Chapter 0094 - 562R - S Ver of HB2410

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 28-4451, Arizona Revised Statutes, is amended to read:

START_STATUTE28-4451. Product liability; warranty obligations; audits; vehicle exports; used vehicle recall obligations; definitions

A. Each manufacturer shall file with the director a copy of the delivery and preparation obligations required to be performed by a new motor vehicle dealer before delivery of new motor vehicles to buyers. These delivery and preparation obligations constitute the new motor vehicle dealer's only responsibility for the product liability as between the new motor vehicle dealers and the manufacturer. The new motor vehicle dealer shall furnish the buyer of a new motor vehicle with a signed copy of the manufacturer's or distributor's delivery and preparation requirements indicating that all of the requirements have in fact been performed.

B. Any mechanical, body or parts defects arising from any express or implied warranties of the manufacturer constitute the manufacturer's product or warranty liability.

C. The manufacturer or distributor shall compensate an authorized new motor vehicle dealer who performs work to rectify the manufacturer's or distributor's warranty obligations, recall obligations or delivery and preparation obligations.

D. The compensation that the manufacturer or distributor pays to a new motor vehicle dealer for diagnostic work, repair service and labor shall be fair and reasonable and, at the option of the new motor vehicle dealer, may be determined pursuant to subsection E of this section. Time allowances for the diagnosis and performance of warranty work and service shall be reasonable and adequate for the work or services to be performed. The compensation that the manufacturer or distributor pays to the new motor vehicle dealer for parts used in warranty or recall related service shall be fair and reasonable and, at the option of the new motor vehicle dealer, may be determined pursuant to subsection E of this section.

E. The new motor vehicle dealer may declare the retail rates that it customarily charges for parts or labor or both parts and labor by submitting to the manufacturer or distributor the lesser of one hundred sequential, nonwarranty, customer-paid service repair orders or ninety consecutive days of customer-paid service repair orders for warranty-like repairs made not more than one hundred eighty days before the submission. The new motor vehicle dealer's retail labor rate shall be determined by dividing the amount of the dealer's total labor sales contained in the submitted repair orders by the total number of labor hours that generated those sales. The new motor vehicle dealer's retail rate for parts shall be a percentage determined by dividing the total sales for parts in the submitted repair orders by the new motor vehicle dealer's total cost for those parts, minus one, multiplied by one hundred to produce a percentage. Declared rates are presumed to be fair and reasonable except that a manufacturer or distributor, within thirty days after receiving the new motor vehicle dealer's submission, may rebut the presumption by reasonably substantiating that the rate or rates are inaccurate or unreasonable compared to other similarly situated same line-make new motor vehicle dealers in this state. The new motor vehicle dealer's declared parts, labor or both parts and labor rates shall go into effect thirty days following the manufacturer's or distributor's receipt of the declaration, unless the manufacturer or distributor timely sends a rebuttal of the declared rate or rates to the new motor vehicle dealer. If any of the declared rates are rebutted, the manufacturer or distributor shall propose an adjustment of the rebutted rate or rates within thirty days after receiving the new motor vehicle dealer's submission. If the new motor vehicle dealer does not agree with the proposed adjusted rate or rates, it may file a protest with the director within thirty days after receipt of the manufacturer's or distributor's proposal. If a protest is timely filed, the director shall inform the manufacturer or distributor that a timely protest has been filed and that a hearing will be held on the protest if any available manufacturer or distributor mediation opportunity has been used and was unsuccessful in reaching an agreement between the parties.

F. In calculating the retail rate or rates that a new motor vehicle dealer customarily charges for parts or labor, the following work may 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.

3. Engine assemblies and transmission assemblies, if the new motor vehicle dealer agrees to be compensated for those assemblies with a handling charge instead of a retail parts markup.

4. Routine maintenance not covered under any retail customer 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 individual part numbers.

6. Vehicle reconditioning.

G. The manufacturer, factory branch, distributor or distributor branch may reasonably and periodically audit a new motor vehicle dealer to determine the validity of paid claims for dealer compensation or any charge-backs for warranty parts or service compensation. Audits shall only be for the twelve month period immediately following the date of the payment. This limitation does not apply if the manufacturer, factory branch, distributor or distributor branch reasonably suspects fraud. As a result of an audit that is authorized by this subsection, the manufacturer or distributor has the right to charge back to the new motor vehicle dealer the amount of any previously paid claim after the new motor vehicle dealer has had notice and an opportunity to participate in any available manufacturer or distributor mediation processes and all legal appeals have been exhausted if mediation failed to result in an agreement.

H. The manufacturer, factory branch, distributor or distributor branch shall reserve the right to reasonable periodic audits to determine the validity of paid claims for dealer compensation or any charge-backs for consumer or dealer incentives. Audits shall only be for a one year period immediately following the date of the payment. This limitation does not apply if the manufacturer, factory branch, distributor or distributor branch reasonably suspects fraud. As a result of an audit authorized by this subsection, the manufacturer or distributor has the right to charge back to the new motor vehicle dealer the amount of any previously paid claim after the new motor vehicle dealer has had notice and an opportunity to participate in any available manufacturer or distributor mediation processes and all legal appeals have been exhausted if mediation failed to result in an agreement.

