Overview
The first franchise bills of 2024 have been enacted in Arizona[1], Idaho[2], Virginia [3], and West Virginia.[4] Here is what is new in the franchise laws of these states:
Arizona
House Bill 2410 is a robust bill that introduces several new regulations to Arizona’s motor vehicle franchise statute.[5]
Competing With Dealers & Reservation Systems
Ariz. Rev. Stat §28-4460(B)(2) will prohibit selling or updating “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, [OEM], or Third-Party Service Provider.” Ariz. Rev. Stat §28-4460(F)(5) defines “Motor Vehicle Feature” as a convenience or safety function that is typically offered to a consumer as an upgrade at the time of purchase, with heated seats and driver assistance being examples. Ariz. Rev. Stat §28-4460(B)(2)(n), however, expressly allows subscription or connection fees for features and services that “rely on cellular or other data networks for continued operation,” such as navigation systems, satellite radio, or roadside assistance.
Ariz. Rev. Stat §28-4460(B) has added a new sub-section (B)(7) governing reservation systems. Any reservation system that allocates vehicles to dealers must use dealer selection or other objective criteria. In addition, OEMs must give at least 30 days’ notice before implementing a vehicle reservation system and provide at least 30 days’ notice of any material changes to the system.
Chargers
Ariz. Rev. Stat §28-4458(A)(7), which is a new provision, prohibits coercing dealers to install “customer-facing EV chargers accessible to the general public.” Meanwhile, Ariz. Rev. Stat §28-4458, the anti-coercion statute, includes a new sub-section (I), which defines “coerce” to mean the wrongful use of force or threat to persuade, constrain, or compel a dealer to take or refrain from taking a specific action. Sub-section (I) includes threatening to wrongfully withhold product, refusing to make incentives available on the same terms as other dealers, or charging a higher price for product.
Ariz. Rev. Stat §28-4458(I)(3), however, provides that coercion does not include compliance with “reasonably necessary standards and requirements to fulfill the Dealer’s sales and service obligations.” And Ariz. Rev. Stat §28-4458(H) has been added, which clarifies that “[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.”
Right of First Refusal
The right of first refusal section, Ariz. Rev. Stat §28-4459, has been slightly amended by the addition of sub-section (B), which states that “a manufacturer or distributor may not use or threaten to use the exercise of the right of first refusal in bad faith.”
Indemnification
Ariz. Rev. Stat §28-4451 will not include sub-section (BB), which requires OEMs to indemnify existing and former dealers for losses (including attorneys’ fees) incurred in a range of third-party claims. The nature of the indemnified claims includes product liability, claims arising from a dealer’s use of an OEM required service system or procedure, OEM disclosure of consumer data, and claims arising from the required use of a digital vendor service that manages consumer data or generates consumer notices or documentation if that digital vendor service violates Arizona law.
Idaho
Idaho House Bill 689 was signed into law on March 27, 2024, and became effective on that date.[6]
Legislative Findings
Idaho Code Ann. § 49-1601A is a new section containing the Legislative Findings and Intent. Similar to other state statutes, § 49-1601A provides that “[t]he distribution and sale of motor vehicles within this state vitally affects the general economy of the state, the public interest, and the public welfare,” that the legislature finds it necessary to regulate the industry, and that the statute “shall be construed and applied to accomplish the purposes provided for in this section.”
Competing With Dealers
Idaho Code Ann. § 49-1613(3)(g) prohibits an OEM from competing with dealers in the sale, lease, or warranty service of vehicles (before the amendment, OEMs were prohibited from “unfairly” competing with a dealer in the relevant market area). That section, however, does not apply to fleet sales, provided that a dealer is involved in the sale, and does not apply to an OEM assisting a fleet owner in performing its own warranty service. OEMs may also provide over-the-air updates if they are at no cost (presumably to the vehicle owner) or “or when creating a new line of motor vehicles and using franchised dealers to sell and service those vehicles.” OEMs may also operate a dealership “for a reasonable period not to exceed one (1) year.”
