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Current Status Bill Number:View additional legislative information at the LPITS web site.4450 Ratification Number:316 Act Number:287 Type of Legislation:General Bill GB Introducing Body:House Introduced Date:20000118 Primary Sponsor:Harrison All Sponsors:Harrison, Cato, Wilkins, Sharpe, Jennings, Allison, Altman, Askins, Bailey, Barfield, Barrett, Battle, Bowers, G. Brown, H. Brown, Carnell, Cooper, Dantzler, Davenport, Easterday, Edge, Gamble, Harrell, Harris, Harvin, Haskins, Hawkins, Hinson, Huggins, Keegan, Kelley, Kirsh, Klauber, Knotts, Koon, Lanford, Leach, Lee, Limehouse, Littlejohn, Loftis, Lourie, Mack, Maddox, Martin, McCraw, McGee, M. McLeod, W. McLeod, McMahand, Meacham-Richardson, Miller, Ott, Phillips, Quinn, Rhoad, Rice, Riser, Robinson, Rodgers, Sandifer, Seithel, Simrill, D. Smith, J. Smith, R. Smith, Taylor, Townsend, Tripp, Trotter, Walker, Wilder, Wilkes, Witherspoon, Woodrum, Young-Brickell, Vaughn, Law, Stuart, Emory, Whatley Drafted Document Number:l:\council\bills\dka\3659mm00.doc Companion Bill Number:1044 Date Bill Passed both Bodies:20000504 Date of Last Amendment:20000426 Governor's Action:S Date of Governor's Action:20000517 Subject:Motor vehicle dealerships, manufacturer not to own or operate; Lemon law, title to reflect; electronic sale of vehicles History Body Date Action Description Com Leg Involved ______ ________ ______________________________________ _______ ____________ ------ 20000606 Act No. A287 ------ 20000517 Signed by Governor ------ 20000516 Ratified R316 House 20000504 Concurred in Senate amendment, enrolled for ratification House 20000503 Debate adjourned upon Senate Amendments until Thursday, 20000504 ------ 20000428 Scrivener's error corrected Senate 20000426 Amended, read third time, returned to House with amendment Senate 20000425 Debate adjourned Senate 20000411 Made Special Order Senate 20000329 Read second time, notice of general amendments, carrying over all amendments to third reading Senate 20000322 Recalled from Committee, 15 ST placed on the Calendar Senate 20000307 Introduced, read first time, 15 ST referred to Committee House 20000302 Read third time, sent to Senate House 20000301 Amended, read second time House 20000301 Co-Sponsor added (Rule 5.2) by Rep. Whatley House 20000229 Request for debate withdrawn by Representative Hayes House 20000224 Debate interrupted by adjournment House 20000222 Request for debate by Representative Scott J.H. Neal Bales Breeland Mack Hayes House 20000217 Co-Sponsor removed (Rule 5.2) by Rep. McKay House 20000216 Committee report: Favorable 26 HLCI House 20000215 Co-Sponsor added (Rule 5.2) by Rep. Emory House 20000118 Introduced, read first time, 26 HLCI referred to Committee Versions of This Bill Revised on February 16, 2000 - Word format Revised on March 1, 2000 - Word format Revised on March 22, 2000 - Word format Revised on April 26, 2000 - Word format Revised on April 28, 2000 - Word format
(A287, R316, H4450)
AN ACT TO AMEND CHAPTER 15, TITLE 56, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO REGULATION OF MOTOR VEHICLE MANUFACTURERS, DISTRIBUTORS, AND DEALERS, BY ADDING SECTION 56-15-45 SO AS TO PROHIBIT OWNERSHIP, OPERATION, OR CONTROL OF COMPETING DEALERSHIPS BY A MANUFACTURER OR FRANCHISOR EXCEPT UNDER CERTAIN CIRCUMSTANCES, PROHIBIT UNFAIR COMPETITION BY A MANUFACTURER OR FRANCHISOR AGAINST A FRANCHISEE, DEFINE PREFERENTIAL TREATMENT GIVING RISE TO A PRESUMPTION OF UNFAIR COMPETITION, EXEMPT SALES BY MANUFACTURERS OR FRANCHISORS TO THEIR EMPLOYEES AND TO THE FEDERAL GOVERNMENT, AND TO ALLOW SALES BY LESSORS TO LESSEES AND ELECTRONIC REFERRALS BY WAY OF A MANUFACTURER'S OR FRANCHISOR'S WEBSITE; BY ADDING SECTION 56-15-46 SO AS TO REQUIRE WRITTEN NOTICE TO A CURRENT DEALERSHIP OF THE INTENTION OF A FRANCHISOR TO RELOCATE