I. All claims by new motor vehicle dealers under this section for labor and parts and all claims for compensation relative to any sales incentive programs shall be paid within thirty days after approval by the manufacturer or distributor subject to the manufacturer's or distributor's right to audit the claims provided in subsection G or H of this section. All claims shall be either approved or disapproved within thirty days after receipt on forms and in the manner specified by the manufacturer or distributor. Any claim not disapproved in writing or by means of electronic transmission within thirty days after receipt is deemed approved, and payment must be made within thirty days after approval.

J. If a manufacturer or distributor furnishes a part or component to a new motor vehicle dealer, at no cost, to use in performing repairs under a recall, campaign service action or warranty repair, the manufacturer or distributor shall compensate the dealer for the part or component in the same manner as warranty parts compensation under this section by compensating the dealer the retail parts rate on the wholesale cost for the part or component as listed in the manufacturer's or distributor's price schedule, minus the wholesale cost for the part or component.

K. A manufacturer or distributor may not require a new motor vehicle dealer to establish the retail rates customarily charged by the dealer for parts or labor by an unduly burdensome or time-consuming method or by requiring information that is unduly burdensome or time-consuming to provide calculations, including part-by-part or transaction-by-transaction calculations. A new motor vehicle dealer may not declare any new retail rate more than once in any twelve-month period. A manufacturer or distributor may use the repair orders submitted by a new motor vehicle dealer under subsection E of this section to validate any or all of a new motor vehicle dealer's current warranty reimbursement rates or require a new motor vehicle dealer to submit, not more than once every twelve months, repair orders pursuant to this section to validate the new motor vehicle dealer's retail rate or rates. If a manufacturer or distributor finds that any of a new motor vehicle dealer's retail rates have declined, the manufacturer or distributor may prospectively reduce the respective warranty reimbursement rate.

L. If the new motor vehicle dealer has otherwise properly submitted the claim pursuant to the manufacturer's or distributor's warranty or incentive program guidelines, a manufacturer or distributor may not deny a claim by a new motor vehicle dealer for reimbursement of any warranty parts or service compensation or any consumer or dealer incentive compensation based solely on a new motor vehicle dealer's incidental failure to comply with a specific claim processing requirement that does not put into question the legitimacy of the claim. If a claim is rejected for such an incidental requirement, the new motor vehicle dealer may correct or complete and resubmit a previously submitted warranty or incentive claim for a period of up to sixty days following after the new motor vehicle dealer's receipt of first notice of the failure from the manufacturer or distributor. A manufacturer or distributor is not required to approve any such warranty or incentive claim if all claim processing requirements are not complied with by the new motor vehicle dealer within the time periods prescribed by this section.

M. If a new motor vehicle dealer sells or leases a vehicle to a customer who exports the vehicle to a foreign country, unless the manufacturer, distributor or importer proves that the new motor vehicle dealer knew or reasonably should have known that the vehicle would be exported, a manufacturer, distributor or importer shall not do any of the following:

1. Refuse to sell, allocate or deliver new motor vehicles to the new motor vehicle dealer.

2. Charge back to or withhold payments or other things of value from the new motor vehicle dealer that the new motor vehicle dealer otherwise would be eligible for under an incentive program or contest.

3. Prevent a new motor vehicle dealer from participating in any sales promotion or program.

4. Take an adverse action against a new motor vehicle dealer, including reducing vehicle allocations or terminating or threatening to terminate a dealer.

N. There is a rebuttable presumption that the new motor vehicle dealer described in subsection M of this section did not know or should not have reasonably known that the vehicle described in subsection M of this section would be exported. The presumption may be rebutted by a preponderance of the evidence that the new motor vehicle dealer knew or should have reasonably known that the vehicle was to be exported.

O. If a timely protest is filed under subsection E of this section, the director shall:

1. Enter an order fixing the time and place of a hearing on the protest. The hearing shall be held within seventy-five days after the date of the order.

2. Send by certified mail a copy of the order to the dealer and the manufacturer.

3. Appoint a member of the Arizona state bar who shall be designated as an administrative law judge to conduct the hearing and who shall be compensated under a contractual relationship.

P. Prehearing discovery shall be conducted pursuant to the Arizona rules of civil procedure.

Q. Evidence that would be admissible under the issues in such an action in a state or federal court is admissible in a hearing held by the administrative law judge. The administrative law judge shall reasonably apportion all costs between the parties, including compensation for the administrative law judge's services. The administrative law judge may:

1. Issue subpoenas.

2. Administer oaths.

3. Compel the attendance of witnesses and the production of books, papers, documents and all other evidence.

4. Apply to the superior court in the county in which the hearing is held for a court order enforcing this section.

R. A transcript of the testimony of all witnesses taken at the hearing shall be made and preserved. Within forty-five days after the hearing the administrative law judge shall make written findings of fact and conclusions of law and enter a final order.

S. A party to the hearing before the administrative law judge may appeal pursuant to title 12, chapter 7, article 6. An appeal of a decision of an administrative law judge has preference over other civil matters and shall be heard at the earliest practicable date.

