Alabama Code Title 8. Commercial Law and Consumer Protection § 8-20-4




Notwithstanding the terms, provisions, or conditions of any dealer agreement or franchise or the terms or provisions of any waiver, prior to the termination, cancellation, or nonrenewal of any dealer agreement or franchise, the following acts or conduct shall constitute unfair and deceptive trade practices:

(1) For any manufacturer, factory branch, factory representative, distributor, or wholesaler, distributor branch, or distributor representative to coerce or attempt to coerce any motor vehicle dealer to do any of the following:

a. To accept, buy, or order any motor vehicle or vehicles, appliances, equipment, parts, or accessories therefor, or any other commodity or commodities or service or services which such motor vehicle dealer has not voluntarily ordered or requested except items required by applicable local, state, or federal law;  or to require a motor vehicle dealer to accept, buy, order, or purchase such items in order to obtain any motor vehicle or vehicles or any other commodity or commodities which have been ordered or requested by such motor vehicle dealer.

b. To order or accept delivery of any motor vehicle with special features, appliances, accessories, or equipment not included in the list price of the motor vehicles as publicly advertised by the manufacturer thereof, except items required by applicable law.

c. To enter into any agreement with such manufacturer, factory branch, factory representative, distributor, or wholesaler, distributor branch or distributor representative, to do any other act prejudicial to the dealer, the effect of which is to reduce the motor vehicle dealer's allocation of motor vehicles or cancel or fail to renew any franchise or any dealer agreement existing between the parties other than as hereinafter provided;  provided, however, that this subsection is not intended to preclude the manufacturer or distributor from insisting on compliance with the reasonable terms or provisions of the franchise, and notice in good faith to any motor vehicle dealer of the dealer's violation of any reasonable terms or provisions of such franchise or dealer agreement or of any law or regulation applicable to the conduct of a motor vehicle dealer shall not constitute a violation of this chapter.

d. To participate monetarily in an advertising campaign or contest, or to purchase any promotional materials, training materials, showroom, or other display decorations or materials at the expense of the new motor vehicle dealer.  This paragraph is not intended to modify any reasonable and uniformly applied provision of the franchise which requires the new motor vehicle dealer to advertise and promote the sale of vehicles and does not apply to campaigns, contests, advertising, and other promotional programs in which the new motor vehicle dealer voluntarily elects to participate.

e. To refrain from participation in the management of, investment in, or the acquisition of any other line of new motor vehicle or related products;  provided that the new motor vehicle dealer maintains a reasonable line of credit for each make or line of new motor vehicle, and that the new motor vehicle dealer remains in substantial compliance with the terms and conditions of the franchise.

f. To change the location of the new motor vehicle dealership or, during the course of the agreement, to make any substantial alterations to the dealership premises when to do so would be unreasonable.

g. To establish or maintain exclusive sales facilities or sales display space for a new motor vehicle line make unless such exclusive sales facilities or sales display space are reasonable and are otherwise justified by reasonable business considerations.  The burden of proving that reasonable business considerations justify exclusive sales facilities or sales display space is on the manufacturer.  Provided, however, a manufacturer or distributor may not coerce, attempt to coerce, or require a motor vehicle dealer to establish or maintain exclusive personnel or exclusive service, parts, or administrative facilities for a line make.

h. To adhere to performance standards that are not fair, reasonable, and equitable or that are not applied uniformly to other similarly situated dealers.  A performance standard, sales objective, or program for measuring dealership performance that may have a material effect on a dealer, including the dealer's right to payment under any incentive or reimbursement program shall be fair, reasonable, equitable, and based on accurate information.

i. To engage in any acts which constitute fraud, deceit, or suppression under Sections 6-5-100 to 6-5-104 , inclusive.

j. To offer to sell or to sell any extended service contract or extended maintenance plan offered, sold, backed by, or sponsored by the manufacturer or to sell, assign, or transfer any retail installment sales contract or lease obtained by the dealer in connection with the sale or lease of a new motor vehicle manufactured by the manufacturer to a specified finance company, class of finance companies, leasing company, or class of leasing companies, or to any other specified persons.

