State Codes and Statutes
Statutes > Utah > Title-13 > Chapter-35 > 13-35-20113-35-201. Prohibited acts by franchisors -- Disclosures.
(1) A franchisor in this state may not:
(a) except as provided in Subsection (2), require a franchisee to order or accept deliveryof any new powersport vehicle, part, accessory, equipment, or other item not otherwise requiredby law that is not voluntarily ordered by the franchisee;
(b) require a franchisee to:
(i) participate monetarily in any advertising campaign or contest; or
(ii) purchase any promotional materials, display devices, or display decorations ormaterials;
(c) require a franchisee to change the capital structure of the franchisee's dealership orthe means by or through which the franchisee finances the operation of the franchisee'sdealership, if the dealership at all times meets reasonable capital standards determined by andapplied in a nondiscriminatory manner by the franchisor;
(d) require a franchisee to refrain from participating in the management of, investmentin, or acquisition of any other line of new powersport vehicles or related products, if thefranchisee:
(i) maintains a reasonable line of credit for each make or line of powersport vehicles; and
(ii) complies with reasonable capital and facilities requirements of the franchisor;
(e) require a franchisee to prospectively agree to a release, assignment, novation, waiver,or estoppel that would:
(i) relieve a franchisor from any liability, including notice and hearing rights imposed onthe franchisor by this chapter; or
(ii) require any controversy between the franchisee and a franchisor to be referred to athird party if the decision by the third party would be binding;
(f) require a franchisee to change the location of the principal place of business of thefranchisee's dealership or make any substantial alterations to the dealership premises, if thechange or alterations would be unreasonable;
(g) coerce or attempt to coerce a franchisee to join, contribute to, or affiliate with anadvertising association;
(h) require, coerce, or attempt to coerce a franchisee to enter into an agreement with thefranchisor or do any other act that is unfair or prejudicial to the franchisee, by threatening tocancel a franchise agreement or other contractual agreement or understanding existing betweenthe franchisor and franchisee;
(i) adopt, change, establish, modify, or implement a plan or system for the allocation,scheduling, or delivery of new powersport vehicles, parts, or accessories to its franchisees so thatthe plan or system is not fair, reasonable, and equitable;
(j) increase the price of any new powersport vehicle that the franchisee has ordered fromthe franchisor and for which there exists at the time of the order a bona fide sale to a retailpurchaser if the order was made prior to the franchisee's receipt of an official written priceincrease notification;
(k) fail to indemnify and hold harmless its franchisee against any judgment for damagesor settlement approved in writing by the franchisor:
(i) including court costs and attorneys' fees arising out of actions, claims, or proceedingsincluding those based on:
(A) strict liability;
(B) negligence;
(C) misrepresentation;
(D) express or implied warranty;
(E) revocation as described in Section 70A-2-608; or
(F) rejection as described in Section 70A-2-602; and
(ii) to the extent the judgment or settlement relates to alleged defective or negligentactions by the franchisor;
(l) threaten or coerce a franchisee to waive or forbear its right to protest theestablishment or relocation of a same line-make franchisee in the relevant market area of theaffected franchisee;
(m) fail to ship monthly to a franchisee, if ordered by the franchisee, the number of newpowersport vehicles of each make, series, and model needed by the franchisee to achieve apercentage of total new vehicle sales of each make, series, and model equitably related to thetotal new vehicle production or importation being achieved nationally at the time of the order byeach make, series, and model covered under the franchise agreement;
(n) require or otherwise coerce a franchisee to under-utilize the franchisee's existingfacilities;
(o) fail to include in any franchise agreement the following language or language to theeffect that: "If any provision in this agreement contravenes the laws, rules, or regulations of anystate or other jurisdiction where this agreement is to be performed, or provided for by such lawsor regulations, the provision is considered to be modified to conform to such laws, rules, orregulations, and all other terms and provisions shall remain in full force.";
(p) engage in the distribution, sale, offer for sale, or lease of a new powersport vehicle topurchasers who acquire the vehicle in this state except through a franchisee with whom thefranchisor has established a written franchise agreement, if the franchisor's trade name,trademark, service mark, or related characteristic is an integral element in the distribution, sale,offer for sale, or lease;
(q) except as provided in Subsection (2), authorize or permit a person to performwarranty service repairs on powersport vehicles, except warranty service repairs:
(i) by a franchisee with whom the franchisor has entered into a franchise agreement forthe sale and service of the franchisor's powersport vehicles; or
