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92_SB0113enr SB113 Enrolled LRB9202571DHmg 1 AN ACT in relation to vehicles. 2 Be it enacted by the People of the State of Illinois, 3 represented in the General Assembly: 4 Section 5. The Motor Vehicle Franchise Act is amended by 5 changing Section 6 as follows: 6 (815 ILCS 710/6) (from Ch. 121 1/2, par. 756) 7 Sec. 6. Warranty agreements; claims; approval; payment; 8 written disapproval. 9 (a) Every manufacturer, distributor, wholesaler, 10 distributor branch or division, factory branch or division, 11 or wholesale branch or division shall properly fulfill any 12 warranty agreement and adequately and fairly compensate each 13 of its motor vehicle dealers for labor and parts. 14 (b) In no event shall such compensation fail to include 15 reasonable compensation for diagnostic work, as well as 16 repair service, labor, and parts. Time allowances for the 17 diagnosis and performance of warranty work and service shall 18 be reasonable and adequate for the work to be performed. In 19 the determination of what constitutes reasonable compensation 20 under this Section, the principal factor to be given 21 consideration shall be the prevailing wage rates being paid 22 by the dealer in the relevant market area in which the motor 23 vehicle dealer is doing business, and in no event shall such 24 compensation of a motor vehicle dealer for warranty service 25 be less than the rates charged by such dealer for like 26 service to retail customers for nonwarranty service and 27 repairs. The franchiser shall reimburse the franchisee for 28 any parts provided in satisfaction of a warranty at the 29 prevailing retail price charged by that dealer for the same 30 parts when not provided in satisfaction of a warranty; 31 provided that such motor vehicle franchisee's prevailing SB113 Enrolled -2- LRB9202571DHmg 1 retail price is not unreasonable when compared with that of 2 the holders of motor vehicle franchises from the same motor 3 vehicle franchiser for identical merchandise in the 4 geographic area in which the motor vehicle franchisee is 5 engaged in business. All claims, either original or 6 resubmitted, made by motor vehicle dealers hereunder and 7 under Section 5 for such labor and parts shall be either 8 approved or disapproved within 30 days following their 9 submission. All approved claims shall be paid within 30 days 10 following their approval. The motor vehicle dealer who 11 submits a claim which is disapproved shall be notified in 12 writing of the disapproval within the same period, and each 13 such notice shall state the specific grounds upon which the 14 disapproval is based. The motor vehicle dealer shall be 15 permitted to correct and resubmit such disapproved claims 16 within 30 days of receipt of disapproval. Any claims not 17 specifically disapproved in writing within 30 days from their 18 submission shall be deemed approved and payment shall follow 19 within 30 days. The manufacturer or franchiser shall have the 20 right to require reasonable documentation for claims and to 21 audit such claims within a one year period from the date the 22 claim was paid or credit issued by the manufacturer or 23 franchiser, and to charge back any false or unsubstantiated 24 claims. The audit and charge back provisions of this Section 25 also apply to all other incentive and reimbursement programs 26 for a period of 18 months after the date of the transactions 27 that are subject to audit by the franchiser. However, the 28 manufacturer retains the right to charge back any fraudulent 29 claim if the manufacturer establishes in a court of competent 30 jurisdiction in this State that the claim is fraudulent. 31 (c) The motor vehicle franchiser shall not, by 32 agreement, by restrictions upon reimbursement, or otherwise, 33 restrict the nature and extent of services to be rendered or 34 parts to be provided so that such restriction prevents the SB113 Enrolled -3- LRB9202571DHmg 1 motor vehicle franchisee from satisfying the warranty by 2 rendering services in a good and workmanlike manner and 3 providing parts which are required in accordance with 4 generally accepted standards. Any such restriction shall 5 constitute a prohibited practice. 6 (d) For the purposes of this Section, the "prevailing 7 retail price charged by that dealer for the same parts" means 8 the price paid by the motor vehicle franchisee for parts, 9 including all shipping and other charges, multiplied by the 10 sum of 1.0 and the franchisee's average percentage markup 11 over the price paid by the motor vehicle franchisee for parts 12 purchased by the motor vehicle franchisee from the motor 13 vehicle franchiser and sold at retail. The motor vehicle 14 franchisee may establish average percentage markup under this 15 Section by submitting to the motor vehicle franchiser 100 16 sequential customer paid service repair orders or 90 days of 17 customer paid service repair orders, whichever is less, 18 covering repairs made no more than 180 days before the 19 submission, and declaring what the average percentage markup 20 is. The average percentage markup so declared shall go into 21 effect 30 days following the declaration, subject to audit of 22 the submitted repair orders by the motor vehicle franchiser 23 and adjustment of the average percentage markup based on that 24 audit. Any audit must be conducted within 30 days following 25 the declaration. Only retail sales not involving warranty 26 repairs, parts covered by subsection (e) of this Section, or 27 parts supplied for routine vehicle maintenance, shall be 28 considered in calculating average percentage markup. No 29 motor vehicle franchiser shall require a motor vehicle 30 franchisee to establish average percentage markup by a 31 methodology, or by requiring information, that is unduly 32 burdensome or time consuming to provide, including, but not 33 limited to, part by part or transaction by transaction 34 calculations. A motor vehicle franchisee shall not request a SB113 Enrolled -4- LRB9202571DHmg 1 change in the average percentage markup more than twice in 2 one calendar year. 3 (e) If a motor vehicle franchiser supplies a part or 4 parts for use in a repair rendered under a warranty other 5 than by sale of that part or parts to the motor vehicle 6 franchisee, the motor vehicle franchisee shall be entitled to 7 compensation equivalent to the motor vehicle franchisee's 8 average percentage markup on the part or parts, as if the 9 part or parts had been sold to the motor vehicle franchisee 10 by the motor vehicle franchiser. The requirements of this 11 subsection (e) shall not apply to entire engine assemblies 12 and entire transmission assemblies. In the case of those 13 assemblies, the motor vehicle franchiser shall reimburse the 14 motor vehicle franchisee in the amount of 30% of what the 15 motor vehicle franchisee would have paid the motor vehicle 16 franchiser for the assembly if the assembly had not been 17 supplied by the franchiser other than by the sale of that 18 assembly to the motor vehicle franchisee. 