TITLE 6

Commerce and Trade

SUBTITLE II

Other Laws Relating to Commerce and Trade

CHAPTER 49. MOTOR VEHICLE FRANCHISING PRACTICES


The General Assembly finds and declares that the distribution and sale of vehicles within this State vitally affects the general economy of the State and the public interest and the public welfare, and that in order to promote the public interest and the public welfare, and in the exercise of its police power, it is necessary to regulate vehicle manufacturers, distributors or wholesalers and factory or distributor representatives, and to regulate franchises issued by the aforementioned who are doing business in this State in order to prevent frauds, impositions and other abuses upon its citizens and to protect and preserve the investments and properties of the citizens of this State.

64 Del. Laws, c. 27, § 1.;

The following words, terms and phrases when used in this chapter shall have the meanings respectively ascribed to them in this section, except where the context clearly indicates a different meaning:

(1) "Commission" means the Public Service Commission.

(2) "Dealership facilities" means the real estate, buildings, fixtures and improvements which have been devoted to the conduct of business under the franchise by the new motor vehicle dealer.

(3) "Designated family member" means the spouse, child, grandchild, parent, brother or sister of the owner of a new motor vehicle dealership who, in the case of the owner's death, is entitled to inherit the ownership interest in the new motor vehicle dealership under the terms of the owner's will, or who has been nominated in any other written instrument, or who, in the case of an incapacitated owner of a new motor vehicle dealership, has been appointed by a court as the legal representative of the new motor vehicle dealership's property.

(4) "Established place of business" means a permanent, commercial building located within this State easily accessible and open to the public at all reasonable times and at which the business of a new motor vehicle dealer, including the display and repair of vehicles, may be lawfully carried on in accordance with the terms of all applicable building codes, zoning and other land-use regulatory ordinances.

(5) "Franchise" means the written agreement or contract between any new motor vehicle manufacturer and any new motor vehicle dealer which purports to fix the legal rights and liabilities of the parties to such agreement or contract, and pursuant to which the dealer purchases and resells the franchise product or leases or rents the dealership premises.

(6) "Good faith" means honesty in fact and the observation of reasonable commercial standards of fair dealing in the trade as defined and interpreted in § 1-201(b)(20) of this title.

(7) "Manufacturer" means any person, resident or nonresident, who manufactures or assembles new motor vehicles, or imports for distribution through distributors of motor vehicles, including any person, partnership or corporation which acts for and is under the control of such manufacturer or assembler in connection with the distribution of said motor vehicles. Additionally, the term "manufacturer" shall include the following terms:

a. "Distributor" which means any person, resident or nonresident, who in whole or in part offers for sale, sells or distributes any new motor vehicle to new motor vehicle dealers or who maintains factory representatives or who controls any person, firm, association, corporation or trust, resident or nonresident, who in whole or in part offers for sale, sells or distributes any new motor vehicle to new motor vehicle dealers.

b. "Factory branch" which means a branch office maintained by a manufacturer for the purpose of selling, or offering for sale, vehicles to a distributor or new motor vehicle dealer, or for directing or supervising in whole or in part factory or distributor representatives.

c. "Franchiser" means:

1. Any person, resident or nonresident, who directly or indirectly licenses or otherwise authorizes 1 or more new motor vehicle dealers to use a trademark or service mark associated with a make of motor vehicle in connection with the retail sale of new motor vehicles bearing such trademark or service mark; or

2. Any person who in the ordinary course of business and on a recurring basis sells such new motor vehicles to a new motor vehicle dealer for resale.

(8)a. "Motor vehicle" means every vehicle intended primarily for use and operation on the public highways which is self-propelled, not including motor homes, motor home products and recreational vehicles, farm tractors and other machines and tools used in the production, harvesting and care of farm products.

b. "New motor vehicle" means a vehicle which has been sold to a new motor vehicle dealer and which has not been used for other than demonstration purposes and on which the original title has not been issued from the new motor vehicle dealer.

(9) "New motor vehicle dealer" or "dealer" means any person or entity engaged in the business of selling, offering to sell, soliciting or advertising the sale of new motor vehicles and who holds, or held at the time a cause of action under this chapter accrued, a valid sales and service agreement, franchise or contract granted by the manufacturer or distributor for the retail sale of said manufacturer's or distributor's new motor vehicles. The Term "new motor vehicle dealer" or "dealer" shall also include any person who engages exclusively in the repair of motor vehicles, except motor homes, if such repairs are performed pursuant to the terms of a franchise or other agreement with a franchiser or such repairs are performed as part of a manufacturer's or franchiser's warranty. The term "new motor vehicle dealer" or "dealer" shall not mean any person engaged solely in the business of selling used motor vehicles.

(10) "Person" means every natural person, partnership, corporation, association, trust, estate or any other legal entity.

(11) "Relevant market area" means the area within a radius of 10 miles from the intended site of a proposed additional dealership.

64 Del. Laws, c. 27, § 1; 70 Del. Laws, c. 186, § 1; 73 Del. Laws, c. 78, §§ 1-3; 78 Del. Laws, c. 372, § 1.;

(a) Each new motor vehicle manufacturer shall specify in writing to each of its new motor vehicle dealers licensed in this State the dealer's obligations for predelivery preparation and warranty service on its products, shall compensate the new motor vehicle dealer for such service required of the dealer by the manufacturer, and shall provide dealer the schedule of compensation to be paid such dealer for parts, work and service in connection therewith, and the time allowance for the performance of such work and service.

(b) In no event shall such schedule of compensation fail to include reasonable compensation for diagnostic work, as well as parts, repair service and labor. Time allowances for the diagnosis and performance of warranty work and service shall be reasonable and adequate for the work to be performed. With respect to parts and labor warranty reimbursement, reasonable compensation shall not be less than the rate charged by such dealer for like services to nonwarranty customers for nonwarranty parts, service and repairs, provided such rate is reasonable.

