State of Illinois
92nd General Assembly

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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.

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