Art. 4413(36). Motor Vehicle Commission Code.

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 1.01. Short Title.

This Act may be cited as the Texas Motor Vehicle Commission Code.

Sec. 1.02. Policy and purpose.

The distribution and sale of motor vehicles in this State vitally affects the general economy of the State and the public interest and welfare of its citizens. It is the policy of this State and the purpose of this Act to exercise the State's police power to insure a sound system of distributing and selling motor vehicles through licensing and regulating manufacturers, distributors, converters, and dealers of those vehicles, and enforcing this Act as to other persons, in order to provide for compliance with manufacturer's warranties, and to prevent frauds, unfair practices, discriminations, impositions, and other abuses of our citizens.

Sec. 1.02 amended by Acts 1987, 70th Leg., ch. 357, Sec. 1, eff. June 11, 1987; Acts 1995, 74th Leg., ch. 357, Sec. 1, eff. June 8, 1995.

Sec. 1.03. Definitions.

In this Act:

(1) "Motor vehicle" means:

(A) every fully self-propelled vehicle which has as its primary purpose the transport of a person or persons, or property, on a public highway, and having two or more wheels;

(B) every two or more wheeled fully self-propelled, titled vehicle which has as its primary purpose the transport of a person or persons or property and is not manufactured for use on public streets, roads, or highways; or

(C) an engine, transmission, or rear axle manufactured for installation in a vehicle having as its primary purpose the transport of a person or persons or property on a public highway and having a gross vehicle weight rating of more than 16,000 pounds, whether or not attached to a vehicle chassis.

(2) "New motor vehicle" means a motor vehicle which has not been the subject of a "retail sale" without regard to the mileage of the vehicle.

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

(4) "Franchised dealer " means any person who holds a general distinguishing number issued by the Department pursuant to the terms of Article 6686, Revised Statutes, and who is engaged in the business of buying, selling, or exchanging new motor vehicles and servicing or repairing motor vehicles pursuant to the terms of a franchise and a manufacturer's warranty at an established and permanent place of business pursuant to a franchise in effect with a manufacturer or distributor.

(5) "Manufacturer" means any person who manufactures or assembles new motor vehicles either within or without this State.

(6) "Distributor" means any person who distributes and/or sells new motor vehicles to franchised dealers and who is not a manufacturer.

(7) "Representative" means any person who is or acts as an agent, employee or representative of a manufacturer, distributor, or converter who performs any duties in this State relating to promoting the distribution and/or sale of new motor vehicles or contacts dealers in this State on behalf of a manufacturer, distributor, or converter.

(8) "Franchise" means one or more contracts between a franchised dealer as franchisee, and either a manufacturer or a distributor as franchisor under which (A) the franchisee is granted the right to sell and service new motor vehicles manufactured or distributed by the franchisor or only service motor vehicles pursuant to the terms of a franchise and a manufacturer's warranty; (B) the franchisee as an independent business is a component of franchisor's distribution system; (C) the franchisee is substantially associated with franchisor's trademark, tradename and commercial symbol; (D) the franchisee's business is substantially reliant on franchisor for a continued supply of motor vehicles, parts, and accessories for the conduct of its business; or (E) any right, duty, or obligation granted or imposed by this Act is affected. The term includes a written communication from a franchisor to a franchisee by which a duty is imposed on the franchisee.

(9) "Broker" means a person who, for a fee, commission, or other valuable consideration, arranges or offers to arrange a transaction involving the sale, for purposes other than resale, of a new motor vehicle, and who is not:

(A) a franchised dealer or bona fide employee of a franchised dealer when acting on behalf of a franchised dealer;

(B) a representative or bona fide employee of a representative when acting on behalf of a representative;

(C) a distributor or bona fide employee of a distributor when acting on behalf of a distributor; or

(D) at any point in the transaction the bona fide owner of the vehicle involved in the transaction.

(10) "Motor home" means a motor vehicle which is designed to provide temporary living quarters and which:

(A) is built onto as an integral part of, or is permanently attached to, a motor vehicle chassis; and

(B) contains at least four of the following independent life support systems if each is permanently installed and designed to be removed only for purposes of repair or replacement and meets the standards of the American National Standards Institute, Standards for Recreational Vehicles:

(i) a cooking facility with an on-board fuel source;

(ii) a gas or electric refrigerator;

(iii) a toilet with exterior evacuation;

(iv) a heating or air conditioning system with an on-board power or fuel source separate from the vehicle engine;

(v) a potable water supply system that includes at least a sink, a faucet, and a water tank with an exterior service supply connection;

(vi) a 110-125 volt electric power supply.

(11) "Conversion" means a motor vehicle, other than a motor home, ambulance, or fire-fighting vehicle, which has been substantially modified by a person other than the manufacturer or distributor of the chassis of the motor vehicle and which has not been the subject of a retail sale.

(12) "Motor home manufacturer" means a person other than the manufacturer of the chassis of a motor vehicle who, prior to the retail sale of the motor vehicle, performs modifications on the chassis that result in the finished product being classified as a motor home.

(13) "Chassis manufacturer" means a person who manufactures and produces the frame upon which is mounted the body of a motor vehicle.

(14) "Converter" means a person who prior to the retail sale of a motor vehicle, assembles, installs, or affixes a body, cab, or special equipment to a chassis, or who substantially adds, subtracts from, or modifies a previously assembled or manufactured motor vehicle.

(15) "Rule" means a statement by the Commission of general and future applicability that implements, interprets, or prescribes law or policy or describes the organization or procedural practice requirements of the Commission. The term includes the amendment or repeal of a prior rule, but does not include statements concerning only the internal management of the Commission which do not affect the rights of a person not connected with the Commission.

(16) "Party" means each person or agency named or admitted as a party and whose legal rights, duties, or privileges are to be determined by the Commission after an opportunity for adjudicative hearing.

(17) "Relocation" means the transfer of an existing dealership operation to facilities at a different location, including a transfer which results in a consolidation or dualing of an existing dealer's operation.

(18) "Retail sale" means the sale of a motor vehicle except:

(A) a sale in which the purchaser acquires a vehicle for the purpose of resale; or

(B) a sale of a vehicle that is operated under and in accordance with Article 6686, Revised Statutes.

(19) "Warranty work" means parts, labor, and any other expenses incurred by a franchised dealer in complying with the terms of a manufacturer's or distributor's warranty.

(20) "Department" means the Texas Department of Transportation.

(21) "Transportation Commission" means the Texas Transportation Commission of the Texas Department of Transportation.

(22) "Nonfranchised dealer" means a person, other than a franchised dealer, who holds a general distinguishing number issued by the Department pursuant to the terms of Article 6686, Revised Statutes.

Text of subd. (23) as added by Acts 1995, 74th Leg., ch. 345, Sec. 1

(23) "Lease" means a transfer of the right to possession and use of a motor vehicle for a term in excess of 180 days in return for consideration.

Text of subd. (23) as added by Acts 1995, 74th Leg., ch. 357, Sec. 2

(23) "Dealer" means a person who holds a general distinguishing number issued by the Department pursuant to the terms of Article 6686, Revised Statutes.

Text of subd. (24) as added by Acts 1995, 74th Leg., ch. 345, Sec. 1

(24) "Lessor" means a person who acquires title to a new motor vehicle for the purpose of leasing the vehicle to another person.

Text of subd. (24) as added by Acts 1995, 74th Leg., ch. 357, Sec. 2

(24) "Dealership" means the physical premises and business facilities on which a franchised dealer operates his business, including the sale and repair of motor vehicles. The term includes premises or facilities at which a person engages only in the repair of motor vehicles if repairs are performed pursuant to the terms of a franchise and a motor vehicle manufacturer's warranty.

Text of subd. (25) as added by Acts 1995, 74th Leg., ch. 345, Sec. 1

(25) "Lease facilitator" means a person, other than a dealer or a bona fide employee of a dealer, or a vehicle lessor or a bona fide employee of a vehicle lessor, who:

(A) holds himself out to any person as a "motor vehicle leasing company" or "motor vehicle leasing agent" or uses a similar title, for the purpose of soliciting or procuring a person to enter into a contract or agreement to become the lessee of a vehicle that is not, and will not be, titled in the name of and registered to the lease facilitator; or

(B) otherwise solicits a person to enter into a contract or agreement to become a lessee of a vehicle that is not, and will not be, titled in the name of and registered to the lease facilitator, or who is otherwise engaged in the business of securing lessees or prospective lessees of motor vehicles that are not, and will not be, titled in the name of and registered to the facilitator.

Text of subd. (25) as added by Acts 1995, 74th Leg., ch. 357, Sec. 2

(25) "Licensee" means a person who holds a license issued by the Board under the terms of this Act or a general distinguishing number issued by the Department pursuant to the terms of Article 6686, Revised Statutes.

Text of subd. (26) as added by Acts 1995, 74th Leg., ch. 345, Sec. 1

(26) "Manufacturer's statement of origin" means a certificate on a form prescribed by the Department showing the original transfer of a new motor vehicle from the manufacturer to the original purchaser.

Text of subd. (26) as added by Acts 1995, 74th Leg., ch. 357, Sec. 2

(26) "Ambulance" means a vehicle used exclusively for providing emergency medical care to an injured or ill person or transporting an injured or ill person, if the vehicle provides:

(A) a driver's compartment;

(B) a compartment to accommodate an emergency medical care technician or paramedic and two injured or ill persons so positioned that one of the injured or ill persons can be given intensive life-support during transit;

(C) equipment and supplies for emergency care of an injured or ill person where the ill person is located or at the scene of an injury-producing incident as well as in transit;

(D) two-way radio communication capability; and

(E) equipment for light rescue or extrication procedures.

(27) "Fire-fighting vehicle" means a motor vehicle which has as its sole purpose transporting fire fighters to the scene of a fire and providing equipment to fight the fire, if the vehicle is built on a truck chassis with a gross carrying capacity of at least 10,000 pounds, to which the following have been permanently affixed or mounted:

(A) a water tank with a minimum combined capacity of 500 gallons; and

(B) a centrifugal water pump with a minimum capacity of not less than 750 gallons per minute at 150 pounds per square inch net pump pressure.

Sec. 1.03(8) amended by Acts 1977, 65th Leg., p. 947, ch. 357, Sec. 1, eff. June 10, 1977; Sec. 1.03(10) added by Acts 1979, 66th Leg., p. 1725, ch. 709, Sec. 1, eff. Sept. 1, 1979; Sec. 1.03 amended by Acts 1983, 68th Leg., p. 4135, ch. 651, Sec. 1, eff. June 19, 1983; Acts 1987, 70th Leg., ch. 357, Sec. 2, eff. June 11, 1987; Acts 1989, 71st Leg., ch. 1130, Sec. 1, eff. June 16, 1989; Acts 1991, 72nd Leg., ch. 501, Sec. 1, eff. June 16, 1991; Acts 1993, 73rd Leg., ch. 61, Sec. 1, eff. April 29, 1993; Acts 1995, 74th Leg., ch. 345, Sec. 1, eff. June 8, 1995; Acts 1995, 74th Leg., ch. 357, Sec. 2, eff. June 8, 1995.

Sec. 1.04. Construction and severability.

This Act shall be liberally construed so as to effectuate its purposes. The provisions of this Act are severable and if any phrase, clause, sentence, or provision of this Act is declared to be contrary to the constitution of this state, or of the United States or the applicability thereof to any person or circumstance is held invalid, the validity of the remainder of this Act and the applicability thereof to any person or circumstance is not affected thereby. An agreement to waive the terms of this Act is void and unenforceable.

