments, settlements, fines, penalties, litigation costs, defense costs, court costs, costs related to the disclosure of security breaches, and attorneys' fees arising out of complaints, claims, security breaches, civil or administrative actions, and, to the fullest extent allowable under the law, governmental investigations and prosecutions to the extent caused by the access, storage, maintenance, use, sharing, disclosure, or retention of such dealer's consumer or customer data or other information, or maintenance or services provided to any computer system utilized by a new motor vehicle dealer by the manufacturer, factory branch, distributor, distributor branch, dealer management computer system vendor, or third party acting on behalf of or through such manufacturer, factory branch, distributor, distributor branch, or dealer management computer system vendor.
…."
SECTION 6.  G.S. 20‑305.1 reads as rewritten:
"§ 20‑305.1.  Automobile dealer warranty obligations.
(a)	Each motor vehicle manufacturer, factory branch, distributor or distributor branch, shall specify in writing to each of its motor vehicle dealers licensed in this State the dealer's obligations for preparation, delivery and warranty service on its products, the schedule of compensation to be paid such dealers for parts, work, and service in connection with warranty service, and the time allowances for the performance of such work and service. In no event shall such schedule of compensation fail to include reasonable compensation for diagnostic work and associated administrative requirements as well as repair service and labor. Time allowances for the performance of warranty work and service shall be reasonable and adequate for the work to be performed. The compensation which must be paid under this section must be reasonable, provided, however, that under no circumstances may the reasonable compensation under this section be in an amount less than the dealer's current retail labor rate and the amount charged to retail customers for the manufacturer's or distributor's original parts for nonwarranty work of like kind, provided such amount is competitive with the retail rates charged for parts and labor by other franchised dealers within the dealer's market.
(a1)	The retail rate customarily charged by the dealer for parts and labor may be established at the election of the dealer by the dealer submitting to the manufacturer or distributor 100 sequential nonwarranty customer‑paid service repair orders which contain warranty‑like parts, or 60 consecutive days of nonwarranty customer‑paid service repair orders which contain warranty‑like parts, whichever is less, covering repairs made no more than 180 days before the submission and declaring the average percentage markup. The average of the parts markup rate and the average labor rate shall both be presumed to be fair and reasonable, however, a manufacturer or distributor may, not later than 30 days after submission, rebut that presumption by reasonably substantiating that the rate is unfair and unreasonable in light of the retail rates charged for parts and labor by all other franchised motor vehicle dealers in the dealer's market offering the same line‑make vehicles. In the event there are no other franchised dealers offering the same line‑make of vehicle in the dealer's market, the manufacturer or distributor may compare the dealer's retail rate for parts and labor with the retail rates charged for parts and labor by other franchised dealers who are selling competing line‑makes of vehicles within the dealer's market. The retail rate and the average labor rate shall go into effect 30 days following the manufacturer's approval, but in no event later than 60 days following the declaration, subject to audit of the submitted repair orders by the manufacturer or distributor and a rebuttal of the declared rate as described above. If the declared rate is rebutted, the manufacturer or distributor shall propose an adjustment of the average percentage markup based on that rebuttal not later than 30 days after such audit, but in no event later than 60 days after submission. If the dealer does not agree with the proposed average percentage markup, the dealer may file a protest with the Commissioner not later than 30 days after receipt of that proposal by the manufacturer or distributor. If such a protest is filed, the Commissioner shall inform the manufacturer or distributor that a timely protest has been filed and that a hearing will be held on such protest. In any hearing held pursuant to this subsection, the manufacturer or distributor shall have the burden of proving by a preponderance of the evidence that the rate declared by the dealer was unfair and unreasonable as described in this subsection and that the proposed adjustment of the average percentage markup is fair and reasonable pursuant to the provisions of this subsection. The reasonable rate determined at hearing shall be effective as of 60 days after the date of the dealer's initial submission of the customer‑paid service orders to the manufacturer or distributor. 
(a2)	In calculating the retail rate customarily charged by the dealer for parts and labor, the following work shall not be included in the calculation:
(1)	Repairs for manufacturer or distributor special events, specials, or promotional discounts for retail customer repairs.
(2)	Parts sold at wholesale or at reduced or specially negotiated rates for insurance repairs.
(3)	Engine assemblies and transmission assemblies.
(4)	Routine maintenance not covered under warranty, such as fluids, filters, and belts not provided in the course of repairs.
(5)	Nuts, bolts, fasteners, and similar items that do not have an individual part number.
(6)	Tires.
(7)	Vehicle reconditioning.
(8)	Batteries and light bulbs.
…."
SECTION 7.  The terms and provisions of this act shall be applicable to all current and future franchises and other agreements in existence between any new motor vehicle dealer located in this State and a manufacturer or distributor as of the effective date of this act.
SECTION 8.  If any provision of this act or its application is held invalid, the invalidity does not affect other provisions or applications of this act that can be given effect without the invalid provisions or application, and to this end the provisions of this act are severable.
SECTION 9.  This act is effective when it becomes law.