ARIZONA STATE SENATE
Phoenix, Arizona
motor vehicle dealers;
factories.
Purpose
Expands the conditions and modifies the temporary extensions under which motor vehicle factories may obtain ownership of individual dealerships.
Background
Current law prohibits a manufacturer, franchisor, distributor or importer of motor vehicles (“factory”) from direct or indirect competition or unfair discrimination among its dealers (A.R.S. 28-4460). Factory ownership interest or franchise interest in a dealer or operating as a dealer falls under the definition of competing with or unfair discrimination unless the factory owns or operates as a new motor vehicle dealer temporarily for up to 12 months during the sale and transfer of ownership from one dealer to another. Statute also allows this temporary period to be extended up to six months for good cause or in one-year increments for not more than five years for recreational vehicle manufacturers.
Currently, if dealers are facing financial losses, factories oftentimes will step in and temporarily own or operate the dealership during the sale and transition from one dealer to another to avoid a disposition of interest or the liquidation of factory stock at the affected dealership. Statute allows such factory ownership for up to a year and an extension for up to six months for good cause. However, some factories view the six-month extension as not enough time to temporarily purchase dealers and engage in resale with independent buyers. S.B. 1096 allows for one-year extension periods and expands the conditions under which a factory may temporarily own or operate a new dealership to include the submission of evidence that disposition of a factory’s interest in the dealership will result in financial loss to the factory or dealership.
There is no anticipated
fiscal impact to the state general fund associated with this legislation.
Provisions
1. Expands the conditions that allow temporary factory ownership or operation of a new motor vehicle dealership to include submission of evidence by a factory that disposition of its interest will result in financial loss to the factory or dealership.
2. Eliminates the six-month extension a factory may currently request for good cause.
3. Applies to all factories the one-year extension increments a recreational vehicle manufacturer may currently request and removes the five-year limit on such extensions.
4. Provides for a general effective date.
Prepared by Senate Staff
January 25, 2002