Sec. 1.04 added by Acts 1989, 71st Leg., ch. 1130, Sec. 2, eff. June 16, 1989. Sec. 1.04 amended by Acts 1993, 73rd Leg., ch. 61, Sec. 2, eff. April 29, 1993.

SUBCHAPTER B. ADMINISTRATIVE PROVISIONS

Sec. 2.01. Texas Motor Vehicle Commission.

(a) The Texas Motor Vehicle Commission shall carry out the functions and duties conferred upon it by this Act and by other provision of law.

(b) A reference in this Act to the "commission" or the Texas Motor Vehicle Commission means the Motor Vehicle Board of the Texas Department of Transportation. A reference in other law, rule or regulation to the Texas Motor Vehicle Commission means the Motor Vehicle Board of the Texas Department of Transportation.

(c) A reference in this Act to the "Executive Director" or the Executive Director of the Texas Motor Vehicle Commission means the Director of the Motor Vehicle Division of the Texas Department of Transportation. A reference in other law, rule or regulation to the Executive Director of the Texas Motor Vehicle Commission means the Director of the Motor Vehicle Division of the Texas Department of Transportation.

(d) A reference in law, rule or regulation to the Texas Motor Vehicle Commission Code means this Act.

Sec. 2.01 amended by Acts 1991, 72nd Leg., 1st C.S., ch. 7, Sec. 1A.03, eff. Sept. 1, 1992; Sec. 2.01(c) amended by Acts 1993, 73rd Leg., ch. 61, Sec. 3, eff. April 29, 1993.

Sec. 2.01a. Repealed by Acts 1991, 72nd Leg., 1st C.S., ch. 7, Sec. 1A.08, eff. Sept. 1, 1992.

Sec. 2.02. Members of Board.

The Motor Vehicle Board of the Texas Department of Transportation consists of six persons appointed by the Governor with the advice and consent of the Senate.

Sec. 2.02 amended by Acts 1979, 66th Leg., p. 1726, ch. 709, Sec. 3, eff. Sept. 1, 1979; Acts 1987, 70th Leg., ch. 357, Sec. 3, eff. June 11, 1987; Acts 1991, 72nd Leg., ch. 501, Sec. 3, eff. June 16, 1991; Acts 1991, 72nd Leg., 1st C.S., ch. 7, Sec. 1A.04, eff. Sept. 1, 1992.

Sec. 2.02A. Appointments.

Appointments to the Commission shall be made with due regard for the ethnicity, gender, and national origin of the appointees.

Sec. 2.02A added by Acts 1989, 71st Leg., ch. 1130, Sec. 3, eff. June 16, 1989.

Sec. 2.03. Qualifications of Members.

(a) A person is eligible to be appointed to the Commission if:

(1) he is a citizen of the United States and a resident of this State; and

(2) he has no interest in a business that manufactures, distributes, converts, or sells motor vehicles.

(b) The office of a member is automatically vacated and shall be filled as any other vacancy, if:

(1) the member becomes a licensee under this Act;

(2) the member acquires an interest in a business that manufactures, distributes, converts, or sells motor vehicles;

(3) the member becomes an officer, employee, or paid consultant of a trade association in the motor vehicle industry; or

(4) a person related to the member within the first degree by consanguinity or affinity, as determined under Article 5996h, Revised Statutes, becomes an officer, employee, or paid consultant of a trade association in the motor vehicle industry, becomes a licensee under this Act, or acquires an interest in a business that manufactures, distributes, converts, or sells motor vehicles.

Sec. 2.03 amended by Acts 1979, 66th Leg., p. 1726, ch. 709, Sec. 4, eff. Sept. 1, 1979; Sec. 2.03(a) amended by Acts 1985, 69th Leg., ch. 241, Sec. 1, eff. June 4, 1985; Sec. 2.03 amended by Acts 1987, 70th Leg., ch. 357, Sec. 4, eff. June 11, 1987; Sec. 2.03(b) amended by Acts 1991, 72nd Leg., ch. 561, Sec. 69, eff. Aug. 26, 1991.

Sec. 2.04. Terms of Members.

(a) The members of the Commission shall hold office for terms of six years, with the terms of two members expiring on January 31 of each odd-numbered year. No person shall serve two consecutive full six-year terms as a member of the Commission.

(b) to (d) Repealed by Acts 1987, 70th Leg., ch. 357, Sec. 6, eff. June 11, 1987.

Sec. 2.04 amended by Acts 1979, 66th Leg., p. 1727, ch. 709, Sec. 5, eff. Sept. 1, 1979; Sec. 2.04(a) amended by Acts 1987, 70th Leg., ch. 357, Sec. 5, eff. June 11, 1987.

Sec. 2.05. Vacancies.

The Governor, with the advice and consent of the Senate, shall fill vacancies on the Commission for the duration of the unexpired term.

Sec. 2.06. Oath.

Members of the Commission qualify by taking the constitutional oath of office which shall, with the certificate of appointment, be filed with the Secretary of State who shall issue a commission as evidence of the authority of the members to act.

Sec. 2.07. Per diem; expenses.

Each member of the Commission shall be entitled to $50.00 per day for each day actually engaged in the duties of the office, including time spent in necessary travel to and from meetings and otherwise, together with all travel and other necessary expenses incurred while performing official duties.

Sec. 2.07 amended by Acts 1987, 70th Leg., ch. 357, Sec. 7, eff. June 11, 1987.

Sec. 2.08. Commission Meetings.

(a) The Governor shall designate one member of the Commission as Chairman of the Commission to serve in that capacity at the pleasure of the Governor. The Commission shall hold a regular annual meeting in September of each year and elect a Vice-chairman to serve for the ensuing year. The Commission shall have regular meetings as the majority of the members may specify and special meetings at the request of the Chairman, any two members, or the Executive Director. Reasonable notice of all meetings shall be given as Commission rules prescribe. A majority of the Commission constitutes a quorum to transact business. The Chairman, or in his absence, the Vice-chairman, shall preside at all meetings of the Commission. In the absence of both the Chairman and the Vice-chairman, the members of the Commission present shall select one of their number to serve as chairman for the meeting.

(b) The Commission is subject to the open meetings law, Chapter 271, Acts of the 60th Legislature, Regular Session, 1967, as amended (Article 6252-17, Vernon's Texas Civil Statutes).

(c) The Commission shall develop and implement policies that provide the public with a reasonable opportunity to appear before the Commission and to speak on any issue under the jurisdiction of the Commission.

Sec. 2.08 amended by Acts 1979, 66th Leg., p. 1727, ch. 709, Sec. 6, eff. Sept. 1, 1979; Sec. 2.08(a) amended by Acts 1987, 70th Leg., ch. 357, Sec. 8, eff. June 11, 1987; Sec. 2.08 amended by Acts 1989, 71st Leg., ch. 1130, Sec. 4, eff. June 16, 1989; Sec. 2.08(a) amended by and Sec. 2.08(c) added by Acts 1991, 72nd Leg., ch. 501, Sec. 4, eff. June 16, 1991.

Sec. 2.08A. Removal of commission member.

(a) It is a ground for removal from the Commission if a member:

(1) does not have at the time of appointment the qualifications required by Section 2.03 of this Act;

(2) does not maintain during service on the Commission the qualifications required by Section 2.03 of this Act;

(3) violates a prohibition established by Section 2.09B of this Act;

(4) cannot discharge the member's duties for a substantial part of the term for which the member is appointed because of illness or disability; or

(5) is absent from more than half of the regularly scheduled Commission meetings that the member is eligible to attend during a calendar year unless the absence is excused by majority vote of the Commission.

(b) The validity of an action of the Commission is not affected by the fact that it is taken when a ground for removal of a Commission member exists.

(c) If the Executive Director has knowledge that a potential ground for removal exists, the Executive Director shall notify the Chairman of the Commission of the ground. The Chairman shall then notify the Governor that a potential ground for removal exists.

Sec. 2.08A added by Acts 1991, 72nd Leg., ch. 501, Sec. 5, eff. June 16, 1991.

Sec. 2.09. Executive director; staff; contracts; indemnity.

(a) The Executive Director of the Texas Department of Transportation shall appoint the Director of the Motor Vehicle Division who shall be the division's chief executive and administrative officer. The Director, who shall be an attorney licensed to practice law in this state, is charged with administering, enforcing, and carrying out the provisions of this Act. The Director serves at the pleasure of the Executive Director of the Texas Department of Transportation.

(b) The Executive Director or his designated representative shall meet with the Commissioners in an advisory capacity without vote in all proceedings of the Commission. The Executive Director shall submit the reports to the Commission as may be required by the Commission's rules or by this Act.

(c) The Executive Director or his designee shall maintain all minutes of Commission proceedings and shall serve as the custodian of the files and records of the Commission.

(d) The Executive Director, on behalf of the Commission, may negotiate with and, with the consent of a majority of the Commissioners, enter into contracts or other agreements with the United States or any of its agencies, with states and political subdivisions thereof, or any other entity for the purpose of carrying out the powers, duties, and responsibilities of the Commission.

(e) The Executive Director shall appoint and employ such Commission staff as are necessary to carry out the duties and functions of the Executive Director and the Commission under this Act. The Commission shall develop and implement policies that clearly define the respective responsibilities of the Commission and the staff of the Commission.

(f) An employee of the Commission is subject to dismissal who has an interest in or is related within the first degree by consanguinity or affinity, as determined under Article 5996h, Revised Statutes, to a person who has an interest in a business that manufactures, distributes, converts, or sells motor vehicles.

(g) Repealed by Acts 1991, 72nd Leg., ch. 501, Sec. 26, eff. June 13, 1991.

(h) Notwithstanding any other provision of law, the Executive Director, each member of the Texas Motor Vehicle Commission, each Hearing Examiner and all other employees of the Texas Motor Vehicle Commission are not personally liable for damages occasioned by their official acts or omissions except when such acts or omissions constitute intentional or malicious malfeasance. The Attorney General shall defend any action brought against a member or employee of the Commission in connection with an official act or omission, whether or not at the time of the institution of the action the defendant has previously ceased to serve the Commission in any capacity, and the State of Texas shall indemnify any such person from and against a judgment entered against the person in any such actions though the State may seek contribution if liability is otherwise permitted by this subsection.

(i) Unless otherwise provided by this Act or by Commission rules, all applications, petitions, or other documents requiring action by the Commission shall be directed to the Executive Director.

(j) The Commission shall provide to its members and employees, as often as necessary, information regarding their qualifications for office or employment under this Act and their responsibilities under applicable laws relating to standards of conduct for state officers or employees.

Sec. 2.09 amended by Acts 1979, 66th Leg., p. 1727, ch. 709, Sec. 7, eff. Sept. 1, 1979; Sec. 2.09(c) amended by Acts 1985, 69th Leg., ch. 479, Sec. 14, eff. Sept. 1, 1985; Sec. 2.09(b) amended by Acts 1987, 70th Leg., ch. 357, Sec. 9, eff. June 11, 1987; Sec. 2.09 amended by Acts 1989, 71st Leg., ch. 1130, Sec. 5, eff. June 16, 1989; Sec. 2.09(e) amended by Acts 1991, 72nd Leg., ch. 501, Sec. 6, eff. June 16, 1991; Sec. 2.09(f) amended by Acts 1991, 72nd Leg., ch. 561, Sec. 70, eff. Aug. 26, 1991; Sec. 2.09(g) amended by Acts 1991, 72nd Leg., ch. 501, Sec. 26, eff. June 16, 1991; Sec. 2.09(j) added by Acts 1991, 72nd Leg., ch. 501, Sec. 6, eff. June 16, 1991; Sec. 2.09(a) amended by Acts 1991, 72nd Leg., 1st C.S., ch. 7, Sec. 1A.05, eff. Sept. 1, 1992. Sec. 2.09A. Hearing examiners.

