In Victory for Auto Brokers, State Senate Votes to Let Them Continue Advertising

Independent automobile brokers, who insist they can sell vehicles cheaper than new-car dealers, won an important legislative victory Monday in what they call their fight for survival.

With no votes to spare, the Senate passed on a 21-5 roll call--the exact majority required--an embattled bill sponsored by auto brokers that would enable them to continue to advertise vehicles, but not describe them as new.

The action wrote the latest chapter in a three-year fight between the brokers and new-car dealers, who maintain that existing state prohibitions against misleading advertising by dealers should apply equally to brokers.

Brokers, who buy new cars from dealers and resell them to consumers often at discount rates, have maintained that dealers want to put them out of business by forbidding them to advertise. The inability to advertise would force them out of business, brokers contend.

The bill, by Assemblyman Elihu M. Harris (D-Oakland), was returned to the Assembly for concurrence in Senate amendments. Supporters forecast the Assembly would grant final legislative approval, sending the measure to Gov. George Deukmejian.

The Senate had approved the legislation last week, but supporters agreed to last-minute amendments proposed by automobile dealers. Essentially, the amendments recast but did not substantively change provisions that were already in the bill. But their approval paved the way for Southern California dealers and some dealers in Northern California to abandon their opposition.

Under the bill, strongly supported by credit unions, a new car could not be advertised as such by a broker but could be offered as a “current year” model or “never registered.” Also, a required disclosure on broker advertising would declare that the automobile, although new, would be considered “used” because it was previously purchased from a new car dealer.

“The cars (brokers) get from the dealers would be new, but classified as used?” asked Sen. Ruben Ayala (D-Chino), who voted no. “That’s wrong.”

Kopp agreed that a contradiction existed but noted that for financing purposes the bill established the vehicle as new. Financing rates are more favorable for new than for used cars.

Since the early 1970s, dealers have been prohibited from advertising vehicles not actually on their premises or easily obtainable. For the past three years, they have contended that brokers should be similarly restricted.

The Department of Motor Vehicles for years has ignored the law and refused to enforce it against auto brokers. But last year, the department acted administratively to include brokers in the prohibition.

However, it delayed actually moving against the brokers to give the Legislature time to write a law that clearly would allow brokers to advertise.