(1) For the purposes of this provision, the dealer's rate charged to nonwarranty customers for parts and labor shall be established by the dealer submitting to the manufacturer 100 sequential customer paid service repair orders or 90 days of customer paid service repair orders, whichever is less, covering like repairs made no more than 180 days before the submission of such customer paid service repair orders and declaring the schedule of compensation. The new schedule of compensation shall take effect within 30 days after the initial submission to the manufacturer and shall be presumed to be fair and reasonable. However, within 30 days following receipt of the declared schedule of compensation from the dealer, the manufacturer may make reasonable requests for additional information supporting the declared schedule of compensation. The 30-day time frame in which the manufacturer shall make the schedule of compensation effective shall commence following receipt from the dealer of any reasonably requested supporting information. No manufacturer shall require a motor vehicle dealer to establish a schedule of compensation by any other methodology or require supportive information that is unduly burdensome or time consuming to provide including, but not limited to, part by part or transaction by transaction calculations. The dealer shall not request a change in the schedule of compensation more than once every 9 months.

(2) For the purposes of this provision, the following parts or types of repairs shall be excluded from the calculation:

a. Repairs for manufacturer special events and manufacturer discounted service campaigns;

b. Parts sold at wholesale or parts discounted by a dealer for repairs made in group fleet, insurance, or other third-party payer service work or parts used in repairs of government agencies' repairs for which volume discounts have been negotiated;

c. Tires replaced due to normal wear; or

d. Routine maintenance not covered under any retail customer warranty such as fluids, filters and belts not provided in the course of repairs.

(3) A manufacturer shall not take or threaten to take adverse action against a dealer who seeks to obtain compensation pursuant to this provision, including but not limited to, creating or implementing an obstacle or process that is inconsistent with the manufacturer's obligations to the dealer under this provision.

(4) Within 30 days of receiving the manufacturer's notice of denial of the dealer's parts and/or labor submission pursuant to this subsection, any such new motor vehicle dealer may file with the Public Service Commission a protest to the manufacturer's denial. In the event a protest is filed, the manufacturer possesses the burden of proof to establish that the dealer's submission did not meet the respective submission requirements contained within this provision. In the event a dealer prevails in a protest filed under this provision, the dealer's increased parts and/or labor reimbursement shall be provided retroactive to the date the submission would have been effective pursuant to the terms of this section but for the manufacturer's denial.

(c) It is a violation of this section for any new motor vehicle manufacturer to fail to perform any warranty obligations or to fail to include in written notices of factory recalls to new motor vehicle owners and dealers the expected date by which necessary parts and equipment will be available to dealers for the correction of such defects, or to fail to compensate any of the new motor vehicle dealers in this State for repairs effected by such recall.

(d) All claims made by new motor vehicle dealers pursuant to this section for such labor and parts shall be paid within 30 days following their approval; provided, however, that the manufacturer retains the right to audit such claims and to charge back the dealer for claims due to fraud, work done unnecessarily, or work not properly performed for a period of 1 year following payment. All such claims shall be either approved or disapproved within 30 days after their receipt on forms and in the manner specified by the manufacturer, and any claim not specifically disapproved in writing within 30 days after the receipt shall be construed to be approved and payment must follow within 30 days. A manufacturer or distributor shall not deny a claim or reduce the amount to be reimbursed to the dealer as long as the dealer has provided reasonably sufficient documentation that the dealer:

(1) Performed the work in compliance with the written policies and procedures of the manufacturer; and

(2) Actually performed the work.

The manufacturer or distributor shall not disapprove a reimbursement claim due to an inadvertent administrative error by the dealer as long as the claim meets the above requirements. The 1-year limitation on the manufacturer's right to audit a claim shall not be effect in the case of fraudulent claims.

(e) Any audit for sales incentives, service incentives, rebates or other forms of incentive compensation shall only be for a period of 1 year following the date of the termination of the sales incentives program, service incentives program, rebate program or other form of incentive compensation program. These limitations shall not be in effect in the case of fraudulent claims.

64 Del. Laws, c. 27, § 1; 73 Del. Laws, c. 78, § 4; 78 Del. Laws, c. 372, § 1.;

(a) Notwithstanding the terms, provisions or conditions of any agreement or franchise, the manufacturer is liable for all damages to motor vehicles before delivery to a carrier or transporter.

(b) If a new motor vehicle dealer determines the method of transportation, the risk of loss passes to the dealer upon delivery of the vehicle to the carrier.

(c) In every other instance, the risk of loss remains with the manufacturer until such time as the new motor vehicle dealer or a designee accepts the vehicle from the carrier.

64 Del. Laws, c. 27, § 1; 70 Del. Laws, c. 186, § 2.;

Notwithstanding the terms of any franchise agreement, it shall be a violation of this chapter for any new motor vehicle manufacturer to fail to indemnify and hold harmless its franchised dealers against any judgment or settlement agreed to in writing by the manufacturer for damages, including, but not limited to, court costs and reasonable attorneys' fees of the new motor vehicle dealer, 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 as is defined in § 2-608 of this title, less any offset recovered by the dealer and only to the extent that the judgment or settlement relates to the alleged defective or negligent manufacture, assembly or design of new motor vehicles, parts or accessories or other functions by the manufacturer, beyond the control of the dealer.

64 Del. Laws, c. 27, § 1; 78 Del. Laws, c. 372, § 1.;

(a) Notwithstanding the terms, provisions or conditions of any franchise or notwithstanding the terms or provisions of any waiver, no manufacturer shall cancel, terminate or fail to renew any franchise with a licensed new motor vehicle dealer unless the manufacturer has:

(1) Satisfied the notice requirement of subsection (d) of this section; and

(2) Has good cause for cancellation, termination or nonrenewal; and

(3) Has acted in good faith with regard to the cancellation, termination or nonrenewal as defined in this chapter.