All Hearing Examiners shall be attorneys licensed to practice law in this state.

Sec. 2.09A added by Acts 1989, 71st Leg., ch. 1130, Sec. 6, eff. June 16, 1989.

Sec. 2.09B. Member and employee restrictions.

(a) An officer, employee, or paid consultant of a Texas trade association in a business or industry regulated by the Commission may not be a member of the Commission or an employee of the Commission who is exempt from the state's position classification plan or is compensated at or above the amount prescribed by the General Appropriations Act for step 1, salary group 17, of the position classification salary schedule.

(b) A person who is the spouse of an officer, manager, or paid consultant of a Texas trade association in a business or industry regulated by the Commission may not be a Commission member and may not be an employee who is exempt from the state's position classification plan or is compensated at or above the amount prescribed by the General Appropriations Act for step 1, salary group 17, of the position classification salary schedule.

(c) A person may not serve as a member of the Commission or act as the general counsel to the Commission if the person is required to register as a lobbyist under Chapter 305, Government Code, because of the person's activities for compensation on behalf of a business or industry related to the operation of the Commission.

(d) For the purposes of this section, a Texas trade association is a nonprofit, cooperative, and voluntarily joined association of business or professional competitors in this state designed to assist its members and its industry or profession in dealing with mutual business or professional problems and in promoting their common interest.

Sec. 2.09B added by Acts 1991, 72nd Leg., ch. 501, Sec. 7, eff. June 16, 1991.

Sec. 2.10. Revenues.

(a) Notwithstanding a law to the contrary, including without limitation the provisions of Section 403.094(h), Government Code, all money paid to the Commission under this Act shall be deposited in the State Treasury to the credit of the state highway fund.

(b) The Commission shall file annually with the Governor and the presiding officer of each house of the legislature a complete and detailed written report accounting for all funds received and disbursed by the Commission during the preceding fiscal year. The annual report must be in the form and reported in the time provided by the General Appropriations Act.

(c) The financial transactions of the Commission are subject to audit by the state auditor in accordance with Chapter 321, Government Code.

Sec. 2.10 amended by Acts 1979, 66th Leg., p. 1728, ch. 709, Sec. 8, eff. Sept. 1, 1979; Sec. 2.10(a) amended by Acts 1987, 70th Leg., ch. 357, Sec. 10, eff. June 11, 1987; Sec. 2.10(c) amended by Acts 1989, 71st Leg., ch. 584, Sec. 44, eff. Sept. 1, 1989; Sec. 2.10(a), (b) amended by Acts 1991, 72nd Leg., ch. 501, Sec. 8, eff. June 16, 1991; Sec. 2.10(a) amended by Acts 1995, 74th Leg., ch. 345, Sec. 2, eff. June 8, 1995; amended by Acts 1995, 74th Leg., ch. 357, Sec. 3, eff. June 8, 1995.

Sec. 2.11. Seal.

The Commission shall adopt a seal for the authentication of its records and orders.

Sec. 2.12. Complaints.

The Commission shall keep an information file about each complaint filed with the Commission that the Commission has authority to resolve. If a written complaint is filed with the Commission that the Commission has authority to resolve, the Commission, at least quarterly and until final disposition of the complaint, shall notify the parties to the complaint of the status of the complaint unless the notice would jeopardize an ongoing Commission investigation.

Sec. 2.12 added by Acts 1989, 71st Leg., ch. 1130, Sec. 7, eff. June 16, 1989; amended by Acts 1991, 72nd Leg., ch. 501, Sec. 9, eff. June 16, 1991.

Sec. 2.13. Intraagency career ladder program; annual performance evaluations; information; equal opportunity implementation plan; public information.

(a) The Executive Director or his designee shall develop an intraagency career ladder program. The program shall require intraagency postings of all nonentry level positions concurrently with any public posting.

(b) The Executive Director or his designee shall develop a system of annual performance evaluations. All merit pay for Commission employees must be based on the system established under this subsection.

(c) The Executive Director or his designee shall prepare information describing the functions of the Commission and describing the procedures by which complaints or protests are filed with and resolved by the Commission. The Commission shall make the information available to the general public and appropriate state agencies.

(d) The Executive Director or his designee shall prepare and maintain a written policy statement to assure implementation of a program of equal employment opportunity under which all personnel transactions are made without regard to race, color, handicap, sex, religion, age, or national origin. The policy statement must include:

(1) personnel policies, including policies relating to recruitment, evaluation, selection, appointment, training, and promotion of personnel;

(2) a comprehensive analysis of the Commission work force that meets federal and state guidelines;

(3) procedures by which a determination can be made of significant underuse in the Commission work force of all persons for whom federal or state guidelines encourage a more equitable balance; and

(4) reasonable methods to appropriately address those areas of significant underuse.

A policy statement prepared under this subsection must cover an annual period, be updated at least annually, and be filed with the Governor's office.

The Governor's office shall deliver a biennial report to the legislature based on the information received under this subsection. The report may be made separately or as a part of other biennial reports made to the legislature.

(e) The Commission shall comply with Section 4(a)(2), Administrative Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas Civil Statutes), by indexing and making available for public inspection all rules and all other written statements of policy or interpretations formulated, adopted, or used by the Commission in the discharge of its functions.

(f) The Commission shall comply with Section 4(a)(3), Administrative Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas Civil Statutes), by indexing and making available for public inspection all of the Commission's final orders, decisions, and opinions.

Sec. 2.13 added by Acts 1989, 71st Leg., ch. 1130, Sec. 8, eff. June 16, 1989; Sec. 2.13(a), (b), (d) amended by Acts 1991, 72nd Leg., ch. 501, Sec. 10, eff. June 16, 1991.

SUBCHAPTER C. POWERS AND DUTIES

Sec. 3.01. Jurisdiction.

(a) The Commission has the general and original power and jurisdiction to regulate all aspects of the distribution, sale, and leasing of motor vehicles and to do all things, whether specifically designated in this Act or implied herein, or necessary or convenient to the exercise of this power and jurisdiction, including the original jurisdiction to determine questions of its own jurisdiction. In addition to the other duties placed on the Commission by this Act, the Commission shall enforce and administer the terms of Article 6686, Revised Statutes.

(b) Unless otherwise specifically provided by Texas law not in conflict with the terms of this Act, all aspects of the distribution and sale of motor vehicles shall be governed exclusively by the provisions of this Act.

Sec. 3.01 amended by Acts 1987, 70th Leg., ch. 357, Sec. 11, eff. June 11, 1987; Acts 1989, 71st Leg., ch. 1130, Sec. 9, eff. June 16, 1989; Sec. 3.01(a) amended by Acts 1995, 74th Leg., ch. 345, Sec. 3, eff. June 8, 1995; Sec. 3.01 amended by Acts 1995, 74th Leg., ch. 357, Sec. 4, eff. June 8, 1995.

Sec. 3.02. Duties.

(a) The Commission shall, in accordance with this Act, administer the provisions of this Act, establish the qualifications of licensees, ensure that the distribution, sale, and leasing of motor vehicles is conducted as provided herein and under the Commission's rules, provide for compliance with warranties, and otherwise prevent fraud, unfair practices, discriminations, impositions, and other abuses in connection with the distribution and sale of motor vehicles.

(b) The Commission shall prepare and maintain a written plan that describes how a person who does not speak English or who has a physical, mental, or developmental disability can be provided reasonable access to the Commission's programs.

Sec. 3.02 amended by Acts 1979, 66th Leg., p. 1728, ch. 709, Sec. 9, eff. Sept. 1, 1979; Acts 1989, 71st Leg., ch. 1130, Sec. 10, eff. June 16, 1989; Acts 1991, 72nd Leg., ch. 501, Sec. 11, eff. June 16, 1991; Sec. 3.02(a) amended by Acts 1995, 74th Leg., ch. 345, Sec. 4, eff. June 8, 1995; amended by Acts 1995, 74th Leg., ch. 357, Sec. 5, eff. June 8, 1995.

Sec. 3.03. General commission powers.

(a) The Commission shall have and may, in its discretion and notwithstanding any other provision of law that is inconsistent with this Act, exercise the powers set forth in this Act, and shall have all other powers necessary, incidental, or convenient to carry out its duties and effectuate its express powers and duties. These powers and duties include the power to initiate and conduct proceedings, investigations, and hearings, administer oaths, receive evidence and pleadings, issue subpoenas to compel the attendance of any person, order the production of any tangible property, including papers, records, and documents, make findings of fact on all factual issues arising out of any proceeding initiated under this Act, specify, govern, and control appearance, practice, and procedure before the Commission, issue rules, conclusions of law, decisions, including declaratory decisions or orders, enter into contracts or execute instruments, retain counsel, utilize the services of the Attorney General of the State of Texas and thereafter institute and direct the conduct of legal proceedings in any forum or obtain other professional services as may be necessary and convenient, sanction for contempt, assess and collect fees and costs including attorney's fees, issue, suspend, and revoke licenses, prohibit and regulate acts and practices in connection with the distribution and sale of motor vehicles and warranty performance obligations, issue cease and desist orders in the nature of temporary and permanent injunctions, and levy civil penalties.

(b) The commission may conduct hearings in contested cases brought pursuant to, and as provided by, Article 6686, Revised Statutes. The procedures applicable to a hearing conducted under this Subsection, and the disposition of a final order after a hearing conducted under this Subsection, are those applicable to a hearing conducted as provided by Section 6.07(e)(2) of this Act. A decision or final order issued under this Subsection is final, and no appeal may, as a matter of right, be made to the Texas Transportation Commission. The department may adopt rules applicable to procedures, hearings, and enforcement proceedings in an action brought pursuant to this Subsection.

Sec. 3.03 amended by Acts 1989, 71st Leg., ch. 1130, Sec. 11, eff. June 16, 1989; Acts 1993, 73rd Leg., ch. 61, Sec. 4, eff. April 29, 1993; Sec. 3.03(a) amended by Acts 1995, 74th Leg., ch. 357, Sec. 6, eff. June 8, 1995.

Sec. 3.04. Delegation of commission powers.

The Commission may delegate any power which it holds or derives under this Act to:

(1) one or more members of the Commission;

(2) the Executive Director; or (3) one or more employees of the Commission.

Sec. 3.04(a) amended by Acts 1979, 66th Leg., p. 1728, ch. 709, Sec. 10, eff. Sept. 1, 1979; Sec. 3.04(g) amended by Acts 1979, 66th Leg., p. 1729, ch. 709, Sec. 11, eff. Sept. 1, 1979; Sec. 3.04(h) amended by Acts 1979, 66th Leg., p. 1729, ch. 709, Sec. 12, eff. Sept. 1, 1979; Sec. 3.04(i), (j) added by Acts 1979, 66th Leg., p. 1729, ch. 709, Sec. 13, eff. Sept. 1, 1979; Sec. 3.04(h), (j) amended by Acts 1983, 68th Leg., p. 4137, ch. 651, Sec. 2, eff. June 19, 1983; Sec. 3.04(j) amended by Acts 1985, 69th Leg., ch. 241, Sec. 2, eff. June 4, 1985; Sec. 3.04 amended by Acts 1987, 70th Leg., ch. 357, Sec. 12, eff. June 11, 1987; Acts 1989, 71st Leg., ch. 1130, Sec. 12, eff. June 16, 1989.

Sec. 3.05. Investigation; enforcement.

