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Second Substitute H.B. 113
Representative Kevin S. Garn proposes to substitute the following bill:
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MOTOR VEHICLE FRANCHISE AMENDMENTS
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2000 GENERAL SESSION
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STATE OF UTAH
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Sponsor: Kevin S. Garn
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AN ACT RELATING TO THE NEW AUTOMOBILE FRANCHISE ACT; PROHIBITING THE
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OWNERSHIP OF A NEW MOTOR VEHICLE DEALERSHIP BY A MANUFACTURER OR
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FRANCHISOR; PROVIDING FOR EXCEPTIONS; PROHIBITING DISCRIMINATION
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BETWEEN FRANCHISEES BY A FRANCHISOR; PROHIBITING THE DISCLOSURE OF
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PROPRIETARY INFORMATION REGARDING A FRANCHISEE BY A FRANCHISOR; AND
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MAKING TECHNICAL CHANGES.
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This act affects sections of Utah Code Annotated 1953 as follows:
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AMENDS:
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13-14-201, as last amended by Chapter 339, Laws of Utah 1998
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Be it enacted by the Legislature of the state of Utah:
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Section 1.
Section
13-14-201
is amended to read:
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13-14-201. Prohibited acts by franchisors -- Disclosures.
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(1) A franchisor may not in this state:
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(a) require a franchisee to order or accept delivery of any new motor vehicle, part,
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accessory, equipment, or other item not otherwise required by law that is not voluntarily ordered
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by the franchisee;
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(b) require a franchisee to participate monetarily in any advertising campaign or contest,
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or purchase any promotional materials, display devices, or display decorations or materials;
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(c) require a franchisee to change the capital structure of the franchisee's dealership or the
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means by or through which the franchisee finances the operation of the franchisee's dealership, if
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the dealership at all times meets reasonable capital standards determined by and applied in a
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nondiscriminatory manner by the franchisor;
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(d) require a franchisee to refrain from participating in the management of, investment in,
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or acquisition of any other line of new motor vehicles or related products, if:
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(i) the franchisee maintains a reasonable line of credit for each make or line of vehicles;
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and
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(ii) complies with reasonable capital and facilities requirements of the franchisor;
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(e) require a franchisee to prospectively agree to a release, assignment, novation, waiver,
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or estoppel that would:
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(i) relieve a franchisor from any liability imposed by this chapter; or
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(ii) require any controversy between the franchisee and a franchisor to be referred to a third
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party if the decision by the third party would be binding;
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(f) require a franchisee to change the location of the principal place of business of the
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franchisee's dealership or make any substantial alterations to the dealership premises, if the change
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or alterations would be unreasonable;
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(g) coerce or attempt to coerce a franchisee to join, contribute to, or affiliate with an
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advertising association;
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(h) require, coerce, or attempt to coerce a franchisee to enter into an agreement with the
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franchisor or do any other act that is unfair or prejudicial to the franchisee, by threatening to cancel
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a franchise agreement or other contractual agreement or understanding existing between the
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franchisor and franchisee;
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(i) adopt, change, establish, modify, or implement a plan or system for the allocation,
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scheduling, or delivery of new motor vehicles, parts, or accessories to its franchisees so that the
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plan or system is not fair, reasonable, and equitable;
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(j) increase the price of any new motor vehicle that the franchisee has ordered from the
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franchisor and for which there exists at the time of the order a bona fide sale to a retail purchaser
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if the order was made prior to the franchisee's receipt of an official written price increase
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notification;
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(k) fail to indemnify and hold harmless its franchisee against any judgment for damages
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or settlement approved in writing by the franchisor:
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(i) including court costs and attorneys' fees arising out of actions, claims, or proceedings
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including those based on:
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(A) strict liability;
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(B) negligence;
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(C) misrepresentation;
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(D) express or implied warranty;
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(E) revocation as described in Section
70A-2-608
; or
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(F) rejection as described in Section
70A-2-602
; and
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(ii) to the extent the judgment or settlement relates to alleged defective or negligent actions
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by the franchisor;
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(l) threaten or coerce a franchisee to waive or forbear its right to protest the establishment