Proposed Transfers
Idaho Code Ann. § 49-1613(3)(t) is a new section governing dealership transfers. The new sub-section (t) provides that it is unlawful for an OEM to “Withhold or threaten to withhold consent or approval of the sale [etc.]. . . to an otherwise qualified buyer capable of being licensed as a dealer in this state.” Sub-section (t) goes on to provide that “Nothing in this section shall preclude the application of a manufacturer’s reasonable and uniform standards and policies.” Idaho Code Ann. § 49-1613(3)(t) also provides that it is unlawful “to condition approval of [a] buyer upon the selling dealer executing a release of all claims or similar instrument releasing or waiving any and all claims the selling dealer has or may have arising from the franchise relationship with the manufacturer unless separate material consideration is paid contemporaneously by the manufacturer to the dealer for such release.”
Interestingly, Idaho Code Ann. § 49-1613(3)(i), which also governs dealership transfers, has not been repealed. Of relevance, Idaho Code Ann. § 49‑1613(3)(i) provides that an OEM may not “[u]nreasonably withhold consent to the sale [etc.]. . . to a to a qualified buyer capable of being licensed as a dealer in this state.”
OEM Involvement in Sales Process & Agency Model Prohibitions
Idaho Code Ann. § 49-1613(8) has been added, and similar to other bills in the past couple of years, it prohibits an OEM (by agreement, program, incentive provision, or loss of incentives) from establishing a dealer agreement in which the OEM may negotiate binding terms with a retail buyer, including maintaining a website to negotiate terms of sale (displaying conditional prices, conditional trade-in values, and available financing sources are allowed). OEMs are also prohibited from having a dealer agreement that essentially authorizes an agency model (the statute prohibits a dealer agreement that allows the OEM to retain ownership of vehicles until they are sold to a retail buyer and prohibits consigning vehicles to dealers).
Dealer Agreement Amendments
Idaho Code Ann. § 49-1613(8) prohibits dealer agreements that authorize an OEM to unilaterally amend a dealer agreement or to seek to amend a dealer agreement, including a change to the dealer’s relevant market area, if the change substantially and adversely affects the dealer’s rights, obligations, investment, or return on investment, unless sixty (60) days advance written notice of the proposed amendment or modification is given to the dealer (in which the dealer may protest and the OEM must then establish good cause for the change). Idaho Code Ann. § 49-1613(9) provides protest procedures and standards for determining good cause.
Chargers
Idaho Code Ann. § 49-1613(10) prohibits an OEM from implementing a program or policy that coerces a dealer to install a fast EV charger for public use. For purposes of that sub‑section, “Coerce” means the use of force or threats and includes threatening to withhold products or charging higher prices. OEMs may, however, require “reasonable charging infrastructure.”
Virginia
Virginia SB 534/HB 191, which amends Va. Code § 46.2-1569(3), were enacted on April 17, 2024 and goes into effect on July 1, 2024.[7] The only area affected by the amendment are the rules for proposed dealership sales.
Va. Code § 46.2-1569(3) has a new deadline for responding to proposed sales. The new deadline is 60 days from the OEMs receipt of the required statutory notice. Per the amendment, the dealer’s notice of sale will be considered complete (and the 60-day window will commence) when the notice provides: (i) the buyer’s name, address, financial qualifications, and business experience during the previous five years; (ii) a certification that the applicant meets the statutory standards to be a dealer; and (iii) a copy of the full agreement for the proposed sale, in the form existing as of the date of the notice. As suggested by (iii), the 60-day deadline does not toll if there are amendments to the sale agreement.
While the OEM may request additional documentation, the amendment to Va. Code § 46.2-1569(3) provides that the request does not toll the 60-day deadline. Of note, the new language provides that “the dealer will provide such requested documentation within 10 business days. The statute further provides that the OEM and dealer may agree to toll the time periods “to facilitate the exchange of information,” but are not required to do so. The statute, as amended, expressly provides that failure to reject the proposed sale by the 60-day deadline is deemed approval.
A more subtle but potentially important change is in the grounds for which an OEM may reject a proposed sale. Before an OEM could reject, among other reasons, on the grounds that the applicant or individual who “is in control of the entity. . . lacks reasonable motor vehicle dealership management experience and qualifications.” That language will now read: “lacks reasonable years of motor vehicle dealership management experience."
Va. Code § 46.2-1569(3) has also been amended with respect to proposed relocations that accompany proposed sales. That sub-section will now provide that “consent [to the relocation] shall not be unreasonably withheld.”
