State of Illinois
2021 and 2022


Introduced 2/22/2021, by Rep. Lawrence Walsh, Jr.


815 ILCS 710/1.1  from Ch. 121 1/2, par. 751.1
815 ILCS 710/6  from Ch. 121 1/2, par. 756

    Amends the Motor Vehicle Franchise Act. Provides that the sale of motor vehicles shall be prohibited (rather than should be prevented). Changes the manner in which dealers are reimbursed by manufacturers. Provides that manufacturers must pay a dealer no less than the amount a retail customer pays the dealer for the same services. Authorizes the use of agreed upon time guides. Applies to warranty work and factory recalls. Establishes manner of determining effective labor rates.

LRB102 17040 JLS 22467 b





HB3940LRB102 17040 JLS 22467 b

1    AN ACT concerning business.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4    Section 5. The Motor Vehicle Franchise Act is amended by
5changing Sections 1.1 and 6 as follows:
6    (815 ILCS 710/1.1)  (from Ch. 121 1/2, par. 751.1)
7    Sec. 1.1. Declaration of purpose. The Legislature finds
8and declares that the distribution and sale of vehicles within
9this State vitally affects the general economy of the State
10and the public interest, welfare, and safety and that in order
11to promote the public interest, welfare, and safety, and in
12the exercise of its police power, it is necessary to regulate
13motor vehicle manufacturers, distributors, wholesalers and
14factory or distributor branches or representatives, and to
15regulate dealers of motor vehicles doing business in this
16State in order to prevent frauds, impositions, discrimination,
17and other abuses upon its citizens, to protect and preserve
18the investments and properties of the citizens of this State,
19to foster healthy competition, and to provide adequate and
20sufficient service to consumers generally. The licensing and
21supervision of motor vehicle dealers is necessary for the
22protection of consumers and the sale of motor vehicles by
23unlicensed dealers shall should be prohibited prevented.



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1    The Legislature further finds that the regulation of motor
2vehicle manufacturers, distributors, wholesalers, factory
3branches, distributor branches and representatives, and
4dealers promotes the distribution of motor vehicles to the
5public and provides a system for servicing vehicles and for
6complying with manufacturer warranties so that consumers can
7keep their motor vehicles properly functioning and safe. The
8sale and distribution of motor vehicles constitutes a
9continuing obligation of manufacturers, distributors,
10wholesalers, factory branches, distributor branches and
11representatives, and dealers to consumers, and the public has
12an interest in promoting the availability of post-sale
13mechanical and operational services.
14(Source: P.A. 100-308, eff. 8-24-17.)
15    (815 ILCS 710/6)  (from Ch. 121 1/2, par. 756)
16    Sec. 6. Warranty agreements; claims; approval; payment;
17written disapproval.
18    (a) Every manufacturer, distributor, wholesaler,
19distributor branch or division, factory branch or division, or
20wholesale branch or division shall properly fulfill any
21warranty agreement and adequately and fairly compensate each
22of its motor vehicle dealers for labor and parts.
23    (b) Adequate and fair compensation requires the
24manufacturer to pay each dealer no less than the amount the
25retail customer pays for the same services with regard to rate



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1and time.
2    Any time guide previously agreed to by the manufacturer
3and the dealer for extended warranty repairs may be used in
4lieu of actual time expended. In the event that a time guide
5has not been agreed to for warranty repairs, or said time guide
6does not define time for an applicable warranty repair, the
7manufacturer's time guide shall be used, multiplied by 1.5.
8    In no event shall such compensation fail to include full
9reasonable compensation for diagnostic work, as well as repair
10service, labor, and parts. Time allowances for the diagnosis
11and performance of warranty work and service shall be no less
12than charged to retail customers reasonable and adequate for
13the same work to be performed.
14    No warranty or factory compensated repairs shall be
15excluded from this requirement, including recalls or other
16voluntary stop-sell repairs required by the manufacturer. If a
17manufacturer is required to issue a recall, the dealer will be
18compensated for labor time as above stated.
19    Furthermore, manufacturers shall pay the dealer the same
20effective labor rate (using the 100 sequential repair orders
21chosen and submitted by the dealer less simple maintenance
22repair orders) that the dealer receives for customer-pay
23repairs. This requirement includes vehicle diagnostic times
24for all warranty repairs. Additionally, if a technician is
25required to communicate with a Technical Assistance
26Center/Engineering/or some external manufacturer source in