(2) For any manufacturer, factory branch, factory representative, distributor, or wholesaler, distributor branch, distributor representative, or motor vehicle dealer to engage in any action with respect to a franchise which is arbitrary, unconscionable, unreasonable, or is not in good faith and which causes damage to any of the parties.

(3) For any manufacturer, factory branch, factory representative, distributor, or wholesaler, distributor branch, or distributor representative to do any of the following:

a. To adopt, change, establish, or implement a plan or system for the allocation and distribution of new or used motor vehicles to motor vehicle dealers which is arbitrary, capricious, or unreasonably discriminatory or to modify an existing plan so as to cause the same to be arbitrary, capricious, or unreasonably discriminatory.

b. To fail or refuse to advise or disclose to any motor vehicle dealer having a franchise or dealer agreement, upon written request therefor, the basis upon which new motor vehicles of the same line make are allocated or distributed to motor vehicle dealers in the state and the basis upon which the current allocation or distribution is being made or will be made to such motor vehicle dealer.

c. To refuse to deliver to a motor vehicle dealer in reasonable quantities and within a reasonable time after receipt of the motor vehicle dealer's order any such motor vehicles as are covered by a franchise or dealer agreement and specifically publicly advertised in the state by such manufacturer, factory branch, factory representative, distributor, or wholesaler, distributor branch, or distributor representative to be available for immediate delivery;  provided, however, that the failure to deliver any motor vehicle shall not be considered a violation of this chapter if such failure is due to an act of God, a work stoppage or delay due to a strike or labor difficulty, a shortage of materials, lack of available manufacturing capacity, a freight embargo, or other cause over which the manufacturer, factory branch, factory representative, distributor, or wholesaler, distributor branch, or distributor representative shall have no control.

d. To cancel or terminate the franchise or dealer agreement of a motor vehicle dealer other than as hereinafter provided.

e. To fail or refuse to extend the franchise or dealer agreement of a motor vehicle dealer upon its expiration other than as hereinafter provided.

f. To offer a renewal, replacement, or succeeding franchise or dealer agreement containing terms and provisions the effect of which is to substantially change or modify the sales and service obligations or capital requirements of the motor vehicle dealer other than as hereinafter provided.

g. To offer to sell or lease, or to sell or lease, any new motor vehicle to any motor vehicle dealer at a lower actual price therefor than the actual price offered to any other motor vehicle dealer for the same model vehicle similarly equipped or to utilize any device including, but not limited to, sales promotion plans or programs which result in such lesser actual price and which are not offered to dealers of vehicles of the same line make;  provided, however, that the provisions of this paragraph shall not apply to sale to a motor vehicle dealer for resale to any unit of the United States government, the state, or any of its political subdivisions.

h. To offer to sell or lease, or to sell or lease, any new motor vehicle to any person, except a wholesaler's or distributor's or manufacturer's employees, at a lower actual price therefor than the actual price offered and charged to a motor vehicle dealer for the same model vehicle similarly equipped or to utilize any device which results in such lesser actual price and which are not offered to dealers of vehicles of the same line make;  provided, however, that the provisions of this paragraph shall not apply to sales to a motor vehicle dealer for resale to any unit of the United States government, the state, or any of its political subdivisions.

i. To prevent or attempt to prevent by contract or otherwise any motor vehicle dealer from changing the executive management control of the motor vehicle dealer unless such change of executive management control will result in executive management control by a person or persons who are not of good moral character or who do not meet the manufacturer's or wholesaler's or distributor's existing and reasonable capital standards and, with consideration given to the volume of sales and service of the new motor vehicle dealer, uniformly applied minimum business experience standards in the market area;  provided, however, that where the manufacturer, or distributor, or wholesaler rejects a proposed change in executive management control, the manufacturer, or distributor, or wholesaler shall give written notice of his or her reasons to the motor vehicle dealer within 45 days of notice to the manufacturer, or wholesaler, or distributor by the motor vehicle dealer of the proposed change accompanied by information reflecting the identity, business experience and affiliations, and source of investment funds of the proposed new management.

