13-14-201 - Prohibited acts by franchisors -- Affiliates -- Disclosures.
13-14-201. Prohibited acts by franchisors -- Affiliates -- Disclosures.
(1) A franchisor may not in this state:
(a) except as provided in Subsection (3), require a franchisee to order or accept deliveryof any new motor vehicle, part, accessory, equipment, or other item not otherwise required bylaw that is not voluntarily ordered by the franchisee;
(b) require a franchisee to:
(i) participate monetarily in any advertising campaign; or
(ii) contest, or purchase any promotional materials, display devices, or displaydecorations or materials;
(c) require a franchisee to change the capital structure of the franchisee's dealership orthe means by or through which the franchisee finances the operation of the franchisee'sdealership, if the dealership at all times meets reasonable capital standards determined by andapplied in a nondiscriminatory manner by the franchisor;
(d) require a franchisee to refrain from participating in the management of, investmentin, or acquisition of any other line of new motor vehicles or related products, if the franchisee:
(i) maintains a reasonable line of credit for each make or line of vehicles; and
(ii) complies with reasonable capital and facilities requirements of the franchisor;
(e) require a franchisee to prospectively agree to a release, assignment, novation, waiver,or estoppel that would:
(i) relieve a franchisor from any liability, including notice and hearing rights imposed onthe franchisor by this chapter; or
(ii) require any controversy between the franchisee and a franchisor to be referred to athird party if the decision by the third party would be binding;
(f) require a franchisee to change the location of the principal place of business of thefranchisee's dealership or make any substantial alterations to the dealership premises, if thechange or alterations would be unreasonable or cause the franchisee to lose control of thepremises or impose any other unreasonable requirement related to the facilities or premises;
(g) coerce or attempt to coerce a franchisee to join, contribute to, or affiliate with anadvertising association;
(h) require, coerce, or attempt to coerce a franchisee to enter into an agreement with thefranchisor or do any other act that is unfair or prejudicial to the franchisee, by threatening tocancel a franchise agreement or other contractual agreement or understanding existing betweenthe franchisor and franchisee;
(i) adopt, change, establish, enforce, modify, or implement a plan or system for theallocation, scheduling, or delivery of new motor vehicles, parts, or accessories to its franchiseesso that the plan or system is not fair, reasonable, and equitable;
(j) increase the price of any new motor vehicle that the franchisee has ordered from thefranchisor and for which there exists at the time of the order a bona fide sale to a retail purchaserif the order was made prior to the franchisee's receipt of an official written price increasenotification;
(k) fail to indemnify and hold harmless its franchisee against any judgment for damagesor settlement approved in writing by the franchisor:
(i) including court costs and attorney fees arising out of actions, claims, or proceedingsincluding those based on:
(A) strict liability;
(B) negligence;
(C) misrepresentation;
(D) express or implied warranty;
(E) revocation as described in Section 70A-2-608; or
(F) rejection as described in Section 70A-2-602; and
(ii) to the extent the judgment or settlement relates to alleged defective or negligentactions by the franchisor;
(l) threaten or coerce a franchisee to waive or forbear its right to protest theestablishment or relocation of a same line-make franchisee in the relevant market area of theaffected franchisee;
(m) fail to ship monthly to a franchisee, if ordered by the franchisee, the number of newmotor vehicles of each make, series, and model needed by the franchisee to achieve a percentageof total new vehicle sales of each make, series, and model equitably related to the total newvehicle production or importation being achieved nationally at the time of the order by eachmake, series, and model covered under the franchise agreement;
(n) require or otherwise coerce a franchisee to under-utilize the franchisee's existingdealer facility or facilities, including by:
(i) requiring or otherwise coercing a franchisee to exclude or remove from thefranchisee's facility operations the selling or servicing of a line-make of vehicles for which thefranchisee has a franchise agreement to utilize the facilities; or
(ii) prohibiting the franchisee from locating, relocating, or occupying a franchise orline-make in an existing facility owned or occupied by the franchisee that includes the selling orservicing of another franchise or line-make at the facility provided that the franchisee gives thefranchisor written notice of the franchise co-location;
(o) fail to include in any franchise agreement or other agreement governing a franchisee'sownership of a dealership or a franchisee's conduct of business under a franchise the followinglanguage or language to the effect that: "If any provision in this agreement contravenes the lawsor regulations of any state or other jurisdiction where this agreement is to be performed, orprovided for by such laws or regulations, the provision is considered to be modified to conformto such laws or regulations, and all other terms and provisions shall remain in full force.";
(p) engage in the distribution, sale, offer for sale, or lease of a new motor vehicle topurchasers who acquire the vehicle in this state except through a franchisee with whom thefranchisor has established a written franchise agreement, if the franchisor's trade name,trademark, service mark, or related characteristic is an integral element in the distribution, sale,offer for sale, or lease;