Whenever the Commission has reason to believe, through receipt of a complaint or otherwise, that a violation of this Act or a Commission rule, order, or decision has occurred or is likely to occur, the Commission shall conduct an investigation unless it determines that a complaint is frivolous or for the purpose of harassment. If the Commission's investigation establishes that a violation of this Act or a Commission rule, order, or decision has occurred or is likely to occur, the Commission shall institute proceedings as it deems appropriate to enforce this Act or its rules, orders, and decisions.

Sec. 3.05 amended by Acts 1979, 66th Leg., p. 1729, ch. 709, Sec. 14, eff. Sept. 1, 1979; Acts 1987, 70th Leg., ch. 357, Sec. 13, eff. June 11, 1987; Acts 1989, 71st Leg., ch. 1130, Sec. 13, eff. June 16, 1989.

Sec. 3.06. Rules.

The authority to issue rules pursuant to this Act shall be vested in the Commission. After notice and hearing conducted by the Commission or by the Executive Director or his delegee in accordance with the Administrative Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas Civil Statutes) and in compliance with this Act and the rules, decisions, and orders of the Commission, the Commission shall adopt such rules and amendments thereto and deletions therefrom as may be necessary or convenient to effectuate the provisions of this Act and to govern practice and procedure before the Commission. Such rules shall become effective as soon as the Commission, acting by and through its Executive Director, complies with the requirements of the Administrative Procedure and Texas Register Act regarding publication of official agency rules.

Sec. 3.06 added by Acts 1979, 66th Leg., p. 1730, ch. 709, Sec. 15, eff. Sept. 1, 1979; amended by Acts 1987, 70th Leg., ch. 357, Sec. 14, eff. June 11, 1987; Acts 1989, 71st Leg., ch. 1130, Sec. 14, eff. June 16, 1989.

Sec. 3.07. Orders and decisions.

An order or decision shall set forth the findings of fact and conclusions of law on which the order or decision is based and shall give the reasons for the particular actions taken. Except as provided by Section 6.07 of this Act, all orders and decisions shall be signed on behalf of the Commission by the Chairman or Vice-chairman and attested by the Executive Director and shall have the seal affixed.

Sec. 3.07 added by Acts 1989, 71st Leg., ch. 1130, Sec. 15, eff. June 16, 1989; amended by Acts 1991, 72nd Leg., ch. 501, Sec. 12, eff. June 16, 1991.

Sec. 3.08. Hearings; notice; hearing procedures; complaints.

(a) A hearing shall be conducted in all contested cases, as defined in the Administrative Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas Civil Statutes), which arise in connection with this Act or any rule of the Commission. All hearings shall be conducted in accordance with this Act, the orders, decisions, or rules of the Commission, and the Administrative Procedure and Texas Register Act to the extent that the Administrative Procedure and Texas Register Act does not conflict with this Act. A hearing may be informally disposed of in accordance with the Administrative Procedure and Texas Register Act. Any hearing held under this section shall be conducted by the Executive Director or any Hearing Examiner, each of whom may be referred to in this Act as the "Examiner." The person or persons serving as Examiner in any contested case hearing are hereby delegated all the power and authority which the Commission has under this Act regarding the conduct of hearings, including, without limitation, the power to hold hearings, administer oaths, receive pleadings and evidence, issue subpoenas to compel the attendance of witnesses, compel the production of papers and documents, issue interlocutory orders, including cease and desist orders in the nature of temporary restraining orders and temporary injunctions, make findings of fact and conclusions of law, and issue proposals for decision and recommended final orders.

(b) Notice of a hearing shall describe in summary form the purpose of the hearing and its date, time, and place.

(c) Notice of a rulemaking hearing shall be given in accordance with the Administrative Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas Civil Statutes) and the rules of the Commission not less than 30 days before the hearing date. Notice of a contested case hearing involving a license shall be given in accordance with this Act and the rules of the Commission.

(d) Notice of a contested case hearing shall be deemed to have been received by any person if notice of the hearing was mailed to the last known address, of any person known to have legal rights, duties, or privileges that could be determined at the hearing, not less than 10 days before the hearing date. Notice of a hearing shall be given by certified mail, return receipt requested. Notice may be given to any officer, agent, employee, legal representative, or attorney of any person. Notice of any hearing may be waived by any person.

(e) A hearing shall be conducted at the time and place stated in the hearing notice or the hearing shall be rescheduled and an amended notice given. Any hearing may be continued from time to time and place to place as announced openly before the hearing is recessed, without further notice, or otherwise, by giving advance notice as required by the Administrative Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas Civil Statutes).

(f) Unless otherwise limited by this Act, any person whose legal rights, duties, or privileges are to be determined at any hearing shall have the right to appear personally and by counsel, to cross-examine adverse witnesses, and to produce evidence and witnesses in the person's own behalf.

(g) In all contested cases a copy of the examiner's proposal for decision and recommended order containing findings of fact and conclusions of law shall be served on all parties and each party may file exceptions and replies to the Commission. After replies and exceptions have been timely filed, the Commission shall consider the materials submitted by all parties. The Commission may receive such oral argument from any party as the Commission may allow. The Commission shall take such further actions as are conducive to the issuance of a final order and shall thereafter issue a written final decision or order. The Commission's written final decision or order shall be signed on behalf of the Commission by the Executive Director. A majority vote of a quorum of the Commissioners shall be required to adopt final decisions or orders of the Commission.

(h) A party who seeks a rehearing of an order shall do so in accordance with the terms of the Administrative Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas Civil Statutes).

(i) The owner of a motor vehicle or the owner's designated agent may make a complaint concerning defects in a motor vehicle which are covered by a manufacturer's, converter's, or distributor's warranty agreement applicable to the vehicle. Any such complaint must be made in writing to the applicable dealer, manufacturer, converter, or distributor and must specify the defects in the vehicle which are covered by the warranty. The owner may also invoke the Commission's jurisdiction by sending the Commission a copy of the complaint. A hearing may be scheduled on all complaints arising under this subsection which are not privately resolved between the owner and the dealer, manufacturer, converter, or distributor.

(j) On motion of any party the Commission may, by final order, and in accordance with the terms and procedures set forth in Rule 166a, Texas Rules of Civil Procedure, dismiss a complaint, protest, or response without holding a contested case hearing.

Sec. 3.08 added by Acts 1989, 71st Leg., ch. 1130, Sec. 16, eff. June 16, 1989; amended by Acts 1991, 72nd Leg., ch. 501, Sec. 13, eff. June 16, 1991; Sec. 3.08(j) amended by Acts 1995, 74th Leg., ch. 357, Sec. 7, eff. June 8, 1995.

Sec. 3.08A. Statutory stay.

(a) Upon the initiation of any Commission proceeding, whether by complaint, protest, or otherwise, no person who receives notice from the Commission of a statutory stay imposed by this Act may allow or commit any act or omission which would constitute a violation of this Act or any rule, order, or decision of the Commission or which would affect the legal rights, duties, or privileges of any party before the Commission or which would tend to render ineffectual a Commission order in any pending proceeding. A statutory stay imposed by this Act remains in effect until vacated or until the proceeding is concluded by a final order or decision.

(b) Any person affected by a statutory stay imposed by this Act may initiate a proceeding before the Commission to modify, vacate, or clarify the extent and application of a statutory stay.

Sec. 3.08A added by Acts 1989, 71st Leg., ch. 1130, Sec. 17, eff. June 16, 1989.

Sec. 3.09. Effect on administrative procedure and Texas Register Act.

In the event of any conflict between the Administrative Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas Civil Statutes) and this Act, the provisions of this Act shall prevail.

Sec. 3.09 added by Acts 1989, 71st Leg., ch. 1130, Sec. 18, eff. June 16, 1989.

SUBCHAPTER D. LICENSES

Sec. 4.01. License Required.

(a) Except as provided by this Section, no person shall engage in business as, serve in the capacity of, or act as a dealer, manufacturer, distributor, converter, representative, lessor, or lease facilitator in this State or perform or offer to perform repair services on a motor vehicle pursuant to the terms of a franchise and a motor vehicle manufacturer's warranty, whether or not the person sells or offers to sell motor vehicles at the same location, without obtaining a license therefor as provided in this Act and the rules of the Commission. All new license applications shall be reviewed and, in the discretion of the Commission, investigated to determine compliance with the provisions of this Act. License renewals may be administratively granted unless protested. Licenses issued by the Commission shall expire one year from date of issuance. All licenses and renewals thereof are issued subject to all provisions of this Act and rules of the Commission in effect upon the date of issuance as well as all future provisions of this Act and rules which may become effective during the term of the license. A lessor or lease facilitator is not required to obtain a lessor or lease facilitator license or pay a license fee under this code if the lessor or lease facilitator is a state or federally chartered financial institution or a regulated subsidiary of a state or federally chartered financial institution. A trust or other entity that owns an interest in a lease and the vehicle that is the subject of the lease is not required to obtain a lessor license or lease facilitator license or pay a license fee with respect to a lease initiated, managed, serviced, and administered by a licensed lessor.

(b) In the case of a nonfranchised dealer, the term "license" in this Act means a general distinguishing number issued by the Department pursuant to the authority of Article 6686, Revised Statutes. A nonfranchised dealer may not operate as a dealer without a valid general distinguishing number but is not required to obtain an additional license under the terms of this Act. A franchised dealer shall have both a general distinguishing number and a separate license issued under the terms of this Act.

Sec. 4.01 amended by Acts 1979, 66th Leg., p. 1730, ch. 709, Sec. 16, eff. Sept. 1, 1979; Acts 1987, 70th Leg., ch. 357, Sec. 15, eff. June 11, 1987; Acts 1989, 71st Leg., ch. 1130, Sec. 19, eff. June 16, 1989; Sec. 4.01amended by Acts 1995, 74th Leg., ch. 345, Sec. 5, eff. June 8, 1995; Sec. 4.01 amended by Acts 1995, 74th Leg., ch. 357, Sec. 8, eff. June 8, 1995.

Sec. 4.01A. Repealed by Acts 1987, 70th Leg., ch. 357, Sec. 16, eff. June 11, 1987. Sec. 4.01B. Notice of License Expiration.

The Commission shall notify each person licensed under this Act of the date of license expiration and the amount of the fee required for license renewal. The notice shall be mailed at least thirty days before the date of license expiration.

Sec. 4.01B added by Acts 1979, 66th Leg., p. 1731, ch. 709, Sec. 19, eff. Sept. 1, 1979.

Sec. 4.02. Dealer Application.

(a) An application for a dealer license shall be on a form prescribed by the Commission which shall include the information required by Article 6686, Revised Statutes, and information on the applicant's financial resources, business integrity, business ability and experience, franchise agreement if applicable, physical facilities, vehicle inventory, and other factors the Commission considers necessary to determine an applicant's qualifications to adequately serve the motoring public.

(b) A dealer shall renew his license annually on an application prescribed by the Commission. If a material change occurs in the information included in a dealer's application for a license or renewal of a license, the dealer shall, within a reasonable time but not later than the next annual renewal, notify the Commission of those changes. The Commission shall prescribe a form for the disclosure of the changes and shall include in the renewal application a request for disclosure of material changes.

(c)(1) A franchised dealer may carry on the business of his dealership at more than one location; however, a separate location for the display and sale of new motor vehicles may not be established and maintained by a franchised dealer unless expressly authorized by the franchised dealer's franchise and license. An application for a franchised dealer's license or to amend a franchised dealer's license which proposes the establishment of a separate display and sales location is subject to all of the provisions of this Act. A separate license shall be required for each separate and distinct dealership as determined by the Commission.