T. As a condition to the appeal, the appealing party shall file a cash bond, supersedeas bond or its equivalent with the director. The bond shall be sufficient in amount to cover the damages incurred by the prevailing party, but the amount of the bond may not exceed the lesser of fifty thousand dollars $50,000 or ten percent of the appealing party's net worth. The appealing party may file alternatives to cash such as certificates of deposit purchased from a financial institution licensed to do business in this state pursuant to title 6 or bonds of the United States government.

U. A manufacturer shall compensate its new motor vehicle dealers for all labor and parts that are required to perform recall repairs. The compensation shall be fair and reasonable and, at the option of the new motor vehicle dealer, may be determined pursuant to subsection E of this section. If parts or a remedy is not reasonably available to perform a recall service or repair on a used motor vehicle held for sale by the new motor vehicle dealer that is authorized to sell new motor vehicles of the same line-make of the recalled motor vehicle within thirty days after the manufacturer issues a stop-sale or do not drive notification on the used motor vehicle, the manufacturer shall compensate the new motor vehicle dealer at a rate of at least 1.5 percent of the value of the used motor vehicle per month, or prorated portion of a month when applicable, until a date when the recall parts or a remedy are is delivered to the dealer or when the vehicle is no longer in the new motor vehicle dealer's inventory.

V. The value of the used motor vehicle that is subject to a stop-sale or do not drive notification shall be the average trade-in value for used vehicles as determined by reference to a nationally recognized publication that reports on used motor vehicle values.

W. It is a violation of this section for a manufacturer to reduce the amount of compensation that is otherwise owed to a new motor vehicle dealer, whether through a chargeback, removal from an incentive program, reduction in amount owed under an incentive program or any other means, because the new motor vehicle dealer has submitted a claim for compensation under subsection U of this section or was otherwise compensated for a vehicle that is subject to a recall if a stop-sale or do not drive notification has been issued.

X. All reimbursement claims that are made by a new motor vehicle dealer pursuant to subsection U of this section for recall remedies or repairs or for compensation if no part or repair is reasonably available and the used motor vehicle is subject to a stop-sale or do not drive notification shall be made in compliance with at least one of the following:

1. In a like manner as a warranty reimbursement claim under this section.

2. At a rate set forth in a national compensation program that the manufacturer manages if the compensation provided to the new motor vehicle dealer equals or exceeds the reimbursement level for a claim that is determined as a warranty reimbursement claim pursuant to paragraph 1 of this subsection.

3. At the level set forth in the national compensation program without further consideration if the manufacturer and new motor vehicle dealer agree.

Y. The manufacturer shall approve or disapprove a claim within thirty days after it is submitted to the manufacturer in the manner and on the forms the manufacturer reasonably prescribes. The manufacturer shall pay a claim within thirty days after approval of the claim. Any claim that is not specifically disapproved in writing by the manufacturer within thirty days following the manufacturer's receipt of the claim is deemed approved.

Z. Subsections U through Y of this section apply only to used motor vehicles that are subject to safety or emissions recalls pursuant to and recalled in accordance with federal law and for which a stop-sale or do not drive notification has been issued and to motor vehicle manufacturers and new motor vehicle dealers with used motor vehicles of the line-make that the new motor vehicle dealer is franchised to sell or on which the new motor vehicle dealer is authorized to perform recall repairs.

AA. Subsections U through Y of this section apply only to new motor vehicle dealers holding an affected used motor vehicle for sale that was any of the following:

1. In inventory at the time the stop-sale or do not drive notification was issued.

2. Taken in the used motor vehicle inventory of the new motor vehicle dealer as a consumer trade-in incident to the purchase of a new motor vehicle from the new motor vehicle dealer after the stop-sale or do not drive notification was issued.

3. Properly taken in the used motor vehicle inventory of the new motor vehicle dealer as a lease return vehicle returned to the new motor vehicle dealer in accordance with the terms of the applicable contract.

BB. If a franchisee demands indemnification, a manufacturer, importer, distributor, distributor branch, factory branch or franchisor that is licensed pursuant to this chapter may not fail or refuse to indemnify an existing or former franchisee and the franchisee's successors and assigns for any sustained damages and attorney fees and other expenses reasonably incurred by the franchisee that result from a claim that is made or asserted by a third party against the franchisee to the extent that the claim results from any of the following:

1. The condition, characteristic, manufacture, assembly or design of any vehicle, parts or accessories, tools or equipment or the selection or combination of parts or components that are manufactured or distributed by the manufacturer, importer, distributor, distributor branch, factory branch or franchisor.

2. Service systems, procedures or methods that the manufacturer, importer, distributor, distributor branch, factory branch or franchisor requires the franchisee to use if the franchisee properly uses the system, procedure or method.

3. The improper use or disclosure by a manufacturer, importer, distributor, distributor branch, factory branch or franchisor of nonpublic personal information obtained from a franchisee relating to a consumer, customer or employee of the franchisee.

4. An act or omission of the manufacturer, importer, distributor, distributor branch, factory branch or franchisor for which the franchisee would have a claim for contribution or indemnity under applicable law or under the franchise, irrespective of and without regard to any prior termination or expiration of the franchise.