19 (f) The obligations imposed on motor vehicle franchisers 20 by this Section shall apply to any parent, subsidiary, 21 affiliate, or agent of the motor vehicle franchiser, any 22 person under common ownership or control, any employee of the 23 motor vehicle franchiser, and any person holding 1% or more 24 of the shares of any class of securities or other ownership 25 interest in the motor vehicle franchiser, if a warranty or 26 service or repair plan is issued by that person instead of or 27 in addition to one issued by the motor vehicle franchiser. 28 (g) (1) Any motor vehicle franchiser and at least a 29 majority of its Illinois franchisees of the same line make 30 may agree in an express written contract citing this Section 31 upon a uniform warranty reimbursement policy used by 32 contracting franchisees to perform warranty repairs. The 33 policy shall only involve either reimbursement for parts used 34 in warranty repairs or the use of a Uniform Time Standards SB113 Enrolled -5- LRB9202571DHmg 1 Manual, or both. Reimbursement for parts under the agreement 2 shall be used instead of the franchisees' "prevailing retail 3 price charged by that dealer for the same parts" as defined 4 in this Section to calculate compensation due from the 5 franchiser for parts used in warranty repairs. This Section 6 does not authorize a franchiser and its Illinois franchisees 7 to establish a uniform hourly labor reimbursement. 8 Each franchiser shall only have one such agreement with 9 each line make. Any such agreement shall: 10 (A) Establish a uniform parts reimbursement rate. 11 The uniform parts reimbursement rate shall be greater 12 than the franchiser's nationally established parts 13 reimbursement rate in effect at the time the first such 14 agreement becomes effective; however, any subsequent 15 agreement shall result in a uniform reimbursement rate 16 that is greater or equal to the rate set forth in the 17 immediately prior agreement. 18 (B) Apply to all warranty repair orders written 19 during the period that the agreement is effective. 20 (C) Be available, during the period it is 21 effective, to any motor vehicle franchisee of the same 22 line make at any time and on the same terms. 23 (D) Be for a term not to exceed 3 years so long as 24 any party to the agreement may terminate the agreement 25 upon the annual anniversary of the agreement and with 30 26 days' prior written notice; however, the agreement shall 27 remain in effect for the term of the agreement regardless 28 of the number of dealers of the same line make that may 29 terminate the agreement. 30 (2) A franchiser that enters into an agreement with its 31 franchisees pursuant to paragraph (1) of this subsection (g) 32 may seek to recover its costs from only those franchisees 33 that are receiving their "prevailing retail price charged by 34 that dealer" under subsections (a) through (f) of this SB113 Enrolled -6- LRB9202571DHmg 1 Section, subject to the following requirements: 2 (A) "costs" means the difference between the 3 uniform reimbursement rate set forth in an agreement 4 entered into pursuant to paragraph (1) of this subsection 5 (g) and the "prevailing retail price charged by that 6 dealer" received by those franchisees of the same line 7 make; 8 (B) the costs shall be recovered only by increasing 9 the invoice price on new vehicles received by those 10 franchisees; and 11 (C) price increases imposed for the purpose of 12 recovering costs imposed by this Section may vary from 13 time to time and from model to model, but shall apply 14 uniformly to all franchisees of the same line make in the 15 State of Illinois that have requested reimbursement for 16 warranty repairs at their "prevailing retail price 17 charged by that dealer", except that a franchiser may 18 make an exception for vehicles that are titled in the 19 name of a consumer in another state. 20 (3) If a franchiser contracts with its Illinois dealers 21 pursuant to paragraph (1) of this subsection (g), the 22 franchiser shall certify under oath to the Motor Vehicle 23 Review Board that a majority of the franchisees of that line 24 make did agree to such an agreement and file a sample copy 25 the agreement. On an annual basis, each franchiser shall 26 certify under oath to the Motor Vehicle Review Board that the 27 reimbursement costs it recovers under paragraph (2) of this 28 subsection (g) do not exceed the amounts authorized by 29 paragraph (2) of this subsection (g). The franchiser shall 30 maintain for a period of 3 years a file that contains the 31 information upon which its certification is based. 32 (4) If a franchiser and its franchisees do not enter 33 into an agreement pursuant to paragraph (1) of this 34 subsection (g), and for any matter that is not the subject of SB113 Enrolled -7- LRB9202571DHmg 1 an agreement, this subsection (g) shall have no effect 2 whatsoever. 3 (5) For purposes of this subsection (g), a Uniform Time 4 Standard Manual is a document created by a franchiser that 5 establishes the time allowances for the diagnosis and 6 performance of warranty work and service. The allowances 7 shall be reasonable and adequate for the work and service to 8 be performed. Each franchiser shall have a reasonable and 9 fair process that allows a franchisee to request a 10 modification or adjustment of a standard or standards 11 included in such a manual. 12 (Source: P.A. 91-485, eff. 1-1-00.) 13 Section 99. Effective date. This Act takes effect upon 14 becoming law.