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or relocation of a same line-make franchisee in the relevant market area of the affected franchisee;
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(m) fail to ship monthly to a franchisee, if ordered by the franchisee, the number of new
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motor vehicles of each make, series, and model needed by the franchisee to achieve a percentage
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of total new vehicle sales of each make, series, and model equitably related to the total new vehicle
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production or importation being achieved nationally at the time of the order by each make, series,
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and model covered under the franchise agreement;
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(n) require or otherwise coerce a franchisee to under-utilize the franchisee's existing
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facilities;
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(o) fail to include in any franchise agreement the following language or language to the
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effect that: "If any provision in this agreement contravenes the laws or regulations of any state or
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other jurisdiction where this agreement is to be performed, or provided for by such laws or
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regulations, the provision is considered to be modified to conform to such laws or regulations, and
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all other terms and provisions shall remain in full force.";
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(p) engage in the distribution, sale, offer for sale, or lease of a new motor vehicle to
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purchasers who acquire the vehicle in this state except through a franchisee with whom the
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franchisor has established a written franchise agreement, if the franchisor's trade name, trademark,
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service mark, or related characteristic is an integral element in the distribution, sale, offer for sale,
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or lease;
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(q) engage in the distribution or sale of a recreational vehicle which is manufactured,
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rented, sold, or offered for sale in this state without being constructed in accordance with the
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standards set by the American National Standards Institute for recreational vehicles and evidenced
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by a seal or plate attached to the vehicle; [or]
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(r) authorize or permit a person to perform warranty service repairs on motor vehicles,
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except warranty service repairs:
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(i) by a franchisee with whom the franchisor has entered into a franchise agreement for the
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sale and service of the franchisor's motor vehicles; or
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(ii) on owned motor vehicles by a person or government entity who has purchased new
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motor vehicles pursuant to a franchisor's or manufacturer's fleet discount program;
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(s) fail to provide a franchisee with a written franchise agreement; [or]
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(t) notwithstanding any other provisions of this chapter, unreasonably fail or refuse to offer
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to its same line make franchised dealers all models manufactured for that line make, or
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unreasonably require a dealer to pay any extra fee, remodel, renovate, recondition the dealer's
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existing facilities, or purchase unreasonable advertising displays or other materials as a prerequisite
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to receiving a model or series of vehicles, except that a recreational vehicle manufacturer may split
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a line make between motor home and travel trailer products[.];
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(u) except as provided in Subsection (6), directly or indirectly:
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(i) own an interest in a new motor vehicle dealer or dealership;
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(ii) operate or control a new motor vehicle dealer or dealership;
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(iii) act in the capacity of a new motor vehicle dealer, as defined in Section
13-14-102
; or
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(iv) operate a motor vehicle service facility;
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(v) fail to timely pay for all reimbursements to a franchisee for incentives and other
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payments made by the franchisor;
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(w) directly or indirectly influence or direct potential customers to franchisees in an
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inequitable manner, including:
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(i) charging a franchisee a fee for a referral regarding a potential sale or lease of any of the
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franchisee's products or services in an amount exceeding the actual cost of the referral;
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(ii) giving a customer referral to a franchisee on the condition that the franchisee agree to
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sell the vehicle at a price fixed by the franchisor; or
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(iii) advising a potential customer as to the amount that the potential customer should pay
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for a particular product;
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(x) fail to provide comparable delivery terms to each franchisee for a product of the
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franchisor, including the time of delivery after the placement of an order by the franchisee;
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(y) if personnel training is provided by the franchisor to its franchisees, unreasonably fail
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to make that training available to each franchisee on proportionally equal terms;
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(z) condition a franchisee's eligibility to participate in a sales incentive program on the
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requirement that a franchisee use the financing services of the franchisor or a subsidiary or affiliate
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of the franchisor for inventory financing;
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(aa) make available for public disclosure, except with the franchisee's permission or under