(b) Notwithstanding the terms, provisions or conditions of any franchise or the terms or provisions of any waiver, good cause shall exist for the purposes of a termination, cancellation or nonrenewal when:

(1) There is a failure by the new motor vehicle dealer to comply with a provision of the franchise which provision is both reasonable and of material significance to the franchise relationship, provided that the dealer has been notified in writing of the failure within 180 days after the manufacturer first acquired knowledge of such failure, or after the dealer was given a reasonable opportunity to correct such failure during a period of not less than 6 months;

(2) If the failure by the new motor vehicle dealer relates to the performance of the new motor vehicle dealer in sales or service, then good cause shall be defined as the failure of the new motor vehicle dealer to comply with reasonable performance criteria established by the manufacturer if the new motor vehicle dealer was apprised by the manufacturer in writing of such failure; and:

a. Said notification stated that notice was provided of failure of performance pursuant to this section;

b. The new motor vehicle dealer was afforded a reasonable opportunity, for a period of not less than 6 months, to comply with such criteria; and

c. The new motor vehicle dealer did not demonstrate substantial compliance with the manufacturer's performance criteria during such period.

(c) The manufacturer shall have the burden of proof under this section.

(d) Notwithstanding the terms, provisions or conditions of any franchise prior to the termination, cancellation or nonrenewal of any franchise, the manufacturer shall furnish notification of such termination, cancellation or nonrenewal to the new motor vehicle dealer as follows:

(1) In the manner described in subsection (b) of this section; and

(2) Not less than 90 days prior to the effective date of such termination, cancellation or nonrenewal; or

(3) Not less than 15 days prior to the effective date of such termination, cancellation or nonrenewal with respect to any of the following:

a. Insolvency of the new motor vehicle dealer, or filing of any petition by or against the new motor vehicle dealer under any bankruptcy or receivership law;

b. Failure of the new motor vehicle dealer to conduct its customary sales and service operations during its customary business hours for 7 consecutive business days, except for acts of God or circumstances beyond the direct control of the new motor vehicle dealer;

c. Conviction in a court of original jurisdiction of the new motor vehicle dealer, or any owner or operator thereof, of any crime which is punishable by imprisonment;

d. Revocation of any license which the new motor vehicle dealer is required to have to operate a dealership.

(4) Not less than 180 days prior to the effective date of such termination or cancellation where the manufacturer or distributor is discontinuing the sale of the product line.

(e) Notification under this section shall be in writing; shall be by certified mail or personally delivered to the new motor vehicle dealer; and shall contain:

(1) A statement of intention to terminate, cancel or not to renew the franchise; and

(2) A statement of the reasons for the termination, cancellation or nonrenewal; and

(3) The date on which such termination, cancellation or nonrenewal takes effect.

64 Del. Laws, c. 27, § 1.;

Upon the termination, nonrenewal, discontinuance or cancellation of any franchise by the manufacturer, the new motor vehicle dealership shall be compensated by the manufacturer as set forth below:

(1) The manufacturer shall purchase from the dealer any new, unused, undamaged and unmodified motor vehicles with less than 750 miles registered on the odometer that the dealer has acquired from the manufacturer or distributor, or from another dealer of the same line-make in the ordinary course of business within 18 months of the notice of termination at dealer cost including any charges for distribution and delivery paid by the dealer, less all allowances paid to the dealer by the manufacturer;

(2) The manufacturer shall purchase from the dealer all new, unused, undamaged parts in their original, unbroken packaging, listed in the current price catalog and acquired from the manufacturer or distributor or from a source approved or recommended by the manufacturer, at the new motor vehicle dealer price listed in the current price catalog, less applicable allowances. If the above parts are not listed in the current price catalog due to the manufacturer's or distributor's renumbering of parts or issuance of a superseding part number within the last 3 years, said parts shall be repurchased by the manufacturer, provided they are new, unused, undamaged parts in their original, unbroken packaging and are in salable condition;

(3) The manufacturer shall purchase from the dealer all equipment and furnishings, showroom kiosks and other marketing structures, signs and special tools particular to the line-make and required by the manufacturer at:

a. The dealer's net acquisition cost if the item was acquired in the 12 months immediately preceding the effective date of the termination, cancellation or nonrenewal;

b. Seventy-five percent of the dealer's net acquisition cost if the item was acquired more than 12 but less than 24 months immediately preceding the effective date of the termination, cancellation or nonrenewal;

c. Fifty percent of the dealer's net acquisition cost if the item was acquired between 24 and 36 months immediately preceding the effective date of the termination, cancellation or nonrenewal;

d. Twenty-five percent of the dealer's net acquisition cost if the item was acquired more than 36 but less than 60 months immediately preceding effective date of the termination, cancellation or nonrenewal; or

e. Fair market value if the item was acquired between 60 and 84 months immediately preceding the termination, cancellation or nonrenewal;

(4) The manufacturer shall reimburse the dealer for any costs the dealer incurred for facility upgrades or alterations required by the manufacturer within the 24 months immediately preceding the effective date of the termination, including facility upgrades or alterations required in order to participate in any manufacturer sponsored programs that provided to the dealer financial reimbursement or benefits; provided, however, that any amounts payable to a dealer shall be reduced by any amounts paid to the dealer by the manufacturer due to the dealer's participation in any such facilities upgrade or alteration program; and

(5) If a termination, cancellation, discontinuance or nonrenewal of a dealer's franchise is the result of the cessation of a line-make by a manufacturer, then in addition to the payment of termination assistance set forth in this statute, the dealer shall be paid an amount at least equivalent to the fair market value of the franchise for the line-make, which amount shall be the greater of that value as determined as of:

a. The date the manufacturer announces the action that results in the cessation of the line-make;

b. The date the action that resulted in the cessation is issued; or

c. The date 12 months prior to the date on which the notice of termination, cancellation, discontinuance or nonrenewal is issued.

