Brief⁽¹⁾

S.B. 593 amends the Kansas Vehicle Dealers and Manufacturers Licensing Act to add new grounds for the denial, suspension, or revocation of vehicle manufacturers' licenses. The changes are designed to give further protection to Kansas automobile dealers from manufacturer unilateral actions and to insure that vehicle dealers may sell or transfer their businesses unless "good cause" is shown by the manufacturer why the sale or transfer should not be made.

The bill prohibits manufacturers from requiring any new vehicle dealer to order or accept delivery of any new motor vehicle, part or accessory, equipment, or any other commodity not required by law, or not necessary for the repair or service of a new motor vehicle which was not ordered by the new vehicle dealer. The manufacturer may not unreasonably fail or refuse to offer to its same line-make new vehicle dealers all models manufactured for that line-make; or may not unreasonably require a dealer to pay any extra fee, purchase unreasonable advertising displays or other materials, or remodel, renovate, or recondition the dealer's existing facilities as a prerequisite to receiving a model or series of vehicles.

The bill also prohibits manufacturers from requiring a change in the capital structure of the new vehicle dealership, or the means by or through which the dealer finances the operation of the dealership, if the dealership at all times meets any reasonable capital standards determined by the manufacturer and in accordance with uniformly applied criteria.

Manufacturers may not discriminate unreasonably among competing dealers of the same line-make in the sale of vehicles or availability of incentive programs or sales promotion plans or other similar programs, unless justified by obsolescence. Finally, manufacturers may not require a new vehicle dealer to release, convey, or otherwise provide customer information if to do so is unlawful, or if the customer objects in writing, unless the information is necessary for the manufacturer or distributor to meet its obligations to consumers or the new vehicle dealer for vehicle recalls or other requirements imposed by state or federal law.

In regard to vehicle dealer transfers or sales, the bill lists what material factors may be considered to include, but not limited to:

• whether the basic financial and facility requirements of the franchise agreement will be met by the proposed transfer, assignment, or sale;



• whether the proposed purchaser, transferee, or assignee is capable of operating, managing, and supervising the business; and



• the extent to which the refusal to approve will have a substantial and adverse effect upon the dealer's investment or return on investment.

Background

The bill was supported by the Kansas Automobile Dealers Association. The Senate Committee amendments to the bill were drafted by the Kansas Automobile Dealers Association in conjunction with the American Automobile Manufacturer's Association. The latter association, however, continued to oppose the bill. A representative of the Kansas Automobile Dealers Association said the bill came about due to some of the business practices of manufacturers, including refusal to allow dealers to sell certain product lines unless the geographic area had a fixed number of such vehicle registrations already, dealerships being forced to buy equipment and other items without their consent, and concerns over refusals by manufacturers regarding dealership sales or transfers.

The bill has no fiscal impact on the state.

The House amendment makes New Section 4 part of and supplemental to the Vehicle Dealers and Manufacturers Licensing Act. The other amendment is technical.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext-bill.html.