(2) Except as provided in this subdivision, no licensee may participate in a new motor vehicle show or exhibition unless the Commission has first had written notice at least 30 days prior to the opening day of the show or exhibition and its written approval has been granted. A licensee may not sell or offer for sale a new motor vehicle at a show or exhibition; however, dealership personnel may be present to aid in the showing or exhibiting of new motor vehicles. This subdivision does not prohibit the sale of a motor home, ambulance, or fire-fighting vehicle at a show or exhibition if the show or exhibition is approved by the Commission and if the sale does not otherwise violate a provision of law.

(3) The Commission shall, under its general rule-making authority granted in this Act, establish rules and guidelines for the implementation and enforcement of this subsection.

(d) A dealer licensed hereunder shall promptly notify the Commission of any proposed change in its ownership, location, franchise, or any other matters the Commission may require by rule. Prior to a change in a dealer's location, a dealer shall obtain a new license for that location.

Sec. 4.02(d) amended by Acts 1977, 65th Leg., p. 947, ch. 357, Sec. 2, eff. June 10, 1977; Sec. 4.02(c) amended by Acts 1985, 69th Leg., ch. 241, Sec. 4, eff. June 14, 1985; Sec. 4.02(b), (c) amended by Acts 1987, 70th Leg., ch. 357, Sec. 17, eff. June 11, 1987; Sec. 4.02(a), (c), (d) amended by Acts 1989, 71st Leg., ch. 1130, Sec. 20, eff. June 16, 1989; Sec. 4.02(d) amended by Acts 1991, 72nd Leg., ch. 501, Sec. 14, eff. June 16, 1991; Sec. 4.02(a) amended by Acts 1995, 74th Leg., ch. 357, Sec. 9, eff. June 8, 1995; Sec. 4.02(c)(1), (2), (d) amended by Acts 1995, 74th Leg., ch. 357, Sec. 10, eff. June 8, 1995.

Sec. 4.03. Manufacturer, distributor, converter, and representative license application.

(a) An application for a manufacturer's, distributor's, converter's, or representative's license shall be on a form prescribed by the Commission which form shall contain such information as the Commission deems necessary to fully determine the qualifications of an applicant for a license, including financial resources, business integrity and experience, facilities and personnel for serving franchised dealers and such other information as the Commission considers to be pertinent to safeguard the public interest and welfare.

(b) An applicant for a manufacturer's license shall furnish a list of all distributors, representatives acting for applicant, and all dealers franchised to sell the applicant's products in this State and their respective locations. All applicants for manufacturer's licenses and all licensed manufacturers shall thereafter advise the Commission within 15 days of any change in their list of distributors, representatives, and franchised dealers. This information shall become part of the application.

(c) Each application for a manufacturer's license shall include an instrument setting forth the terms and conditions of all warranty agreements in force and effect on the products it sells in this State so that the Commission may ascertain the degree of protection afforded the retail purchasers of its products and the obligations of its franchised dealers in connection therewith as well as the basis for compensating its franchised dealers for labor, parts and other expenses incurred in connection with such manufacturer's warranty agreements. Each application shall include a statement regarding the manufacturer's compliance with Section 5.02 of this Act. In addition, each manufacturer's license application shall specify the delivery and preparation obligations of its franchised dealers prior to delivery of a new motor vehicle to a retail purchaser and the schedule of compensation to be paid to its franchised dealers for the work and service performed by them in connection with such delivery.

(d) An application for a distributor's license shall disclose the manufacturer for whom the distributor will act, whether the manufacturer is licensed in this State, the warranty covering the vehicles to be sold, the persons in this State who will be responsible for compliance with that warranty, and the terms of the contract under which the distributor will act for a manufacturer. A distributor's license application must disclose the franchised dealers with whom the distributor will do business. If the distributor is to have any responsibility for warranties, the distributor shall furnish the same information pertaining thereto as is required of a manufacturer. The Commission shall be advised of any change in any such information within 15 days from the date thereof and any such new information shall become part of the application.

(e) All licensees may apply for issuance of a license for each succeeding year by complying with the application process specified by this Act and the Commission's rules.

Sec. 4.03(c) amended by Acts 1977, 65th Leg., p. 948, ch. 357, Sec. 3, eff. June 10, 1977; Sec. 4.03 amended by Acts 1987, 70th Leg., ch. 357, Sec. 18, eff. June 11, 1987; Acts 1989, 71st Leg., ch. 1130, Sec. 21, eff. June 16, 1989; Sec. 4.03(a) to (d) amended by Acts 1995, 74th Leg., ch. 357, Sec. 11, eff. June 8, 1995.

Sec. 4.03A. Lessor Application.

An application for a lessor license shall be on a form prescribed by the Commission and shall contain evidence of compliance with Article 6686, Revised Statutes, if applicable, and other information prescribed by the Commission. This Act does not require a separate license for each individual employee of a lessor.

Sec. 4.03A added by Acts 1995, 74th Leg., ch. 345, Sec. 6, eff. June 8, 1995.

Sec. 4.03B. Lease Facilitator Application.

An application of a lease facilitator license shall be on a form prescribed by the Commission and shall contain the information prescribed by the Commission. This Act does not require a separate license for each individual employee of a lease facilitator.

Sec. 4.03B added by Acts 1995, 74th Leg., ch. 345, Sec. 6, eff. June 8, 1995. Sec. 4.04. Doing Business.

(a) The obtaining of a license hereunder shall constitute the doing of business in this State, and if no agent for service of process has been designated by a licensee, the licensee will be deemed to have designated the Secretary of State of Texas as his or its agent for receipt of service of process.

(b) A manufacturer whose products are offered for sale in this State pursuant to a franchise entered into between its distributor or representative and a franchised dealer is bound by the terms of the franchise agreement and the provisions of this Act as if it had executed the franchise agreement. A manufacturer that changes its distributor or the method of distribution of its products in this State in a manner that results in unlawful termination or noncontinuance of a franchise may not directly or indirectly distribute its products in this State.

Sec. 4.04 amended by Acts 1985, 69th Leg., ch. 241, Sec. 3, eff. June 4, 1985; Sec. 4.04(b) amended by Acts 1995, 74th Leg., ch. 357, Sec. 12, eff. June 8, 1995.

Sec. 4.05. Fees.

(a) The annual license fees for licenses issued hereunder shall be as follows:

(1) For each manufacturer and distributor, $900 plus $20 for each individual dealer franchised by the manufacturer or distributor.

(2) For each franchised dealer who sold 200 or fewer new motor vehicles during the preceding calendar year, $175.

(3) For each franchised dealer who sold more than 200, but not more than 400, new motor vehicles during the preceding calendar year, $275.

(4) For each franchised dealer who sold more than 400, but not more than 800, new motor vehicles during the preceding calendar year, $400.

(5) For each franchised dealer who sold more than 800 but not more than 1,200 new motor vehicles during the preceding calendar year, $500.

(6) For each franchised dealer who sold more than 1,200 but not more than 1,600 new motor vehicles during the preceding calendar year, $625.

(7) For each franchised dealer who sold more than 1,600 new motor vehicles during the preceding calendar year, $750.

(8) For each representative, $100.

Text of subsec. (a)(9) as added by Acts 1995, 74th Leg., ch. 345, Sec. 7

(9) For each lessor who leased 200 or fewer motor vehicles during the preceding calendar year, $175.

Text of subsec. (a)(9) as added by Acts 1995, 74th Leg., ch. 357, Sec. 13

(9) For each converter, $375.

Text of subsec. (a)(10) as added by Acts 1995, 74th Leg., ch. 345, Sec. 7

(10) For each lessor who leased more than 200 but not more than 400 motor vehicles during the preceding calendar year, $275.

Text of subsec. (a)(10) as added by Acts 1995, 74th Leg., ch. 357, Sec. 13

(10) For each amendment to a dealer's license, $25.

(11) For each lessor who leased more than 400 but not more than 800 motor vehicles during the preceding calendar year, $400.

(12) For each lessor who leased more than 800 but not more than 1,200 motor vehicles during the preceding calendar year, $500.

(13) For each lessor who leased more than 1,200 but not more than 1,600 motor vehicles during the preceding calendar year, $625.

(14) For each lessor who leased more than 1,600 motor vehicles during the preceding calendar year, $750.

(15) For each lease facilitator, $375.

(a-1) Repealed by Acts 1987, 70th Leg., ch. 357, Sec. 19, eff. June 11, 1987.

(b) If any person fails to apply for a license required hereunder or fails to pay a fee within the time specified, such person shall pay as a penalty 50% of the amount of the fee for each thirty days of default.

(c) The commission may prorate the fee for a representative's license so that the representative's license and the license of the manufacturer or distributor by whom the representative is employed expire on the same day.

(d) The Commission may refund, from funds appropriated to the Commission for that purpose, any fees collected under this Act that are not due or that exceed the amount due.

(e) The filing fees for a contested case or protest that involves a hearing are:

(1) for a complaint filed under Section 6.07 of this Act, $35; and

(2) for all other complaints or protests, $200.

(f) In a case brought under Section 6.07 of this Act in which a complainant prevails, the Commission shall order a nonprevailing party to reimburse to the complainant the full amount of the filing fee.

Sec. 4.05(a) amended by Acts 1979, 66th Leg., p. 1730, ch. 709, Sec. 18, eff. Sept. 1, 1979; Sec. 4.05(a) amended by Acts 1983, 68th Leg., p. 388, ch. 81, Sec. 15(a), eff. Sept. 1, 1983; Sec. 4.05(a) amended by Acts 1983, 68th Leg., p. 4137, ch. 651, Sec. 3, eff. June 19, 1983; Sec. 4.05(a-1) added by Acts 1983, 68th Leg., p. 388, ch. 81, Sec. 15(b), eff. Sept. 1, 1983; Sec. 4.05(c), (d) added by Acts 1983, 68th Leg., p. 388, ch. 81, Sec. 15(c), eff. Sept. 1, 1983; Sec. 4.05(a) amended by Acts 1987, 70th Leg., ch. 357, Secs. 19, 20, eff. June 11, 1987; Sec. 4.05(e), (f) added by Acts 1987, 70th Leg., ch. 357, Sec. 21, eff. June 11, 1987; Sec. 4.05(a), (e) amended by Acts 1991, 72nd Leg., ch. 501, Sec. 15, eff. June 16, 1991; Sec. 4.05(e) amended by Acts 1993, 73rd Leg., ch. 61, Sec. 5, eff. April 29, 1993; Sec. 4.05(a) amended by Acts 1995, 74th Leg., ch. 345, Sec. 7, eff. June 8, 1995; amended by Acts 1995, 74th Leg., ch. 357, Sec. 13, eff. June 8, 1995.

Sec. 4.06. Sanctions; denial, revocation, or suspension of license.

(a) The Commission may deny an application for a license, revoke or suspend an outstanding license, or place on probation a person whose license has been suspended, or reprimand a licensee, for any of the following reasons:

(1) Unfitness of an applicant or licensee under standards set out in this Act or in Commission rules.

(2) Material misrepresentation in any application or other information filed under this Act or Commission rules.

(3) Failure to comply with this Act or any Commission rule or order promulgated by the Commission.

(4) Failure to maintain the qualifications for a license.

(5) Willfully defrauding any retail buyer.

(6) Violation of any law relating to the sale, distribution, financing, or insuring of motor vehicles.

(7) Any act or omission by an officer, director, partner, trustee, or other person acting in a representative capacity for a licensee which act or omission would be cause for denying, revoking, or suspending a license to an individual licensee.

(8) Failure to fulfill written agreements between the licensee and a retail buyer of a motor vehicle.

(b) The revocation of a license previously held under this Act may be grounds for denying a subsequent application for a license.

