Motor vehicle dealers

AN ACT Relating to protecting consumer choice by creating a 1
fairer marketplace for auto sales; amending RCW 46.96.185; and 2
providing an effective date. 3
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:4
Sec. 1. RCW 46.96.185 and 2018 c 296 s 2 are each amended to 5
read as follows: 6
(1) Notwithstanding the terms of a franchise agreement, a 7
manufacturer, distributor, factory branch, or factory representative, 8
or an agent, officer, parent company, wholly or partially owned 9
subsidiary, affiliated entity, or other person controlled by or under 10
common control with a manufacturer, distributor, factory branch, or 11
factory representative, shall not: 12
(a) Discriminate between new motor vehicle dealers by selling or 13
offering to sell a like vehicle to one dealer at a lower actual price 14
than the actual price offered to another dealer for the same model 15
similarly equipped; 16
(b) Discriminate between new motor vehicle dealers by selling or 17
offering to sell parts or accessories to one dealer at a lower actual 18
price than the actual price offered to another dealer;19
(c) Discriminate between new motor vehicle dealers by using a 20
promotion plan, marketing plan, or other similar device that results 21
S-0562.1
SENATE BILL 5377
State of Washington 69th Legislature 2025 Regular Session
By Senators Saldaña, Chapman, and Stanford
Read first time 01/20/25. Referred to Committee on Labor & Commerce.
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in a lower actual price on vehicles, parts, or accessories being 1
charged to one dealer over another dealer; 2
(d) Discriminate between new motor vehicle dealers by adopting a 3
method, or changing an existing method, for the allocation, 4
scheduling, or delivery of new motor vehicles, parts, or accessories 5
to its dealers that is not fair, reasonable, and equitable. Upon the 6
request of a dealer, a manufacturer, distributor, factory branch, or 7
factory representative shall disclose in writing to the dealer the 8
method by which new motor vehicles, parts, and accessories are 9
allocated, scheduled, or delivered to its dealers handling the same 10
line or make of vehicles; 11
(e) Discriminate against a new motor vehicle dealer by 12
preventing, offsetting, or otherwise impairing the dealer's right to 13
request a documentary service fee on affinity or similar program 14
purchases. This prohibition applies to, but is not limited to, any 15
promotion plan, marketing plan, manufacturer or dealer employee or 16
employee friends or family purchase programs, or similar plans or 17
programs; 18
(f) Give preferential treatment to some new motor vehicle dealers 19
over others by refusing or failing to deliver, in reasonable 20
quantities and within a reasonable time after receipt of an order, to 21
a dealer holding a franchise for a line or make of motor vehicles 22
sold or distributed by the manufacturer, distributor, factory branch, 23
or factory representative, a new vehicle, parts, or accessories, if 24
the vehicle, parts, or accessories are being delivered to other 25
dealers, or require a dealer to purchase unreasonable advertising 26
displays or other materials, or unreasonably require a dealer to 27
remodel or renovate existing facilities as a prerequisite to 28
receiving a model or series of vehicles; 29
(g) Compete with a new motor vehicle dealer of any make or line 30
by acting in the capacity of a new motor vehicle dealer, or by 31
owning, operating, or controlling, whether directly or indirectly, a 32
motor vehicle dealership in this state. It is not, however, a 33
violation of this subsection for: 34
(i) A manufacturer, distributor, factory branch, or factory 35
representative to own or operate a dealership for a temporary period, 36
not to exceed two years, during the transition from one owner of the 37
dealership to another where the dealership was previously owned by a 38
franchised dealer and is currently for sale to any qualified 39
independent person at a fair and reasonable price. The temporary 40
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operation may be extended for one twelve-month period on petition of 1
the temporary operator to the department. The matter will be handled 2
as an adjudicative proceeding under chapter 34.05 RCW. A dealer who 3
is a franchisee of the petitioning manufacturer or distributor may 4
intervene and participate in a proceeding under this subsection 5
(1)(g)(i). The temporary operator has the burden of proof to show 6
justification for the extension and a good faith effort to sell the 7
dealership to an independent person at a fair and reasonable price;8
(ii) A manufacturer, distributor, factory branch, or factory 9