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subpoena or in any administrative or judicial proceeding in which the franchisee or the franchisor
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is a party, any confidential financial information regarding a franchisee, including:
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(i) monthly financial statements provided by the franchisee;
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(ii) the profitability of a franchisee; or
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(iii) the status of a franchisee's inventory of products;
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(bb) use any performance standard, incentive program, or similar method to measure the
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performance of franchisees unless the standard or program:
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(i) is designed and administered in a fair, reasonable, and equitable manner;
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(ii) if based upon a survey, utilizes an actuarially generally acceptable, valid sample; and
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(iii) is, upon request by a franchisee, disclosed and explained in writing to the franchisee,
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including how the standard or program is designed, how it will be administered, and the types of
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data that will be collected and used in its application;
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(cc) other than sales to the federal government, directly or indirectly, sell, lease, offer to
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sell, or offer to lease, a new motor vehicle or any motor vehicle owned by the franchisor, except
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through a franchised new motor vehicle dealer;
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(dd) compel a franchisee, through a finance subsidiary, to agree to unreasonable operating
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requirements, except that this Subsection (1)(dd) shall not be construed to limit the right of a
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financing subsidiary to engage in business practices in accordance with the usage of trade in retail
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and wholesale motor vehicle financing; or
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(ee) condition the franchisor's participation in co-op advertising for a product category on
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the franchisee's participation in any program related to another product category or on the
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franchisee's achievement of any level of sales in a product category other than that which is the
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subject of the co-op advertising.
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(2) Notwithstanding Subsection (1)(r), a franchisor may authorize or permit a person to
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perform warranty service repairs on motor vehicles if the warranty services is for a franchisor of
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recreational vehicles.
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(3) Subsection (1)(a) does not prevent the franchisor from requiring that a franchisee carry
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a reasonable inventory of:
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(a) new motor vehicle models offered for sale by the franchisor; and
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(b) parts to service the repair of the new motor vehicles.
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(4) Subsection (1)(d) does not prevent a franchisor from:
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(a) requiring that a franchisee maintain separate sales personnel or display space; or
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(b) refusing to permit a combination of new motor vehicle lines, if justified by reasonable
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business considerations.
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(5) Upon the written request of any franchisee, a franchisor shall disclose in writing to the
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franchisee the basis on which new motor vehicles, parts, and accessories are allocated, scheduled,
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and delivered among the franchisor's dealers of the same line-make.
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(6) (a) A franchisor may engage in any of the activities listed in Subsection (1)(u), for a
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period not to exceed 12 months if:
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(i) (A) the person from whom the franchisor acquired the interest in or control of the new
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motor vehicle dealership was a franchised new motor vehicle dealer; and
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(B) the franchisor's interest in the new motor vehicle dealership is for sale at a reasonable
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price and on reasonable terms and conditions; or
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(ii) the franchisor is engaging in the activity listed in Subsection (1)(u) for the purpose of
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broadening the diversity of its dealer body and facilitating the ownership of a new motor vehicle
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dealership by a person who:
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(A) is part of a group that has been historically underrepresented in the franchisor's dealer
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body;
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(B) would not otherwise be able to purchase a new motor vehicle dealership;
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(C) has made a significant investment in the new motor vehicle dealership which is subject
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to loss;
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(D) has an ownership interest in the new motor vehicle dealership; and
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(E) operates the new motor vehicle dealership under a plan to acquire full ownership of
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the dealership within a reasonable period of time and under reasonable terms and conditions.
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(b) The board may, for good cause shown, extend the time limit set forth in Subsection
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(6)(a) for an additional period not to exceed 12 months.
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(c) A franchisor who was engaged in any of the activities listed in Subsection (1)(u) in this
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state prior to May 1, 2000, may continue to engage in that activity, but shall not expand that
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activity to acquire an interest in any other new motor vehicle dealerships or motor vehicle service
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facilities after May 1, 2000.
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