North Carolina HB 406: Clarify Motor Vehicle Dealer Laws.

Bill Text

GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2025
H 2
HOUSE BILL 406
Committee Substitute Favorable 4/9/25

Short Title: Clarify Motor Vehicle Dealer Laws. (Public)
Sponsors:
Referred to:
March 17, 2025
*H406-v-2*
A BILL TO BE ENTITLED 1
AN ACT TO CLARIFY VARIOUS MOTOR VEHICLE DEALER LAWS. 2
The General Assembly of North Carolina enacts: 3
4
PREVENT UNFAIR DEALER FRANCHISE TERMINATIONS AND CLARIFY RV 5
DEALER TERMINATION ASSISTANCE RIGHTS 6
SECTION 1. G.S. 20-305 reads as rewritten: 7
"§ 20-305. Coercing dealer to accept commodities not ordered; threatening to cancel 8
franchise; preventing transfer of ownership; granting additional franchises; 9
terminating franchises without good cause; preventing family succession. 10
It shall be unlawful for any manufacturer, factory branch, distributor, or distributor branch, 11
or any field representative, officer, agent, or any representative whatsoever of any of them: 12
... 13
(4) Notwithstanding the terms of any franchise agreement, to prevent or refuse to 14
approve the sale or transfer of the ownership of a dealership by the sale of the 15
business, stock transfer, or otherwise, or the transfer, sale or assignment of a 16
dealer franchise, or a change in the executive management or principal 17
operator of the dealership, change in use of an existing facility to provide for 18
the sales or service of one or more additional line-makes of new motor 19
vehicles, or relocation of the dealership to another site within the dealership's 20
relevant market area, if the Commissioner has determined, if requested in 21
writing by the dealer within 30 days after receipt of an objection to the 22
proposed transfer, sale, assignment, relocation, or change, and after a hearing 23
on the matter, that the failure to permit or honor the transfer, sale, assignment, 24
relocation, or change is unreasonable under the circumstances. The following 25
applies: 26
... 27
i. It is unlawful for a manufacturer to, in any way, do any of the 28
following: 29
1. Condition its approval of a proposed transfer, sale, assignment, 30
change in the dealer's executive management, principal 31
operator, or appointment of a designated successor, on the 32
existing or proposed dealer's willingness to construct a new 33
facility, renovate the existing facility, acquire or refrain from 34
acquiring one or more line-makes of vehicles, separate or 35

General Assembly Of North Carolina Session 2025
Page 2 House Bill 406-Second Edition
divest one or more line-makes of vehicle, or establish or 1
maintain exclusive facilities, personnel, or display space. 2
... 3
4. Condition, directly or indirectly, the approval of the sale or 4
transfer of the ownership of a dealership by the sale of the 5
business, stock transfer, or otherwise, or the transfer, sale, 6
succession, or assignment of a dealer's franchise, or a change 7
in the executive management or principal operator of the 8
dealership, or a dealer's proposed relocation of the dealership 9
facility, or a dealer's satisfaction of the terms of any incentive 10
program or contest, upon the existing or proposed dealer's 11
willingness to enter into a right of first refusal in favor of the 12
manufacturer. 13
5. In determining whether to approve a dealer's proposed transfer, 14
sale, assignment, change in the dealer's executive management, 15
principal operator, or appointment of a designated successor, 16
to inquire about or consider whether another manufacturer or 17
distributor had previously denied, rejected, or otherwise turned 18
down the application of the applicant, or any person or entity 19
affiliated with the applicant, to acquire a franchise or 20
dealership or become principal operator, part of the executive 21
management, or a successor owner or manager of a dealership. 22
6. In determining whether to approve a dealer's proposed transfer, 23
sale, assignment, change in the dealer's executive management, 24
principal operator, or appointment of a designated successor, 25
to inquire about or consider whether the applicant, or any 26
person or entity affiliated with the applicant, had, for any 27
reason, ever previously commenced a civil or administrative 28
proceeding against any manufacturer or distributor. 29
j. If a manufacturer or distributor objects to, denies, rejects, or otherwise 30
turns down a dealer's proposed transfer, sale, assignment, change in 31
the dealer's executive management, principal operator, or appointment 32
of a designated successor, the manufacturer or distributor shall 33
reimburse both the dealer and applicant for their respective attorneys' 34
fees, if either of the following is applicable: 35
1. Both the dealer and applicant elect not to appeal from or 36
otherwise seek civil or administrative redress from the decision 37
of the manufacturer to object to, deny, reject, or otherwise turn 38
down the dealer's application. 39
2. The decision of the manufacturer or distributor to object to, 40
deny, reject, or otherwise turn