Fair market value shall only include the value of the dealer's franchise for that line-make in the dealer's relevant market area. Payment is due not later than 45 days after fair market value has been determined as set forth below. Upon the dealer's written notice to the manufacturer that the dealer seeks compensation pursuant to this section, the affected dealer and the affected manufacturer shall each select a business valuation appraiser, certified public accountant, or other person that performs business valuations as a part of their occupation. The valuations shall be performed and exchanged within 60 days of the dealer's notice to the manufacturer. If the difference in valuation as determined by the respective valuators is within 10%, then the valuations shall be averaged and the average of the 2 valuations shall constitute fair market value for the purposes of this provision. If the difference in valuation as determined by the respective valuators is greater than 10%, then the chosen valuators shall select a third valuator by mutual agreement within 20 days following the exchange of the valuations. The third valuator shall provide its determination of fair market value within 45 days of selection. The third valuator's determination shall be the fair market value for the purposes of this provision unless the valuator's determination is within 25% of either the dealer or manufacturer's valuation. In that instance the valuator's determination shall be averaged with the determination that is within 25% of and that average shall be the fair market value for the purposes of this section.

64 Del. Laws, c. 27, § 1; 73 Del. Laws, c. 78, § 5; 78 Del. Laws, c. 372, § 1.;

In the event of a termination, cancellation or nonrenewal by the manufacturer under this chapter, except termination, cancellation or nonrenewal by the manufacturer for insolvency, license revocation, conviction of a crime or fraud by a dealer owner or failure of the dealer to conduct customary sales and service operations during business hours for 7 consecutive business days, except in circumstances beyond the direct control of the dealer, if the new motor vehicle dealer is leasing the dealership facilities from a lessor other than the manufacturer, the manufacturer shall pay the new motor vehicle dealer a sum equivalent to the rent for the unexpired term of the lease or 3 years' rent, whichever is less, or if the new motor vehicle dealer owns the dealership facilities, the manufacturer shall pay the new motor vehicle dealer a sum equivalent to the reasonable rental value of the dealership facilities for 3 years. Nothing in this section shall relieve a lessee from the obligation to mitigate damages under the lease, nor prevent a manufacturer from discharging its obligations by negotiating a lease termination, sublease or new lease.

64 Del. Laws, c. 27, § 1; 73 Del. Laws, c. 78, § 6; 78 Del. Laws, c. 372, § 1.;

(a) Any owner of a new motor vehicle dealership may appoint by will or any other written instrument a designated family member to succeed in the ownership interest of the said owner in the new motor vehicle dealership.

(b) Unless there exists good cause for refusal to honor succession on the part of the franchiser, any designated successor of a deceased or incapacitated owner may succeed to the ownership interest of the owner if:

(1) The designated successor gives the franchiser written notice of his or her intention to succeed to the ownership interest within 120 days of the owner's death or incapacity or within a longer period if so provided in the franchise agreement; and

(2) The designated successor agrees to be bound by all the terms and conditions of the franchise.

(c) The franchiser may request the designated successor to complete a standard dealer application, and the designated successor shall provide promptly upon said request personal and financial data that is customarily required by the franchiser to determine whether the succession should be honored.

(d) If a franchiser believes that good cause exists for refusing to honor the succession to the ownership interest of an owner by a designated successor of a deceased or incapacitated owner, the franchiser may, within 60 days following receipt of:

(1) Notice of the designated successor's intent to succeed to the ownership interest of the owner, or

(2) Any personal or financial data which it has requested,

serve upon the designated successor notice of its refusal to honor the succession and of its intent to discontinue the existing franchise with the dealer no sooner than 90 days from the date such notice is served. However, if the franchiser shall enter into 1 or more interim or trial agreements with the designated successor, which interim or trial agreements may not extend more than 2 years from the owner's death or disability, then and in such event notice shall be deemed timely if sent within 60 days of the termination of such interim or trial agreement.

(e) The notice must state the specific grounds for the refusal to honor the succession and the franchiser's intent to discontinue the existing franchise with the dealer.

(f) If a franchiser refuses to honor the succession to the ownership interest of a deceased or incapacitated owner, then and in such event:

(1) The franchiser shall allow the designated successor a reasonable period of time, which shall not be less than 6 months, in which to negotiate a sale of the dealership.

(2) Upon termination of the franchise pursuant to such refusal, the provisions of § 4906 of this title shall apply.

(g) If notice of refusal and discontinuance is not timely served upon the designated successor, the franchise shall continue in effect subject to termination only as otherwise permitted by this chapter.

(h) No franchiser shall terminate, cancel or fail to renew any franchise solely because of the death or incapacity of an owner who is not listed in the franchise as one on whose expertise and abilities the franchiser relied in the granting of the franchise.

64 Del. Laws, c. 27, § 1; 70 Del. Laws, c. 186, § 1; 73 Del. Laws, c. 78, § 7; 73 Del. Laws, c. 273, § 1.;

(a) If a new motor vehicle dealer desires to make a change in its executive management or ownership or to sell its principal assets, the new motor vehicle dealer will give the franchiser written notice of the proposed change or sale. The franchiser shall not arbitrarily refuse to agree to such proposed change or sale and may not disapprove or withhold approval of such change or sale unless the franchiser can prove:

(1) That its decision is not arbitrary; and

(2) That the new management, owner or transferee is unfit or unqualified to be a dealer based on the franchiser's prior written, reasonable, objective standards or qualifications which directly relate to the prospective transferee's business experience, moral character and financial qualifications.

(b) Where the franchiser rejects a proposed change or sale, the franchiser shall give written notice of the franchiser's reasons to the new motor vehicle dealer within 60 days. If no such notice is given to the new motor vehicle dealer, the change or sale shall be deemed approved.

(c) It shall be a violation of the Delaware franchise statute for a motor vehicle franchiser to exercise the right of first refusal or other right to acquire a motor vehicle franchise from a motor vehicle franchisee as a means to influence the consideration or other terms offered by a person in connection with the acquisition of the motor vehicle franchise or to influence a person to refrain from entering into or to withdraw from, negotiations for the acquisition of the motor vehicle franchise.

(d) In the event of a proposed sale or transfer of a dealership and if the franchise agreement has a right of first refusal in favor of the manufacturer or distributor, then notwithstanding the terms of the franchise agreement, the manufacturer, distributor or franchiser shall be permitted to exercise a right of first refusal to acquire the motor vehicle dealer's assets or ownership if all of the following requirements are met:

(1) In order to exercise the right of first refusal, the manufacturer or distributor shall notify the motor vehicle dealer in writing within 60 days of receipt of the completed proposal for the proposed sale or transfer and all related agreements.