5. An act or omission of the franchisee that is the result of the franchisee's use of a service provided by a digital vendor required by the manufacturer, importer, distributor, distributor branch, factory branch or franchisor if the use of the service violates the laws of this state or federal law. This paragraph does not apply if the claim arises out of the wilful misconduct of a franchisee or a franchisee's employee.

BB. CC. For the purposes of this section: ,

1. "Service provided by a digital vendor" includes any electronic system that manages consumer data or generates consumer notices or documentation.

2. "Stop-sale or do not drive notification" means a notification that is issued by a manufacturer to some or all of its franchised dealerships and that states that certain used motor vehicles in the dealerships' inventories shall not be sold or leased, either at retail or wholesale, due to a federal safety defect or noncompliance recall or a federal or California emissions recall. END_STATUTE

Sec. 2. Section 28-4458, Arizona Revised Statutes, is amended to read:

START_STATUTE28-4458. Coercion prohibited; definition

A. A manufacturer of new motor vehicles, factory branch, distributor, distributor branch, field representative, officer or agent or any representative of a manufacturer of new motor vehicles, factory branch, distributor, distributor branch, field representative, officer or agent shall not coerce or attempt to coerce a new motor vehicle dealer to do any of the following:

1. Accept delivery of a new motor vehicle or vehicles, parts or accessories for the vehicle or vehicles or any other commodities that the dealer has not ordered.

2. Enter into an agreement with the manufacturer, factory branch, distributor, distributor branch or representative of the manufacturer, factory branch, distributor or distributor branch.

3. Do any other act unfair to the dealer by threatening to cancel or not renew a franchise existing between the manufacturer, factory branch, distributor, distributor branch or representative of the manufacturer, factory branch, distributor or distributor branch and the dealer.

4. Construct, renovate or make substantial alterations to the dealer's facilities unless the manufacturer, factory branch, distributor, distributor branch or representative of the manufacturer, factory branch, distributor or distributor branch is able to demonstrate that the changes are reasonable and justifiable in light of current and reasonably foreseeable economic conditions, the availability of additional vehicle allocation and the dealer's market for the sale of vehicles or unless the alteration is reasonably required to effectively display and service a vehicle based on the technology of the vehicle.

5. Enter into a real property use or site control agreement as a condition of awarding a franchise, adding a line-make or dealer agreement to an existing new motor vehicle dealer, renewing a dealer agreement, approving the sale or transfer of the ownership of a dealership or approving the relocation of a dealership. This paragraph does not apply to a real property use or site control agreement if either of the following is offered to and accepted by the dealer without coercion or condition in exchange for a real property use or site control agreement:

(a) Fair and reasonable monetary consideration.

(b) Separate and valuable consideration that may be calculated to a sum certain.

6. In connection with the sale of a used motor vehicle, other than a used motor vehicle sold pursuant to a factory's certified pre-owned program, require the use of only parts and accessories manufactured by the manufacturer, factory branch, distributor, distributor branch or importer. This paragraph does not apply to parts used to perform repairs pursuant to a recall or repairs performed pursuant to a manufacturer, factory branch, distributor, distributor branch or importer's warranty.

7. Install on the dealer's dealership premises a customer facing electric vehicle charging station accessible to the general public.

B. A manufacturer, factory branch, distributor, distributor branch or field representative or an officer, agent or representative of a manufacturer, factory branch, distributor, distributor branch or field representative shall not require, coerce or attempt to coerce any new motor vehicle dealer in this state to refrain from participation in the management of, investment in or acquisition of any other line-make of new motor vehicle or related products unless justified by reasonable business considerations.

C. A manufacturer, factory branch, distributor, distributor branch, field representative or officer shall not coerce or attempt to coerce a motor vehicle dealer and a manufacturer shall not do either of the following:

1. Release to any outside party any confidential financial information of the dealer that may be provided from time to time by the dealer.

2. Release to the general public average or composite prices, identified as such, based in whole or in part on such financial information.

D. Information described in subsection C, paragraphs 1 and 2 of this section shall not be released without the express written consent of the dealer, except that it may be released:

1. Pursuant to subpoena or as otherwise required by law in any administrative, judicial or arbitration proceeding or in any law enforcement investigation.

2. To a law enforcement agency, except that this exception does not apply to personal financial information.

E. A manufacturer, importer or distributor shall not adopt, change, establish or implement a plan or system for the allocation, scheduling or delivery of new motor vehicles, parts or accessories to its motor vehicle dealers that is not fair, reasonable and equitable or modify an existing plan or system for the allocation, scheduling or delivery of new motor vehicles, parts or accessories in a manner that causes the plan or system to be unreasonable, unfair or inequitable to the dealers of the manufacturer's, importer's or distributor's line-make. On the request of a franchisee, a manufacturer, importer or distributor shall disclose in writing to the franchisee the basis on which new motor vehicles, parts and accessories are allocated, scheduled and delivered among the manufacturer's, importer's or distributor's dealers of the same line-make.

