Colo. Rev. Stat. § 44-20-423, Unlawful acts

(1) It is unlawful and a violation of this part 4 for any powersports vehicle manufacturer, distributor, or manufacturer representative:

(a) To willfully fail to perform or cause to be performed any written warranties made with respect to a powersports vehicle or parts thereof;

(b) To coerce or attempt to coerce any powersports vehicle dealer to perform or allow to be performed an act that could be financially detrimental to the dealer or that would impair the dealer's goodwill or to enter into an agreement with a powersports vehicle manufacturer or distributor that would be financially detrimental to the dealer or impair the dealer's goodwill, by threatening to cancel or not renew a franchise between a powersports vehicle manufacturer or distributor and the dealer;

(c) To coerce or attempt to coerce any powersports vehicle dealer to accept delivery of a powersports vehicle, parts or accessories thereof, or any commodities or services that have not been ordered by the dealer;

(d) (I) To cancel or cause to be canceled, directly or indirectly, without just cause, the franchise of a powersports vehicle dealer, and the nonrenewal of a franchise or selling agreement without just cause is a violation of this subsection (1)(d) and shall constitute an unfair cancellation.

(II) As used in this subsection (1)(d), just cause shall be determined in the context of all circumstances surrounding the cancellation or nonrenewal, including but not limited to:

(A) The amount of business transacted by the powersports vehicle dealer;

(B) The investments necessarily made and obligations incurred by the powersports vehicle dealer, including but not limited to goodwill, in the performance of its duties under the franchise agreement, together with the duration and permanency of the investments and obligations;

(D) The powersports vehicle dealer's failure to provide adequate service of facilities, equipment, parts, and qualified service personnel;

(E) The powersports vehicle dealer's failure to perform warranty work on behalf of the powersports vehicle manufacturer, subject to reimbursement by the powersports vehicle manufacturer; and

(F) The powersports vehicle dealer's failure to substantially comply, in good faith, with requirements of the franchise that are determined to be reasonable and material.

(III) The following conduct by a powersports vehicle dealer shall constitute just cause for termination without consideration of other factors:

(A) Conviction of, or a plea of guilty or nolo contendere to, a felony;

(B) A continuing pattern of fraudulent conduct against the powersports vehicle manufacturer or consumers; or

(e) To withhold, reduce, or delay unreasonably or without just cause delivery of powersports vehicles, powersports vehicle parts and accessories, commodities, or money due powersports vehicle dealers for warranty work done by any powersports vehicle dealer;

(f) To withhold, reduce, or delay unreasonably or without just cause services contracted for by powersports vehicle dealers;

(g) To coerce any powersports vehicle dealer to provide installment financing with a specified financial institution;

(h) To violate any duty imposed by, or fail to comply with, any provision of section 44-20-424, 44-20-425, or 44-20-426;

(i) (I) To fail to provide to the powersports vehicle dealer, within twenty days after receipt of a notice of intent from a powersports vehicle dealer, the list of documents and information necessary to approve the sale or transfer of the ownership of a dealership by sale of the business or by stock transfer or the change in executive management of the dealership;

(II) To fail to confirm within twenty days after receipt of all documents and information listed in subsection (1)(i)(I) of this section that the documentation and information has been received;

(III) To refuse to approve, unreasonably, the sale or transfer of the ownership of a dealership by sale of the business or by stock transfer within sixty days after the manufacturer has received all documents and information necessary to approve the sale or transfer of ownership, or to refuse to approve, unreasonably, the change in executive management of the dealership within sixty days after the manufacturer has received all information necessary to approve the change in management; except that nothing in this part 4 shall authorize the sale, transfer, or assignment of a franchise or a change of the principal operator without the approval of the powersports vehicle manufacturer or distributor unless the manufacturer or distributor fails to send notice of the disapproval within sixty days after receiving all documents and information necessary to approve the sale or transfer of ownership; or