(q) engage in the distribution or sale of a recreational vehicle that is manufactured,rented, sold, or offered for sale in this state without being constructed in accordance with thestandards set by the American National Standards Institute for recreational vehicles andevidenced by a seal or plate attached to the vehicle;
(r) except as provided in Subsection (2), authorize or permit a person to performwarranty service repairs on motor vehicles, except warranty service repairs:
(i) by a franchisee with whom the franchisor has entered into a franchise agreement forthe sale and service of the franchisor's motor vehicles; or
(ii) on owned motor vehicles by a person or government entity who has purchased newmotor vehicles pursuant to a franchisor's fleet discount program;
(s) fail to provide a franchisee with a written franchise agreement;
(t) (i) except as provided in Subsection (1)(t)(ii) and notwithstanding any otherprovisions of this chapter:
(A) unreasonably fail or refuse to offer to its same line-make franchised dealers allmodels manufactured for that line-make;
(B) unreasonably require a dealer to:
(I) pay any extra fee, remodel, renovate, recondition the dealer's existing facilities; or
(II) purchase unreasonable advertising displays or other materials as a prerequisite toreceiving a model or series of vehicles;
(ii) notwithstanding Subsection (1)(t)(i), a recreational vehicle franchisor may split aline-make between motor home and travel trailer products;
(u) except as provided in Subsection (6), directly or indirectly:
(i) own an interest in a new motor vehicle dealer or dealership;
(ii) operate or control a new motor vehicle dealer or dealership;
(iii) act in the capacity of a new motor vehicle dealer, as defined in Section 13-14-102; or
(iv) operate a motor vehicle service facility;
(v) fail to timely pay for all reimbursements to a franchisee for incentives and otherpayments made by the franchisor;
(w) directly or indirectly influence or direct potential customers to franchisees in aninequitable manner, including:
(i) charging a franchisee a fee for a referral regarding a potential sale or lease of any ofthe franchisee's products or services in an amount exceeding the actual cost of the referral;
(ii) giving a customer referral to a franchisee on the condition that the franchisee agree tosell the vehicle at a price fixed by the franchisor; or
(iii) advising a potential customer as to the amount that the potential customer shouldpay for a particular product;
(x) fail to provide comparable delivery terms to each franchisee for a product of thefranchisor, including the time of delivery after the placement of an order by the franchisee;
(y) if personnel training is provided by the franchisor to its franchisees, unreasonably failto make that training available to each franchisee on proportionally equal terms;
(z) condition a franchisee's eligibility to participate in a sales incentive program on therequirement that a franchisee use the financing services of the franchisor or a subsidiary oraffiliate of the franchisor for inventory financing;
(aa) make available for public disclosure, except with the franchisee's permission orunder subpoena or in any administrative or judicial proceeding in which the franchisee or thefranchisor is a party, any confidential financial information regarding a franchisee, including:
(i) monthly financial statements provided by the franchisee;
(ii) the profitability of a franchisee; or
(iii) the status of a franchisee's inventory of products;
(bb) use any performance standard, incentive program, or similar method to measure theperformance of franchisees unless the standard or program:
(i) is designed and administered in a fair, reasonable, and equitable manner;
(ii) if based upon a survey, utilizes an actuarially generally acceptable, valid sample; and
(iii) is, upon request by a franchisee, disclosed and explained in writing to the franchisee,including:
(A) how the standard or program is designed;
(B) how the standard or program will be administered; and
(C) the types of data that will be collected and used in the application of the standard orprogram;
(cc) other than sales to the federal government, directly or indirectly, sell, lease, offer tosell, or offer to lease, a new motor vehicle or any motor vehicle owned by the franchisor, exceptthrough a franchised new motor vehicle dealer;
(dd) compel a franchisee, through a finance subsidiary, to agree to unreasonableoperating requirements, except that this Subsection (1)(dd) may not be construed to limit theright of a financing subsidiary to engage in business practices in accordance with the usage oftrade in retail and wholesale motor vehicle financing;
(ee) condition the franchisor's participation in co-op advertising for a product category onthe franchisee's participation in any program related to another product category or on thefranchisee's achievement of any level of sales in a product category other than that which is thesubject of the co-op advertising;
(ff) except as provided in Subsections (7) through (9), discriminate against a franchiseein the state in favor of another franchisee of the same line-make in the state:
(i) by selling or offering to sell a new motor vehicle to one franchisee at a higher actualprice, including the price for vehicle transportation, than the actual price at which the samemodel similarly equipped is offered to or is made available by the franchisor to anotherfranchisee in the state during a similar time period;