F. A manufacturer, factory branch, distributor, distributor branch or field representative or an officer, agent or representative of a manufacturer, factory branch, distributor, distributor branch or field representative shall not require a dealer or condition the awarding of a franchise, the addition of a line-make, the renewal of a franchise, the approval of the relocation of a franchise or the approval of a sale or transfer of a franchise on the willingness of a dealer or a proposed dealer or owner of an interest in the dealership facility to construct, renovate or maintain exclusive facilities, personnel or showroom area dedicated to a particular line-make if the imposition of such a requirement would be unreasonable in light of the existing circumstances, including the manufacturer's reasonable business considerations, present economic and market conditions and forecasts for future economic and market conditions in the dealer's retail territory. The manufacturer, factory branch, distributor, distributor branch or field representative has the burden of proof to demonstrate that its demand for exclusivity is justified by reasonable business considerations and is reasonable in light of the dealer's circumstances. This subsection does not apply to a voluntary agreement between a dealer and a manufacturer if separate and valuable consideration was offered and accepted. The renewal of a franchise agreement does not, by itself, constitute separate and valuable consideration. The manufacturer has the burden of proof to show by a preponderance of the evidence that the dealer entered into a voluntary agreement regarding exclusivity.

G. Any condition, stipulation or provision in a franchise or distributorship agreement purporting to bind any person acquiring or holding a franchise or distributorship to waive compliance with any provision of this chapter or any other law of this state is void except that a person who is acquiring or holding a franchise or distributorship is not prohibited under this section from electing in writing, at or after the time a dispute arises, from using any voluntary dispute resolution procedure, from entering into any voluntary agreement to settle legitimate disputes between the disputed parties or from entering into any agreement waiving any provision of this chapter or any other law of this state for which the franchisee receives separate and valid consideration at the time of the execution of the waiver.

H. A manufacturer, importer or distributor is not required to make available or pay incentives or other benefits to a dealer that has not satisfied the requirements for eligibility on the same terms that are applied uniformly and equitably to all dealers of the same line-make in this state.

i. For the purposes of this section, "coerce":

1. Means the wrongful use of force or threat to persuade, constrain or compel a dealer to take or refrain from taking a specific action.

2. Includes threatening to wrongfully withhold vehicles or parts or refusing to offer available incentives on the same terms as offered to other dealers of the same line-make in this state or offering a dealer a higher price for vehicles or parts than is offered to other same line-make dealers in this state or not providing the opportunity to earn available incentives on the same terms as other same line-make dealers in this state on the basis of the dealer refusing, declining or failing to perform a specific behavior.

3. Does not include required compliance with a manufacturer's, importer's or distributor's reasonably necessary standards and requirements to fulfill the dealer's sales and service obligations.END_STATUTE

Sec. 3. Section 28-4459, Arizona Revised Statutes, is amended to read:

START_STATUTE28-4459. Manufacturer or distributor right of first refusal

A. If a change of all, or substantially all, ownership of a new motor vehicle dealership or transfer of all, or substantially all, dealership assets is proposed, a manufacturer or distributor may exercise a right of first refusal to acquire the dealership if all of the following requirements are met:

1. The manufacturer or distributor notifies the dealer in writing within sixty days after receipt of the completed application forms and related information generally used by a manufacturer or distributor to conduct its review and a copy of all agreements regarding the proposed transfer of its intent to exercise its right of first refusal or its rejection of the proposed transfer. If the manufacturer or distributor fails to notify the dealer of its exercise of its right of first refusal or its rejection of the proposed transfer within the sixty day period, the proposed transfer is deemed to be approved by the manufacturer or distributor.

2. The exercise of the right of first refusal results in the dealer receiving the same or greater compensation than the dealer negotiated or contracted to receive in connection with the proposed change of all, or substantially all, ownership of the dealership or transfer of all, or substantially all, dealership assets.

3. The proposed change of all, or substantially all, dealership assets does not involve the transfer of assets or the transfer or issuance of stock by the dealer or one or more dealer owners to a designated family member or members or the spouse, child, grandchild, spouse of a child or grandchild, brother, sister or parent of the dealer or one or more dealer owners or to a qualified manager, a partnership or a corporation controlled by any of those persons.

4. The manufacturer or distributor agrees to pay the reasonable expenses, including reasonable attorney fees that do not exceed the usual, customary and reasonable fees charged for similar work done for other clients, incurred by the proposed new owner and transferee before the manufacturer's or distributor's exercise of its right of first refusal in negotiating and implementing the contract for the proposed change of all, or substantially all, ownership of the dealership or transfer of all, or substantially all, dealership assets. Notwithstanding the provisions of this paragraph, a manufacturer or distributor shall not pay those expenses and attorney fees if the dealer has not submitted or caused to be submitted to the manufacturer or distributor an accounting of those expenses within twenty days after the dealers' receipt of the manufacturer's or distributor's written request for the accounting. This accounting may be requested by a manufacturer or distributor before exercising its right of first refusal.