(2) The exercise of the right of first refusal will result in the dealer receiving the same or greater consideration as the dealer has contracted to receive in connection with the proposed change of ownership or transfer.

(3) The proposed sale or transfer of the dealership's assets does not involve the transfer or sale to a member or members of the family of 1 or more dealers or to a qualified manager with at least 2 years management experience at the dealership or to a partnership or corporation controlled by such persons.

(4) The manufacturer or distributor agrees to pay the reasonable expenses, including attorney fees which do not exceed the usual, customary and reasonable fees charged for similar work done for other clients, incurred by the proposed owner or transferee prior to the manufacturer's or distributor's exercise of its right of first refusal in negotiating and implementing the contract for the proposed sale or transfer of the dealership or dealership assets.

a. Such expenses and attorney fees shall be paid to the proposed new owner or transferee at the time of closing of the sale or transfer for which the manufacturer or distributor exercised its right of first refusal.

b. No payment of such expenses and attorney fees shall be required if the new owner or transferee has not submitted or caused to be submitted an accounting of those expenses within 30 days of the dealer's receipt of the manufacturer's or distributor's written request for such an accounting.

c. A manufacturer or distributor may request such accounting before exercising the right of first refusal.

64 Del. Laws, c. 27, § 1; 70 Del. Laws, c. 186, § 1; 73 Del. Laws, c. 78, § 8.;

In determining whether good cause for the refusal to honor the succession or sale of dealership exists, the manufacturer, distributor, factory branch or importer has the burden of proving that the successor or purchaser is a person who is not of good moral character or does not meet the franchisor's existing and reasonable standards and, considering the volume of sales and service of the new motor vehicle dealer, uniformly applied minimum business experience standards in the market area.

64 Del. Laws, c. 27, § 1; 73 Del. Laws, c. 78, § 9.;

This chapter does not preclude the owner of a new motor vehicle dealer from designating any person as successor by written instrument filed with the manufacturer or distributor and, in the event there is a conflict between such written instrument and this section, and that written instrument has not been revoked by the owner of the new motor vehicle dealer in writing to the manufacturer or distributor, then the written instrument shall govern.

64 Del. Laws, c. 27, § 1; 70 Del. Laws, c. 186, § 1.;

(a) Notwithstanding the terms of any franchise agreement, it shall be a violation of this chapter for any manufacturer licensed under this chapter to require, attempt to require, coerce or attempt to coerce any new motor vehicle dealer in this State:

(1) To order or accept delivery of any new motor vehicle, part or accessory thereof, equipment or any other commodity not required by law which shall not have been voluntarily ordered by the new motor vehicle dealer; except that this paragraph is not intended to modify or supersede any terms or provisions of the franchise requiring new motor vehicle dealers to market a representative line of those motor vehicles which the manufacturer or distributor is publicly advertising.

(2) To order or accept delivery of any new motor vehicle with special features, accessories or equipment not included in the list price of such motor vehicles as publicly advertised by the manufacturer or distributor.

(3) 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.

(4) To enter into any agreement with the manufacturer or to do any other act prejudicial to the new motor vehicle dealer by threatening to terminate or cancel a franchise or any contractual agreement existing between the dealer and the manufacturer; except that this paragraph is not intended to preclude the manufacturer or distributor from insisting on compliance with the reasonable terms or provisions of the franchise or other contractual agreement, and notice in good faith to any new motor vehicle dealer of the new motor vehicle dealer's violation of such terms or provisions shall not constitute a violation of the chapter.

(5) To change the capital structure of the new motor vehicle dealer or the means by or through which the new motor vehicle dealer finances the operation of the dealership provided that the new motor vehicle dealer at all times meets any reasonable capital standards determined by the manufacturer in accordance with uniformly applied criteria; and also provided that no change in the capital structure shall cause a change in the principal management or have the effect of a sale of the franchise without the consent of the manufacturer or distributor; said consent shall not be unreasonably withheld.

(6) 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, however, that this paragraph does not apply unless the new motor vehicle dealer maintains a reasonable line of credit for each make or line of new motor vehicle, the new motor vehicle dealer remains in substantial compliance with the terms and conditions of the franchise and any reasonable facilities requirements of the manufacturer, and no change is made in the principal management of the new motor vehicle dealer.

(7) To prospectively assent to a release, assignment, novation, waiver or estoppel which would relieve any person from liability to be imposed by this law or to require any controversy between a new motor vehicle dealer and a manufacturer, distributor or representatives to be referred to any person other than the duly constituted courts of the State or the United States of America, if such referral would be binding upon the new motor vehicle dealer.

(8) To either establish or maintain exclusive facilities, personnel or display space when such requirements would not be justified by reasonable business considerations. The burden of proof for this subsection shall be on the manufacturer.

(9) To expand, construct or significantly modify facilities without written assurances that the franchisor will provide a reasonable supply of new motor vehicles within a reasonable time so as to justify such an expansion, in light of the market and economic conditions. To require, coerce or attempt to coerce a dealer to substantially alter a facility or premises if the facility or premises has been altered within the last 7 years at a cost of more than $250,000 and the alteration was required and approved by the manufacturer, except for improvements made to comply with health or safety laws, to accommodate the technology requirements necessary to sell or to service a motor vehicle or for alterations made pursuant to voluntary agreements between a dealer and a manufacturer where separate and valuable consideration has been offered and accepted.

(10) To adhere to unreasonable sales, service or facility standards arrived at through policies, surveys or programs.

(11) To purchase nonline, make-specific goods, services or design elements from the manufacturer or its designated sources if the desired results can be produced through alternative means, except for parts or when necessary to protect the manufacturer's trademark or brand name.