representative to own or operate a dealership in conjunction with an 10
independent person in a bona fide business relationship for the 11
purpose of broadening the diversity of its dealer body and enhancing 12
opportunities for qualified persons who are part of a group who have 13
historically been underrepresented in its dealer body, or other 14
qualified persons who lack the resources to purchase a dealership 15
outright, and where the independent person: (A) Has made, or within a 16
period of two years from the date of commencement of operation will 17
have made, a significant, bona fide capital investment in the 18
dealership that is subject to loss; (B) has an ownership interest in 19
the dealership; and (C) operates the dealership under a bona fide 20
written agreement with the manufacturer, distributor, factory branch, 21
or factory representative under which he or she will acquire all of 22
the ownership interest in the dealership within a reasonable period 23
of time and under reasonable terms and conditions. The manufacturer, 24
distributor, factory branch, or factory representative has the burden 25
of proof of establishing that the acquisition of the dealership by 26
the independent person was made within a reasonable period of time 27
and under reasonable terms and conditions. Nothing in this subsection 28
(1)(g)(ii) relieves a manufacturer, distributor, factory branch, or 29
factory representative from complying with (a) through (f) of this 30
subsection; 31
(iii) A manufacturer, distributor, factory branch, or factory 32
representative to own or operate a dealership in conjunction with an 33
independent person in a bona fide business relationship where the 34
independent person: (A) Has made, or within a period of two years 35
from the date of commencement of operation will have made, a 36
significant, bona fide capital investment in the dealership that is 37
subject to loss; (B) has an ownership interest in the dealership; and 38
(C) operates the dealership under a bona fide written agreement with 39
the manufacturer, distributor, factory branch, or factory 40
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representative under which he or she will acquire all of the 1
ownership interest in the dealership within a reasonable period of 2
time and under reasonable terms and conditions. The manufacturer, 3
distributor, factory branch, or factory representative has the burden 4
of proof of establishing that the acquisition of the dealership by 5
the independent person was made within a reasonable period of time 6
and under reasonable terms and conditions. The number of dealerships 7
operated under this subsection (1)(g)(iii) may not exceed four 8
percent rounded up to the nearest whole number of a manufacturer's 9
total of new motor vehicle dealer franchises in this state. Nothing 10
in this subsection (1)(g)(iii) relieves a manufacturer, distributor, 11
factory branch, or factory representative from complying with (a) 12
through (f) of this subsection; 13
(iv) A truck manufacturer to own, operate, or control a new motor 14
vehicle dealership that sells only trucks of that manufacturer's line 15
make with a gross vehicle weight rating of 12,500 pounds or more, and 16
the truck manufacturer has been continuously engaged in the retail 17
sale of the trucks at least since January 1, 1993;18
(v) A manufacturer to own, operate, or control a new motor 19
vehicle dealership trading exclusively in a single line make of the 20
manufacturer if (A) the manufacturer does not own, directly or 21
indirectly, in the aggregate, in excess of forty-five percent of the 22
total ownership interest in the dealership, (B) at the time the 23
manufacturer first acquires ownership or assumes operation or control 24
of any such dealership, the distance between any dealership thus 25
owned, operated, or controlled and the nearest new motor vehicle 26
dealership trading in the same line make of vehicle and in which the 27
manufacturer has no ownership or control is not less than fifteen 28
miles and complies with the applicable provisions in the relevant 29
market area sections of this chapter, (C) all of the manufacturer's 30
franchise agreements confer rights on the dealer of that line make to 31
develop and operate within a defined geographic territory or area, as 32
many dealership facilities as the dealer and the manufacturer agree 33
are appropriate, and (D) as of January 1, 2000, the manufacturer had 34
no more than four new motor vehicle dealers of that manufacturer's 35
line make in this state, and at least half of those dealers owned and 36
operated two or more dealership facilities in the geographic 37
territory or area covered by their franchise agreements with the 38