B. A manufacturer or distributor may not use or threaten to use the exercise of the right of first refusal in bad faith. END_STATUTE

Sec. 4. Section 28-4460, Arizona Revised Statutes, is amended to read:

START_STATUTE28-4460. Factories; competition or unfair discrimination prohibited; definitions

A. A factory shall not directly or indirectly compete with or unfairly discriminate among its dealers.

B. Competing with or unfair discrimination includes any one of the following:

1. The factory having an ownership interest or franchise interest in, or operating or acting in the capacity of, a new motor vehicle dealer or a used motor vehicle dealer, except that:

(a) A factory is not prohibited from owning or operating as a new motor vehicle dealer for a temporary period if either of the following applies:

(i) The temporary period is not more than twelve months during the transition from one dealer to another dealer if the dealership is for sale and is being actively marketed by the factory at a bona fide reasonable price and on reasonable terms and conditions to any independent qualified buyer.

(ii) The factory submits evidence that disposition of its interest will result in financial loss to the factory or dealership.

The temporary period may be extended in one year increments if either of the requirements of this subdivision are met.

(b) A factory is not prohibited from temporarily owning a dealership while in a bona fide relationship with a qualified person. A bona fide relationship with a person who is qualified requires that:

(i) The total sales price of the dealership is not less than an amount that is consistent with standard business practices.

(ii) The independent qualified person make a substantial unencumbered bona fide initial investment in the dealership that is reasonable and consistent with standard business practices.

(iii) The bona fide initial investment of the qualified person is subject to potential loss. The qualified person's percentage share of any potential dealership losses shall not be less than the person's percentage share of ownership of the dealership at the time of the loss.

(iv) The qualified person buy substantial portions of the factory's remaining ownership interest in substantial regular periodic payments throughout the acquisition period.

(v) The qualified person can expect to acquire and retain full and complete ownership of the dealership within a reasonable period of time that is not longer than ten years and on reasonable terms and conditions that are consistent with standard business practices. The ten-year acquisition period may be extended for good cause shown by the qualified person.

(vi) During the acquisition period if the qualified person is paid a management fee, the management fee shall be reasonable and consistent with standard business practices for an individual managing a franchise of similar size and volume of sales and leases of vehicles or products.

(c) A factory is not prohibited from owning on a permanent basis a minority interest in a dealership if all of the following conditions are satisfied:

(i) The interest owned by the factory is not more than forty-five percent or the percentage interest actually owned by the factory on January 1, 2000, whichever is less.

(ii) Any dealership in which the factory owns the interest shall not be less than seventy-five miles from the nearest dealership of the same line-make in which the factory does not own the interest.

(iii) All dealerships in which the factory owns the interest shall not sell or lease more than one of the line-makes of new motor vehicles and parts manufactured by the factory.

(iv) All dealerships in which the factory owns the interest shall sell or lease the same line-make of new motor vehicles and parts manufactured by the factory. The dealerships may also sell or lease new motor vehicles and parts of a line-make manufactured by a factory that does not have an ownership interest in the dealership.

(v) The factory or an entity in which the factory has the interest must have been licensed in this state as a new motor vehicle dealer on January 1, 2000 selling the line-make of new motor vehicle manufactured by the factory.

(vi) The factory must have owned the interest in at least one dealership selling the line-make manufactured by the factory on January 1, 2000.

(vii) The factory or an entity in which the factory has the interest shall not sell any line-make of new motor vehicle that it was not selling in this state before January 1, 2000.

(viii) All automotive related services and financing related to the line-make or the factory owning the interest shall be sold or provided only to owners of vehicles of the line-make, regardless of where the vehicle was purchased, or to any purchasers of any new or used motor vehicles purchased from a dealership in which the factory has an interest. This item shall not preclude that dealership from selling or providing any nonwarranty repairs or maintenance on motor vehicles of any line-make or warranty repairs or maintenance of any line-make of new motor vehicles sold by the dealership and not manufactured by the factory.

(ix) All used motor vehicles of a line-make manufactured by the factory, other than the line-make that the dealership sells or leases new, acquired by the dealership, directly or indirectly from the factory, shall be acquired only at wholesale auction open to dealers of all line-makes manufactured by the factory.

2. The factory selling, leasing or, providing or updating, or offering to sell, lease or, provide or update, a vehicle or product, service or financing to any retail consumer or lead, including a subscription service for a motor vehicle feature that uses components and hardware that is already installed on the motor vehicle at the time of purchase or lease and would function after activation without ongoing cost to or support by the dealer, manufacturer, factory, distributor or third-party service provider. This paragraph does not:

(a) Prohibit a factory from advertising to sell, lease or provide a vehicle or product, service or financing through its dealers.

(b) Prohibit a factory from selling, leasing or, providing or updating or offering to sell, lease or, provide or update a vehicle or product, service or financing through its dealers.

(d) Prohibit a factory from selling, leasing or providing a vehicle or product, service or financing to an agency of the federal government.

(e) Prohibit a factory from selling or leasing a vehicle or product, service or financing through its dealers to retail consumers who qualify for any reasonable factory sponsored factory employee, factory retiree or factory vendor new vehicle purchase program or any other reasonable similar factory related new vehicle purchase program.

(f) Prohibit a factory from providing financing to retail consumers through any used motor vehicle dealer or new motor vehicle dealer of any line-make.

(g) Prohibit a factory from providing a loan directly to a person or entity if the loan is for a purpose unrelated to the ownership or leasing of a new motor vehicle or a used motor vehicle not for resale.

