OLR Bill Analysis

SB 3

AN ACT CONCERNING THE LICENSING OF NEW AND USED CAR DEALERS.

SUMMARY:

This bill allows a licensed motor vehicle manufacturer to sell the vehicles it makes directly to Connecticut consumers under certain conditions. It does so by authorizing the motor vehicles commissioner to issue a new or used car dealer's license to a licensed motor vehicle manufacturer that meets certain requirements.

Current motor vehicle law bars manufacturers from holding a new or used car dealer's license (see BACKGROUND) except that:

1. the motor vehicles commissioner may issue a used car dealer's license to a manufacturer primarily engaged in renting motor vehicles and industrial and construction equipment under certain conditions and

2. a manufacturer may operate a dealership for up to one year (or two years if the commissioner makes certain determinations).

The bill also makes technical and conforming changes.

EFFECTIVE DATE: October 1, 2016

CRITERIA A MOTOR VEHICLE MANUFACTURER MUST MEET TO SELL DIRECTLY TO CONNECTICUT RESIDENTS

To qualify for a new or used car dealer's license under the bill, a licensed manufacturer:

1. cannot have a franchise agreement with a new car dealer in Connecticut;

2. must manufacture only electric vehicles and sell at retail only vehicles it makes;

3. cannot hold a controlling interest in another manufacturer or a subsidiary, affiliate, or entity owned or controlled by another manufacturer, licensed as a dealer under the bill; and

4. cannot be owned or controlled by another manufacturer or a subsidiary, affiliate, or entity owned or controlled by another manufacturer, licensed as a dealer under the bill.

The bill exempts a manufacturer who meets these qualifications from motor vehicle franchise laws (see BACKGROUND). One law from which it exempts a manufacturer licensed as a dealer under the bill assigns priority order of dealer ownership rights in cases where such ownership rights conflict.

Under the bill, a manufacturer is any person, firm, or corporation licensed as a motor vehicle manufacturer under state law and any subsidiary, affiliate, or entity it owns or controls. The bill expands the statutory definitions of new and used car dealers to include such a manufacturer and generally subjects the manufacturer to the rules governing these dealers. Under the bill, if a manufacturer is licensed as a new car dealer, it may also repair vehicles and sell used vehicles; if licensed as a used car dealer, it may also repair vehicles.

BACKGROUND

Motor Vehicle Franchises and Dealerships

Under the laws governing motor vehicle franchises, a motor vehicle manufacturer makes or assembles new motor vehicles or imports them for distribution to dealers or through distributors or factory branches. A dealer sells motor vehicles and holds a valid sales and service agreement, franchise, or contract with a manufacturer or distributor for retail sale of the manufacturer's or distributor's new motor vehicles (CGS 42-133r).

The motor vehicle franchise laws set out, among other things, the respective obligations of manufacturers and dealerships (CGS 42-133r to 42-133mm). They generally prohibit a manufacturer from unfairly competing with a dealer who (1) sells the manufacturer's “line make” of vehicles (e.g., Toyota or Ford) and (2) is operating under an agreement or franchise with the manufacturer (CGS 42-133cc (8)).

Motor Vehicle Dealer Laws and Regulations

Motor vehicle dealers are subject to laws governing vehicle licensing, registration, and recordkeeping, among other things.

The Department of Motor Vehicles (DMV) requires new and used car dealers to pay a biennial license fee of $700 and $560 respectively. New and used car dealers also must post a $50,000 cash or surety bond and comply with applicable state and federal laws. The commissioner may refuse to grant or renew a license if the dealer, an officer, or major stockholder has been convicted of violating any criminal laws pertaining to the business or certain other crimes such as fraud (CGS 14-52 & 52a).

Dealers must follow motor vehicle law regulations in such areas as use of dealer plates, record-keeping, motor vehicle guarantees, odometer readings, issuing vehicle registrations, and customer complaints (Conn. Agencies Reg. 14-63-1 et seq.).

Manufacturer

Under the motor vehicle statutes, a manufacturer generally is (1) a person, whether or not a Connecticut resident, engaged in the business of constructing or assembling new motor vehicles of a type required to be registered by the commissioner, for operation upon any highway, except a utility trailer, which are offered for sale in Connecticut, or (2) a person who distributes new motor vehicles to new car dealers licensed in Connecticut (CGS 14-1 (48)).

The law prohibits any person, firm, or corporation from engaging in the business of manufacturing motor vehicles without receiving a manufacturer's license, which expires biennially on June 30. Applicants for a manufacturer license must apply to DMV and pay a biennial license fee of $2,300 (CGS 14-67a).

COMMITTEE ACTION

Transportation Committee

Joint Favorable

Yea

29

Nay

4

(03/15/2016)