HS HB 1603 -- MOTOR VEHICLE FRANCHISE PRACTICES (May, 108)

This substitute makes several changes to the Motor Vehicle
Franchise Law.

Protections for relevant market areas for automobile dealers are
provided.  "Relevant market area" is defined as either a 12 or
20 mile radius depending on whether the population of the county
is over or under 300,000.  Dealers can follow an administrative
complaint process when the manufacturer wants to establish or
move another dealership that represents the same line or make
within that market area.  Manufacturers must notify an existing
dealer at least 60 days in advance of their intention to
establish a new dealer within the market area.  An existing
dealer within a market area has 30 days after receipt of notice
or the end of an appeals procedure provided by the franchisor,
whichever is greater, to file a petition with the Administrative
Hearing Commission protesting the establishment or relocation.
The commission will use a list of factors to weigh the benefits
of the proposed dealership.  The Administrative Hearing
Commission must find 7 of the 10 factors in favor of adding a
dealership before a new dealership can be approved.

The substitute expands the time limits for the process within
the Administrative Hearing Commission.  A party seeking relief
may file an application for a hearing.  The Administrative
Hearing Commission will then enter an order setting a date,
time, and place for a hearing on the record to all parties.  A
hold is put on any franchisor action requiring "good cause" when
the action is protested by a franchisee, and the administrative
law judge determines that good cause does not exist.  Discovery
may be obtained by parties in the same manner as other civil
actions.  Appeals are provided for, and the jurisdiction is Cole
County.

The substitute requires manufacturers to compensate dealerships
for the parts used in preparation obligations or in warranty
defects within 30 days.  The criteria for the compensation for
labor is spelled out.  Audits by manufacturers for warranty
compensation must not be done more than 12 months after a claim.

Dealers will not be prohibited from purchasing or operating
another line of new motor vehicles if the dealer maintains a
reasonable line of credit for each line of new motor vehicles
and is under compliance with any reasonable capital standards
and facility requirements of the franchise.

The substitute prohibits factory-owned dealerships except when a
dealership is for sale or when assisting an economically
disadvantaged person buying a dealership.  Recreational vehicle
dealers and rental dealers are excluded from certain provisions
of the substitute.

FISCAL NOTE:  No impact on state funds.

HB 1603, HCA 1, 2 -- MOTOR VEHICLE FRANCHISE PRACTICES

SPONSOR:  O'Connor

COMMITTEE ACTION:  Voted "do pass" by the Committee on Motor
Vehicle and Traffic Regulations by a vote of 15 to 0.

This bill revises Missouri's Motor Vehicle Franchise Law.

A motor vehicle franchiser will be required to give notice to
franchisees at least 60 days in advance when establishing an
additional or new motor vehicle dealership in a relevant market
area of same line-make.

The bill spells out the procedure and contents of the
notification.  Any dealer, within 30 days after receipt of a
notice, may file a petition with the Administrative Hearing
Commission protesting a proposed establishment or relocation.  A
franchiser will be restricted from establishing or relocating a
new dealer until the commission has held a hearing and has
determined there is good cause for permitting the proposed
establishment or relocation.  The bill contains language for
determining good cause.

A motor vehicle franchiser and franchisee will be subject to the
jurisdiction of the courts and administrative agencies of the
state.

When any party is seeking relief, the commission has 30 days
instead of 10 days, after receipt of application for a hearing
to enter an order setting a date, time, and place for a
hearing.  Such hearing must be within 180 days of the date of
the order instead of the current 45 days.  The commission may
continue the date up to 90 days instead of the current 45
additional days.

The bill also contains language dealing with warranty
reimbursements, warranty service audits, stay of proceeding or
action, appeals of Administrative Hearing Commission decisions,
dual product lines, and factory franchise ownership.

HCA 1 -- Deletes much of the language of the bill except the
provisions on prohibition of factory-owned dealerships with
exceptions, administrative hearing procedures, and dualing.

