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92nd General Assembly

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Public Act 92-0498

SB113 Enrolled                                 LRB9202571DHmg

    AN ACT in relation to vehicles.

    Be it  enacted  by  the  People  of  the  State  of  Illinois,
represented in the General Assembly:

    Section 5.  The Motor Vehicle Franchise Act is amended by
changing Section 6 as follows:

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

    Section  99.  Effective date.  This Act takes effect upon
becoming law.
    Passed in the General Assembly November 28, 2001.
    Approved December 12, 2001.
    Effective December 12, 2001.

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