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1order to provide a warranty repair, the manufacturer shall pay
2for the time from start of communications (including hold
3time) until the communication is complete.
4    The dealer may submit a request to the manufacturer for
5warranty labor rate increases a maximum of once per calendar
7    A claim made by a franchised motor vehicle dealer for
8compensation under this Section shall be either approved or
9disapproved within 30 days after the claim is submitted to the
10manufacturer in the manner and on the forms the manufacturer
11reasonably prescribes. An approved claim shall be paid within
1230 days after its approval. If a claim is not specifically
13disapproved in writing or by electronic transmission within 30
14days after the date on which the manufacturer receives it, the
15claim shall be considered to be approved and payment shall
16follow within 30 days.
17    In the determination of what constitutes reasonable
18compensation under this Section, the principal factor to be
19given consideration shall be the prevailing wage rates being
20paid by the dealer in the relevant market area in which the
21motor vehicle dealer is doing business, and in no event shall
22such compensation to of a motor vehicle dealer for labor times
23and labor rates warranty service be less than the rates
24charged by such dealer for like service to retail customers
25for nonwarranty service and repairs. Additionally, the
26manufacturer The franchiser shall reimburse the dealer



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1franchisee for any parts provided in satisfaction of a
2warranty at the prevailing retail price charged by that dealer
3for the same parts when sold to a retail customer not provided
4in satisfaction of a warranty; provided that such motor
5vehicle franchisee's prevailing retail price is not
6unreasonable when compared with that of the holders of motor
7vehicle franchises from the same motor vehicle franchiser for
8identical merchandise in the geographic area in which the
9motor vehicle franchisee is engaged in business.
10    There shall be no reduction in payments due to
11preestablished market norms or market averages. Manufacturers
12are prohibited from establishing restrictions or limitations
13of customer repair frequency due to failure rate indexes or
14national failure averages.
15    No debit reduction or charge back of any item on a warranty
16repair order may be made absent a finding of fraud or illegal
17actions by the dealer.
18    A warranty claim timely made shall not be deemed invalid
19solely because unavailable parts cause additional use and
20mileage on the vehicle.
21    If a manufacturer imposes a recall or stop sale on any new
22vehicle in a dealer's inventory that prevents the sale of the
23vehicle, the manufacturer shall compensate the dealer for any
24interest and storage until the vehicle is repaired and made
25ready for sale.
26    Manufacturers are not permitted to impose any form of cost



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1recovery fees or surcharges against a franchised auto
2dealership for payments made in accordance with this Section.
3    All claims, either original or resubmitted, made by motor
4vehicle dealers hereunder and under Section 5 for such labor
5and parts shall be either approved or disapproved within 30
6days following their submission. All approved claims shall be
7paid within 30 days following their approval. The motor
8vehicle dealer who submits a claim which is disapproved shall
9be notified in writing of the disapproval within the same
10period, and each such notice shall state the specific grounds
11upon which the disapproval is based. The motor vehicle dealer
12shall be permitted to correct and resubmit such disapproved
13claims within 30 days of receipt of disapproval. Any claims
14not specifically disapproved in writing within 30 days from
15their submission shall be deemed approved and payment shall
16follow within 30 days. The manufacturer or franchiser shall
17have the right to require reasonable documentation for claims
18and to audit such claims within a one year period from the date
19the claim was paid or credit issued by the manufacturer or
20franchiser, and to charge back any false or unsubstantiated
21claims. The audit and charge back provisions of this Section
22also apply to all other incentive and reimbursement programs
23for a period of one year after the date the claim was paid or
24credit issued by the manufacturer or franchiser. However, the
25manufacturer retains the right to charge back any fraudulent
26claim if the manufacturer establishes in a court of competent