The amendment removes the requirement in the bill of 15% of the
total sales price when a manufacturer is entering into a
relationship with an economically disadvantaged person and
instead requires the person to make a reasonable initial
investment in the franchise.  The amendment also allows
franchisees to sell motor vehicles from 2 or more different
manufacturers as long as the franchisee has separate showrooms.

HCA 2 -- Makes several changes in the process used for hearings
before the Administrative Hearing Commission pursuant to the
Motor Vehicle Franchise Practices Act.  The amendment eliminates
the requirement that the commission set a hearing date within 10
days of receiving an application for a hearing; hold a hearing
within 45 days, or in certain cases 90 days, of setting the
hearing date; and issue a final decision within 60 days of the
hearing.  Respondents are required to file a responsive pleading
within 30 days of receiving a hearing notice from the
commission.  The discovery process for the hearing is similar to
the process used in circuit court.  In addition, franchisees are
allowed to seek enforcement of decisions of the commission in
Cole County circuit court.  The court is required to defer to
the commission's findings of fact.

FISCAL NOTE:  No impact on state funds.

PROPONENTS:  Supporters say that their business has changed more
in the last 5 years than in the previous hundred years.  Dealers
want to face the challenges presented to their industry on a
level playing field.  Supporters feel factory-owned dealerships
bring unfair competition to dealers.  They feel unfair practices
also exist concerning issues relating to relevant market areas,
warranties and warranty audits, exclusivity or dualing, and
civil procedure aspects to cleanup some problems with the
Administrative Hearing Commission.

Testifying for the bill were Representative O'Connor, Missouri
Automobile Dealers Association; and John Richardson, attorney
with Brydon, Swearengen and England.

OPPONENTS:  Those who oppose the bill say that the auto industry
is in the middle of a revolution.  There have been significant
consolidations at the manufacturing level.  Similarly at the
retail level, several large public corporations are buying
dozens of dealerships.  Consumers have gained unprecedented
information about vehicles, financing, and options through the
Internet.  Supporters say these changes in the retail
environment are, by and large, caused by forces over which
manufacturers have no control.  They say manufacturers must have
the flexibility to respond to these changes.  Restrictive
franchise legislation will impair that flexibility and will
disadvantage consumers.  Supporters also say these new
developments must be viewed against the background of an economy
that is so strong that dealers are making unprecedented amounts
of money and selling record numbers of vehicles.

Testifying against the bill were Alliance of Automobile
Manufactures; Ford Motor Corporation; General Motors
Corporation; and DaimlerChrysler Corporation.

Robert Triplett, Legislative Analyst

HB 1603 -- Motor Vehicle Franchise Practices

Co-Sponsors:  O'Connor, Hilgemann, Relford, Gratz, Hickey

This bill revises Missouri's motor vehicle franchise law.

A motor vehicle franchiser will be required to give notice to
franchisees at least 60 days in advance when establishing an
additional or new motor vehicle dealership in a relevant market
area of same line-make.

The bill spells out the procedure and contents of the
notification.  Any dealer, within 30 days after receipt of a
notice, may file a petition with the Administrative Hearing
Commission protesting a proposed establishment or relocation.  A
franchiser will be restricted from establishing or relocating a
new dealer until the commission has held a hearing and has
determined there is good cause for permitting the proposed
establishment or relocation.  The bill contains language for
determining good cause.

A motor vehicle franchiser and franchisee will be subject to the
jurisdiction of the courts and administrative agencies of the
state.

When any party is seeking relief, the commission has 30 days
instead of 10 days, after receipt of application for a hearing
to enter an order setting a date, time, and place for a
hearing.  Such hearing must be within 180 days of the date of
the order instead of the current 45 days.  The commission may
continue the date up to 90 days instead of the current 45
additional days.

The bill also contains language dealing with warranty
reimbursements, warranty service audits, stay of proceeding or
action, appeals of Administrative Hearing Commission decisions,
dual product lines, and factory franchise ownership.