(12) To refuse to pay, or claim reimbursement from, a dealer for sales, incentives or payments related to a motor vehicle sold by the dealer because the purchaser of the motor vehicle exported or resold the motor vehicle in violation of the policy of the manufacturer unless the manufacturer can show that, at the time of sale, the dealer knew or reasonably should have known of the purchaser's intention to export or resell the motor vehicle. There is a rebuttable presumption that the dealer did not know or should not have reasonably known that the vehicle would be exported if the vehicle is titled and registered in any state of the United States.

(13) To require a dealer to provide its customer lists or service files to the manufacturer, unless necessary for the sale and delivery of a new motor vehicle to a consumer, to validate and pay consumer or dealer incentives, for reasonable marketing purposes, for evaluation of dealer performance, for analytics or for the submission to the manufacturer for any services supplied by the dealer for any claim for warranty parts or repairs. Nothing in this section shall limit the manufacturer's ability to require or use customer information to satisfy any safety or recall notice obligation or other legal obligation. To release or cause to be released a dealer's nonpublic customer information to another dealer unless the franchise has been terminated, the customer has relocated to an address that is greater than 40 miles outside of the motor vehicle dealer's primary market area as assigned by the manufacturer, a customer has not transacted with the dealer from which a vehicle was purchased for a period of 36 months or the dealer expressly consents in writing to the sharing of customer information with other dealers.

(b) It shall be a violation of this chapter for any manufacturer:

(1) To delay, refuse or fail to deliver new motor vehicles or new motor vehicle parts or accessories in a reasonable time, and in reasonable quantity relative to the new motor vehicle dealer's facilities and sales potential in the new motor vehicle dealer's relevant market area, after acceptance of an order from a new motor vehicle dealer having a franchise for the retail sale of any new motor vehicle sold or distributed by the manufacturer, any new motor vehicle, parts or accessories to new vehicles as are covered by such franchise, if such vehicle, parts or accessories are publicly advertised as being available for immediate delivery or actually being delivered. This paragraph is not violated, however, if such failure is caused by acts or causes beyond the control of the manufacturer.

(2) To refuse to disclose to any new motor vehicle dealer, handling the same line-make, any matters relating to the manner and mode of distribution of that line-make within the State, including, without limitation, matters related to establishment or relocation of dealers under § 4915 of this title (but with appropriate exclusion of financial information not essential to a complete understanding of the manufacturer's manner and mode of distribution).

(3) To obtain money, goods, service or any other benefit from any other person with whom the new motor vehicle dealer does business, on account of, or in relation to, the transaction between the new motor vehicle dealer and such other person, other than for compensation for services rendered, unless such benefit is promptly accounted for, and transmitted to, the new motor vehicle dealer.

(4) To increase prices of new motor vehicles which the new motor vehicle dealer had ordered for consumers prior to the new motor vehicle dealer's receipt of the written official price increase notification. A sales contract signed by a 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 paid to the new motor vehicle dealer, the amount of any such reduction or rebate received by a new motor vehicle dealer shall be passed on to the consumer by the new motor vehicle 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 shall not be considered a price increase or price decrease. Price changes caused by either:

a. The addition to a motor vehicle of required or optional equipment; or

b. Revaluation of the United States dollar, in the case of foreign-make vehicles or components; or

c. An increase in transportation charges due to increased rates imposed by carriers;

shall not be subject to this paragraph.

(5) To release to any outside party, except under subpoena or as otherwise required by law (including, without limitation, provisions of this chapter) or in an administrative, judicial or arbitration proceeding involving the manufacturer or new motor vehicle dealer, any business, financial or personal information which may be from time to time provided by the new motor vehicle dealer to the manufacturer, without the express written consent of the new motor vehicle dealer.

(6) To deny any new motor vehicle dealer the right of free association with any other new motor vehicle dealer for any lawful purpose.

(7) To unfairly compete with a new motor vehicle dealer in the same line-make operating under an agreement or franchise from the aforementioned manufacturer in the relevant market area. A manufacturer shall not, however, be deemed to be competing when operating a dealership either temporarily for a reasonable period, or in a bona fide retail operation which is for sale to any qualified independent person at a fair and reasonable price, or in a bona fide relationship in which an independent person has made a significant investment subject to loss in the dealership and can reasonably expect to acquire full ownership of such dealership on reasonable terms and conditions.

(8) To unfairly discriminate among its new motor vehicle dealers with respect to warranty reimbursement.

(9) To prevent or attempt to prevent the new motor vehicle dealer by written instrument or otherwise from either receiving the fair market value of the dealership in a sale transaction or from transferring the new motor vehicle dealership to a spouse or legal heir as specified in this chapter.

(10) To offer to sell or lease, or to sell or lease, any new motor vehicle to any new motor vehicle dealer at a lower actual invoice price than the actual invoice price offered to another for the same model vehicle, notwithstanding the availability of incentive programs or sales promotion plans or other similar programs available to new motor vehicle dealers at the time of consumer purchase.

(11) To use a promotional program or device or an incentive, payment or other benefit, whether paid at the time of sale of the new motor vehicle to the dealer or later, that results in the sale or offer to sell a new motor vehicle at a lower price, including the price for vehicle transportation, than the price at which the same model similarly equipped is offered or is available to another dealer in the State during a similar time period. This subdivision shall not prohibit a promotional or incentive program that is functionally available to competing dealers of the same line-make in the State.

(12) To engage in any predatory practice or discrimination against any new motor vehicle dealer or unreasonably discriminate between or among dealers in the sale of a motor vehicle owned by the manufacturer or distributor.

(13) To resort to or to use any fraudulent or intentionally misleading advertisement in connection with its business as a distributor or manufacturer licensed in this State; or for any agent of a distributor or manufacturer or distributor to make any fraudulent or intentionally misleading statements to new motor vehicle dealers as inducements to enter into any agreement or franchise.