manufacturer; or39
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(vi) A final-stage manufacturer to own, operate, or control a new 1
motor vehicle dealership; ((or2
(vii) A manufacturer that held a vehicle dealer license in this 3
state on January 1, 2014, to own, operate, or control a new motor 4
vehicle dealership that sells new vehicles that are only of that 5
manufacturer's makes or lines and that are not sold new by a licensed 6
independent franchise dealer, or to own, operate, or control or 7
contract with companies that provide finance, leasing, or service for 8
vehicles that are of that manufacturer's makes or lines;))9
(h) Compete with a new motor vehicle dealer by owning, operating, 10
or controlling, whether directly or indirectly, a service facility in 11
this state for the repair or maintenance of motor vehicles under the 12
manufacturer's new car warranty and extended warranty. Nothing in 13
this subsection (1)(h), however, prohibits a manufacturer, 14
distributor, factory branch, or factory representative from owning or 15
operating a service facility for the purpose of providing or 16
performing maintenance, repair, or service work on motor vehicles 17
that are owned by the manufacturer, distributor, factory branch, or 18
factory representative; 19
(i) Use confidential or proprietary information obtained from a 20
new motor vehicle dealer to unfairly compete with the dealer. For 21
purposes of this subsection (1)(i), "confidential or proprietary 22
information" means trade secrets as defined in RCW 19.108.010, 23
business plans, marketing plans or strategies, customer lists, 24
contracts, sales data, revenues, or other financial information;25
(j)(i) Terminate, cancel, or fail to renew a franchise with a new 26
motor vehicle dealer based upon any of the following events, which do 27
not constitute good cause for termination, cancellation, or 28
nonrenewal under RCW 46.96.060: (A) The fact that the new motor 29
vehicle dealer owns, has an investment in, participates in the 30
management of, or holds a franchise agreement for the sale or service 31
of another make or line of new motor vehicles; (B) the fact that the 32
new motor vehicle dealer has established another make or line of new 33
motor vehicles or service in the same dealership facilities as those 34
of the manufacturer or distributor; (C) that the new motor vehicle 35
dealer has or intends to relocate the manufacturer or distributor's 36
make or line of new motor vehicles or service to an existing 37
dealership facility that is within the relevant market area, as 38
defined in RCW 46.96.140, of the make or line to be relocated, except 39
that, in any nonemergency circumstance, the dealer must give the 40
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manufacturer or distributor at least sixty days' notice of his or her 1
intent to relocate and the relocation must comply with RCW 46.96.140 2
and 46.96.150 for any same make or line facility; or (D) the failure 3
of a franchisee to change the location of the dealership or to make 4
substantial alterations to the use or number of franchises on the 5
dealership premises or facilities. 6
(ii) Notwithstanding the limitations of this section, a 7
manufacturer may, for separate consideration, enter into a written 8
contract with a dealer to exclusively sell and service a single make 9
or line of new motor vehicles at a specific facility for a defined 10
period of time. The penalty for breach of the contract must not 11
exceed the amount of consideration paid by the manufacturer plus a 12
reasonable rate of interest; 13
(k) Coerce or attempt to coerce a motor vehicle dealer to refrain 14
from, or prohibit or attempt to prohibit a new motor vehicle dealer 15
from acquiring, owning, having an investment in, participating in the 16
management of, or holding a franchise agreement for the sale or 17
service of another make or line of new motor vehicles or related 18
products, or establishing another make or line of new motor vehicles 19
or service in the same dealership facilities, if the prohibition 20
against acquiring, owning, investing, managing, or holding a 21
franchise for such additional make or line of vehicles or products, 22
or establishing another make or line of new motor vehicles or service 23
in the same dealership facilities, is not supported by reasonable 24
business considerations. The burden of proving that reasonable 25
business considerations support or justify the prohibition against 26
the additional make or line of new motor vehicles or products or 27
nonexclusive facilities is on the manufacturer; 28
(l) Require, by contract or otherwise, a new motor vehicle dealer 29
