CNCDA-Sponsored Legislation To Protect the Franchise System In 2023, the California Legislature enacted AB 473, CNCDA-sponsored legislation, to protect franchised new motor vehicle dealers. Subsection (b) of Section A of that legislation provides: “The new motor vehicle franchise system, which operates within a strictly defined and highly regulated statutory scheme, ensures the consuming public of a well-organized distribution system for the availability and sale of new motor vehicles throughout the state, provides a network of quality warranty, recall and repair facilities to maintain those vehicles, and creates a cost-effective method for the state to police those systems through the licensing and regulation of private sector franchisors and franchisees.” Vehicle Code Section 11713.13 (o)(1) is a very significant provision of AB 473. It provides: “It is unlawful and a violation of this code for a manufacturer, manufacturer branch, distributor or distributor branch licensed pursuant to this code to do, directly or indirectly through an affiliate, any of the following: to compete with their franchisees in the sale, lease or warranty service of new motor vehicles.” Subsection (z)(1) of Section 11713.13 adds an important element to the prohibition of manufacturer competition by defining an affiliate: “Affiliate” means a person who directly or indirectly, through one or more intermediaries, controls, is controlled by or is under the common direction and control with, another person. “Control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of any person.” This is important because manufacturers are not allowed to compete with franchised dealers by acting through affiliates, and that is exactly what Volkswagen and Honda are doing with the Scout and Afeela vehicles. The CNCDA Lawsuits CNCDA has filed a lawsuit over the Scout vehicles against Volkswagen Group of America, Volkswagen AG, Scout Motors and Scout Motors Sales LLC, which is pending in the United States District Court for the Southern District of California. CNCDA has also filed a lawsuit over the Afeela vehicles against American Honda Motor Co., Sony Honda Mobility of America, and Sony Honda Mobility, which is pending in the Los Angeles County Superior Court. Both lawsuits allege that the defendants have violated 17 California New Car Dealer Quarterly
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