(ii) except as provided in Subsection (8), by using a promotional program or device or anincentive, payment, or other benefit, whether paid at the time of the sale of the new motor vehicleto the franchisee or later, that results in the sale of or offer to sell a new motor vehicle to onefranchisee in the state at a higher price, including the price for vehicle transportation, than theprice at which the same model similarly equipped is offered or is made available by thefranchisor to another franchisee in the state during a similar time period;
(iii) except as provided in Subsection (9), by failing to provide or direct a lead in a fair,equitable, and timely manner; or
(iv) if the franchisee complies with any reasonable requirement concerning the sale ofnew motor vehicles, by using or considering the performance of any of its franchisees located inthis state relating to the sale of the franchisor's new motor vehicles in determining the:
(A) dealer's eligibility to purchase program, certified, or other used motor vehicles fromthe franchisor;
(B) volume, type, or model of program, certified, or other used motor vehicles the dealeris eligible to purchase from the franchisor;
(C) price of any program, certified, or other used motor vehicles that the dealer is eligibleto purchase from the franchisor; or
(D) availability or amount of any discount, credit, rebate, or sales incentive the dealer iseligible to receive from the manufacturer for the purchase of any program, certified, or othermotor vehicle offered for sale by the franchisor;
(gg) (i) take control over funds owned or under the control of a franchisee based on thefindings of a warranty audit or sales incentive audit unless the following conditions are satisfied:
(A) the franchisor fully identifies in writing the basis for the franchisor's claim or chargeback arising from the audit, including notifying the franchisee that the franchisee has 20 days
from the day on which the franchisee receives the franchisor's claim or charge back to assert aprotest in writing to the franchisor identifying the basis for the protest;
(B) the franchisee's protest shall inform the franchisor that the protest shall be submittedto a mediator in the state who is identified by name and address in the franchisee's notice to thefranchisor;
(C) if mediation is requested under Subsection (1)(gg)(i)(B), mediation shall occur nolater than 30 days after the day on which the franchisor receives the franchisee's protest of aclaim or charge back;
(D) if mediation does not lead to a resolution of the protest, the protest shall be set forbinding arbitration in the same venue in which the mediation occurred;
(E) binding arbitration under Subsection (1)(gg)(i)(D) shall be conducted:
(I) by an arbitrator mutually agreed upon by the franchisor and the franchisee; and
(II) on a date mutually agreed upon by the franchisor and the franchisee, but shall be heldno later than 90 days after the franchisor's receipt of the franchisee's notice of protest;
(F) this Subsection (1)(gg)(i) applies exclusively to warranty audits and sales incentiveaudits;
(G) Subsections (1)(gg)(i)(A) through (E) do not apply if the franchisor reasonablybelieves that the amount of the claim or charge back is related to a fraudulent act by thefranchisee; and
(H) the costs of the mediator or arbitrator instituted under this Subsection (1)(gg) shall beshared equally by the franchisor and the franchisee; or
(ii) require a franchisee to execute a written waiver of the requirements of Subsection(1)(gg)(i);
(hh) coerce, or attempt to coerce a franchisee to purchase or sell an aftermarket productmanufactured by the franchisor, or obtained by the franchisor for resale from a third-partysupplier and the franchisor or its affiliate derives a financial benefit from the franchisee's sale orpurchase of the aftermarket product as a condition to obtaining preferential status from thefranchisor;
(ii) through an affiliate, take any action that would otherwise be prohibited under thischapter;
(jj) impose any fee, surcharge, or other charge on a franchisee designed to recover thecost of a warranty repair for which the franchisee is paid by the franchisor;
(kk) directly or indirectly condition any of the following actions on the willingness of afranchisee, prospective new franchisee, or owner of an interest in a dealership facility to enterinto a site-control agreement:
(i) the awarding of a franchise to a prospective new franchisee;
(ii) the addition of a line-make or franchise to an existing franchisee;
(iii) the renewal of an existing franchisee's franchise;
(iv) the approval of the relocation of an existing franchisee's dealership facility, unlessthe franchisor pays, and the franchisee voluntarily accepts, additional specified cashconsideration to facilitate the relocation; or
(v) the approval of the sale or transfer of a franchise's ownership, unless the franchisorpays, and the buyer voluntarily accepts, additional specified cash consideration to facilitate thesale or transfer;
(ll) subject to Subsection (11), deny a franchisee the right to return any or all parts or
accessories that:
(i) were specified for and sold to the franchisee under an automated ordering systemrequired by the franchisor; and
(ii) (A) are in good, resalable condition; and
(B) (I) the franchisee received within the previous 12 months; or
(II) are listed in the current parts catalog; or
(mm) subject to Subsection (12), obtain from a franchisee a waiver of a franchisee'sright, by threatening:
(i) to impose a detriment upon the franchisee's business; or
(ii) to withhold any entitlement, benefit, or service:
(A) to which the franchisee is entitled under a franchise agreement, contract, statute, rule,regulation, or law; or
(B) that has been granted to more than one other franchisee of the franchisor in the state.