(ii) on owned powersport vehicles by a person or government entity who has purchasednew powersport vehicles pursuant to a franchisor's or manufacturer's fleet discount program;
(r) fail to provide a franchisee with a written franchise agreement;
(s) notwithstanding any other provisions of this chapter, unreasonably fail or refuse tooffer to its same line-make franchised dealers all models manufactured for that line-make, orunreasonably require a dealer to pay any extra fee, remodel, renovate, recondition the dealer'sexisting facilities, or purchase unreasonable advertising displays or other materials as aprerequisite to receiving a model or series of vehicles;
(t) except as provided in Subsection (5), directly or indirectly:
(i) own an interest in a new powersport vehicle dealer or dealership;
(ii) operate or control a new powersport vehicle dealer or dealership;
(iii) act in the capacity of a new powersport vehicle dealer, as defined in Section13-35-102; or
(iv) operate a powersport vehicle service facility;
(u) fail to timely pay for all reimbursements to a franchisee for incentives and otherpayments made by the franchisor;
(v) directly or indirectly influence or direct potential customers to franchisees in aninequitable manner, including:
(i) charging a franchisee a fee for a referral regarding a potential sale or lease of any ofthe franchisee's products or services in an amount exceeding the actual cost of the referral;
(ii) giving a customer referral to a franchisee on the condition that the franchisee agree tosell the vehicle at a price fixed by the franchisor; or
(iii) advising a potential customer as to the amount that the potential customer shouldpay for a particular product;
(w) fail to provide comparable delivery terms to each franchisee for a product of thefranchisor, including the time of delivery after the placement of an order by the franchisee;
(x) if personnel training is provided by the franchisor to its franchisees, unreasonably failto make that training available to each franchisee on proportionally equal terms;
(y) condition a franchisee's eligibility to participate in a sales incentive program on therequirement that a franchisee use the financing services of the franchisor or a subsidiary oraffiliate of the franchisor for inventory financing;
(z) make available for public disclosure, except with the franchisee's permission or undersubpoena or in any administrative or judicial proceeding in which the franchisee or the franchisoris a party, any confidential financial information regarding a franchisee, including:
(i) monthly financial statements provided by the franchisee;
(ii) the profitability of a franchisee; or
(iii) the status of a franchisee's inventory of products;
(aa) use any performance standard, incentive program, or similar method to measure theperformance of franchisees unless the standard or program:
(i) is designed and administered in a fair, reasonable, and equitable manner;
(ii) if based upon a survey, utilizes an actuarially generally acceptable, valid sample; and
(iii) is, upon request by a franchisee, disclosed and explained in writing to the franchisee,including:
(A) how the standard or program is designed;
(B) how the standard or program will be administered; and
(C) the types of data that will be collected and used in the application of the standard orprogram;
(bb) other than sales to the federal government, directly or indirectly, sell, lease, offer tosell, or offer to lease, a new powersport vehicle or any powersport vehicle owned by thefranchisor, except through a franchised new powersport vehicle dealer;
(cc) compel a franchisee, through a finance subsidiary, to agree to unreasonableoperating requirements, except that this Subsection (1)(cc) may not be construed to limit the rightof a financing subsidiary to engage in business practices in accordance with the usage of trade inretail and wholesale powersport vehicle financing;
(dd) condition the franchisor's participation in co-op advertising for a product categoryon the franchisee's participation in any program related to another product category or on thefranchisee's achievement of any level of sales in a product category other than that which is thesubject of the co-op advertising;
(ee) discriminate against a franchisee in the state in favor of another franchisee of the
same line-make in the state by:
(i) selling or offering to sell a new powersport vehicle to one franchisee at a higher actualprice, including the price for vehicle transportation, than the actual price at which the samemodel similarly equipped is offered to or is made available by the franchisor to anotherfranchisee in the state during a similar time period;
(ii) except as provided in Subsection (6), using a promotional program or device or anincentive, payment, or other benefit, whether paid at the time of the sale of the new powersportvehicle to the franchisee or later, that results in the sale of or offer to sell a new powersportvehicle to one franchisee in the state at a higher price, including the price for vehicletransportation, than the price at which the same model similarly equipped is offered or is madeavailable by the franchisor to another franchisee in the state during a similar time period; or
(iii) except as provided in Subsection (7), failing to provide or direct a lead in a fair,equitable, and timely manner; or
(ff) through an affiliate, take any action that would otherwise be prohibited under thischapter.