(c) The Commission may deny an application to establish a dealership if, after protest, the applicant fails to establish good cause therefor. In determining good cause, the Commission shall consider:

(1) whether the manufacturer or distributor of the same line-make of new motor vehicle is being adequately represented as to sales and service;

(2) whether the protesting franchised dealer representing the same line-make of new motor vehicle is in substantial compliance with his franchise agreement;

(3) the desirability of a competitive marketplace;

(4) any harm to the protesting franchised dealer; and

(5) the public interest.

(d) A franchised dealer shall have standing under Subsection (c) of this section to protest an application to establish or relocate a dealership if the person filing the protest:

(1) is a franchised dealer of the same line-make whose dealership is located in the county in which the proposed dealership site is to be located; or

(2) is a franchised dealer of the same line-make whose dealership is located within a 15 mile radius of the proposed dealership site.

(e) Notwithstanding the provisions of Subsection (d) of this section, the relocation of a dealership is not subject to protest by a franchised dealer whose dealership is not closer to the proposed location than it is to the location from which the relocated dealership is being relocated.

(f) The revocation or suspension of a manufacturer's or distributor's license may be limited to one or more municipalities or counties or any other defined area, or may be revoked or suspended in a defined area only as to certain aspects of its business, or as to a specified franchised dealer or franchised dealers.

(g) No license shall be denied, revoked, or suspended, or disciplinary action taken under this section, except on order of the Commission after a hearing. The Commission may inspect the books and records of a licensee in connection with the performance of its duties under this Act.

(h) If a suspension of a license is probated, the Commission may:

(1) require the licensee to report regularly to the Commission on matters that are the basis of the probation; or

(2) limit activities to those prescribed by the Commission.

Sec. 4.06(c) amended by Acts 1977, 65th Leg., p. 948, ch. 357, Sec. 4, eff. June 10, 1977. Sec. 4.06(a), (c) amended by Acts 1979, 66th Leg., p. 1731, ch. 709, Secs. 20, 21, eff. Sept. 1, 1979; Sec. 4.06(c), (e) amended by Acts 1987, 70th Leg., ch. 357, Sec. 22, eff. June 11, 1987; Sec. 4.06 amended by Acts 1989, 71st Leg., ch. 1130, Sec. 22, eff. June 16, 1989; Acts 1991, 72nd Leg., ch. 501, Sec. 16, eff. June 16, 1991; Sec. 4.06(a), (f) amended by and Sec. 4.06(g) added by Acts 1991, 72nd Leg., ch. 501, Sec. 17, eff. June 16, 1991; Sec. 4.06 amended by Acts 1995, 74th Leg., ch. 357, Sec. 14, eff. June 8, 1995. Sec. 4.07. Required Notice to Buyers.

(a) A franchised dealer licensed under this Act shall provide notice of the complaint procedures provided by Sections 3.08(i) and 6.07 of this Act to each person to whom the franchised dealer sells a new motor vehicle.

(b) The Commission may require its approval of the contents of notices required by Subsection (a) of this section or may prescribe the contents of required notices. The Commission shall prepare, publish, and distribute information concerning an owner's rights under Section 6.07 of this Act, and the retail seller of any new motor vehicle shall conspicuously post a copy of the information in the area where its customers usually make payment for repairs.

(c) Failure to give the notice required by Subsections (a) and (b) of this section is a violation of this Act.

Sec. 4.07 added by Acts 1979, 66th Leg., p. 1731, ch. 709, Sec. 22, eff. Sept. 1, 1979; Sec. 4.07(b), (c) amended by Acts 1983, 68th Leg., p. 4138, ch. 651, Sec. 4, eff. June 19, 1983; Sec. 4.07(a), (c) amended by Acts 1989, 71st Leg., ch. 1130, Sec. 23, eff. June 16, 1989; Sec. 4.07(a) amended by Acts 1991, 72nd Leg., ch. 501, Sec. 18, eff. June 16, 1991; amended by Acts 1995, 74th Leg., ch. 357, Sec. 15, eff. June 8, 1995.

SUBCHAPTER E. PROHIBITIONS

Sec. 5.01. Franchised dealers. It is unlawful for any franchised dealer to:

(1) Require a retail purchaser of a new motor vehicle as a condition of sale and delivery thereof to purchase special features, equipment, parts, or accessories not ordered or desired by the purchaser, provided such features, equipment, parts, or accessories are not already installed on the new motor vehicle at the time of sale.

(2) Fail to perform the obligations placed on the selling franchised dealer in connection with the delivery and preparation of a new motor vehicle for retail sale as provided in the manufacturer's preparation and delivery agreements on file with the Commission and applicable to such vehicle.

(3) Fail to perform the obligations placed on the franchised dealer in connection with the manufacturer's warranty agreements on file with the Commission.

(4) Operate without appropriate signs readily and easily visible to the public, identifying the franchised dealer's place of business and the products the franchised dealer offers for sale. In the event of a conflict with another law or ordinance, this Subdivision prevails, and in the event of a dispute, the Board has exclusive jurisdiction to determine whether a sign or signs are in compliance with the terms of this Subdivision. In the event of a dispute, the Board shall uphold local ordinances of a home-rule city and protect franchised dealers from retribution by manufacturers or distributors for having complied with local ordinances.

(5), (6) Deleted by Acts 1995, 74th Leg., ch. 357, Sec. 16, eff. June 8, 1995.

(7) Directly or indirectly pay a fee to a lessor or lease facilitator.

Sec. 5.01 amended by Acts 1979, 66th Leg., p. 1732, ch. 709, Sec. 23, eff. Sept. 1, 1979; Acts 1985, 69th Leg., ch. 241, Sec. 5, eff. June 4, 1985; Acts 1987, 70th Leg., ch. 357, Sec. 23, eff. June 11, 1987; Acts 1993, 73rd Leg., ch. 61, Sec. 6, eff. April 29, 1993; Acts 1995, 74th Leg., ch. 345, Sec. 8, eff. June 8, 1995; Acts 1995, 74th Leg., ch. 357, Sec. 16, eff. June 8, 1995. Sec. 5.01A. Dealers.

No dealer may:

(1) use false, deceptive, or misleading advertising;

(2) operate as a dealer without a currently valid license or general distinguishing number issued by the Board;

(3) violate a rule of the Board; or

(4) aid or abet a person who violates this Act.

Sec. 5.01A added by Acts 1995, 74th Leg., ch. 357, Sec. 17, eff. June 8, 1995.

Sec. 5.02. Manufacturers; Distributors; Representatives.

(a) In this section, "dealer" means franchised dealer.

(b) It is unlawful for any manufacturer, distributor, or representative to:

(1) Require or attempt to require any dealer to order, accept delivery of or pay anything of value, directly or indirectly, for any motor vehicle, appliance, part, accessory or any other commodity unless voluntarily ordered or contracted for by such dealer.

(2) Refuse or fail to deliver, in reasonable quantities and within a reasonable time, to a dealer having a franchise agreement for the retail sale of any motor vehicles sold or distributed by such manufacturer, distributor, or representative, any new motor vehicle or parts or accessories to new motor vehicles as are covered by such franchise if such vehicle, parts or accessories are publicly advertised as being available for delivery or are actually being delivered; provided, however, this provision is not violated if such failure is caused by acts of God, work stoppage or delays due to strikes or labor disputes, freight embargoes or other causes beyond the control of the manufacturer, distributor, or representative.

(3) Notwithstanding the terms of any franchise agreement:

(A) Terminate or refuse to continue any franchise with a dealer or directly or indirectly force or attempt to force a dealer to discontinue a line-make or parts or products related to that line-make unless all of the following conditions are met:

(i) the dealer and the Commission have received written notice by registered or certified mail from the manufacturer, distributor, or representative not less than 60 days before the effective date of termination or noncontinuance setting forth the specific grounds for termination or noncontinuance; and

(ii) the written notice contains on the first page thereof a conspicuous statement which reads as follows: "NOTICE TO DEALER: YOU MAY BE ENTITLED TO FILE A PROTEST WITH THE TEXAS MOTOR VEHICLE COMMISSION IN AUSTIN, TEXAS, AND HAVE A HEARING IN WHICH YOU MAY PROTEST THE PROPOSED TERMINATION OR NONCONTINUANCE OF YOUR FRANCHISE UNDER THE TERMS OF THE TEXAS MOTOR VEHICLE COMMISSION CODE IF YOU OPPOSE THIS ACTION."; and

(iii) the manufacturer, distributor, or representative has received the informed, written consent of the affected dealer or the appropriate period for the affected dealer to protest the proposed franchise termination or noncontinuance has lapsed; or

(iv) if the affected dealer files a protest with the Commission within the greater of (1) 60 days after receiving its 60-day notice of proposed termination or noncontinuance or (2) the time specified in such notice, the Commission determines that the party seeking to terminate or not continue a dealer's franchise has established by a preponderance of the evidence, at a hearing called by the Commission, that there is good cause for the proposed termination or noncontinuance.

(v) Notwithstanding Subdivisions (3)(A)(i) and (3)(A)(iv) of this section, notice may be made not less than 15 days prior to the effective date of termination or noncontinuance if a licensed dealer fails to conduct its customary sales and service operations during its customary business hours for seven consecutive business days unless such failure is caused by an act of God, work stoppage or delays due to strikes or labor disputes, an order of the Commission, or other causes beyond the control of the dealer.

(B) Whenever a dealer files a timely protest to a proposed franchise termination or noncontinuance, the Commission shall notify the party seeking to terminate or to not continue the protesting dealer's franchise that a timely protest has been filed, that a hearing is required in accordance with this Act, and that the party who gave the dealer notice of termination or noncontinuance of the franchise may not terminate or refuse to continue the franchise until the Commission issues its final decision or order.

(C) If a franchise is terminated or not continued, another franchise in the same line-make will be established within a reasonable time unless it is shown to the Commission by a preponderance of the evidence that the community or trade area cannot reasonably support such a dealership. If this showing is made, no dealer license shall be thereafter issued in the same area unless a change in circumstances is established.

(4) Notwithstanding the terms of any franchise agreement, modify or replace a franchise with a succeeding franchise if the modification or replacement would adversely affect, to a substantial degree, the dealer's sales, investment, or obligations to provide service to the public, unless the manufacturer, distributor, or representative has first given the Commission and each affected dealer written notice by registered or certified mail of any such action 60 days in advance of the modification or replacement. The written notice shall contain on the first page thereof a conspicuous statement which reads as follows: "NOTICE TO DEALER: YOU MAY BE ENTITLED TO FILE A PROTEST WITH THE TEXAS MOTOR VEHICLE COMMISSION IN AUSTIN, TEXAS, AND HAVE A HEARING IN WHICH YOU MAY PROTEST THE PROPOSED MODIFICATION OR REPLACEMENT OF YOUR FRANCHISE WITH A SUCCEEDING FRANCHISE UNDER THE TERMS OF THE TEXAS MOTOR VEHICLE COMMISSION CODE IF YOU OPPOSE THIS ACTION." Within the greater of (1) 60 days after receipt of such notice or (2) the time specified in such notice, a dealer may file a protest with the Commission and the modification or replacement shall not become effective unless and until the Commission determines that the party seeking to modify or replace a franchise with a succeeding franchise has demonstrated by a preponderance of the evidence that there is good cause for the modification or replacement. The prior franchise shall continue in effect until the protest is resolved by the Commission.