(14) To directly or indirectly own an interest in a dealer or dealership; or operate or control a dealer or dealership; or act in the capacity of a dealer except as provided by this section.

a. A manufacturer or distributor may own an interest in a franchised dealer, or otherwise control a dealership for a period not to exceed 24 months from the date the manufacturer or distributor acquires the dealership if the dealership is for sale by the manufacturer or distributor at a reasonable price and on reasonable terms and conditions.

b. A manufacturer or distributor may temporarily own an interest in a dealership if the manufacturer's or distributor's participation in the dealership is a bona fide relationship with a franchised dealer who:

1. Is required to make a significant investment in the dealership, subject to loss;

2. Has an ownership interest in the dealership; and

3. Operates the dealership under a plan to acquire full ownership of the dealership within a reasonable time and under reasonable terms and conditions.

(15) To engage in business as a dealer or to manage, control, operate or own any interest in a dealership either directly or indirectly, if the primary business of such dealer or dealership is to perform repair services on motor vehicles, except motor homes, pursuant to a manufacturer's or franchiser's warranty.

(c)(1) It is unlawful for any manufacturer, or any officer, agent or representative to coerce or to attempt to coerce any new motor vehicle dealer in this State to sell, assign or transfer any retail installment sales contract, obtained by such dealer in connection with the sale by the dealer in this State of new motor vehicles manufactured or sold by such manufacturer, to a specified finance company or class of such companies, or to any other specified persons, by any of the acts or means hereinafter set forth, namely:

a. By any statement, suggestion, promise or threat that such manufacturer will in any manner benefit or injure such new motor vehicle dealer, whether such statement, suggestion, threat or promise is express or implied or made directly or indirectly.

b. By any act that will benefit or injure such new motor vehicle dealer.

c. By any contract, or any express or implied offer of contract, made directly or indirectly to such new motor vehicle dealer for handling such new motor vehicles on the condition that such new motor vehicle dealer sell, assign or transfer retail installment sales contract thereon, in this State, to a specified finance company or class of such companies or to any other specified person.

d. By any express or implied statement or representation made directly or indirectly that such new motor vehicle dealer is under any obligation whatsoever to sell, assign or transfer any retail sales contracts, in this State, on new motor vehicles manufactured or sold by such manufacturer to such finance company, or class of companies, or other specified person, because of any relationship or affiliation between such manufacturer and such finance company or companies or such specified person or persons.

(2) Any such statements, threats, promises, acts, contracts or offers of contracts, when the effect thereof may be to lessen or eliminate competition or tend to create a monopoly, are declared unfair trade practices and unfair methods of competition and against the policy of this State, are unlawful and are hereby prohibited.

(d) It shall be illegal for any manufacturer or agent or employee of a manufacturer to use a written instrument, agreement or waiver to attempt to nullify any of the provisions of this section and such agreement, written instrument or waiver shall be null and void.

64 Del. Laws, c. 27, § 1; 70 Del. Laws, c. 186, § 1; 70 Del. Laws, c. 497, §§ 1-3; 73 Del. Laws, c. 78, §§ 10-13; 78 Del. Laws, c. 372, § 1.;

(a) It shall be unlawful directly or indirectly to impose unreasonable restrictions on the new motor vehicle dealer relative to the sale, transfer, right to renew, termination, discipline, noncompetition covenants, site control (whether by sublease, collateral pledge of lease or otherwise), right of first refusal to purchase, option to purchase, compliance with subjective standards and assertion of legal or equitable rights.

(b) This chapter shall not preclude dealers, manufacturers or distributors from entering into valid releases or settlement agreements consistent with the policy of this chapter. In no case shall a general release required to be executed as a condition to renewal of a franchise agreement be deemed to be consistent with the policy of this chapter.

(c) It shall be unlawful to sell a new motor vehicle to a consumer except for the federal government in the State unless that person, persons, partnership or corporation has a valid franchise agreement from a franchiser for that make or line and is in compliance with all Delaware Motor Vehicle licensing requirements. This subsection shall not preclude a franchiser from providing information to consumers for the purposes of marketing or facilitating the sale of a new motor vehicle or from establishing programs to sell or offer to sell new motor vehicles through participating franchisees.

64 Del. Laws, c. 27, § 1; 73 Del. Laws, c. 78, § 14.;

(a) In the event that a manufacturer seeks to enter into a franchise establishing an additional new motor vehicle dealer or relocating an existing new motor vehicle dealer within or into a relevant market area where the same line-make is then represented, the manufacturer shall in writing first notify the Public Service Commission and each new motor vehicle dealer in such line-make in the relevant market area of the intention to establish an additional dealer or to relocate an existing dealer within or into that market area. Within 30 days of receiving such notice or within 30 days after the end of any appeal procedure provided by the manufacturer, any such new motor vehicle dealer may file with the Public Service Commission a protest to the establishing or relocating of the new motor vehicle dealer. When such a protest is filed, the Public Service Commission shall inform the manufacturer that a timely protest has been filed, and that the manufacturer shall not establish or relocate the proposed new motor vehicle dealer until the Public Service Commission has held a hearing, nor thereafter, unless, the Public Service Commission has determined that there is good cause for permitting the addition or relocation of such new motor vehicle dealer.

(b) This section does not apply:

(1) To the relocation of an existing dealer within that dealer's relevant market area, provided that the relocation not be at a site within 7 miles of a licensed new motor vehicle dealer for the same line-make of motor vehicle; or

(2) If the proposed new motor vehicle dealer is to be established at or within 2 miles of a location at which a former new motor vehicle dealer for the same line-make of new motor vehicle had ceased operating within the previous 2 years. Determination of whether a new motor vehicle dealer "had ceased operating" under the preceding sentence shall be based on the facts and circumstances of a particular case; provided however, that in transactions involving a sale of the business or assets of a new motor vehicle dealer, the seller and purchaser shall be treated as the same entity.