(2) Subsection (1)(a) does not prevent the franchisor from requiring that a franchiseecarry a reasonable inventory of:
(a) new powersport vehicle models offered for sale by the franchisor; and
(b) parts to service the repair of the new powersport vehicles.
(3) Subsection (1)(d) does not prevent a franchisor from:
(a) requiring that a franchisee maintain separate sales personnel or display space; or
(b) refusing to permit a combination of new powersport vehicle lines, if justified byreasonable business considerations.
(4) Upon the written request of any franchisee, a franchisor shall disclose in writing tothe franchisee the basis on which new powersport vehicles, parts, and accessories are allocated,scheduled, and delivered among the franchisor's dealers of the same line-make.
(5) (a) A franchisor may engage in any of the activities listed in Subsection (1)(t), for aperiod not to exceed 12 months if:
(i) (A) the person from whom the franchisor acquired the interest in or control of the newpowersport vehicle dealership was a franchised new powersport vehicle dealer; and
(B) the franchisor's interest in the new powersport vehicle dealership is for sale at areasonable price and on reasonable terms and conditions; or
(ii) the franchisor is engaging in the activity listed in Subsection (1)(t) for the purpose ofbroadening the diversity of its dealer body and facilitating the ownership of a new powersportvehicle dealership by a person who:
(A) is part of a group that has been historically underrepresented in the franchisor'sdealer body;
(B) would not otherwise be able to purchase a new powersport vehicle dealership;
(C) has made a significant investment in the new powersport vehicle dealership which issubject to loss;
(D) has an ownership interest in the new powersport vehicle dealership; and
(E) operates the new powersport vehicle dealership under a plan to acquire fullownership of the dealership within a reasonable period of time and under reasonable terms andconditions.
(b) After receipt of the advisory board's recommendation, the executive director may, for
good cause shown, extend the time limit set forth in Subsection (5)(a) for an additional periodnot to exceed 12 months.
(c) Notwithstanding Subsection (1)(t), a franchisor may own, operate, or control a newpowersport vehicle dealership trading in a line-make of powersport vehicle if:
(i) as to that line-make of powersport vehicle, there are no more than four franchised newpowersport vehicle dealerships licensed and in operation within the state as of January 1, 2002;
(ii) the franchisor does not own directly or indirectly, more than a 45% interest in thedealership;
(iii) at the time the franchisor first acquires ownership or assumes operation or control ofthe dealership, the distance between the dealership thus owned, operated, or controlled and thenearest unaffiliated new powersport vehicle dealership trading in the same line-make is not lessthan 150 miles;
(iv) all the franchisor's franchise agreements confer rights on the franchisee to developand operate as many dealership facilities as the franchisee and franchisor shall agree areappropriate within a defined geographic territory or area; and
(v) as of January 1, 2002, no fewer than half of the franchisees of the line-make withinthe state own and operate two or more dealership facilities in the geographic area covered by thefranchise agreement.
(6) Subsection (1)(ee)(ii) does not prohibit a promotional or incentive program that isfunctionally available to all franchisees of the same line-make in the state on substantiallycomparable terms.
(7) Subsection (1)(ee)(iii) may not be construed to:
(a) permit provision of or access to customer information that is otherwise protectedfrom disclosure by law or by contract between franchisor and a franchisee; or
(b) require a franchisor to disregard the preference of a potential customer in providingor directing a lead, provided that the franchisor does not direct the customer to such a preference.
(8) Subsection (1)(ff) does not limit the right of an affiliate to engage in businesspractices in accordance with the usage of trade in which the affiliate is engaged.
Amended by Chapter 268, 2005 General Session