(IV) To condition the sale, transfer, relocation, or renewal of a franchise agreement or to condition sales, services, parts, or finance incentives upon site control or an agreement to renovate or make improvements to a facility; except that voluntary acceptance of the conditions by the dealer shall not constitute a violation;

(j) (I) To fail or refuse to offer to its same line-make franchised dealers all models manufactured for that line-make except as a result of a strike or labor difficulty, lack of manufacturing capacity, shortage of materials, freight embargo, or other cause over which the powersports vehicle manufacturer has no control; or

(II) To require a dealer to pay an unreasonable fee, purchase unreasonable advertising displays or other materials, or comply with unreasonable training or facilities requirements as a prerequisite to receiving any particular model of that same line-make, which shall be judged based on the circumstances of the individual dealer and the conditions of the market served by the dealer;

(k) To require, coerce, or attempt to coerce any powersports vehicle dealer to refrain from participation in the management of, investment in, or acquisition of another line-make of new powersports vehicles or related products; except that this subsection (1)(k) shall not apply unless the powersports vehicle dealer:

(I) Maintains a reasonable line of credit for each make or line of new powersports vehicle;

(II) Remains in compliance with reasonable capital standards and reasonable facilities requirements specified by the powersports vehicle manufacturer; but reasonable facilities requirements shall not include a requirement that a powersports vehicle dealer establish or maintain exclusive facilities, personnel, or display space; and

(III) Provides written notice to the manufacturer, distributor, or manufacturer's representative, no less than ninety days prior to the dealer's intent to participate in the management of, investment in, or acquisition of another line-make of new powersports vehicles or related products;

(l) To fail to pay to a powersports vehicle dealer, within ninety days after the termination, cancellation, or nonrenewal of a franchise, all of the following:

(I) The dealer cost, plus any charges made by the powersports vehicle manufacturer for distribution, delivery, and taxes, less all allowances paid or credited to the powersports vehicle dealer by the powersports vehicle manufacturer, of unused, undamaged, and unsold powersports vehicles in the powersports vehicle dealer's inventory that were acquired from the powersports vehicle manufacturer or from another powersports vehicle dealer of the same line-make in the ordinary course of business within the previous twelve months;

(II) The dealer cost, less all allowances paid or credited to the powersports vehicle dealer by the powersports vehicle manufacturer, for all unused, undamaged, and unsold supplies, parts, and accessories in original packaging and listed in the powersports vehicle manufacturer's current parts catalog;

(III) The fair market value of each undamaged sign owned by the powersports vehicle dealer and bearing a common name, trade name, or trademark of the powersports vehicle manufacturer if acquisition of the sign was required by the powersports vehicle manufacturer;

(IV) The fair market value of all special tools and equipment that were acquired from the powersports vehicle manufacturer or from sources approved and required by the powersports vehicle manufacturer and that are in good and usable condition, excluding normal wear and tear; and

(V) The cost of transporting, handling, packing, and loading the powersports vehicles, supplies, parts, accessories, signs, special tools, equipment, and furnishings described in this subsection (1)(l);

(m) To require, coerce, or attempt to coerce a powersports vehicle dealer to close or change the location of the powersports vehicle dealer, or to make any substantial alterations to the dealer premises or facilities when doing so would be unreasonable or without written assurance of a sufficient supply of powersports vehicles so as to justify the changes, in light of the current market and economic conditions;

(n) To authorize or permit a person to perform warranty service repairs on powersports vehicles unless the person is:

(I) A powersports vehicle dealer with whom the powersports vehicle manufacturer has entered into a franchise agreement for the sale and service of the manufacturer's powersports vehicles; or

(II) A person or government entity that has purchased new powersports vehicles pursuant to a powersports vehicle manufacturer's fleet discount program and is performing the warranty service repairs only on vehicles owned by the person or entity;

(o) To require, coerce, or attempt to coerce a powersports vehicle dealer to prospectively agree to a release, assignment, novation, waiver, or estoppel that would relieve any person of a duty or liability imposed under this article 20 except in settlement of a bona fide dispute;