(2) Notwithstanding Subsection (1)(r), a franchisor may authorize or permit a person toperform warranty service repairs on motor vehicles if the warranty services is for a franchisor ofrecreational vehicles.
(3) Subsection (1)(a) does not prevent the franchisor from requiring that a franchiseecarry a reasonable inventory of:
(a) new motor vehicle models offered for sale by the franchisor; and
(b) parts to service the repair of the new motor vehicles.
(4) Subsection (1)(d) does not prevent a franchisor from requiring that a franchiseemaintain separate sales personnel or display space.
(5) Upon the written request of any franchisee, a franchisor shall disclose in writing tothe franchisee the basis on which new motor vehicles, parts, and accessories are allocated,scheduled, and delivered among the franchisor's dealers of the same line-make.
(6) (a) A franchisor may engage in any of the activities listed in Subsection (1)(u), for aperiod not to exceed 12 months if:
(i) (A) the person from whom the franchisor acquired the interest in or control of the newmotor vehicle dealership was a franchised new motor vehicle dealer; and
(B) the franchisor's interest in the new motor vehicle dealership is for sale at a reasonableprice and on reasonable terms and conditions; or
(ii) the franchisor is engaging in the activity listed in Subsection (1)(u) for the purpose ofbroadening the diversity of its dealer body and facilitating the ownership of a new motor vehicledealership by a person who:
(A) is part of a group that has been historically underrepresented in the franchisor'sdealer body;
(B) would not otherwise be able to purchase a new motor vehicle dealership;
(C) has made a significant investment in the new motor vehicle dealership which issubject to loss;
(D) has an ownership interest in the new motor vehicle dealership; and
(E) operates the new motor vehicle dealership under a plan to acquire full ownership ofthe dealership within a reasonable period of time and under reasonable terms and conditions.
(b) After receipt of the advisory board's recommendation, the executive director may, forgood cause shown, extend the time limit set forth in Subsection (6)(a) for an additional periodnot to exceed 12 months.
(c) A franchisor who was engaged in any of the activities listed in Subsection (1)(u) inthis state prior to May 1, 2000, may continue to engage in that activity, but may not expand thatactivity to acquire an interest in any other new motor vehicle dealerships or motor vehicle servicefacilities after May 1, 2000.
(d) Notwithstanding Subsection (1)(u), a franchisor may own, operate, or control a newmotor vehicle dealership trading in a line-make of motor vehicle if:
(i) as to that line-make of motor vehicle, there are no more than four franchised newmotor vehicle dealerships licensed and in operation within the state as of January 1, 2000;
(ii) the franchisor does not own directly or indirectly, more than a 45% interest in thedealership;
(iii) at the time the franchisor first acquires ownership or assumes operation or control ofthe dealership, the distance between the dealership thus owned, operated, or controlled and thenearest unaffiliated new motor vehicle dealership trading in the same line-make is not less than150 miles;
(iv) all the franchisor's franchise agreements confer rights on the franchisee to developand operate as many dealership facilities as the franchisee and franchisor shall agree areappropriate within a defined geographic territory or area; and
(v) as of January 1, 2000, no fewer than half of the franchisees of the line-make withinthe state own and operate two or more dealership facilities in the geographic area covered by thefranchise agreement.
(7) Subsection (1)(ff) does not apply to recreational vehicles.
(8) Subsection (1)(ff)(ii) does not prohibit a promotional or incentive program that isfunctionally available to all competing franchisees of the same line-make in the state onsubstantially comparable terms.
(9) Subsection (1)(ff)(iii) may not be construed to:
(a) permit provision of or access to customer information that is otherwise protectedfrom disclosure by law or by contract between a franchisor and a franchisee; or
(b) require a franchisor to disregard the preference volunteered by a potential customer inproviding or directing a lead.
(10) Subsection (1)(ii) does not limit the right of an affiliate to engage in businesspractices in accordance with the usage of trade in which the affiliate is engaged.
(11) (a) Subsection (1)(ll) does not apply to parts or accessories that the franchiseeordered and purchased outside of an automated parts ordering system required by the franchisor.
(b) In determining whether parts or accessories in a franchisee's inventory were specifiedand sold under an automated ordering system required by the franchisor, the parts and accessoriesin the franchisee's inventory are presumed to be the most recent parts and accessories that thefranchisor sold to the franchisee.
(12) (a) Subsection (1)(mm) does not apply to a good faith settlement of a dispute,including a dispute relating to contract negotiations, in which the franchisee gives a waiver inexchange for fair consideration in the form of a benefit conferred on the franchisee.
(b) Subsection (12)(a) may not be construed to defeat a franchisee's claim that a waiverhas been obtained in violation of Subsection (1)(mm).
Amended by Chapter 33, 2010 General Session