(h) Prohibit a factory from providing loans directly to used motor vehicle dealers or new motor vehicle dealers of any line-make for any purpose, including working capital, real estate, construction or motor vehicle or parts inventories.

(i) Prohibit a factory from arranging or providing emergency roadside service.

(j) Prohibit a factory from offering factory sponsored extended service contracts to purchasers of new motor vehicles, provided that:

(i) Such offers shall not take place less than ninety days after the date the retail consumer takes delivery of the new motor vehicle.

(ii) Such offers are made to retail consumers only at the manufacturer's suggested retail price.

(k) Prohibit a factory from selling a lease vehicle to the original lessee pursuant to a purchase option set forth in the lease. Such sale may be a credit sale with the factory as the credit seller and may include the direct sale of extended service contracts at the manufacturer's suggested retail price.

(l) Prohibit a factory, at the request of a motor vehicle lessee, from extending a lease of a motor vehicle.

(m) Prohibit a factory from offering and approving a retail consumer credit application for the financing or leasing of a motor vehicle if both of the following apply:

(i) The final transaction takes place through a licensed motor vehicle dealer.

(ii) The factory does not establish or quote any interest rate, finance rate or lease rate in association with a credit application.

(n) Prohibit a factory from renewing or charging any subscription or connection fees for any in-vehicle electronic wireless communication, information or entertainment services such as navigation system updates, satellite radio, roadside assistance, software-dependent driver assistance or driver automation features and vehicle-connected services that rely on cellular or other data networks for continued operation.

3. The factory controlling any aspect of the final amount charged, the final sales price or the final lease price for any vehicle or product, trade-in or service offered to retail consumers in a dealer's area of responsibility without the written consent of the dealer. The dealer's consent may be withdrawn on forty-five days' notice without retribution or the threat of retribution from the factory. This paragraph does not prohibit a factory from:

(a) Changing dealer cost or establishing any of the following:

(i) Manufacturer's suggested retail price pursuant to 15 United States Code section 1232.

(ii) Factory's suggested retail price for parts.

(iii) Factory's suggested retail price for service.

(b) Establishing from time to time reasonable sales, lease or financing promotions of reasonable and limited duration. Programs up to a year are presumed to be of reasonable and limited duration.

(d) Establishing the terms of any vehicle warranty.

(e) Establishing reasonable sales, lease or financing terms through its dealers to retail consumers who qualify for any reasonable factory sponsored factory employee, factory retiree or factory vendor new vehicle purchase program or any other reasonable similar factory related new vehicle purchase program.

(f) Linking the factory's internet site to internet sites maintained by its dealers or third parties, or to internet sites maintained jointly by the factory and its dealers and made available to all of the factory's dealers of the same line-make, provided that the factory shall not dictate, limit, establish, set or endorse as a basis for a retail transaction any price other than the manufacturer's suggested retail price.

(g) Establishing the price at which the lessee of a motor vehicle may purchase or re-lease that motor vehicle on expiration or termination of that lessee's lease.

(h) Operating or facilitating a program or system through which individual dealers may provide quotes or offers to individual consumers.

4. The factory refusing to unconditionally offer and provide to its same line-make dealers all models, series and editions of new motor vehicles that are publicly advertised for that line-make in this state. The failure to deliver any new motor vehicles shall not be considered a violation of this paragraph if the failure is caused by a lack of manufacturing capacity, labor strike, shortage of materials or trade embargo or any other condition over which the factory has no control. A factory may require a dealer to purchase reasonable quantities of advertising materials, purchase reasonable quantities of special tools required to properly service a motor vehicle and undertake reasonable salesperson or service person training related to the motor vehicle as a condition of receiving a motor vehicle. This paragraph does not:

(a) Apply to recreational vehicle manufacturers.

(b) Prohibit a factory from providing monetary, financial or optional equipment incentives to fleet purchasers for new motor vehicles not for resale.

5. The factory denying to any dealer any price reduction, rebate, incentive payment or similar pricing device relating to the sale or offer to sell a new motor vehicle to a dealer, pursuant to a program that discriminates among dealers of the same line-make in this state, when the dealer cannot qualify or receive the benefits of the program for reasons other than the dealer's failure to use reasonable effort to qualify and the terms of the program are such that a failure to qualify or receive its benefits would constitute the constructive termination of the dealer.

6. The factory failing to provide or direct a lead relating to a particular line-make either:

(a) To the dealer with whom the lead has a preexisting relationship.

(b) To the dealer of the same line-make that is located closest to where the lead resides, or to the local business address if the lead is a business.

(c) To the dealer of the same line-make in whose assigned area of responsibility the lead resides, or the local business address if the lead is a business.

(d) According to the lead's voluntary preference.

7. The factory implementing or modifying a vehicle reservation system for the sale or lease of motor vehicles that does not comply with the following requirements:

(a) A vehicle reservation system designed, implemented or controlled by the factory that allocates vehicles to dealers shall use customer dealer selection or other objective criteria to allocate the vehicles.

(b) At least thirty days before implementing a vehicle reservation system, a factory shall make available to its dealers a description of the reservation program rules and requirements through the system, as applicable. Notice of a material change to the rules and requirements shall be provided by the factory to its dealers at least thirty days before the changes becoming effective.