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1jurisdiction in this State that the claim is fraudulent.
2    (c) The motor vehicle franchiser shall not, by agreement,
3by restrictions upon reimbursement, or otherwise, restrict the
4nature and extent of services to be rendered or parts to be
5provided so that such restriction prevents the motor vehicle
6franchisee from satisfying the warranty by rendering services
7in a good and workmanlike manner and providing parts which are
8required in accordance with generally accepted standards. Any
9such restriction shall constitute a prohibited practice.
10    (d) For the purposes of this Section, the "prevailing
11retail price charged by that dealer for the same parts" means
12the price paid by the motor vehicle franchisee for parts,
13including all shipping and other charges, multiplied by the
14sum of 1.0 and the franchisee's average percentage markup over
15the price paid by the motor vehicle franchisee for parts
16purchased by the motor vehicle franchisee from the motor
17vehicle franchiser and sold at retail. The motor vehicle
18franchisee may establish average percentage markup under this
19Section by submitting to the motor vehicle franchiser 100
20sequential customer paid service repair orders or 90 days of
21customer paid service repair orders, whichever is less,
22covering repairs made no more than 180 days before the
23submission, and declaring what the average percentage markup
24is. The average percentage markup so declared shall go into
25effect 30 days following the declaration, subject to audit of
26the submitted repair orders by the motor vehicle franchiser



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1and adjustment of the average percentage markup based on that
2audit. Any audit must be conducted within 30 days following
3the declaration. Only retail sales not involving warranty
4repairs, parts covered by subsection (e) of this Section, or
5parts supplied for routine vehicle maintenance, shall be
6considered in calculating average percentage markup. No motor
7vehicle franchiser shall require a motor vehicle franchisee to
8establish average percentage markup by a methodology, or by
9requiring information, that is unduly burdensome or time
10consuming to provide, including, but not limited to, part by
11part or transaction by transaction calculations. A motor
12vehicle franchisee shall not request a change in the average
13percentage markup more than twice in one calendar year.
14    (e) If a motor vehicle franchiser supplies a part or parts
15for use in a repair rendered under a warranty other than by
16sale of that part or parts to the motor vehicle franchisee, the
17motor vehicle franchisee shall be entitled to compensation
18equivalent to the motor vehicle franchisee's average
19percentage markup on the part or parts, as if the part or parts
20had been sold to the motor vehicle franchisee by the motor
21vehicle franchiser. The requirements of this subsection (e)
22shall not apply to entire engine assemblies and entire
23transmission assemblies. In the case of those assemblies, the
24motor vehicle franchiser shall reimburse the motor vehicle
25franchisee in the amount of 30% of what the motor vehicle
26franchisee would have paid the motor vehicle franchiser for



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1the assembly if the assembly had not been supplied by the
2franchiser other than by the sale of that assembly to the motor
3vehicle franchisee.
4    (f) The obligations imposed on motor vehicle franchisers
5by this Section shall apply to any parent, subsidiary,
6affiliate, or agent of the motor vehicle franchiser, any
7person under common ownership or control, any employee of the
8motor vehicle franchiser, and any person holding 1% or more of
9the shares of any class of securities or other ownership
10interest in the motor vehicle franchiser, if a warranty or
11service or repair plan is issued by that person instead of or
12in addition to one issued by the motor vehicle franchiser.
13    (g) (Blank). (1) Any motor vehicle franchiser and at least
14a majority of its Illinois franchisees of the same line make
15may agree in an express written contract citing this Section
16upon a uniform warranty reimbursement policy used by
17contracting franchisees to perform warranty repairs. The
18policy shall only involve either reimbursement for parts used
19in warranty repairs or the use of a Uniform Time Standards
20Manual, or both. Reimbursement for parts under the agreement
21shall be used instead of the franchisees' "prevailing retail
22price charged by that dealer for the same parts" as defined in
23this Section to calculate compensation due from the franchiser
24for parts used in warranty repairs. This Section does not
25authorize a franchiser and its Illinois franchisees to
26establish a uniform hourly labor reimbursement.