(c) In determining whether good cause has been established for entering into or relocating an additional new motor vehicle dealer for the same line-make, the Public Service Commission shall take into consideration the existing circumstances, including, but not limited to:

(1) Permanency of the investment of both the existing and proposed new motor vehicle dealers;

(2) Growth or decline in population and new car registrations in the relevant market area;

(3) Effect on the consuming public in the relevant market area;

(4) Whether it is injurious or beneficial to the public welfare for an additional new motor vehicle dealer to be established;

(5) Whether the new motor vehicle dealers of the same line-make in that relevant market area are providing adequate competition and convenient customer care for the motor vehicles of the line-make in the market area which shall include the adequacy of motor vehicle sales and service facilities, equipment, supply of motor vehicle parts and qualified service personnel;

(6) Whether the establishment of an additional new motor vehicle dealer would increase competition, and therefore be in the public interest;

(7) The effect on the relocating dealer of a denial of its relocation.

(d) The manufacturer and proposed additional or relocating new motor vehicle dealer shall have the burden of proof to establish that good cause exists for permitting the proposed addition or relocation under this section.

(e) The Public Service Commission or its designee shall conduct the hearing and render its final determination within 90 days after a protest is filed.

(f) Any parties to a hearing by the Public Service Commission concerning the establishing or relocating of a new motor vehicle dealer shall have a right of review of the decision in the Superior Court; if no decision is made by the Public Service Commission within 90 days of the protest then the matter shall be heard and determined by the Superior Court on application by either party filed within 120 days after the protest.

(g) All new motor vehicle dealers in the State shall bear the costs of the administration of this chapter by means of an annual assessment which shall be established by the Commission and shall be no more than what is reasonably needed to defray the annual cost of administering this chapter; provided, in the event the Commission determines that any action or actions by a manufacturer pursuant to this section are frivolous, the Commission may assess the reasonable cost of the hearing against the manufacturer. Such assessment shall be paid by each new motor vehicle dealer on or before March 31 of each year. If a new motor vehicle dealer fails to pay the assessment, it shall pay a penalty of 12 percent of the amount due for each month or fraction thereof that the amount is unpaid. The Commission may enforce the collection of any delinquent assessment, or portion thereof, by legal action or in any other manner by which the collection of debts due the State may be enforced. All assessments under this section shall be deposited in the State Treasury to the credit of a New Motor Vehicle Dealer Fund to be used for the administration of this chapter by the Commission, as authorized by the General Assembly in its annual operating budget. Any amount which remains in the Fund at the end of any fiscal year shall be applied on an equal basis to the assessment charged against each new motor vehicle dealer for the next succeeding fiscal year.

64 Del. Laws, c. 27, § 1; 67 Del. Laws, c. 101, §§ 1-3; 70 Del. Laws, c. 186, § 1; 70 Del. Laws, c. 497, § 4.;

(a) Notwithstanding the terms, provisions or conditions of any agreement or franchise or other terms or provisions of any novation, waiver or other written instrument, any person who is or may be injured by a violation of a provision of this chapter or any party to a franchise who is so injured in such party's business or property by a violation of a provision of this chapter relating to that franchise, or any person so injured because such person refuses to accede to a proposal for an arrangement which, if consummated, would be in violation of this chapter may bring an action in any court of competent jurisdiction for damages and equitable relief including injunctive relief. Said person may recover damages in the amount equal to the actual pecuniary loss. In addition, said person may recover costs and reasonable attorney's fees as damages. Upon a prima facie showing by the person filing the petition or cause of action that a violation of this chapter has occurred, the burden of proof shall then be upon the opposing party to prove that such violation did not occur.

(b) Where the violation of a provision of this chapter can be shown to be wilful or wanton, or if continued multiple violations of a provision or provisions of this chapter occur, the court may award punitive damages, attorney's fees and costs in addition to any other damages under this chapter.

(c) A new motor vehicle dealer, if the dealer has not suffered any loss of money or property, may obtain final equitable relief if it can be shown that the violation of a provision of this chapter by a manufacturer may have the effect of causing such loss of money or property.

(d) Where there are continued violations of a provision or provisions of this chapter and it can be shown that the violations are wilful or wanton, the court, in addition to any other remedy or award of damages under this chapter, may assess monetary penalties.

(e) In addition to any other relief under this chapter, the court may assess monetary penalties against a manufacturer for violations of this chapter.

64 Del. Laws, c. 27, § 1; 70 Del. Laws, c. 186, § 1; 73 Del. Laws, c. 78, § 15; 78 Del. Laws, c. 372, § 1.;

(a) Any person who engages directly or indirectly in purposeful contacts within this State in connection with the offering or advertising for sale or has business dealings with respect to a new motor vehicle sale within this State shall be subject to this chapter and shall be subject to the jurisdiction of the courts of this State.

(b) The applicability of this chapter shall not be affected by a choice of law clause in any franchise, agreement, prospective waiver, novation or any other written instrument.

(c) Any provision of any agreement, franchise, prospective waiver, novation or any other written instrument which is in violation of any section of this chapter shall be deemed null and void and without force and effect.

(d) It shall be unlawful for a manufacturer to use any subsidiary corporation, affiliated corporation or any other controlled corporation, partnership, association or person to accomplish what would otherwise be illegal conduct under this chapter on the part of the manufacturer.

(e) If any provision of this chapter is declared to be invalid or unenforceable by a court or authority of competent jurisdiction, the remaining provisions of this chapter shall continue in full force and effect.

64 Del. Laws, c. 27, § 1; 73 Del. Laws, c. 78, § 16.;

(a) Actions arising out of any provision of this chapter shall be commenced within a 4-year period of the accrual of the cause of action; provided, however, that if a person liable hereunder conceals the cause of action from the knowledge of the person entitled to bring it, the period prior to the discovery of a cause of action by the person entitled shall be excluded in determining the time limited for the commencement of the action.

(b) If a cause of action accrues during the pendency of any civil, criminal or administrative proceeding against a person brought by the United States or any of its agencies under the antitrust laws, the Federal Trade Commission Act [15 U.S.C. §§ 41-58] or any other federal act, or the laws as to franchising, such actions may be commenced within 1 year after the final disposition of such civil, criminal or administrative proceeding.

64 Del. Laws, c. 27, § 1; 70 Del. Laws, c. 186, § 1.;