(p) To discriminate between or refuse to offer to its same line-make franchised dealers all models manufactured for that line-make based upon unreasonable sales and service standards;

(q) To fail to make practically available an incentive, rebate, bonus, or other similar benefit to a powersports vehicle dealer that is offered to another powersports vehicle dealer of the same line-make within this state;

(r) To fail to pay to a powersports vehicle dealer:

(I) Within ninety days after the termination, cancellation, or nonrenewal of a franchise for the failure of a dealer to meet performance sales and service obligations or after the termination, elimination, or cessation of a line-make, the cost of the lease for the facilities used for the franchise or line-make for the unexpired term of the lease, not to exceed one year; except that:

(A) If the powersports vehicle dealer owns the facilities, the value of renting the facilities for one year, prorated for each line-make based upon total sales volume for the previous twelve months before the involuntary termination;

(B) Nothing in this subsection (1)(r)(I) shall be construed to limit the application of subsection (1)(d) of this section;

(II) Within ninety days after the termination, elimination, or cessation of a line-make or the termination of a franchise due to the insolvency of the manufacturer or distributor, the fair market value of the powersports vehicle dealer's goodwill for the line-make as of the date the manufacturer or distributor announces the action that results in the termination, elimination, or cessation, not including any amounts paid under subsections (1)(l)(I) to (1)(l)(V) of this section;

(s) To condition a franchise agreement on improvements to a facility unless reasonably required by the technology of a powersports vehicle being sold at the facility;

(t) To charge back, deny powersports vehicle allocation, withhold payments, or take other actions against a powersports vehicle dealer if a powersports vehicle sold by the powersports vehicle dealer is exported from Colorado unless the manufacturer, distributor, or manufacturer representative proves that the powersports vehicle dealer knew or reasonably should have known a powersports vehicle was intended to be exported, which shall operate as a rebuttable presumption that the powersports vehicle dealer did not have this knowledge;

(u) Within ninety days after the termination, elimination, or cessation of a line-make or the termination, cancellation, or nonrenewal of a franchise by the manufacturer, distributor, or manufacturer representative, for any reason other than that the powersports vehicle dealer commits fraud, makes a misrepresentation, or commits any other crime within the scope of the franchise agreement or in the operation of the dealership, to fail to reimburse a powersports vehicle dealer for the cost depreciated by five percent per year of any upgrades or alterations to the powersports vehicle dealer's facilities required by the manufacturer, distributor, or manufacturer representative within the previous five years;

(v) To fail to notify a powersports vehicle dealer at least ninety days before the following and to provide the specific reasons for the following:

(I) Directly or indirectly terminating, canceling, or not renewing a franchise agreement; or

(II) Modifying, replacing, or attempting to modify or replace the franchise or selling agreement of a powersports dealer, including a change in the dealer's geographic area upon which sales or service performance is measured, if the modification would substantially and adversely alter the rights or obligations of the dealer under the current franchise or selling agreement or would substantially impair the sales or service obligations or the dealer's investment;

(w) To require, coerce, or attempt to coerce a powersports dealer to substantially alter a facility or premises if the facility or premises has been altered within the last ten years at a cost of more than twenty-five thousand dollars, and the alteration was required and approved by the manufacturer, distributor, or manufacturer representative; except that this subsection (1)(w) does not apply to improvements made to comply with health or safety laws or to accommodate the technology requirements necessary to sell or service a line-make;

(x) (I) To sell or offer to sell new powersports vehicles to a franchised powersports vehicle dealer with whom the manufacturer has a franchise agreement at a lower actual price than the actual price offered to any other powersports vehicle dealer with whom the manufacturer has a franchise agreement for the same powersports vehicle similarly equipped; except that this subsection (1)(x) does not apply to:

(A) Resale to any government;

(B) Donation or use by the dealer in a driver education course; or

(C) A price change made in the ordinary course of business if made available to all powersports vehicle dealers when the price changes.