j. To prevent or attempt to prevent by contract or otherwise any motor vehicle dealer from establishing or changing the capital structure of his or her dealership or the means by or through which he or she finances the operation thereof;  provided the dealer meets any reasonable capital standards agreed to between the motor vehicle dealer and the manufacturer, distributor, or wholesaler, who may require that the sources, method, and manner by which the motor vehicle dealer finances or intends to finance its operation, equipment, or facilities be fully disclosed.

k. To refuse to give effect to or prevent or attempt to prevent by contract or otherwise any motor vehicle dealer or any officer, partner, or stockholder of any motor vehicle dealer from selling or transferring any part of the interest of any of them to any other person unless such sale or transfer is to a transferee who would not otherwise qualify for a new motor vehicle dealer's license issued by the State of Alabama or a political subdivision thereof or unless such sale or transfer is to a person who is not of good moral character or who does not meet the manufacturer's or wholesaler's or distributor's existing and reasonable capital standards and, with consideration given to the volume of sales and service of the dealership, uniformly applied minimum business experience standards in the market area;  provided, however, that where such a rejection of a transfer is made the manufacturer or distributor or wholesaler shall give written notice of his or her reasons to the motor vehicle dealer within 60 days of notice to the manufacturer or wholesaler or distributor by the dealer of the proposed transfer accompanied by information reflecting the identity of the new owner or owners, their business experience and affiliations and the pro forma balance sheet and source of investment funds of the proposed new dealership.  A manufacturer or distributor may exercise a contractual right of first refusal with respect to the sale or transfer of the interest of the dealer only if each of the following requirements are met:

1. The sale or transfer is not to a family member of an owner of the dealership, nor a managerial employee of the dealership owning 15 percent or more of the dealership, nor a corporation, partnership, or other legal entity owned by the existing owners of the dealership.  For purposes of this subparagraph, a “family member” means the spouse of an owner of the dealership, the child, grandchild, brother, sister, or parent of an owner, or a spouse of one of those family members.

2. The manufacturer or distributor notifies the dealer in writing within 60 days after receipt of the completed application forms and related information generally used by a manufacturer or distributor to conduct its review and a copy of all agreements regarding the proposed transfer of its intent to exercise its right of first refusal or its rejection of the proposed transfer.  If the manufacturer or distributor fails to notify the dealer of its exercise of the right of first refusal or its rejection of the proposed transferee within the 60-day period, the effect of such failure shall constitute approval of the proposed sale or transfer.  If the manufacturer or distributor exercises a right of first refusal under this section, the transfer shall be deemed to be rejected.

3. The exercise of the right of first refusal provides to the dealer the same compensation as, or greater compensation than, the dealer had negotiated to receive from the proposed buyer or transferee.

4. The manufacturer or distributor agrees to pay the reasonable expenses, including reasonable attorneys' and accountants' fees that do not exceed the usual, customary, and reasonable fees charged for similar work done for other clients incurred by the proposed buyer or transferee before the manufacturer's or distributor's exercise of its right of first refusal in negotiating and implementing the contract for the sale or transfer.  The proposed buyer or transferee shall provide to the manufacturer or distributor a written itemization of the expenses incurred within 30 days of the receipt by the proposed buyer or transferee of a written request from the manufacturer or distributor for an accounting of the expenses.  The manufacturer or distributor shall make payment of these expenses within 30 days of exercising the right of first refusal.

