BILL ANALYSIS
AB 585
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 585 (Negrete McLeod)
As Amended August 29, 2005
2/3 vote. Urgency
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|ASSEMBLY: |74-0 |(May 27, 2005) |SENATE: |30-6 |(September 6, |
| | | | | |2005) |
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Original Committee Reference: B. & P.
SUMMARY : Sets forth the contractual rights and obligations of
dealers, single-line dealers, suppliers, and single-line
suppliers.
The Senate amendments :
1)Define "claim" as a dealer's claim for reimbursement from a
supplier for labor and materials expended by a dealer to meet
the requirements of the supplier's warranty agreement with a
consumer.
2)Provide that no provision of the Equipment Dealer's Act (Act)
permits the offering or enforcement of a provision in a dealer
contract that requires a dealer to engage in price-fixing or
any other activity that limits competition; however, a
contract provision pertaining to exclusive territorial rights
shall not be prohibited.
3)Provide that a supplier must give a one-year notice to a
dealer before terminating a contract with the dealer because
the dealer has not met the supplier's reasonable standards and
performance objectives. If a dealer meets the supplier's
reasonable standards and performance objectives before
expiration of one year, the termination notice shall be void.
4)Provide that, where sales, rental, or repair of a supplier's
equipment constitute either 10% or $350,000, whichever is
less, of a dealer's total gross annual revenue, a supplier
must give a 180-day notice before terminating a contract with
the dealer because the dealer has not met the supplier's
reasonable standards and performance objectives. If the
dealer meets the supplier's reasonable standards and
performance objectives within 60 days of receipt of the
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termination notice, the termination notice shall be void.
5)Provide that a supplier shall have "good cause" to cancel a
contract if a dealer has engaged in conduct that is injurious
or detrimental to the dealer's customers, the public welfare,
or the reputation of a supplier's products.
6)Provide that a supplier that has issued a termination notice
to a dealer may begin negotiating with a potential replacement
dealer 60 days prior to the end of the grace period (either
180 days or one year) granted to the dealer whose contract is
being terminated; however, a replacement dealer may not
conduct operations with a supplier while an exclusive contract
remains in effect.
7)Provide that a supplier receiving returned parts from a dealer
may credit the dealer's account for the value of those parts
within 30 days if the dealer owes the supplier an outstanding
balance. A supplier shall pay a dealer for returned parts
within 30 days of receipt of those parts if no outstanding
balance exists. If the supplier does not compensate a dealer
for returned parts within 30 days, the supplier shall be
liable to the dealer for 110% of the current cost, plus
interest, of the returned parts.
8)Provide that when a supplier terminates a contract with a
dealer that has multiple business locations, the supplier
shall only be obligated to repurchase equipment in the
dealer's inventory at the business location(s) affected by a
contract termination.
9)Provide that, where sales, rental, or repair of a supplier's
product constitute either 10% or $350,000, whichever is less,
of a dealer's total gross annual revenue, the supplier shall
only be obligated to repurchase its product within the
dealer's inventory if the contract is terminated for one of
the following reasons:
a) The supplier consistently failed to provide adequate
product support for the type and use of the product;
b) The supplier consistently failed to provide adequate
training for maintenance, repair, or usage of the
supplier's product;
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c) The supplier's product is defective;
d) The supplier consistently failed to meet its warranty
obligations to the dealer;
e) The supplier abandons the market, thereby failing to
provide the dealer with the necessary parts and services
for the dealer to perform warranty obligations;
f) The supplier engaged in conduct that is injurious or
detrimental to the dealer's customers, the public welfare,
or the reputation of the dealer;
g) The supplier made a material misrepresentation or
falsification of any record; or,
h) The supplier violated any provision of the Act.
10)Provide that a supplier must reject or approve a warranty
claim from a dealer within 45 days and provide written
justification for any rejection. A supplier may audit a
dealer's warranty claims and both parties have specified
rights pertaining to warranty claims.
11)Define "established customer hourly retail labor rate" as the
lowest posted customer in-shop retail labor rate during the
six months preceding the claim for the purpose of determining
the cost of warranty work performed by the dealer.
12)Provide that a dealer may not cancel an agreement with a
supplier in order to avoid a payment obligation to the
supplier.
13)Delete a change to the definition of "dealer contract" under
existing law.
14)Delete a change to the definition of "good cause" under
existing law.
15)Delete a change to the definition of "supplier" under
existing law.
16)Make this bill an urgency statute.
17)Make technical and conforming changes.
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EXISTING LAW provides for the regulation of equipment dealers
and defines equipment as machines designed for agriculture,
livestock, grazing, light industrial, and utility purposes.
This definition excludes all-terrain vehicles, earth moving and
heavy construction equipment, and mining and forestry equipment.
AS PASSED BY THE ASSEMBLY , this bill set forth the contractual
rights and obligations of dealers, single-line dealers,
suppliers, and single-line suppliers.
FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS : The Senate amendments address the concerns of small
equipment manufacturers (suppliers) as represented by Farm
Equipment Manufacturers Association (FEMA). With the August 29,
2005 amendments, FEMA removes its opposition and now supports
this bill. FEMA asserts that the latest amendments "will
provide more certainty for small equipment manufacturers
struggling to compete in the marketplace."
According to the sponsor, Far West Equipment Dealers Association
(Far West), the sole intention of this bill is to clarify,
modernize, and add uniformity to existing law. Since the
enactment of the original Act in 1992, business practices
between dealers and suppliers have changed and the updates in
this bill are necessary to reflect those changes. Far West
states that it has been working with manufacturers to find
uniform and consistent language to ensure fair treatment of both
dealers and manufacturers.
AB 2478 (Areias), Chapter 2478, Statutes of 1992, regulates
business relations between independent dealers and
manufacturers, wholesalers, and distributors of agricultural,
utility, and industrial equipment.
Analysis Prepared by : Pablo Garza / B. & P. / (916) 319-3301
FN: 0012961