(II) This subsection (1)(x) does not prohibit a manufacturer, distributor, or manufacturer representative from offering incentive programs, sales-promotion plans, or other discounts if the incentives or discounts are reasonably available to all powersports vehicle dealers with whom the manufacturer has a franchise agreement.

(y) To require a powersports vehicle dealer to grant a manufacturer, distributor, or manufacturer representative the following or to enforce the following if the exercise of the contractual right would stop the transfer of the powersports vehicle dealer ownership from an owner to an immediate family member of the owner:

(I) A right of first refusal to purchase the powersports vehicle dealer; or

(II) An option to purchase the powersports vehicle dealer; and

(z) (I) To use an unreasonable, arbitrary, or unfair performance standard in determining a powersports vehicle dealer's compliance with a franchise agreement; or

(II) To fail to communicate, upon the request of the dealer, any performance standard in a clear and concise writing to a powersports vehicle dealer before applying the standard to the powersports vehicle dealer.

(2) It is unlawful for a person to act as a wholesaler, powersports vehicle dealer, used powersports vehicle dealer, powersports vehicle manufacturer, powersports vehicle distributor, powersports vehicle manufacturer representative, or powersports vehicle salesperson unless the person has been duly licensed under this part 4; except that this subsection (2) does not apply to a business owner selling a powersports vehicle if the vehicle has been owned for more than one year, the vehicle has been used exclusively for business purposes, the vehicle is titled in the name of the business, all taxes for the vehicle have been paid, and the total number of vehicles sold by the business owner over a two-year period does not exceed twenty vehicles.

Source: L. 2018: (2) amended, (HB 18-1105), ch. 28, p. 328, � 2, effective August 8; entire article added with relocations, (SB 18-030), ch. 7, p. 120, � 2, effective October 1; (1)(a) and IP(1)(x)(I) amended, (HB 18-1354), ch. 349, p. 2073, � 2, effective October 1.

Editor's note: (1) This section is similar to former � 12-6-523 as it existed prior to 2018.

(2) (a) Subsections (1)(a) and IP(1)(x)(I) of this section were numbered as � 12-6-523 (1)(a) and IP(1)(x)(I), respectively, in HB 18-1354. Those provisions were harmonized with and relocated to this section as this section appears in SB 18-030.

(b) Subsection (2) of this section was numbered as � 12-6-523 (2) in HB 18-1105. That provision was harmonized with and relocated to this section as this section appears in SB 18-030.

Cross references: For the legislative declaration in HB 18-1354, see section 1 of chapter 349, Session Laws of Colorado 2018.

44-20-424. New, reopened, or relocated dealer - notice required - grounds for refusal of dealer license - definitions - rules. (1) No powersports vehicle manufacturer or distributor shall establish an additional powersports vehicle dealer, reopen a previously existing powersports vehicle dealer, or authorize an existing powersports vehicle dealer without first providing at least sixty days' notice to all of its franchised dealers within whose relevant market area the new, reopened, or relocated dealer would be located. The notice must state:

(a) The specific location at which the additional, reopened, or relocated powersports vehicle dealer will be established;

(b) The date on or after which the powersports vehicle manufacturer intends to be engaged in business with the additional, reopened, or relocated powersports vehicle dealer at the proposed location; and

(c) The identity of all powersports vehicle dealers who are franchised to sell the same line-make of vehicles with licensed locations in the relevant market area where the additional, reopened, or relocated powersports vehicle dealer is proposed to be located.

(2) A powersports vehicle manufacturer shall approve or disapprove of a powersports vehicle dealer facility initial site location, relocation, or reopening request within sixty days after the request or after sending the notice required by subsection (1) of this section to all of its franchised powersports vehicle dealers, whichever is later.

(3) Subsection (1) of this section shall not apply to:

(a) The relocation of an existing dealer within two miles of its current location; or

(b) The establishment of a replacement dealer, within two years, either at the former location or within two miles of the former location.