AN EXISTING DEALERSHIP OR TO ESTABLISH A NEW DEALERSHIP WITHIN A TEN-MILE RADIUS OF THE CURRENT DEALERSHIP, PROVIDE GROUNDS FOR INJUNCTION OF THAT ESTABLISHMENT OR RELOCATION, AND PROVIDE FOR EXCEPTIONS; TO AMEND SECTION 56-15-60, RELATING TO DEALERS' CLAIMS FOR COMPENSATION, SO AS TO LIMIT THE AUDIT PERIOD FOR INCENTIVE COMPENSATION PROGRAMS AND ALLOW FOR REIMBURSEMENT OF A CLAIM PAYMENT IF THE CLAIM IS MATERIALLY DEFECTIVE; BY ADDING SECTION 56-15-85 SO AS TO PROVIDE FOR THE ELECTRONIC SALE OF MOTOR VEHICLES TO CONSUMERS IN THIS STATE BY A DEALERSHIP LOCATED IN THIS STATE; BY ADDING SECTION 56-15-140 SO AS TO PROVIDE FOR VENUE FOR ACTIONS FILED PURSUANT TO THIS ACT IN THIS STATE, NOTWITHSTANDING AN AGREEMENT TO THE CONTRARY; AND BY ADDING SECTION 56-19-490 SO AS TO REQUIRE THAT THE TITLE OF A MOTOR VEHICLE REFLECT THAT IT WAS RETURNED TO A MANUFACTURER PURSUANT TO A "LEMON LAW" OR SIMILAR PROCEEDING.
Be it enacted by the General Assembly of the State of South Carolina:
Legislative findings
SECTION 1. The General Assembly finds that the distribution of motor vehicles in the State of South Carolina vitally affects the general economy of the State and its public interest and public welfare. In the exercise of its police power, it is necessary for the State to regulate motor vehicle manufacturers, distributors, dealers, and their representatives doing business in South Carolina to prevent frauds and other abuses upon its citizens.
Regulation of motor vehicle manufacturer, distributor, dealer; prohibition of unfair competition
SECTION 2. Chapter 15, Title 56 of the 1976 Code is amended by adding:
"Section 56-15-45. (A) It is unlawful for a manufacturer or franchisor or any parent, affiliate, wholly or partially owned subsidiary, officer, or representative of a manufacturer or franchisor to own, operate, or control or to participate in the ownership, operation, or control of a new motor vehicle dealer in this State, to establish in this State an additional dealer or dealership in which that person or entity has an interest, or to own, operate, or control, directly or indirectly, an interest in a dealer or dealership in this State, excluding a passive interest in a publicly traded corporation held for investment purposes. This subsection does not prohibit the ownership, operation, or control of a new motor vehicle dealer by a manufacturer or franchisor:
(1) for a temporary period, not to exceed one year, during the transition from one owner or operator to another, except that on a showing by a manufacturer or franchisor of good cause, a court of competent jurisdiction may extend this time limit for periods up to an additional twelve months;
(2) during a period in which the new motor vehicle dealer is being sold pursuant to a bona fide contract, shareholder agreement, or purchase option to the operator of the dealership; or
(3) at the same location at which the manufacturer or franchisor has been engaged in the retail sale of new motor vehicles as the owner, operator, or controller of the dealership for a continuous two-year period of time immediately before January 1, 2000, where there is no prospective new motor vehicle dealer available to own or operate the dealership in a manner consistent with the public interest.
(B)(1) It is unlawful for a manufacturer or franchisor or any parent, affiliate, wholly or partially owned subsidiary, officer, or representative of a manufacturer or franchisor to compete unfairly with a new motor vehicle dealer of the same line make operating pursuant to a franchise in the State of South Carolina. Except as otherwise provided in this subsection, the mere ownership, operation, or control of a new motor vehicle dealer by a manufacturer or franchisor pursuant to the conditions set forth in subsection (A) of this section is not a violation of this subsection.