to make a material alteration, expansion, or addition to any 30
dealership facility, unless the required alteration, expansion, or 31
addition is uniformly required of other similarly situated new motor 32
vehicle dealers of the same make or line of vehicles and is 33
reasonable in light of all existing circumstances, including economic 34
conditions. In any proceeding in which a required facility 35
alteration, expansion, or addition is an issue, the manufacturer or 36
distributor has the burden of proof. Except for a program or any 37
renewal or modification of a program that is in effect with one or 38
more new motor vehicle dealers in this state on June 12, 2014, a 39
manufacturer shall not require, coerce, or attempt to coerce any new 40
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motor vehicle dealer by program, policy, standard, or otherwise to 1
change the location of the dealership or construct, replace, 2
renovate, or make any substantial changes, alterations, or remodeling 3
to a new motor vehicle dealer's sales or service facilities, except 4
as necessary to comply with health or safety laws or to comply with 5
technology requirements without which a dealer would be unable to 6
service a vehicle the dealer has elected to sell, before the tenth 7
anniversary of the date of issuance of the certificate of occupancy 8
or the manufacturer's approval, whichever is later, from:9
(i) The date construction of the dealership at that location was 10
completed if the construction was in substantial compliance with 11
standards or plans provided by a manufacturer, distributor, or 12
representative or through a subsidiary or agent of the manufacturer, 13
distributor, or representative; or 14
(ii) The date a prior change, alteration, or remodel of the 15
dealership at that location was completed if the construction was in 16
substantial compliance with standards or plans provided by a 17
manufacturer, distributor, or representative or through a subsidiary 18
or agent of the manufacturer, distributor, or representative;19
(m) Prevent or attempt to prevent by contract or otherwise any 20
new motor vehicle dealer from changing the executive management of a 21
new motor vehicle dealer unless the manufacturer or distributor, 22
having the burden of proof, can show that a proposed change of 23
executive management will result in executive management by a person 24
or persons who are not of good moral character or who do not meet 25
reasonable, preexisting, and equitably applied standards of the 26
manufacturer or distributor. If a manufacturer or distributor rejects 27
a proposed change in the executive management, the manufacturer or 28
distributor shall give written notice of its reasons to the dealer 29
within sixty days after receiving written notice from the dealer of 30
the proposed change and all related information reasonably requested 31
by the manufacturer or distributor, or the change in executive 32
management must be considered approved; 33
(n) Condition the sale, transfer, relocation, or renewal of a 34
franchise agreement or condition manufacturer, distributor, factory 35
branch, or factory representative sales, services, or parts 36
incentives upon the manufacturer obtaining site control, including 37
rights to purchase or lease the dealer's facility, or an agreement to 38
make improvements or substantial renovations to a facility. For 39
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purposes of this section, a substantial renovation has a gross cost 1
to the dealer in excess of five thousand dollars; 2
(o) Fail to provide to a new motor vehicle dealer purchasing or 3
leasing building materials or other facility improvements the right 4
to purchase or lease franchisor image elements of like kind and 5
quality from an alternative vendor selected by the dealer if the 6
goods or services are to be supplied by a vendor selected, 7
identified, or designated by the manufacturer or distributor. If the 8
vendor selected by the manufacturer or distributor is the only 9
available vendor of like kind and quality materials, the new motor 10
vehicle dealer must be given the opportunity to purchase the 11
franchisor image elements at a price substantially similar to the 12
capitalized lease costs of the elements. This subsection (1)(o) must 13
not be construed to allow a new motor vehicle dealer or vendor to 14
gain additional intellectual property rights they are not otherwise 15
entitled to or to impair or eliminate the intellectual property 16
rights of the manufacturer or distributor or to permit a new motor 17
vehicle dealer to erect or maintain signs that do not conform to the 18
reasonable intellectual property usage guidelines of the manufacturer 19