l. To unreasonably and without notice to existing motor vehicle dealers, as hereinafter provided, enter into a franchise with an additional motor vehicle dealer who intends to conduct its dealership operations from a place of business situated within the relevant market area of an existing motor vehicle dealer or motor vehicle dealers representing the same line make.  The appointment of a successor motor vehicle dealer at the same location as its predecessor or within a two-mile radius therefrom within two years from the date on which its predecessor ceased operations or was terminated, whichever occurred later, shall not be construed as the entering into of an additional franchise.  Any manufacturer, distributor, or wholesaler, factory branch, factory representative, distributor branch, or distributor representative which intends to enter into an additional franchise shall, at least 60 days prior to granting such franchise, give written notice of its intention to do so to each motor vehicle dealer of the same line make within the relevant market area.  Such notice shall state the date on or after which such proposed franchise shall be granted or entered into.  Prior to the date set forth in the notice on or after which such franchise will be entered into, any such motor vehicle dealer may petition a court of competent jurisdiction to determine whether such appointment or proposed appointment is unreasonable in which action the manufacturer, wholesaler, or distributor shall have the burden of proof that such action is not unreasonable.  No bond shall be required as a precondition to entry of an injunction enjoining appointment of an additional franchise.  Such petition shall be entitled to a speedy trial.  In determining whether such proposed appointment is unreasonable, the court shall consider all pertinent circumstances.  These may include but are not limited to:

1. Whether the establishment of such additional franchise is warranted by economic and marketing conditions including anticipated future changes.

2. The past, present, and anticipated retail sales and service business transacted by the objecting motor vehicle dealer or dealers and other motor vehicle dealers of the same line make with a place of business in the relevant market area.

3. The investment made and obligations incurred by the objecting motor vehicle dealer or dealers and other motor vehicle dealers of the same line make with a place of business in the relevant market area.

4. Whether it is beneficial or injurious to the public welfare for an additional franchise to be established.

m. To prospectively assent to a release, assignment, novation, agreement, waiver, or estoppel 1. which would relieve any person from any liability or obligation under this chapter, 2. which would require any controversy between a new motor vehicle dealer and a manufacturer to be referred to any person other than the duly constituted courts of this state or the United States, if the referral would be binding on the new motor vehicle dealer, 3. which would limit the entitlement to recover damages under this chapter or other Alabama law, 4. which specifies the jurisdiction or venues in which disputes arising with respect to the franchise shall or shall not be submitted for resolution or otherwise prohibits a dealer from bringing an action in the courts of Alabama, or 5. which would waive the right to trial by jury.

n. To prevent or refuse to give effect to the succession to the ownership or management control of a dealership upon the death or incapacity of a motor vehicle dealer to any legatee or devisee under the will of a dealer or to an heir under the laws of descent and distribution of this state unless the successor is a person who is not of good moral character or who does not meet the manufacturer's or distributor's or wholesaler's existing and reasonable capital standards and, with consideration given to the volume of the sales and service of the dealership, uniformly applied minimum business experience standards in the market area;  provided, however, that where such a rejection of succession is made, the manufacturer or distributor or wholesaler shall give written notice of his or her reasons to the proposed successor within 60 days of notice to the manufacturer or wholesaler or distributor by the proposed successor of his or her intent to succeed to the ownership or management of the dealership accompanied by information reflecting the identity of the new owner or owners, their business experience and affiliation and the pro forma balance sheet and source of investment funds of the proposed new dealership.  This section does not preclude the owner of a new motor vehicle dealer from designating any person as his or her successor by written instrument filed with the manufacturer or distributor and, in the event there is a conflict between such written instrument and the provisions of this section, the written instrument shall govern.

o. To fail to indemnify and hold harmless its motor vehicle dealers against any losses, including, but not limited to, court costs and reasonable attorneys' fees, or damages arising out of complaints, claims, or lawsuits, including, but not limited to, strict liability, negligence, misrepresentation, warranty (express or implied), or rescission of the sale where the complaint, claim, or lawsuit relates to 1. the manufacture, assembly, or design of new motor vehicles, parts, or accessories;  2. a defect in any forms furnished to the dealer or in the written instructions for the completion of such forms by the manufacturer, an affiliate of the manufacturer, or person controlled by the manufacturer used in connection with the sale, lease, or financing of a vehicle and associated products, unless the dealer improperly completes the forms or makes misrepresentations contrary either to the terms of the forms or the written instructions for their completion;  or 3. other functions by the manufacturer, beyond the control of the dealer, including, without limitation, the selection by the manufacturer of parts or components for the vehicle, or any damages to merchandise occurring in transit to the dealer where the carrier is designated by the manufacturer.