(4) As used in this section:

(a) Powersports manufacturer means a powersports vehicle manufacturer, distributor, or manufacturer representative.

(b) Relevant market area means the greater of the following:

(I) The geographic area of responsibility defined in the franchise agreement of an existing dealer; or

(II) The geographic area within a radius of ten miles of any existing dealer of the same line-make of powersports vehicle as the proposed additional motor vehicle dealer.

(5) (a) An existing powersports vehicle dealer adversely affected by the reopening or relocation of an existing same line-make powersports vehicle dealer or the addition of a same line-make powersports vehicle dealer may, within ninety days after receipt of the notice required in subsection (1) of this section, file a legal action in a district court of competent jurisdiction or file an administrative complaint with the executive director to prevent or enjoin the relocation, reopening, or addition of the proposed powersports vehicle dealer. An existing powersports vehicle dealer is adversely affected if:

(I) The dealer is located within the relevant market area of the proposed relocated, reopened, or additional dealership described in the notice required in subsection (1) of this section; or

(II) The existing dealer or dealers of the same line-make show that, during any twelve-month period within the thirty-six months preceding the receipt of the notice required in subsection (1) of this section, the dealer or dealers, or a dealer's predecessor, made at least twenty-five percent of the dealer's retail sales of new powersports vehicles to persons whose addresses are located within ten miles of the location of the proposed relocated, reopened, or additional dealership.

(b) The executive director shall refer a complaint filed under this section to an administrative law judge in the office of administrative courts for final agency action.

(I) The change in population;

(II) The relevant vehicle buyer profiles;

(III) The relevant historical new powersports vehicle registrations for the line-make of vehicles versus the manufacturer's actual competitors in the relevant market area;

(IV) Whether the opening of the proposed reopened, relocated, or additional powersports vehicle dealer is materially beneficial to the public interest or the consumers in the relevant market area;

(V) Whether the powersports vehicle dealers of the same line-make in the relevant market area are providing adequate representation and convenient customer care, including the adequacy of sales and service facilities, equipment, parts, and qualified service personnel, for powersports vehicles of the same line-make in the relevant market area;

(VI) The reasonably expected market penetration of the line-make, given the factors affecting penetration; and

(VII) Whether the reopened, relocated, or additional dealership is reasonable and justifiable based on expected economic and market conditions within the relevant market area.

(d) In any court or administrative action, the powersports vehicle dealer has the burden of proof on each of the following issues:

(I) Whether the manufacturer engaged in any action or omission that, directly or indirectly, denied the existing powersports vehicle dealer of the same line-make the opportunity for reasonable growth or market expansion;

(II) Whether the manufacturer has coerced or attempted to coerce any existing powersports vehicle dealer into consenting to additional or relocated franchises of the same line-make in the community or territory or relevant market area; and

(III) The size and permanency of the investment of, and the obligations incurred by, the existing powersports vehicle dealers of the same line-make located in the relevant market area.

(e) (I) In a legal or administrative action challenging the relocation, reopening, or addition of a powersports vehicle dealer, the district court or administrative law judge shall make a determination, based on the factors identified in subsections (5)(c) and (5)(d) of this section, of whether the relocation, reopening, or addition of a powersports vehicle dealer is:

(A) In the public interest; and

(B) Fair and equitable to the existing powersports vehicle dealers.

(II) The district court or the executive director shall deny any proposed relocation, reopening, or addition of a powersports vehicle dealer unless the manufacturer shows by a preponderance of the evidence that the existing powersports vehicle dealer or dealers of the same line-make in the relevant market area of the proposed dealership are not providing adequate representation of the line-make powersports vehicles. A determination to deny, prevent, or enjoin the relocation, reopening, or addition of a powersports vehicle dealer is effective for at least eighteen months.

Source: L. 2018: Entire article added with relocations, (SB 18-030), ch. 7, p. 126, � 2, effective October 1.

Editor's note: This section is similar to former � 12-6-524 as it existed prior to 2018.