or distributor; 20
(p) Take any adverse action against a new motor vehicle dealer 21
including, but not limited to, charge backs or reducing vehicle 22
allocations, for sales and service performance within a designated 23
area of primary responsibility unless that area is reasonable in 24
light of proximity to relevant census tracts to the dealership and 25
competing dealerships, highways and road networks, any natural or 26
man-made barriers, demographics, including economic factors, buyer 27
behavior information, and contains only areas inside the state of 28
Washington unless specifically approved by the new motor vehicle 29
dealer; 30
(q) Require, coerce, or attempt to coerce any new motor vehicle 31
dealer by program, policy, facility guide, standard, or otherwise to 32
order or accept delivery of any service or repair appliances, 33
equipment, parts, or accessories, or any other commodity not required 34
by law, which the dealer has not voluntarily ordered or which the 35
dealer does not have the right to return unused for a full refund 36
within ninety days or a longer period as mutually agreed upon by the 37
dealer and manufacturer; or 38
(r) Modify the franchise agreement for any new motor vehicle 39
dealer unless the manufacturer notifies the dealer in writing of its 40
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intention to modify the agreement at least ninety days before the 1
effective date thereof, stating the specific grounds for the 2
modification, and undertakes the modification in good faith, for good 3
cause, and in a manner that would not adversely and substantially 4
alter the rights, obligations, investment, or return on investment of 5
the franchised new motor vehicle dealer under the existing agreement.6
(2) Subsection (1)(a), (b), and (c) of this section do not apply 7
to sales to a motor vehicle dealer: (a) For resale to a federal, 8
state, or local government agency; (b) where the vehicles will be 9
sold or donated for use in a program of driver's education; (c) where 10
the sale is made under a manufacturer's bona fide promotional program 11
offering sales incentives or rebates; (d) where the sale of parts or 12
accessories is under a manufacturer's bona fide quantity discount 13
program; or (e) where the sale is made under a manufacturer's bona 14
fide fleet vehicle discount program. For purposes of this subsection, 15
"fleet" means a group of fifteen or more new motor vehicles purchased 16
or leased by a dealer at one time under a single purchase or lease 17
agreement for use as part of a fleet, and where the dealer has been 18
assigned a fleet identifier code by the department of licensing.19
(3) The following definitions apply to this section:20
(a) "Actual price" means the price to be paid by the dealer less 21
any incentive paid by the manufacturer, distributor, factory branch, 22
or factory representative, whether paid to the dealer or the ultimate 23
purchaser of the vehicle. 24
(b) "Control" or "controlling" means (i) the possession of, title 25
to, or control of ten percent or more of the voting equity interest 26
in a person, whether directly or indirectly through a fiduciary, 27
agent, or other intermediary, or (ii) the possession, direct or 28
indirect, of the power to direct or cause the direction of the 29
management or policies of a person, whether through the ownership of 30
voting securities, through director control, by contract, or 31
otherwise, except as expressly provided under the franchise 32
agreement. 33
(c) "Motor vehicles" does not include trucks that are 14,001 34
pounds gross vehicle weight and above or recreational vehicles as 35
defined in RCW 43.22.335. 36
(d) "Operate" means to manage a dealership, whether directly or 37
indirectly. 38
(e) "Own" or "ownership" means to hold the beneficial ownership 39
of one percent or more of any class of equity interest in a 40
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dealership, whether the interest is that of a shareholder, partner, 1
limited liability company member, or otherwise. To hold an ownership 2
interest means to have possession of, title to, or control of the 3
ownership interest, whether directly or indirectly through a 4
fiduciary, agent, or other intermediary. 5
(4) A violation of this section is deemed to affect the public 6
interest and constitutes an unlawful and unfair practice under 7
chapter 19.86 RCW. A person aggrieved by an alleged violation of this 8
section may petition the department to have the matter handled as an 9
adjudicative proceeding under chapter 34.05 RCW. 10
NEW SECTION. Sec. 2. This act takes effect January 1, 2026.11
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