p. To increase prices of new motor vehicles which the new motor vehicle dealer had ordered for retail consumers prior to the dealer's receipt of the written official price increase notification.  A sales contract signed by a retail consumer shall constitute evidence of each such order;  provided that the vehicle is in fact delivered to that customer.  In the event of manufacturer price reductions or cash rebates, the amount of any such reduction or rebate received by a dealer shall be passed on to the retail consumer by the dealer if the retail price was negotiated on the basis of the previous higher price to the dealer.  Price reductions shall apply to all vehicles in the dealer's inventory which were subject to the price reduction.  Price differences applicable to new model or series motor vehicles at the time of the introduction of new models or series shall not be considered a price increase or price decrease.  Price changes caused by either:  1. the addition to a motor vehicle of required or optional equipment pursuant to state or federal law;  2. revaluation of the United States dollar, in the case of foreign-made vehicles or components;  or 3. an increase in transportation charges due to increased rates imposed by common or contract carriers, shall not be subject to the provisions of this paragraph.

q. To offer any refunds or other types of inducements to any person for the purchase of new motor vehicles of a certain line make to be sold to the state or any political subdivision thereof without making the same offer to all other new motor vehicle dealers in the same line make within the state.

r. To release to any outside party, except under subpoena, or as otherwise required by law or in an administrative, judicial, or arbitration proceeding, any business, financial, or personal information which may be from time to time provided by the dealer to the manufacturer, without the express written consent of the dealer.

s. To own an interest in a new motor vehicle dealership, to operate or control a dealership, to make direct sales or leases of new motor vehicles to the public in Alabama, or to own, operate, or control a facility for performance of motor vehicle warranty or repair service work, except as follows:

1. The manufacturer or distributor is owning or operating a new motor vehicle dealership or a warranty repair facility for a temporary period of not more than 24 months, as long as the new motor vehicle dealership or warranty repair center is for sale at a reasonable price and on reasonable terms and conditions;  or

2. The manufacturer's or distributor's participation is in a bona fide relationship with an independent person (i) who is required to make significant investment in the new motor vehicle dealership or warranty repair center subject to loss, (ii) and operates the dealership or warranty repair center and may reasonably be expected to acquire full ownership of the dealership or warranty repair center within a reasonable time and under reasonable terms and conditions.

3. The manufacturer or distributor is selling or leasing new motor vehicles in Alabama to its qualified vendors, not-for-profit organizations, fleets, or the federal, state, or local government if sold or leased and delivered through new motor vehicle dealers in this state.  The manufacturer or distributor is selling or leasing new motor vehicles in Alabama to its employees and employees' families if delivered through new motor vehicle dealers in this state.  The manufacturer or distributor is implementing a program to sell or lease or offer to sell or lease new motor vehicles through new motor vehicle dealers in this state.

4. The manufacturer or distributor owns a passive interest of not more than 10 percent in a publicly traded corporation held exclusively for investment purposes.

5. A manufacturer of recreational vehicles which as of December 31, 1999, owns, operates, or controls a facility in this state for performance of motor vehicle warranty repair or service work on recreational vehicles manufactured by that manufacturer.

6. The manufacturer or distributor is owning, operating, or controlling an entity primarily engaged in the business of renting passenger and commercial motor vehicles and industrial and construction equipment, as well as activities incidental to the businesses, including warranty and repair work on vehicles that it owns, previously owned, or takes in trade.

7. A manufacturer or distributor that meets all of the following requirements:

(i) Manufactures or distributes engines for installation in a vehicle having as its primary purpose the transport of a person or persons or property on a public highway and having a gross vehicle weight rating of more than 16,000 pounds, provided that the manufacturer does not otherwise manufacture motor vehicles as defined in Section 8-20-3 .

(ii) Owned, operated, or controlled a new motor vehicle dealership or a warranty repair facility in this state prior to January 1, 2016.