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1    Each franchiser shall only have one such agreement with
2each line make. Any such agreement shall:
3        (A) Establish a uniform parts reimbursement rate. The
4    uniform parts reimbursement rate shall be greater than the
5    franchiser's nationally established parts reimbursement
6    rate in effect at the time the first such agreement
7    becomes effective; however, any subsequent agreement shall
8    result in a uniform reimbursement rate that is greater or
9    equal to the rate set forth in the immediately prior
10    agreement.
11        (B) Apply to all warranty repair orders written during
12    the period that the agreement is effective.
13        (C) Be available, during the period it is effective,
14    to any motor vehicle franchisee of the same line make at
15    any time and on the same terms.
16        (D) Be for a term not to exceed 3 years so long as any
17    party to the agreement may terminate the agreement upon
18    the annual anniversary of the agreement and with 30 days'
19    prior written notice; however, the agreement shall remain
20    in effect for the term of the agreement regardless of the
21    number of dealers of the same line make that may terminate
22    the agreement.
23    (2) A franchiser that enters into an agreement with its
24franchisees pursuant to paragraph (1) of this subsection (g)
25may seek to recover its costs from only those franchisees that
26are receiving their "prevailing retail price charged by that



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1dealer" under subsections (a) through (f) of this Section,
2subject to the following requirements:
3        (A) "costs" means the difference between the uniform
4    reimbursement rate set forth in an agreement entered into
5    pursuant to paragraph (1) of this subsection (g) and the
6    "prevailing retail price charged by that dealer" received
7    by those franchisees of the same line make. "Costs" do not
8    include the following: legal fees or expenses;
9    administrative expenses; a profit mark-up; or any other
10    item;
11        (B) the costs shall be recovered only by increasing
12    the invoice price on new vehicles received by those
13    franchisees; and
14        (C) price increases imposed for the purpose of
15    recovering costs imposed by this Section may vary from
16    time to time and from model to model, but shall apply
17    uniformly to all franchisees of the same line make in the
18    State of Illinois that have requested reimbursement for
19    warranty repairs at their "prevailing retail price charged
20    by that dealer", except that a franchiser may make an
21    exception for vehicles that are titled in the name of a
22    consumer in another state.
23    (3) If a franchiser contracts with its Illinois dealers
24pursuant to paragraph (1) of this subsection (g), the
25franchiser shall certify under oath to the Motor Vehicle
26Review Board that a majority of the franchisees of that line



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1make did agree to such an agreement and file a sample copy of
2the agreement. On an annual basis, each franchiser shall
3certify under oath to the Motor Vehicle Review Board that the
4reimbursement costs it recovers under paragraph (2) of this
5subsection (g) do not exceed the amounts authorized by
6paragraph (2) of this subsection (g). The franchiser shall
7maintain for a period of 3 years a file that contains the
8information upon which its certification is based.
9    (3.1) A franchiser subject to subdivision (g)(2) of this
10Section, upon request of a dealer subject to that subdivision,
11shall disclose to the dealer, in writing or in person if
12requested by the dealer, the method by which the franchiser
13calculated the amount of the costs to be reimbursed by the
14dealer. The franchiser shall also provide aggregate data
15showing (i) the total costs the franchiser incurred and (ii)
16the total number of new vehicles invoiced to each dealer that
17received the "prevailing retail price charged by that dealer"
18during the relevant period of time. In responding to a
19dealer's request under this subdivision (g)(3.1), a franchiser
20may not disclose any confidential or competitive information
21regarding any other dealer. Any dealer who receives
22information from a franchiser under this subdivision (g)(3.1)
23may not disclose that information to any third party unless
24the disclosure occurs in the course of a lawful proceeding
25before, or upon the order of, the Motor Vehicle Review Board or
26a court of competent jurisdiction.



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1    (4) If a franchiser and its franchisees do not enter into
2an agreement pursuant to paragraph (1) of this subsection (g),
3and for any matter that is not the subject of an agreement,
4this subsection (g) shall have no effect whatsoever.
5    (5) For purposes of this subsection (g), a Uniform Time
6Standard Manual is a document created by a franchiser that
7establishes the time allowances for the diagnosis and
8performance of warranty work and service. The allowances shall
9be reasonable and adequate for the work and service to be
10performed. Each franchiser shall have a reasonable and fair
11process that allows a franchisee to request a modification or
12adjustment of a standard or standards included in such a
14    (6) A franchiser may not take any adverse action against a
15franchisee for not having executed an agreement contemplated
16by this subsection (g) or for receiving the "prevailing retail
17price charged by that dealer". Nothing in this subsection
18shall be construed to prevent a franchiser from making a
19determination of a franchisee's "prevailing retail price
20charged by that dealer", as provided by this Section.
21(Source: P.A. 96-11, eff. 5-22-09.)