(2) For purposes of this subsection, a manufacturer or franchisor or any parent, affiliate, wholly or partially owned subsidiary, officer, or representative of a manufacturer or franchisor is conclusively presumed to be competing unfairly if it gives preferential treatment to a dealer or dealership in which an interest is directly or indirectly owned, operated, or controlled by the manufacturer or franchisor or any partner, affiliate, wholly or partially owned subsidiary, officer, or representative of the manufacturer or franchisor, expressly including, but not limited to, preferential treatment regarding the direct or indirect cost of vehicles or parts, the availability or allocation of vehicles or parts, the availability or allocation of special or program vehicles, the provision of service and service support, the availability of or participation in special programs, the administration of warranty policy, the availability or allocation of factory rebates, or the availability and use of after warranty adjustments, advertising, floor planning, or financing or financing programs.
(C) It is unlawful for a manufacturer or franchisor or any parent, affiliate, wholly or partially owned subsidiary, officer, or representative of a manufacturer or franchisor to own a facility that engages primarily in the repair of motor vehicles, except motor homes, if the repairs are performed pursuant to the terms of a franchise or other agreement or the repairs are performed as part of a manufacturer's or franchisor's warranty. Nothing in this subsection prohibits a manufacturer or franchisor or any parent, affiliate, wholly or partially owned subsidiary, officer, or representative of a manufacturer or franchisor from owning a facility to perform warranty or other repairs on motor vehicles owned and operated by the manufacturer or franchisor or any parent, affiliate, wholly or partially owned subsidiary, officer, or representative of a manufacturer or franchisor.
(D) Except as may be provided otherwise in subsections (A) and (B) of this section, a manufacturer or franchisor may not sell, directly or indirectly, a motor vehicle to a consumer in this State, except through a new motor vehicle dealer holding a franchise for the line make that includes the motor vehicle. This subsection does not apply to manufacturer or franchisor sales of new motor vehicles to the federal government, nor to manufacturer or franchisor leases of new motor vehicles to employees of the manufacturer or franchisor. Nothing in this subsection prohibits a manufacturer or franchisor or any parent, affiliate, wholly or partially owned subsidiary, officer, or representative of a manufacturer or franchisor operating as a motor vehicle lessor from selling a motor vehicle to the lessee at the conclusion of a lease agreement between the two parties. Nothing in this subsection prevents a manufacturer or franchisor from establishing an e-commerce website for the purpose of referring prospective customers to motor vehicle dealers holding a franchise for the same line make of the manufacturer or franchisor.
Section 56-15-46. (A) A franchisor that intends to establish a new dealership or to relocate a current dealership for a particular line-make motor vehicle within a ten-mile radius of an existing dealership of the same line-make motor vehicle shall give written notice of that intent by certified mail to the existing dealership. The notice must include the:
(1) specific location of the additional or relocated dealership;
(2) date of commencement of operation of the additional or relocated dealership at the new location;
(3) identities of all existing dealerships located in the market area of the new or relocated dealership; and
(4) names and addresses of the dealer and principals in the new or relocated dealership.
(B) If a franchisor intends to establish a new dealership or to relocate a current dealership within a ten-mile radius of an existing dealership, then that existing dealership may petition the court, within sixty days of the receipt of the notice, to enjoin or prohibit the establishment of the new or relocated dealership within a ten-mile radius of the existing dealership. The court shall enjoin or prohibit the establishment of the new or relocated dealership within a ten-mile radius of the protesting dealership unless the franchisor shows by a preponderance of the evidence that the existing dealership is not providing adequate representation of the line-make motor vehicle and that the new or relocated dealership is necessary to provide the public with reliable and convenient sales and service within that area. The burden of proof in establishing adequate representation is on the franchisor. In determining if the existing dealership is providing adequate representation and if the new or relocated dealership is necessary, the court may consider, but is not limited to considering:
(1) the impact the establishment of the new or relocated dealership will have on consumers, the public interest, and the protesting dealership, except that financial impact may be considered only with respect to the protesting dealership;
(2) the size and permanency of investment reasonably made and the reasonable obligations incurred by the protesting dealership to perform its obligation pursuant to the dealership's franchise agreement;
(3) the reasonably expected market penetration of the line-make motor vehicle, after consideration of all factors which may affect the penetration including, but not limited to, demographic factors such as age, income, education, size class preference, product popularity, retail lease transactions, and other factors affecting sales to consumers;
(4) actions by the franchisor in denying its existing dealership of the same line make the opportunity for reasonable growth, market expansion, or relocation, including the availability of line-make motor vehicles in keeping with reasonable expectations of the franchisor in providing an adequate number of dealerships;
(5) attempts by the franchisor to coerce the protesting dealership into consenting to an additional or relocated dealership of the same line make within a ten-mile radius of the protesting dealership;
(6) distance, travel time, traffic patterns, and accessibility between the protesting dealership of the same line make and the location of the proposed new or relocated dealership;
(7) the likelihood of benefits to consumers from the establishment or relocation of the dealership, which benefits may not be obtained by other geographic or demographic changes or other expected changes within a ten-mile radius of the protesting dealership;
(8) if the protesting dealership is in substantial compliance with its franchise agreement;
(9) if there is adequate interbrand and intrabrand competition with respect to the line-make motor vehicles, including the adequacy of sales and service facilities;
(10) if the establishment or relocation of the proposed dealership appears to be warranted and justified based on economic and market conditions pertinent to dealerships competing within a ten-mile radius of the protesting dealership, including anticipated changes; and
(11) the volume of registrations and service business transacted by the protesting dealership.
