Colorado Debating Dealer Franchise Laws

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Colorado’s House of Representatives has given preliminary approval to a proposal giving motorcycle dealers greater freedom in dealing with manufacturers.

Senate Bill 91, which applies to motorcycle, car and truck dealerships, prohibits a manufacturer or distributor from:
  • conditioning the sale, transfer, or relocation or the renewal of a franchise agreement upon site control;
  • refusing to offer its same line-make to franchised dealers based upon unreasonable sales and service standards;
  • failing to offer an incentive or sales program to a motor vehicle dealer that is offered to another motor vehicle dealer;
  • requiring a motor vehicle dealer to devote facilities, personnel, or display space exclusively to a single line-make;
  • conditioning a franchise agreement on improvements to a facility;
  • owning or operating a used motor vehicle dealership; and
  • operating a dealership during the transition between owners or operators for more than 12 months.
SB 91 also requires a manufacturer or distributor to notify the motor vehicle dealer within 30 days of the following disapprovals: the denial of a location or relocation for a franchise; the denial of the approval of the sale of a dealership; or the denial of the approval to change management.

If a franchise agreement is terminated, a manufacturer or distributor who disapproves of a sale or transfer of a franchise must reimburse the prospective purchaser and seller for any actual costs incurred in the effort to sell or transfer the franchise.

Under current law, manufacturers can determine pricing structures, incentives, dealership expansions and other conditions for contract renewal. Manufacturers also can cancel the contract if dealers decide not to go along with contractual conditions.

Tim Jackson, president of the Colorado Auto Dealers Association, told the Denver Business Journal the bill creates a “better balance on behalf of the dealers” by updating car dealer franchising laws dating to 1937 and making them more consistent with the rest of the country.

SB 91 has passed through the Business, Labor and Technology Committee in the Senate and the Business Affairs and Labor Committee in the House.

The bill is sponsored in the Senate by Sen. Chris Romer, D-Denver, and is sponsored in the House by Rep. Joe Rice, D-Littleton.

If passed, the legislation would take effect July 1.

- Submitted by Guido Ebert