(5) Notwithstanding the terms of any franchise agreement, in determining whether good cause has been established for modifying, replacing, terminating, or refusing to continue a franchise, or for forcing or attempting to force a dealer to discontinue a line-make or parts or products related to that line-make, the Commission shall consider all the existing circumstances including, without limitation by the enumeration herein, all the following:

(A) the dealer's sales in relation to the sales in the market;

(B) the dealer's investment and obligations;

(C) injury to the public welfare;

(D) the adequacy of the dealer's service facilities, equipment, parts, and personnel in relation to those of other dealers of new motor vehicles of the same line-make;

(E) whether warranties are being honored by the dealer;

(F) the parties' compliance with their franchise agreement; and

(G) the enforceability of the franchise agreement from a public policy standpoint, including, without limitation, issues of the reasonableness of the franchise agreement's terms, oppression, adhesion, and the relative bargaining power of the parties.

Good cause shall not be shown solely by the desire of a manufacturer, distributor, or representative for market penetration.

(6) Use any false, deceptive or misleading advertising.

(7) Notwithstanding the terms of any franchise agreement, prevent any dealer from reasonably changing the capital structure of his dealership or the means by or through which he finances the operation thereof, provided that the dealer meets reasonable capital requirements.

(8) Notwithstanding the terms of any franchise agreement, fail to give effect to or attempt to prevent any sale or transfer of a dealer, dealership or franchise or interest therein or management thereof unless, after complaint or protest, it is demonstrated to the Commission after hearing that the result of any such sale or transfer will be detrimental to the public or the representation of the manufacturer or distributor.

(9) Notwithstanding the terms of any franchise agreement, require or attempt to require that a dealer assign to or act as an agent for any manufacturer, distributor or representative in the securing of promissory notes and security agreements given in connection with the sale or purchase of new motor vehicles or the securing of policies of insurance on or having to do with the operation of vehicles sold.

(10) Notwithstanding the terms of any franchise agreement, fail or refuse, after complaint and hearing, to perform the obligations placed on the manufacturer in connection with the delivery, preparation and warranty of a new motor vehicle as provided in the manufacturer's warranty, preparation, and delivery agreements on file with the Commission.

(11) Notwithstanding the terms of any franchise agreement, fail to compensate its dealers for the work and services they are required to perform in connection with the dealer's delivery and preparation obligations according to the agreements on file with the Commission which must be found by the Commission to be reasonable, or fail to adequately and fairly compensate its dealers for labor, parts and other expenses incurred by such dealer to perform under and comply with a manufacturer's or a distributor's warranty agreement, or require, as a prerequisite to the manufacturer's or distributor's payment of a claim for reimbursement as required by this section, that a dealer file with the manufacturer or distributor the actual time spent in the performance of labor unless actual time is the basis for reimbursement. In no event shall any manufacturer or distributor pay its dealers an amount of money for warranty work that is less than that charged by the dealer to the retail customers of the dealer for nonwarranty work of like kind. All claims made by dealers for compensation for delivery, preparation, and warranty work shall be paid within 30 days after approval and shall be approved or disapproved within 30 days after receipt. When any claim is disapproved, the dealer shall be notified in writing of the grounds for disapproval. No claim which has been approved and paid may be charged back to the dealer unless it can be shown that the claim was false or fraudulent, that the repairs were not properly made or were unnecessary to correct the defective condition, or that the dealer failed to reasonably substantiate the claim in accordance with reasonable written requirements of the manufacturer or distributor, if the dealer has been notified of the requirements prior to the time the claim arose, and if the requirements were in effect at the time the claim arose. A manufacturer or distributor may not audit a claim after the expiration of two years following the submission of the claim unless the manufacturer or distributor has reasonable grounds to suspect that a claim was fraudulent. Notwithstanding the terms of a franchise agreement or provision of law in conflict with this section, the dealer's delivery, preparation, and warranty obligations as filed with the Commission shall constitute the dealer's sole responsibility for product liability as between the dealer and manufacturer or distributor, and, except for a loss caused by the dealer's failure to adhere to these obligations, a loss caused by the dealer's negligence or intentional misconduct, or a loss caused by the dealer's modification of a product without manufacturer or distributor authorization, the manufacturer or distributor shall reimburse the dealer for all loss incurred by the dealer, including legal fees, court costs, and damages, as a result of the dealer having been named a party in a product liability action.

(12) Operate as a manufacturer, distributor, or representative without a currently valid license from the Commission or otherwise violate this Act or rules promulgated by the Commission hereunder.

(13) Notwithstanding the terms of any franchise agreement, to prevent or refuse to honor the succession to a dealership by any legal heir or devisee under the will of a dealer or under the laws of descent and distribution of this State unless it is shown to the Commission, after notice and hearing, that the result of such succession will be detrimental to the public interest and to the representation of the manufacturer or distributor; provided, however, nothing herein shall prevent a dealer, during his lifetime, from designating any person as his successor dealer, by written instrument filed with the manufacturer or distributor.

(14) Notwithstanding the terms of any franchise agreement, require that a dealer pay or assume, directly or indirectly, any part of any refund, rebate, discount, or other financial adjustment made by the manufacturer, distributor, or representative to, or in favor of, any customer of a dealer, unless voluntarily agreed to by such dealer.

(15) Notwithstanding the terms of any franchise agreement, deny or withhold approval of a written application to relocate a franchise unless (A) the applicant has received written notice of the denial or withholding of approval within 60 days after receipt of the application containing information reasonably necessary to enable the manufacturer or distributor to adequately evaluate the application, and if (B) the applicant files a protest with the Commission and the manufacturer or distributor establishes by a preponderance of the evidence at a hearing called by the Commission that the grounds for the denial or withholding of approval of the relocation are reasonable.

(16) Notwithstanding the terms of any franchise agreement, fail to pay to a dealer or any lienholder in accordance with their respective interest after the termination of a franchise:

(A) the dealer cost of each new motor vehicle in the dealer's inventory with mileage of 6,000 miles or less, reduced by the net discount value of each, where "net discount value" is determined according to the following formula: net cost multiplied by total mileage divided by 100,000, and where "net cost" equals the dealer cost plus any charges by the manufacturer, distributor, or representative for distribution, delivery, and taxes, less all allowances paid to the dealer by the manufacturer, distributor, or representative for new, unsold, undamaged, and complete motor vehicles of current model year or one year prior model year in the dealer's inventory, except that if a vehicle cannot be reduced by the net discount value, the manufacturer or distributor shall pay the dealer the net cost of the vehicle;

(B) the dealer cost of each new, unused, undamaged, and unsold part or accessory if the part or accessory is in the current parts catalogue and is still in the original, resalable merchandising package and in unbroken lots, except that in the case of sheet metal, a comparable substitute for the original package may be used, and if the part or accessory was purchased by the dealer either directly from the manufacturer or distributor or from an outgoing authorized dealer as a part of the dealer's initial inventory;

(C) the fair market value of each undamaged sign owned by the dealer which bears a trademark or tradename used or claimed by the manufacturer, distributor, or representative if the sign was purchased from or purchased at the request of the manufacturer, distributor, or representative;

(D) the fair market value of all special tools, data processing equipment, and automotive service equipment owned by the dealer which were recommended in writing and designated as special tools and equipment and purchased from or purchased at the request of the manufacturer, distributor, or representative, if the tools and equipment are in usable and good condition except for reasonable wear and tear;

(E) the cost of transporting, handling, packing, storing, and loading of any property subject to repurchase under this section;

(F) except as provided by this subdivision, any sums due as provided by Paragraph (A) of this subdivision within 60 days after termination of a franchise and any sums due as provided by Paragraphs (B) through (E) of this subdivision within 90 days after termination of a franchise. As a condition of payment, the dealer is to comply with reasonable requirements with respect to the return of inventory as are set out in the terms of the franchise agreement. A manufacturer or distributor shall reimburse a dealer for the dealer's cost for storing any property covered by this subdivision beginning 90 days following termination. A manufacturer or distributor shall reimburse a dealer for the dealer's cost of storing any property covered by this subdivision before the expiration of 90 days from the date of termination if the dealer notifies the manufacturer or distributor of the commencement of storage charges within that period. On receipt of notice of the commencement of storage charges, a manufacturer or distributor may immediately take possession of the property in question by repurchasing the property as provided by this subdivision. A manufacturer, distributor, or representative who fails to pay those sums within the prescribed time or at such time as the dealer and lienholder, if any, proffer good title prior to the prescribed time for payment, is liable to the dealer for:

(i) the greatest of dealer cost, fair market value, or current price of the inventory;

(ii) interest on the amount due calculated at the rate applicable to a judgment of a court; and

(iii) reasonable attorney's fees and costs.

(17) Notwithstanding the terms of any franchise agreement, change its distributor, its method of distribution of its products in this state, or its business structure or ownership in a manner that results in the termination or noncontinuance of a franchise without good cause. The manufacturer, distributor, or representative shall issue the same notice to the dealer and to the Commission as is provided in Subdivisions (3)(A) and (B) of this section and said same procedures shall apply to the parties.

(18) Notwithstanding the terms of any franchise agreement, require a dealer to submit to arbitration on any issue unless the dealer and the manufacturer, distributor, or representative and their respective counsel agree to arbitrate after a controversy arises. The arbitrator shall apply the provisions of this Act in resolving the pertinent controversy. Either party may appeal to the Commission a decision of an arbitrator on the ground that the arbitrator failed to apply this Act.

(19) Notwithstanding the terms of any franchise agreement, require that a dealer join, contribute to, or affiliate with, directly or indirectly, any advertising association.

(20) Notwithstanding the terms of a franchise agreement:

(A) require adherence to unreasonable sales or service standards;

(B) directly or indirectly, discriminate against a dealer or otherwise treat dealers differently as a result of a formula or other calculation or process intended to gauge the performance of a dealership, except a sales contest or other recognition program based on reasonable sales and service criteria;

(C) unreasonably require that a dealer purchase special tools or equipment; or

(D) fail to compensate a dealer for all costs incurred by the dealer as required by the manufacturer in complying with the terms of a product recall by the manufacturer or distributor, including the costs, if any, incurred by the dealer in notifying vehicle owners of the existence of the recall.

(21) Discriminate unreasonably between or among franchisees in the sale of a motor vehicle owned by the manufacturer or distributor.

(22) Directly or indirectly, or through a subsidiary or agent, require, as a condition for obtaining financing for a motor vehicle, the purchaser of a vehicle to purchase any product other than the motor vehicle from the manufacturer or distributor, or from an entity owned or controlled by the manufacturer or distributor.

(23) Directly or indirectly, or through a subsidiary or agent, require, as a condition of its or its subsidiary's agreement to provide financing for a motor vehicle, that any insurance policy or service contract purchased by the motor vehicle purchaser be purchased from a specific source.

(24) Compel a dealer through a financing subsidiary of the manufacturer or distributor to agree to unreasonable operating requirements or directly or indirectly to terminate a dealer through the actions of a financing subsidiary of the manufacturer or distributor. This subdivision does not limit the right of a financing entity to engage in business practices in accordance with the usage of trade in retail and wholesale motor vehicle financing.

(25) Operate as a dealer except on a temporary basis and only if:

(A) the dealership was previously owned by a franchised dealer and is currently for sale at a reasonable price; or

(B) the manufacturer, distributor, or representative operates the dealership in a bona fide relationship with a franchised dealer who is required to make a significant investment in the dealership, subject to loss, and who reasonably expects to acquire full ownership of the dealership under reasonable terms and conditions.