(C) This section does not apply to the:
(1) addition of a new dealership at a location that is within a three-mile radius of a former dealership of the same line make and that has been closed for less than two years;
(2) relocation of an existing dealership to a new location that is further away from the protesting dealer's location than the relocated dealer's previous location; or
(3) relocation of an existing dealership to a new location that is within a three-mile radius of the dealership's current location, when it has been at the current location at least ten years."
Fulfillment of warranty agreements; dealer's claim for compensation
SECTION 3. Section 56-15-60 of the 1976 Code is amended to read:
"Section 56-15-60. (A) Every manufacturer, distributor, wholesaler, distributor branch or division, factory branch or division, or wholesale branch or division must fulfill properly a warranty agreement and compensate adequately and fairly each of its motor vehicle dealers for labor and parts. All claims made by motor vehicle dealers pursuant to this section and Section 56-15-50 for labor and parts must be paid within thirty days following their approval. All claims must be either approved or disapproved within thirty days after their receipt. The motor vehicle dealer who submits a disapproved claim must be notified in writing of its disapproval within that period, and the notice must state the specific grounds upon which the disapproval is based. Any special handling of claims required by the manufacturer, distributor, wholesaler, distributor branch or division, factory branch or division, or wholesale branch or division, but not uniformly required of all dealers of that make, may be enforced only after thirty days' notice in writing of good and sufficient reason.
(B) An audit for sales incentives, service incentives, rebates, or other forms of incentive compensation may include only the twelve-month period immediately following the date of the termination of the incentive compensation program. This limitation is not effective in the case of fraudulent claims.
(C) If an audit or other authorized means of review by the manufacturer or franchisor discloses a material defect in the claim, the manufacturer or franchisor may demand reimbursement for funds previously paid to a dealer for warranty service provided the audit is completed within twelve months of filing a claim."
Electronic sale of motor vehicles
SECTION 4. Chapter 15, Title 56 of the 1976 Code is amended by adding:
"Section 56-15-85. This chapter does not prohibit a dealership located in this State from contracting with an on-line electronic service to provide motor vehicles to consumers in this State."
Establishment of venue
SECTION 5. Chapter 15, Title 56 of the 1976 Code is amended by adding:
"Section 56-15-140. In an action brought pursuant to this article, venue is in the State of South Carolina. A provision of a franchise or other agreement with contrary provisions is void and unenforceable."
Notice on title of return to manufacturer under lemon law
SECTION 6. Chapter 19, Title 56 of the 1976 Code is amended by adding:
"Section 56-19-490. (A) In every sale or transfer of a motor vehicle returned to the manufacturer under the provisions of Chapter 28, Title 56, a similar statute of another state, or as the result of a legal action, the title must have the following sentence printed on its face in large, bold, uppercase type: 'RETURNED TO MANUFACTURER UNDER LEMON LAW OR OTHER PROCEEDING.' The notice required under the provisions of this subsection must continue to appear on each title issued as a result of any subsequent sale or transfer of that motor vehicle.
(B) Any person who transfers or attempts to transfer a motor vehicle in violation of this section is subject to a fine of not less than five hundred dollars nor more than five thousand dollars if the person had knowledge that the motor vehicle was returned to the manufacturer for failure to meet express warranties under a 'lemon law' or other similar proceeding."
Time effective
SECTION 7. This act takes effect upon approval by the Governor.
Ratified the 16th day of May, 2000.
Approved the 17th day of May, 2000.
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