(iii) Does not own or operate more than three new motor vehicle dealership or warranty repair facilities in this state.

(iv) Does not regularly provide motor vehicle warranty or repair service work in this state to noncommercial single-family passenger motor vehicles having a gross vehicle weight rating of less than 16,000 pounds unless the repair is not reasonably available at a motor vehicle dealer that sells new motor vehicles with a gross vehicle weight rating of less than 16,000 pounds or at the request of such motor vehicle dealer.

(v) Avoids any acts or practices the effect of which may be to lessen or eliminate competition that provided to dealers on materially equal terms access to all support for completing repairs, including, but not limited to, parts and assembles, training, and technical service bulletins and other information concerning repairs that the manufacturer provides to facilities owned, operated, or controlled by the manufacturer.

t. To make any material change in any franchise agreement without giving the dealer written notice by certified mail of such change at least 60 days prior to the effective date of such change.

u. To fail to pay or otherwise compensate its new motor vehicle dealers for sales incentives, service incentives, rebates, or other forms of incentive compensation earned by the dealer as a consequence of incentive programs of the manufacturer.  The manufacturer shall have the right to audit any such incentive payments made to the dealer and to charge back the dealer for any fraudulent claims for incentive payments made to the dealer for a period not to exceed 12 months from the date the claim was paid.  A manufacturer shall not disapprove claims for which the dealer has received preauthorization from the manufacturer or its representative nor shall the manufacturer unreasonably disapprove a claim solely based on the dealer's incidental failure to comply with a specific claim processing requirement that results only in a clerical error or administrative error;  rather a claim denial must be based upon a material defect and deviation from the reasonable written claim submission requirements of the manufacturer.  In the event of neglect, oversight, or mistake by the dealer, a dealer may submit an amended claim, or may submit a claim not submitted within the time required by the manufacturer, for sales incentives, service incentives, rebates, or other forms of incentive compensation up to 120 days from the date on which such claim was first submitted or could have been submitted.

v. To fail or refuse to offer its same line make franchised dealers all models of new motor vehicles manufactured for that line make and offered to any dealer in this state.  No unreasonable additional requirements, over the requirements originally required to obtain a franchise from the manufacturer, may be required of existing franchised dealers to receive any model by that line make.  The provisions in this paragraph shall not apply to recreational vehicles and reasonable requirements of a manufacturer that its dealers obtain tools or diagnostic equipment to properly service its line make of motor vehicles.  The failure to deliver any such new motor vehicle shall not be considered a violation of this section if the failure is due to a lack of manufacturing capacity or to a strike or labor difficulty, a shortage of materials, a freight embargo, or any other cause over which the manufacturer has no control.

w. To prohibit a motor vehicle dealer from changing the location of the new motor vehicle dealership to another location within the dealer's assigned area of responsibility if the refusal to approve the relocation is not reasonable under the circumstances.

x. To charge back, deny vehicle allocation, withhold payments, or take any other adverse actions against a dealer because of a sale of a new motor vehicle which is exported from the United States unless the manufacturer can prove that the dealer knew or reasonably should have known on the date of the sale that the new motor vehicle was to be exported.  A dealer is rebuttably presumed to have no knowledge of the intended export if the vehicle is sold by the dealer to a United States resident who titles and registers the vehicle in any state in the United States.

y. To condition the sale, transfer, relocation, or renewal of a franchise or dealer agreement or to condition sales, service, parts, or finance incentives upon site control or an agreement to renovate or make substantial improvements to a facility;  provided, however, that voluntary and non-coerced acceptance of such conditions by the dealer in writing, including, but not limited to, a written agreement for which the dealer has accepted separate and valuable consideration, shall not constitute a violation.

z. To assign or change a dealer's area of responsibility under the franchise or dealer agreement arbitrarily or without due regard to the present or projected future pattern of motor vehicle sales and registrations within the dealer's market area and without first having provided the dealer with written notice of the change in the dealer's area of responsibility and a detailed description of the change and reasons therefor.





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