C. Under subsection B, paragraph 6 of this section:

1. The factory need not provide or direct a lead to a dealer who does not sell the vehicle or product, service or financing in which the lead expresses an interest.

2. The factory is responsible only for providing to the dealer information that it possesses concerning the lead.

3. The factory is not precluded from providing or directing leads to any other dealer of the same line-make.

4. All leads are provided or directed in a fair, nondiscriminatory, equitable and timely manner to dealers and, except as provided in subsection D of this section, without charging a fee for those leads.

D. Subsection B, paragraph 6 of this section does not apply to any factory sponsored internet-based program specifically designed to provide retail consumers with internet access to dealer quotations on vehicles, products, financing or services if:

1. Fees for the program are reasonable and consistent with industry standards.

2. Dealer participation is not conditioned on participation in any other program or on ratings derived from customer surveys.

E. A manufacturer or distributor may not recover all or any portion of its costs for compensating a dealer for warranty parts and service, including parts and service associated with vehicle recalls, either by reduction in the amount due the dealer or by separate charge, surcharge, administrative fee or other imposition. This subsection does not prohibit a manufacturer or distributor from increasing the wholesale price of a vehicle or part in the ordinary course of business.

F. For the purposes of this section:

1. "Controlling" means dictating, limiting, establishing, setting or endorsing as a basis for a retail transaction any price other than the manufacturer's suggested retail price.

2. "Dealer" or "dealership" means a new motor vehicle dealer or franchisee.

3. "Factory":

(a) Means a manufacturer, importer or distributor or any legal entity in which a manufacturer, importer or distributor owns a majority interest or has direct or indirect power to direct or cause the direction of the management whether through voting securities, contract or otherwise.

(b) Includes successors in interest to all entities described in subdivision (a) of this paragraph that continue retail operations selling or servicing the same line-make as any motor vehicle dealer that has, as of the effective date of such succession, a franchise to sell and service such line-make, including successors that acquire the interests by purchase, merger or conversion.

(d) Excludes any agent, affiliate, representative or subsidiary that is primarily engaged in the business of rental of passenger and commercial motor vehicles and industrial and construction equipment and activities incidental to that business if all of the following conditions are satisfied:

(i) Passenger and commercial motor vehicles sold by the agent, affiliate, representative or subsidiary are limited to used passenger and commercial motor vehicles that have been previously used exclusively and regularly by the agent, affiliate, representative or subsidiary in the conduct of business and used passenger and commercial motor vehicles traded in on motor vehicles sold by the agent, affiliate, representative or subsidiary.

(ii) Warranty repairs performed by the agent, affiliate, representative or subsidiary on passenger and commercial motor vehicles are limited to those passenger and commercial motor vehicles that it owns, previously owned or takes in trade.

(iii) Motor vehicle financing provided by the agent, affiliate, representative or subsidiary to retail consumers for passenger and commercial motor vehicles is limited to vehicles sold by the agent, affiliate, representative or subsidiary in the conduct of business.

4. "Financing":

(a) Means the financial service of providing retail consumers the ability to pay for a purchase or lease of a new or used motor vehicle, parts or services over an extended period of time.

(b) Does not include the furnishing of credit cards capable of general use in retail transactions or the provision of any loans secured by real estate.

5. "Motor vehicle feature" means a convenience or safety function included on a motor vehicle, such as heated seats or driver assistance, that typically is offered to a consumer as an upgrade at the time of purchase or lease of the motor vehicle.

5. 6. "Parts":

(a) Means all items that are designed to be incorporated within or attached to or used to operate, maintain or service a motor vehicle.

(b) Does not include any of the following:

(i) Parts purchased or provided for use by professional racing enterprises.

(ii) Parts no longer included in the current factory price schedule.

(iii) Specialized parts for research vehicles or other similar uses of limited application.

(iv) Owners' manuals or repair manuals.

(v) Parts that are provided by an automotive recycler in the normal course of business for an automotive recycler.

(vi) Motor vehicle keys.

6. 7. "Service" means either of the following:

(a) Motor vehicle warranty and nonwarranty repairs or maintenance, including both parts and labor.

(b) Extended warranties, vehicle mechanical maintenance insurance and similar vehicle repair service contracts.

8. "Subscription service":

(a) Means a service that is provided in exchange for a recurring payment, including a weekly, monthly or annual payment that is charged to and made by a consumer.

(b) Does not include a consumer's recurring payment made pursuant to a retail installment contract as defined in section 44-281 or lease as defined in section 47-2A103.

7. 9. "Vehicle or product" means a new motor vehicle, a used motor vehicle or parts.

10. "Vehicle reservation system" means a process that is used to hold open the opportunity for a specified consumer to place an order for the purchase or lease of a new motor vehicle. END_STATUTE

Sec. 5. Title 28, chapter 10, article 5, Arizona Revised Statutes, is amended by adding section 28-4464, to read:

START_STATUTE28-4464. Applicability

This article does not apply to a manufacturer that does not and has never used franchised new motor vehicle dealers to offer, sell or service new motor vehicles that are manufactured or distributed by a franchisor, manufacturer, importer or distributor. END_STATUTE