A bill aimed at restricting the right of first refusal on dealership buy-sell deals failed in West Virginia’s House of Delegates last month because of concerns that eliminating it would increase racial diversity among dealers in the state. Automakers’ efforts may be hampered. For a representative of the dealer association of the State.
The right of first refusal allows automakers to renegotiate the dealership purchase agreement and negotiate the terms to another buyer of their choosing. And they argue that the right of first refusal gives them more flexibility in managing the dealership network, especially aiding in the diversification of dealership owners representing their brands.
It is estimated that fewer than a dozen states prohibit it, according to interviews by industry experts, state dealer association heads and dealership attorneys. automotive news,
Johnny Brown, outside general counsel of the West Virginia Automobile Dealers Association, said the bill died when it was placed on the House calendar on March 7, just five days before the 60-day legislative session was to end. A bill requires three readings and a vote to pass in the House, and there was not enough time left in the session for this to happen.
The West Virginia bill was sponsored by Republican Sen. Rupi Phillips. It was introduced on 24 January and passed unanimously by the Senate with 33 votes in favor and one abstention on 25 February.
House Democrat Evan Henson expressed concern during the legislative process that restricting the right of first refusal could violate automakers’ efforts to expand diversity among their dealer networks. Brown said that played a role in the bill’s failure.
Hansen said that during testimony, a representative supporting the bill cited the potential use of the right of first refusal to increase minority ownership “as if it were a bad thing.”
“Then there was more testimony from the next representative who was basically saying, these dealerships are selling people from Tennessee to Cleveland and they don’t share West Virginia values,” Hansen reported. automotive news, “I found that outrageous and fought against the bill once I heard it.”
West Virginia is one of the least racially diverse states in the country and has also experienced population decline. According to the Census Bureau, West Virginia is set to lose 1.7 percent of its population from 2010 to 2022. And according to 2022 Census Bureau projections, more than 93 percent of the state’s population is white.
Hansen said, “I really don’t have an opinion about whether a right of first refusal is good or bad, if it can promote diversity in West Virginia and bring newcomers to the state.”
Brown said the right of first refusal is not always exercised as part of automaker diversity efforts. Last year, of three buy-sell deals he was involved in, Brown said two of them were disrupted by manufacturers exercising their right of first refusal. According to Brown, none of those deals were assigned to a minority dealer.
“We’ve had some positive feedback that we should be able to get our bill next year,” he said.
Separately in California, an assembly transportation committee hearing for a similar bill, which would bar an automaker from exercising its right of first refusal in bad faith, among other franchise law amendments, is set for April 24. Is. That bill has been introduced on 6 February. Amended.
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