West Virginia
West Virginia SB 173 was approved by the governor on March 9, 2024, SB 173 and goes into effect on June 5, 2024.[8]
Warranty Compensation
W.V. Code §17A-6A-8a(a)(3), governing warranty compensation, will now include language requiring compensation for time spent communicating with the OEM on warranty repairs. That same sub-section will also include language providing that if there is a dispute over time allowances, a dealer’s written request for a modification of time allowances “shall be presumed reasonable.” Meanwhile, language will be added to §17A-6A-8a(g) that confirms that if the OEM does not respond to labor rate and parts markup requests within 30 days, the rate/markup is deemed approved.
Facilities
W.V. Code §17A-6A-10, the “prohibited practices” section, already had language providing that an OEM may not “[c]oerce or require any dealer, whether by agreement, program, incentive provision, or otherwise” to construct new facilities/install new signs or image elements if the dealer had done so within the previous 15 years and those image elements/signs were required or approved by the OEM. The statute provided that, in that instance, the dealer is “determined to be in compliance” for purposes of any program that pays incentives on a per-vehicle basis. What is being added in W.V. Code §17A-6A-10(a)(9) is language that applies this provision to any dealer acquiring a dealership if the selling dealer has completed construction of an approved facility within the past 15 years, unless the seller has a separate agreement to construct a new facility/install new signs or image elements.
Dealer Agreement Amendments
W.V. Code §17A-6A-10(a)(12) is a new section that prohibits an OEM from requiring a dealer to agree to a dealer agreement term that gives the OEM the right to unilaterally amend dealer agreement terms governing the operation or a dealer, which includes the purchase, sale, lease, or service of a new motor vehicle. Any amendment to a dealer agreement governing operational issues must be agreed to at the time of the amendment.
Allocation of Full Product Line
W.V. Code §17A-6A-10(b)(2) already prohibits OEMs from refusing to offer all dealers the full range of models of a line-make. That sub-section now provides that this requirement applies to all models “regardless of the new motor vehicle’s means of propulsion” (i.e., EVs). Language has also been added that extends this prohibition to models sold under a new line-make, including by an affiliate (defined as “a company affiliated through ownership of the manufacturer, factory branch, distributor, or distributor branch of at least 25 percent of the equity of the company.)”
Rights of First Refusal
W.V. Code §17A-6A-10(b)(20), which governs rights of first refusal, has been heavily modified, with most of its language being stricken. That section had provided that an OEM is prohibited from “unreasonably” restricting a dealer’s ownership of a dealership through, among other things, a right of first refusal. The statute then provided the conditions under which a “right of first refusal is created.”
The word “unreasonably” has been deleted, so the statute now provides that an OEM may not “[r]estrict or attempt to restrict a dealer’s ownership” by a right of first refusal (and other things). Also, all of the language providing for when a right of first refusal is created has been deleted.
OEM Involvement in Sales Process & Agency Model Prohibition
W.V. Code §17A-6A-10(k) has been added. That sub-section prohibits an OEM from coercing or requiring a dealer to enter into or amend a dealer agreement that allows the OEM to negotiate terms of sale with a consumer (including through a web). OEMs are also prohibited from requiring dealer agreements that essentially use an agency model. Sub-section (k) specifically prohibits dealer agreements that allow the OEM to retain ownership of vehicles until they are sold to a retail buyer, consigning vehicles to dealers, or designating dealers as delivery agents.
[1] https://www.azleg.gov/legtext/56leg/2R/laws/0094.pdf
[2] https://legislature.idaho.gov/wp-content/uploads/sessioninfo/2024/legislation/H0689.pdf
[3] https://lis.virginia.gov/cgi-bin/legp604.exe?241+ful+SB534ER2+pdf
[4] For the enrolled version, see https://www.wvlegislature.gov/Bill_Text_HTML/2024_SESSIONS/RS/bills/sb173%20enr.pdf
For the introduced version (showing amendments), see https://www.wvlegislature.gov/Bill_Text_HTML/2024_SESSIONS/RS/bills/sb173%20intr.pdf
[5] In Arizona, bills go into effect 91 days after the end of the legislative session. See https://www.azleg.gov/viewDocument/?docName=https://www.azleg.gov/const/4/1.p1.htm
[6] https://legislature.idaho.gov/sessioninfo/2024/legislation/H0689/
[7] https://lis.virginia.gov/cgi-bin/legp604.exe?241+sum+SB534
[8] https://www.wvlegislature.gov/Bill_Status/bills_history.cfm?year=2024&sessiontype=RS&input=173