(26) Notwithstanding the terms of a franchise agreement, deny or withhold approval of a dealer's application to add a line-make or parts or products related to that line-make unless, within 60 days of receipt of the dealer's written application to add the line-make, the manufacturer or distributor gives the dealer written notice of the denial or withholding of approval. After receipt of notice, the dealer may file a protest with the Commission. If the dealer files a protest as provided by this subdivision, the Commission may uphold the manufacturer's or distributor's decision to deny or withhold approval of the addition of the line-make only if the manufacturer or distributor proves by a preponderance of the evidence that the denial or withholding of approval was reasonable. In determining whether or not the manufacturer or distributor has met its burden to show that its denial or withholding of approval is reasonable, the Commission shall consider all existing circumstances, including, without limitation, the following:

(A) the dealer's sales in relation to the sales in the market;

(B) the dealer's investment and obligations;

(C) injury to the public welfare;

(D) the adequacy of the dealer's sales and service facilities, equipment, parts, and personnel in relation to those of other dealers of new motor vehicles of the same line-make;

(E) whether warranties are being honored by the dealer agreement;

(F) the parties' compliance with their franchise agreement;

(G) the enforceability of the franchise agreement from a public policy standpoint, including without limitation, issues of the reasonableness of the franchise agreement's terms, oppression, adhesion, and the relative bargaining power of the parties;

(H) whether the dealer complies with reasonable capitalization requirements or will be able to comply with reasonable capitalization requirements within a reasonable time;

(I) the harm, if any, to the manufacturer if the denial or withholding of approval is not upheld; and

(J) the harm, if any, to the dealer if the denial or withholding of approval is upheld.

Sec. 5.02 amended by Acts 1977, 65th Leg., p. 948, ch. 357, Sec. 5, eff. June 10, 1977; Acts 1981, 67th Leg., p. 555, ch. 235, Sec. 1, eff. May 28, 1981; Acts 1983, 68th Leg., p. 4138, ch. 651, Sec. 5, eff. June 19, 1983; Acts 1985, 69th Leg., ch. 241, Sec. 6, eff. June 4, 1985; Acts 1987, 70th Leg., ch. 357, Sec. 24, eff. June 11, 1987; Acts 1989, 71st Leg., ch. 1130, Sec. 24, eff. June 16, 1989; Acts 1991, 72nd Leg., ch. 501, Sec. 19, eff. June 16, 1991; Acts 1993, 73rd Leg., ch. 61, Sec. 7, eff. April 29, 1993; Acts 1995, 74th Leg., ch. 357, Sec. 18, eff. June 8, 1995.

Sec. 5.03. Brokers.

A person may not act as, offer to act as, or hold itself out to be, a broker.

Sec. 5.03 added by Acts 1979, 66th Leg., p. 1732, ch. 709, Sec. 24, eff. Sept. 1, 1979; amended by Acts 1989, 71st Leg., ch. 1130, Sec. 25, eff. June 16, 1989.

Sec. 5.03A. Lessors.

(a) A lessor may not directly or indirectly accept a fee from a dealer.

(b) A lessor may not pay a fee to any person in return for the solicitation, procurement, or production by that person of prospective lessees of motor vehicles unless the person receiving the fee is a lease facilitator who holds a valid license as provided by this code and a valid appointment from the lessor as provided by this section.

(c) A lessor may appoint one or more lease facilitators licensed pursuant to the terms of this code to represent the lessor in obtaining prospective lease customers. An appointment complies with the requirements of this subsection if it is in writing, discloses its terms, and otherwise complies with rules of the Commission.

(d) In a lease contract or agreement between a lessor and a lessee solicited, procured, or produced by a lease facilitator, the lessor shall disclose to the lessee that a fee was paid, or will be paid to the lease facilitator for the solicitation, procurement, or production of the lessee or the lease. The lessor shall include the disclosure required by this subsection in a prominent position either:

(1) on the face of the written memorandum of the lease contract or agreement; or

(2) on a separate instrument signed by the lessee at the same time as the signing of the lease contract or agreement.

(e) Except as provided by this subsection or by law of the United States or a rule duly promulgated by an agency of the United States, a lessor may not, and the terms of a lease agreement may not, prohibit the lessee from taking the vehicle that is the subject of the lease agreement into a specific foreign nation unless the lease agreement prohibits the lessee from taking the vehicle into all foreign nations. In the interests of justice and giving deference to standard national business practices, the Commission may adopt a rule by which a lease agreement may prohibit the lessee from taking the leased vehicle into a foreign nation whether or not it prohibits the lessee from taking the vehicle into another foreign nation. In adopting a rule under this subsection the Commission shall give due consideration to the proximity of international borders to prospective Texas lessees.

Sec. 5.03A added by Acts 1995, 74th Leg., ch. 345, Sec. 9, eff. June 8, 1995. Sec. 5.03B. Lease facilitators.

(a) No person may hold himself out to any person as a "leasing company," "leasing agent," "lease facilitator," or similar title, directly or indirectly engaged in the business of lease facilitator, or otherwise engage in the solicitation or procurement of prospective lessees for motor vehicles not titled in the name of and registered to the person, unless the person holds a valid lease facilitator license and is in compliance with the terms of this code.

(b) A lease facilitator may not:

(1) sell or offer to sell a new motor vehicle;

(2) accept a fee from a dealer;

(3) sign a motor vehicle manufacturer's statement of origin to a vehicle, accept an assignment of a manufacturer's statement of origin to a vehicle, or otherwise assume any element of title to a new motor vehicle;

(4) procure or solicit prospective lessees for or on behalf of any person other than a lessor; or

(5) act in the capacity of or engage in the business of lease facilitator without a valid license issued as provided by this code and a valid appointment from a lessor to act on behalf of the lessor in soliciting prospective lease clients or customers as provided by this code.

(c) Except as provided by Subsection (b)(2) of this section, a lease facilitator may accept a fee for procuring a vehicle lessee or prospective vehicle lessee for or on behalf of a lessor.

(d) This section does not limit the ability of a lease facilitator to accept an appointment from more than one lessor.

(e) This section does not prohibit a lease facilitator from representing a lessor or lessee in the acquisition of a motor vehicle for the purpose of leasing the vehicle to another person.

Sec. 5.03B added by Acts 1995, 74th Leg., ch. 345, Sec. 9, eff. June 8, 1995.

Sec. 5.04. Sale of New Motor Vehicles.

(a) No person may engage in the business of buying, selling, or exchanging new motor vehicles unless that person:

(1) holds a valid franchised dealer's license issued by the Commission for the make or makes of new motor vehicles being bought, sold, or exchanged; or

(2) is acting as a bona fide employee of the licensee.

(b) The "make" of a conversion is that of the chassis manufacturer and the "make" of a motor home is that of the motor home manufacturer.

Sec. 5.04 added by Acts 1981, 67th Leg., p. 557, ch. 235, Sec. 2, eff. May 28, 1981; amended by Acts 1983, 68th Leg., p. 4143, ch. 651, Sec. 6, eff. June 19, 1983; Acts 1987, 70th Leg., ch. 357, Sec. 25, eff. June 11, 1987; Sec. 5.04(a), (c) amended by Acts 1989, 71st Leg., ch. 1130, Sec. 26, eff. June 16, 1989; Sec. 5.04 amended by Acts 1991, 72nd Leg., ch. 501, Sec. 20, eff. June 16, 1991; Sec. 5.04(a) amended by Acts 1995, 74th Leg., ch. 357, Sec. 19, eff. June 8, 1995.

SUBCHAPTER F. ENFORCEMENT

Sec. 6.01. Civil penalty.

(a) In the event the Commission determines, after a proceeding conducted in accordance with this Act and the rules of the Commission, that any person is violating or has violated any provision of this Act or any rule or order of the Commission issued pursuant to this Act, the Commission may levy a civil penalty not to exceed $10,000.00 for each day of violation and for each act of violation. Notwithstanding a law to the contrary, including without limitation the provisions of Section 403.094(h), Government Code, all civil penalties recovered under this Act shall be deposited in the state treasury to the credit of the state highway fund.

(b) In determining the amount of a civil penalty levied under this Act, the Commission shall consider:

(1) the seriousness of the violation, including but not limited to the nature, circumstances, extent, and gravity of the prohibited acts, and the harm or potential harm created to the safety of the public;

(2) the economic damage to the public caused by the violation;

(3) the history of the previous violations;

(4) the amount necessary to deter future violations;

(5) efforts made to correct the violations; and

(6) any other matters that justice may require.

Sec. 6.01 amended by Acts 1985, 69th Leg., ch. 241, Sec. 7, eff. June 4, 1985; Acts 1989, 71st Leg., ch. 1130, Sec. 27, eff. June 16, 1989; Acts 1991, 72nd Leg., ch. 501, Sec. 21, eff. June 16, 1991; Sec. 6.01(a) amended by Acts 1995, 74th Leg., ch. 357, Sec. 20, eff. June 8, 1995.

Sec. 6.01A. Cease and Desist Orders.

(a) If it appears to the Commission at any time that a person is violating the provisions of this Act or any rule or order of the Commission issued pursuant to this Act it may notify the person engaged in such conduct to appear and show cause why a cease and desist order should not be issued prohibiting the proscribed conduct. An interlocutory cease and desist order may be granted with or without bond or other undertaking if:

(1) such an order is necessary to the performance of the duties delegated to the Commission by this Act or is otherwise necessary or convenient to maintaining the status quo between two or more adverse parties before the Commission;

(2) a party before the Commission is entitled to relief demanded of the Commission and all or part of the relief requires the restraint of some act prejudicial to the party;

(3) a person is performing or is about to perform or is procuring or allowing the performance of an act relating to the subject of a contested case pending before the Commission, in violation of the rights of a party before the Commission, and the act would tend to render the Commission's order in that case ineffectual; or

(4) substantial injury to the rights of a person subject to the Commission's jurisdiction is threatened irrespective of any remedy at law.

(b) Proceedings under this section shall be governed by the provisions of this Act and the Commission's rules and, to the extent not inconsistent therewith, the provisions of the Administrative Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas Civil Statutes) relating to contested cases. Interlocutory cease and desist orders shall remain in effect until vacated or until incorporated into a final Commission order. Permanent cease and desist orders may issue without regard to the above enumerations but only in accordance with the provisions of this Act pertaining to the issuance of final Commission orders. Appeal of any interlocutory cease and desist order shall be made to the Commission prior to seeking judicial review under the provisions of this Act pertaining to judicial review. Appeal of a permanent cease and desist order shall be conducted pursuant to the provisions of this Act pertaining to judicial review of final orders.

Sec. 6.01A added by Acts 1985, 69th Leg., ch. 241, Sec. 8, eff. June 4, 1985; amended by Acts 1989, 71st Leg., ch. 1130, Sec. 28, eff. June 16, 1989.

Sec. 6.02. Injunction.

Whenever it appears that a person has violated, is violating, or is threatening to violate any provision of this Act or of any rule or order of the Commission issued pursuant to this Act then the Commission, or the Executive Director when authorized by the Commission, may cause a suit to be instituted in any court for injunctive relief to restrain any such person from continuing the violation or threat of violation or for the assessment and recovery of a civil penalty as provided for in this Act or for both injunctive relief and a civil penalty.

Sec. 6.02 amended by Acts 1989, 71st Leg., ch. 1130, Sec. 29, eff. June 16, 1989.

Sec. 6.03. Suit.

At the request of the Commission, or the Executive Director when authorized by the Commission, the Attorney General shall institute and conduct a suit in the name of the State of Texas for injunctive relief or to recover a civil penalty or for both injunctive relief and penalty.

Sec. 6.03 amended by Acts 1989, 71st Leg., ch. 1130, Sec. 30, eff. June 16, 1989.

Sec. 6.04. Venue.

Suits brought on behalf of the Commission or the State of Texas may be brought in any forum or jurisdiction allowed by law.

Sec. 6.04 amended by Acts 1989, 71st Leg., ch. 1130, Sec. 31, eff. June 16, 1989.

Sec. 6.05. Bond.

In any suit to enjoin a